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

China Specialist, Auto and Industrial Specialist

Victoria Li

It is well recognised that the New Energy Vehicle (NEV) growth in China (and elsewhere for that matter) has been fueled by subsidies with the governments competing to burnish their 'green' credentials. The central government has announced the plan to reduce the subsidy for NEV in a phased manner out to 2020. The local governments now can only provide subsidy up to only 50% of the level provided by the central government. The economic attractiveness of buying an NEV for the average working…

It is well recognised that the New Energy Vehicle (NEV) growth in China (and elsewhere for that matter) has been fueled by subsidies with the governments competing to burnish their 'green' credentials. The central government has announced the plan to reduce the subsidy for NEV in a phased manner out to 2020. The local governments now can only provide subsidy up to only 50% of the level provided by the central government. The economic attractiveness of buying an NEV for the average working…

China NEV - Driving in the Post-Subsidy World

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

We have revised our near-term Macau gross gaming revenue growth forecast, based on our industry checks that point to improvement in both VIP and mass play. We forecast total GGR to grow 6% in 2017 (versus 3% previously), and we still expect high-single-digit average annual growth in 2018 through 2020 (4% in 2018, 11% in 2019, and 8% in 2020) as key infrastructure that improves capacity in Macau comes on line, followed by mid-single-digit growth in 2021-25 (no change). To account for the time value of money and increased industry gaming revenue forecasts, we increase our fair value estimate for <a href="https://www.smartkarma.com/entities/182" target="_blank" data-smartkarma-citation="entities:182:1">Sands China Ltd (1928 HK)</a> , <a href="https://www.smartkarma.com/entities/806" target="_blank" data-smartkarma-citation="entities:806:1">Galaxy Entertainment Group Limited (27 HK)</a> , <a href="https://www.smartkarma.com/entities/805" target="_blank" data-smartkarma-citation="entities:805:1">Sjm Holdings Ltd (880 HK)</a> and <a href="https://www.smartkarma.com/entities/472" target="_blank" data-smartkarma-citation="entities:472:1">MGM China Holdings Ltd (2282 HK)</a> . Our fair value estimates for narrow-moat <a href="https://www.smartkarma.com/entities/2406" target="_blank" data-smartkarma-citation="entities:2406:1">Melcolot Ltd (8198 HK)</a> and narrow-moat <a href="https://www.smartkarma.com/entities/473" target="_blank" data-smartkarma-citation="entities:473:1">Wynn Macau Ltd (1128 HK)</a> remain unchanged as we become slightly more conservative on the ramp-up in margins of their new casino resorts. Our six Macau gaming names are fairly valued. We also plan to increase our fair value estimates for <a href="https://www.smartkarma.com/entities/807" target="_blank" data-smartkarma-citation="entities:807:1">Las Vegas Sands Corp (LVS US)</a> and <a href="https://www.smartkarma.com/entities/606" target="_blank" data-smartkarma-citation="entities:606:1">Wynn Resorts Ltd (WYNN US)</a> by mid-single-digit rates, and our <a href="https://www.smartkarma.com/entities/16227" target="_blank" data-smartkarma-citation="entities:16227:1">MGM Resorts International (MGM US)</a> by a low-single-digit rate.We are prevented from further upgrading our long-term-focused fair value estimates by the potential of: 1) future policies controlling capital outflow from China; 2) a smoking ban in the VIP gaming area, with the exception of smoking lounges; and 3) more stringent license renewal terms--for example, a higher gaming tax.Analyst: Chelsey Tam

We have revised our near-term Macau gross gaming revenue growth forecast, based on our industry checks that point to improvement in both VIP and mass play. We forecast total GGR to grow 6% in 2017 (versus 3% previously), and we still expect high-single-digit average annual growth in 2018 through 2020 (4% in 2018, 11% in 2019, and 8% in 2020) as key infrastructure that improves capacity in Macau comes on line, followed by mid-single-digit growth in 2021-25 (no change). To account for the time value of money and increased industry gaming revenue forecasts, we increase our fair value estimate for Sands China Ltd (1928 HK) , Galaxy Entertainment Group Limited (27 HK) , Sjm Holdings Ltd (880 HK) and MGM China Holdings Ltd (2282 HK) . Our fair value estimates for narrow-moat Melcolot Ltd (8198 HK) and narrow-moat Wynn Macau Ltd (1128 HK) remain unchanged as we become slightly more conservative on the ramp-up in margins of their new casino resorts. Our six Macau gaming names are fairly valued. We also plan to increase our fair value estimates for Las Vegas Sands Corp (LVS US) and Wynn Resorts Ltd (WYNN US) by mid-single-digit rates, and our MGM Resorts International (MGM US) by a low-single-digit rate.We are prevented from further upgrading our long-term-focused fair value estimates by the potential of: 1) future policies controlling capital outflow from China; 2) a smoking ban in the VIP gaming area, with the exception of smoking lounges; and 3) more stringent license renewal terms--for example, a higher gaming tax.Analyst: Chelsey Tam

Upgrading 2017 Macau Gaming Revenue Growth to 6%; Policy Risks Prevent Robust Recovery

China's Passenger Vehicle sales is very likely to have an annual decline for the first time in 2017. The 15% y/y growth in 2016 (which saw Chinese car sales grow by an equivalent of car sales in Germany) was a result of the sales tax being reduced from 10% to 5%. Though the sales tax has been increased to only 7.5%, vs. previously expected 10%, in 2017, consumers brought forward purchases last year. Slowing property sales growth and high property prices also mean less discretionary income for car purchases. SUV may still outperform.

China's Passenger Vehicle sales is very likely to have an annual decline for the first time in 2017. The 15% y/y growth in 2016 (which saw Chinese car sales grow by an equivalent of car sales in Germany) was a result of the sales tax being reduced from 10% to 5%. Though the sales tax has been increased to only 7.5%, vs. previously expected 10%, in 2017, consumers brought forward purchases last year. Slowing property sales growth and high property prices also mean less discretionary income for car purchases. SUV may still outperform.

Making sense of the Global Market, Euromonitor International Ltd.

Yu Mitsuhashi

Making sense of the Global Market

Euromonitor International Ltd.

We are a global market research company focused on industries, countries, economies and consumers worldwide. Our cross-country comparable research helps your organisation identify opportunities and develop growth strategies in countries and regions across the globe. With offices around the world, 1,200 analysts in 100 countries and market research on every key trend and driver, we give you powerful access to the real story behind consumer change.

Emerging markets, following a slowdown in traditional toy sales due to macroeconomic volatility, are expected to recover through 2020 and once again drive traditional toys and games growth globally. However, emerging market growth will differ based on the income and demographic trends of emerging countries, from growth markets like China that will have positive income and child demographic trends, to stalled markets like Brazil that face negative trends. While the macro environment in many emerging markets could remain unstable in the short to medium term, research detailed in the new report “<a target="_blank">The Shifting Dynamics of Traditional Toys in Emerging Markets</a>” points to improving prospects in India, Sub-Saharan Africa, Russia and China in 2020-2030, as well as possible long term issues in the Brazilian market.

Emerging markets, following a slowdown in traditional toy sales due to macroeconomic volatility, are expected to recover through 2020 and once again drive traditional toys and games growth globally. However, emerging market growth will differ based on the income and demographic trends of emerging countries, from growth markets like China that will have positive income and child demographic trends, to stalled markets like Brazil that face negative trends. While the macro environment in many emerging markets could remain unstable in the short to medium term, research detailed in the new report “The Shifting Dynamics of Traditional Toys in Emerging Markets” points to improving prospects in India, Sub-Saharan Africa, Russia and China in 2020-2030, as well as possible long term issues in the Brazilian market.

How Incomes & Demographics Will Drive Traditional Toys/Games Spending Shifts in Key Emerging Markets

China

Hisense Visual Technology Co., Ltd. manufactures and markets electronic products and household electrical appliances.  The Company's products include television sets, refrigerators, freezers, communication products.

Hisense Visual Technology Co., Ltd. A (600060 CH)

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Hisense Visual Technology Co., Ltd. A (600060 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

China NEV - Driving in the Post-Subsidy World

It is well recognised that the New Energy Vehicle (NEV) growth in China (and elsewhere for that matter) has been fueled by subsidies with the...

Victoria Li

Upgrading 2017 Macau Gaming Revenue Growth to 6%; Policy Risks Prevent Robust Recovery

We have revised our near-term Macau gross gaming revenue growth forecast, based on our industry checks that point to improvement in both VIP and...

Morningstar, Inc.

China Auto 2017 - Hangover Time

China's Passenger Vehicle sales is very likely to have an annual decline for the first time in 2017. The 15% y/y growth in 2016 (which saw Chinese...

Victoria Li

How Incomes & Demographics Will Drive Traditional Toys/Games Spending Shifts in Key Emerging Markets

Emerging markets, following a slowdown in traditional toy sales due to macroeconomic volatility, are expected to recover through 2020 and once...

Euromonitor International Ltd.

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)