JOM SILKKITIE ASIA EQUITY INVESTMENT FUND Monthly Report November 2017

Transcription

1 JOM SILKKITIE ASIA EQUITY INVESTMENT FUND Monthly Report November 2017 JOM Silkkitie Asia Equity Investment Fund s NAV was at the end of November, so the performance during the month stood at -2.73%. Since fund inception (31 st July 2009) the NAV has increased by %, thus the annual performance has been %. This year has been challenging for our Silkkitie Fund, as the share prices of our SE-Asian small and midcap companies have largely declined during the year despite their mostly robust results, while the expensive Asian large/growth equities have risen even further. However, only 28% of the index shares have outperformed the index so far this year, which is historically a very low figure (see page 7). The Silkkitie Fund has been following its strategy, but should we have continued with the positions we had at the end of 2016, we would now be reporting returns lower by some 8-10% compared to where we stand now. Around 40 to 50% of the portfolio shares have been changed this year. The biggest hindrances have been the so-called old economy shares and Indonesian SMEs, which you can read more about under the Komodo fund s section below on page 3. During the month, we reduced the weights of Indonesian real estate and infrastructure developers. The weight of the Philippines was also reduced, while those of China s and Vietnam s increased. In addition, we purchased shares of J Kumar Infra, which is an infrastructure construction company from India. J Kumar Infra has a PE of only 12x for next year, and a gearing of 22%, which is low for an Indian company. It has, in general, been difficult to find low-cost companies with low gearing in India. We have recently shifted the portfolio towards northern Asia, as e.g. large Chinese companies with improving outlooks can be found in the region. Going forward, we ll increase Indonesia s weight when we see signs of improving market sentiment. The most important indicators we are looking for are a more robust growth of bank loans, GDP growth exceeding 5.2%, accelerating private consumption figures and the return of foreign institutional investors. Equities by Investment Themes Financial & Property 20 % Global Leaders 10 % Consumers 39 % Infra 24 % Green & Clean 7 % Equities Geographical Break-down Pakistan 3 % Vietnam 18 % Japan 4 % India 3 % Philippines 19 % China 36 % Indonesia 17 % JOM SILKKITIE, NET ASSET VALUE (30 November 2017) Fund size meur Number of fund units Inception date Last month s performance -2.73% Performance since inception % Annualised performance since inception % Accumulated management fee* 1.10% Accumulated performance fee* 0.00% Accumulated custodian fee* 0.15% Net investment position (prior to subscriptions on ) 90.8% Volatility** 9.9% Portfolio turnover 210.8% Name: JOM Silkkitie Fund (UCITS) Portfolio Manager: Juuso Mykkänen Custodian: SEB. Helsinki branch Benchmark index: No official index Profit sharing: The Fund has only accumulating units Fund rules last confirmed: OVERVIEW OF THE FUND Inception date: ISIN-code: FI Bloomberg-ticker: JOMSILK FH Fund target group: Demanding investors who understand the potential of Asian equity markets in the long run. Minimum subscription: Subscription account: IBAN: FI BIC: ESSEFIHXXXX Management fee: 1.2% p.a. Subscription fee: 1.5% - 0% Redemption fee: 1% (min. 20 ) Performance fee: 10% on the return exceeding the hurdle rate of 5%. (pls see Fund prospectus for details) Pastperformanceis no guaranteeforfuturereturns.the Fundvalue mayincrease or decrease, andtheinvestor mayincurlosses whenredeeming his shares. MSCI AC Asia ex-japan (EUR) is a price index, which takes dividends into account. Further details on JOM Silkkitie Investment Fund may be foundin thekeyinvestorinformation document,fundprospectus andfundrules,which areavailable by requestfromjom Fund ManagementLtd, or on the website *For the fiscal period since , % of fund average net assets. **Based on daily returns during 12 months. Detailed formulasavailablefromthefundmanagement Company.

2 JOM SILKKITIE ASIA EQUITY INVESTMENT FUND Monthly Report November 2017 Jakarta Composite Index JCI FUND CORRELATION (12M, DAILY) WITH SOME EQUITY INDICES (EUR) Philippine composite Index PCOMP HK China H shares HSCEI MSCI Asia ex-japan Topix MSCI World S&P 500 Bloomberg Europe 500 Index Indonesia Philippines China Asia Japan World US Europe FUND PERFORMANCE MONTHLY (%) JOM SILKKITIE NAV VS. THE REGIONAL EQUITY MARKET INDEX Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Year % MSCI AC Asia ex-japan (Total return, EUR) JOM Silkkitie FUND PERFORMANCE BI-ANNUALLY (%) % % % + 20 % % + 0 % -20 % % % % % % % % % % % % % % % Pastperformanceis no guaranteeforfuturereturns.the Fundvalue mayincrease or decrease, andtheinvestor mayincurlosses whenredeeming his shares. MSCI AC Asia ex-japan (EUR) is a price index, which takes dividends into account. Further details on JOM Silkkitie Investment Fund may be foundin thekeyinvestorinformation document,fundprospectus andfundrules,which areavailable by requestfromjom Fund ManagementLtd, or on thewebsite

3 JOM KOMODO INDONESIA EQUITY INVESTMENT FUND Monthly Report November 2017 JOM Komodo Indonesia Equity Investment Fund s NAV was at the end of November, as it decreased by -4.47% during the month. Since fund inception (15 th May 2012) the NAV has increased by %, thus the annual performance has been +8.60%. In November, the Indonesian JCI index reached its all time high in the local currency, while the MSCI Indonesia Small Cap index weakened by nearly 6% (in euros) after a strong October. The index has now weakened by -23.6% in euro since the beginning of the year, whereas the JCI index stands at +1% measured in euro. Foreign investors net sales in November alone amounted to 1.38bn USD. We expect that window dressing will continue also during December. In November, we reduced the weights of real estate development companies, as the demand environment for certain companies still remains relatively uncertain. We introduced Aneka Gas into the portfolio. It is Indonesia s largest distributor of industrial gas with a 30% market share. The company s major capex cycle is now over and the interest expenses are diminishing. Whilst the company s profit trend has been very positive this year (+40%), the share price has nonetheless fallen by over 30% since the beginning of the year. In 2018, company s net income is set to grow +50%. JOM KOMODO, NET ASSET VALUE (30 November 2017) Size of the fund meur Number of fund units Inception date Last month s performance -4.47% Performance since inception % Annualiced performance since inception +8.60% Accumulated management fee* 1.37% Accumulated performance fee* 0.00% Accumulated custodian fee* 0.22% Net investment position (prior to subscriptions on ) 97.7% Volatility** 11.4% Portfolio turnover 137.2% Fund s correlation to JCI-Index (12m) 0.48 FUND OVERVIEW Equities by Investment Sectors Consumer, Cyclical 25 % Communications 6 % Consumer, Non-cyclical 12 % Basic Materials 11 % Industrial 19 % Financial 27 % Name: JOM Komodo Fund (UCITS) Portfolio Manager: Juuso Mykkänen Custodian: SEB. Helsinki branch Benchmark index: No official index Profit sharing: The Fund has only accumulating units Fund rules last confirmed: Inception date: ISIN-code: FI Fund target group: Demanding investors who understand the potential of Asian equity markets in the long run. Minimum subscription: Subscription account: IBAN: FI BIC: ESSEFIHXXX Management fee: 1.5% p.a. Subscription fee: 1.5% - 0% Redemption fee: 2% (min. 20 ) Performance fee: 10% on the return exceeding the hurdle rate of 5%. (pls see Fund prospectus for details) Past performance is no guarantee for future returns. The Fund value may increase or decrease, and the investor may incur losses when redeeming his shares. Jakarta Composite Index (EUR) and MV Indonesia SmallCap Index (EUR) are price indices, which take dividends into account. Further details on JOM Komodo Investment Fund may be found in the key investor information document, fund prospectus and fund rules, which areavailable by request from JOM Fund Management Ltd, or on the website *For the fiscal period since , % of fund average netassets. **Will be calculated based on daily returns during 12 months. after the fund has sufficient track history. Detailed formulas availablefrom the Fund Management Company.

4 JOM KOMODO INDONESIA EQUITY INVESTMENT FUND Monthly Report November JOM KOMODO NAV VS. INDONESIA EQUITY INDICES FUND PERFORMANCE MONTHLY (%) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Year JAKARTA COMPOSITE Index S&P Indonesia SmallCap Price (EUR) JOM Komodo Pastperformanceis no guaranteeforfuturereturns.the Fundvalue mayincrease or decrease, andtheinvestor mayincurlosses whenredeeming his shares.jakartacompositeindex(eur) andmv IndonesiaSmallCapIndex(EUR)arepriceindices,whichtakedividendsintoaccount.Furtherdetailson JOM Komodo Investment Fund may be found in the key investor information document, fund prospectus and fund rules, which are available by requestfromjomfundmanagement Ltd,oronthewebsitewww.jom.fi.

5 JOM Funds Monthly Report November 2017 MEETING WITH COMPANIES AND INSPECTING THE ECONOMIC CLIMATE IN VIETNAM AND INDONESIA In Vietnam we met mainly our portfolio companies, but also a few new candidates. A record number of construction cranes dominated the street view and the economy seemed generally very vibrant. We started visiting Saigon in 2012, and since then the city profile has taken a remarkable leap, clearly seen in the form of countless new roads and buildings. According to the construction companies we met with, construction will continue going forward, even though the high-end and office segments are facing oversupply at the moment. Major projects are underway especially in the affordable housing segment, the industrial side and in the tourism destinations. The order book of the construction company Cotec is record full, yet the company indicated that its gray order book is almost twice as full. The company is also debt-free, meaning that in the next downturn its market share will increase, as most other construction companies have very high debt levels %). Cotec has been in Silkkitie s portfolio since Vietnam was incontestably Asia s best market in November, rising by +13% over the month. Foreign investment money has now began to flow into Vietnam especially to large index stocks. The country s one-party system has clearly been favorable to the country s economy, as important economic decisions have been implemented in a more straight forward manner as compared to the sometimes slow democratic model of decision making. Foreign investors net sales from Indonesia were intensive in November, but a record amount of foreign funds flowed back to Vietnam. Source: Bloomberg

6 JOM Funds Monthly Report November 2017 The consumer companies in Jakarta and Bandung, Indonesia, were somewhat surprised about the annual consumption growth of under 5%, as consumption has been growing faster in previous years. Especially during the Ramadan holiday, the demand has been unimpressive compared to last couple of years. Explaining the situation, the companies named the Tax Amnesty package, the rise in electricity prices (subsidy cut), and the holiday period's transition to Q2 from Q3, as causes for the stagnation, as well as the smaller than usual increases in wages. On the other hand, all the companies we met were confident about 2018, as the aforementioned obstacles are coming to an end, and the next year s municipal election and the Asian Games are going to fuel consumption. Quite on the contrary, the banks we met, were clearly more positive as lending is slowly gaining speed and NPLs are decreasing. Banks liquidity situation is sound, as savings have increased deposits have been growing faster than lending. Banks still have a lot of room for structural growth, as only about 36% of the population have bank accounts and less thank 6% of the population have a credit card. Another positive sign on the banking sector was the large number of digitalization projects. As regards to the infrastructure companies, the situation continued to be similar to that of last year s growth is strong, order books are full and new orders in 2018 are expected to grow about 15% - 20%, which is slightly less than this year. In relation to infrastructure, we experienced first hand that the traffic was smoother than before, as new overpasses, bridges, etc. have now been completed. Congestion has mainly been caused by large scale infrastructure construction. For example, the network of toll roads has grown by more than 40% during President Jokowi s time ( ) and by the end of 2019 twice as many toll roads are expected to be finished, as compared to the current situation (see figure). In the next few years, when many major infra projects will be completed, the developed infrastructure will also start showing its effect on the Indonesian economy the country s logistic related costs are going to decrease and the FDI investors will perceive the country enormously more attractive. Our view is that by then the country s GDP growth will rise to 6-7 %.

7 JOM Funds Monthly Report November 2017 One of the most interesting companies we met was Kresna Graha. The company owns stakes in a number of companies involved in the fintech industry, most of which are already profitable or will be profitable relatively quickly. Thus, Kresna s companies are not subsidizing their end users with private equity money, which is the strategy of Go-Jek unicorn for example. Go-Jek is backed by Chinese techgiants. Many of Kresna s companies are operating mainly on the banking sector and e-commerce, but also on many other areas where technology induced advantages can be found as compared to traditional practices. The company s management seemed also very passionate about the company and the fintech-market, which is of course a very positive sign. Kresna could be described as the Indonesian version of Softbank. Funds valuation data: JOM Komodo: PE2018: 9.9x, P/BV 1.7, DY 2.9% JOM Silkkitie: PE2018: 9.3x, P/BV 1.8, DY 2.5% Above: After a strong October, the MSCI Indonesia small-cap index dropped to its lowest levels in November-December, even though the country s main index JCI made new highs. In November, foreign net sales from the Indonesian stock market also reached its highest value this year. We believe that when the investment flow to SE-Asia returns, the Indonesian SMEs have the greatest potential. Left bottom: The narrowness of the well performing shares in 2017 has been very clear in Asia. North Asian technology/growth companies have been in the lead, while the so-called old economy and value shares returns have been negligible. In 2018, a big change may occur if the high growth prospects for the favored companies fail to exceed expectations. Source: CLSA