Quality-Value Investing

Marc Melendez, CFA

Emerging Market Small and Mid Cap Equities

Reperio Capital

Reperio Capital Research was founded in 2013 with the goal of better serving the investment community with in-depth, high quality, value oriented research.

Reperio means to discover in latin. Using value investing principles, we aim to discover a minimum of 12 investment opportunities per year within the Emerging Markets Small and Mid Cap universe.

We take a business owners perspective with a long term investment horizon. We conduct bottom up, fundamental research. We focus on downside risks and require a significant margin of safety in any investment to prevent the permanent loss of capital. All factors differentiating our research from the short term, trading focus of traditional research providers.

Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/17836" target="_blank" data-smartkarma-citation="entities:17836:1">Xingda Int'L (1899 HK)</a> is one of the largest steel cord manufacturers in China. It is consistently profitable due to its operational efficiency. It continually pays a dividend with no corporate governance concerns or obsolescence concerns. Its industry is experiencing cyclical weakness due to poor macro, overcapacity, rising raw material costs, and a lack of pricing power. These cyclical concerns are causing Xingda to trade near trough valuations.  
There are a number of ways for the operating environment to emerge from its depressed state. The Chinese government is attempting to decrease overcapacity in a number of industries, including the steel cord industry. Many smaller players are having difficulty generating profits and may have to shut down capacity. There also may be a turn in the macroeconomic environment or pressures from raw material prices may relent.
The base case earnings and asset valuation has a fair value of HKD4.51, which is 97.7% above Xingda’s current share price making it a very attractive investment. It typically does not take long for the cycle to turn. Historically, when Xingda hits multiples one standard deviation below its mean, it reaches one standard deviation above the mean in less than two years.

Xingda Int'L (1899 HK) is one of the largest steel cord manufacturers in China. It is consistently profitable due to its operational efficiency. It continually pays a dividend with no corporate governance concerns or obsolescence concerns. Its industry is experiencing cyclical weakness due to poor macro, overcapacity, rising raw material costs, and a lack of pricing power. These cyclical concerns are causing Xingda to trade near trough valuations.  
There are a number of ways for the operating environment to emerge from its depressed state. The Chinese government is attempting to decrease overcapacity in a number of industries, including the steel cord industry. Many smaller players are having difficulty generating profits and may have to shut down capacity. There also may be a turn in the macroeconomic environment or pressures from raw material prices may relent.
The base case earnings and asset valuation has a fair value of HKD4.51, which is 97.7% above Xingda’s current share price making it a very attractive investment. It typically does not take long for the cycle to turn. Historically, when Xingda hits multiples one standard deviation below its mean, it reaches one standard deviation above the mean in less than two years.

Shougang Concord Century Holdings Ltd (103 HK)

Xingda (1899:HK) 100% Upside Due to Cyclical Weakness

Xingda International

Xingda (1899:HK) 100% Upside Due to Cyclical Weakness