KNIGHT MEKONG FUND Distributed by the FMG Group

Transcription

1 KNIGHT MEKONG FUND Distributed by the FMG Group Thailand and the Neighbours September 2015 IMPORTANT NOTICE This presentation is not a prospectus, and does not form part of any offer or invitation to invest in any funds or securities. Any investment in Knight Mekong Fund should be made on the basis of the private placement memorandum, authorized by CSSF in Luxembourg. Investments may fall in value as well as rise, and past performance is no guarantee of future success.

2 EXECUTIVE SUMMARY After decades of base building, the countries of the Greater Mekong Sub-Region have come of age, with Thailand as the leading entrepot for trade and capital flow. Knight Mekong Fund invests in listed and pre-ipo companies in Thailand and the countries of the Mekong Region: Cambodia, Laos, Myanmar and Vietnam, including Mekong companies listed outside the region, such as Hong Kong and Singapore. The Fund applies similar value driven principles and contrarian timing that have served the manager well in Thai and ASEAN orientated funds, generating 15-20% per annum for the past 5 years. Utilizing Siam Knight Fund Management s research capability to identify undervalued growth stocks, with particular emphasis on high dividend yield. 2

3 WHY INVEST IN MEKONG COUNTRIES NOW? DEMOGRAPHICS: Collectively 326 million people, with a growing number of young middle class consumers, especially in Thailand, Yunnan and Vietnam. LOW DEBT LEVELS: Average government debt to GDP in the MEKONG is below 50% vs US 72% and Europe 87.2%; similarly household savings rate is high at 43% in Asia ex Japan; With the exception of Vietnam Banking sector is full of excess liquidity, with average loan to deposit ratio <80%. REGIONAL DYNAMICS: Almost 50% of Thai trade is now within ASEAN, including a growing portion within the Mekong. Reliance on exports to Europe and America steadily declining; regional tourism also on the rise with almost 60% of visitors to Thailand coming from within Asia itself. RESOURCE RICHES: Agriculture in Thailand, Vietnam, Myanmar and Cambodia, including the newly formed Rice Cartel ; Oil & Gas in Cambodia, Myanmar and Vietnam; Copper & Gold in Laos & Myanmar; Hydro power in Laos & Myanmar. INFRASTRUCTURE DEVELOPMENT: China and Japan are competing to build roads and railways to link up ASEAN with China and the Mekong countries. This will be positive not just for the construction industry, but also open up the development of regional cities, as well as boost trade and tourism. 3

4 WHY INVEST IN THE MEKONG REGION? continued RAPID GDP GROWTH: GDP growth in the Mekong countries has averaged +6.2% per annum in 2014, and +6.4% is forecast for 2015, vs 0.8% in Europe and +2.7% in the US in RURAL REFORM: Governments of the Mekong Region are all encouraging hinterland development, both as a political necessity and in order to widen the consumer base. URBANISATION: Average urban populations are 38%, still well below the 81% level in the US, and 89% in the UK. The flows to the cities are underpinning property markets, banking and creating a dynamic business culture. LIQUID STOCKMARKETS: The market capitalization of the Thai market is now over US$400 billion; with daily turnover over US$1 billion. STRONG THAI BAHT: Recurrent trade surpluses, healthy banks, forex reserves, capital flows and tourism, are underpinning ASEAN currencies, including the Thai Baht, which is encouraging more ASEAN investment into the Mekong Region. 4

5 SIAM KNIGHT FUND MANAGEMENT THE INVESTMENT MANAGER Siam Knight Fund Management (SKFM) is a leading regional fund manager, licensed and based in Thailand. Founded in June 2002 with the vision of trading value stocks combining timing- orientation with a research-driven process. Five investment professionals, including Jeremy King (MD & CIO), Patrick Davenport, Richard Neville, Chalermdet Techato, Patarapong Attawatin, and Koonrat Leelaniramol. Niche and unorthodox player in investment management business specialising in identifying undervalued stocks among emerging Asia s listed companies. Investment methodology involves conducting proprietary research. 5

6 SIAM KNIGHT FUND PERFORMANCE Performance (%) Portfolio Inception Date YTD (30Sep) Annualized Since inception SKFM Thai Dividend Portfolio (L05TDF)(USD) 21-Dec KNIGHT MEKONG FUND (USD) 2-DEC-13 n/a n/a n/a n/a n/a n/a FTSE ASEAN DEC SET (Thailand) (USD) DEC Hang Seng Index (HKD) DEC MSCI * Since Asia ex inception Japan DEC

7 MACRO TREND DRIVERS Financial Cycles Political Regulatory Investment Strategy Environment Demographic 7

8 STRATEGY To monitor cross-border capital flows, technology transfer, and M&A within the target countries. Overweight Thai companies which are active in investing in the Mekong Region, and listed proxies on the Singapore and Hong Kong Stock exchanges. Focus on undervalued companies & sectors relative to growth potential. Industry preferences Agribusiness, Infrastructure, Tourism, Energy (Esp. natural gas and hydro), and real estate. Theme orientated, identifying medium-term macro drivers, such as regional integration, middle income consumption, & cross border M&A. Variable SET Index futures hedge to protect against international headwinds. 8

9 RISK MANAGEMENT Diversification: weightings limited to 25% by Country (except Thailand 50%), 25% by Industry, and 10% per Company Close monitoring of business performance. Constant review of under-performing positions. Regular analysis of country-specific political risk. Managed overlay SET50 Index Futures beta hedge. 9

10 PORTFOLIO By Country 10

11 MODEL PORTFOLIO By Industry 11

12 MODEL PORTFOLIO By Time Horizon 50% 40% 40% 30% 30% 30% 20% 10% 0% Short-Term Medium-Term Long-Term 12

13 MODEL PORTFOLIO (KNIGHT MEKONG FUND Luxembourg, for example)

14 THE FUND MANAGEMENT TEAM JEREMY KING, CEO of Knight Asia & SKFM. Formerly MD of Kerry Financial Services in partnership with Kuok Group (owner of Shangri-la Hotels) involved in investment banking and fund management. Former Director of Thai Rung Reung Finance & Securities, and fund manager at Gartmore Investment Management. Law Degree (LLB), Nottingham University. Based in Asia since 1986, Thailand since PATRICK DAVENPORT, Director of SKFM. Based in Ho Chi Minh and Thailand. Working in Asia since 1987, involved in private equity in Hong Kong/China, India & Cambodia/Myanmar. Fluent in Cantonese, Mandarin, Tamil and Hindi. RICHARD NEVILLE, Director of SKFM. Working in Asia since 1988, including researching and capital raising for Asian listed companies in Hong Kong & Thailand; COO of Minor Group from PATARAPONG ATTAWETIN, Fund manager, former banker at UOB, and Senior Engineer at KAO Industrial. Mechanical Engineering. MBA degree. CHALERMDET TECHATO, Fund manager, former broker at Capital Nomura Securities Plc. Master degree, Managerial & Business Economics. KOONRAT LEELANIRAMOL, Risk manager, former Senior Risk Asset Review at BBL Plc., and Accountant of CPALL Plc. MBA degree. 14

15 LIKELY IPO: MAX (MYANMAR) MANUFACTURING CO. LTD. Myanmar currently produces around 2.5 million tpy, but demand is over 5 million tpy and growing resulting in high prices from imported cement. Per capita consumption is only 90 kg against 180 kg in Cambodia and over 450 kg in Thailand. two 500 tpd wet process cement plants in central Myanmar built four years ago that are now being converted to more energy efficient dry process and their capacities each increased to 2,500 tpd On completion of both plants in mid 2016, MMM should produce 1,600,000 tpy at a cost of USD 55 per tonne & selling price of USD per tonne resulting in annual free cash flow of USD 60 mn MMM plans to add 1-2 more plants with similar capacities over the next 2-3 years and will seek a public listing of its shares 15

16 MAX (MYANMAR) MANUFACTURING CO. LTD. 16

17 LIKELY IPO: CHAKREYTING CEMENT FACTORY CO. LTD. With CCC completion in 3Q14, Cambodia will now have 2 million tpy of supply against demand of 3 million tpy. Per capita demand is now 200 kg against 450 kg in Thailand with prices of 85-95/MT. CCC should produce 1 million tpy at a cost of around USD 50 per tonne and selling prices of USD 85 per tonne yielding an annual free cash flow of USD million. The new CCC plant was built on budget and several months ahead of schedule. We believe the plant should see a healthy revaluation once commercial production begins with a multiple of 3-5x original investment. 17

18 CHAKREYTING CEMENT FACTORY CO. LTD.

19 LIKELY IPO: BATTAMBANG RICE MILLS (CAMBODIA) Paddy rice production today in Cambodia is around 9 million MT with average yields per hectare of 3.17 MT, but less than 25% of the paddy rice can be processed into rice for the export market. The balance of the paddy rice is exported to and processed in Thailand and Vietnam for overseas markets. BRM will be a new company formed to build, own and operate a new 10 tonne per hour rice mill and a 2,000 ha rice plantation in Battambang Province, Cambodia. Our partner will be Mr. Pai Eap, a French and Cambodian national, with extensive business interests including existing rice plantations in Battambang that will be contributed for equity. Under our base case forecast, this investment in rice growing and milling would deliver a compounded return of over 32%. 19

20 BATTAMBANG RICE MILL (CAMBODIA) 20

21 INVESTMENT COVERAGE Market Industry Sectors Jeremy King China, Singapore, Myanmar, & Australia Banking, Financial Services, Mining & resource Patrick Davenport Cambodia, Laos, Vietnam Agribusiness & Energy Patarapong Attawetin Thailand Industrial, Communications, Transportation & Automotive Chalermdet Techato Thailand Property, Hotels, Hospital, Electronic & Retails Koonrat Leelaniramol Risk Management, VAR, and Stress Testing 21

22 DIRECTORS OF THE FUND Directors licensed by Luxembourg CSSF Mr. Luc Leleux Mr. Julien Renaux Mr. Andreas Fuchs Mr. Mirò Stoev 22

23 REPORTING LINES & ROLES Appointment & Terms of Reference Apex Fund Services Ltd. Administrator & Registrar Knight Mekong Fund Sub-Fund of LFP Prime SICAV SIF S.A. (Board of Directors) Investment Policies & Restrictions Societe Generale Bank&Trust Custodian Settlement Instructions Siam Knight Fund Management The Investment Manager Brokers Ernst & Young Auditors 23

24 DEALING DAYS, FEES & EXPENSES Management fees: 2% p.a. Performance fees: 20% of gains above high water mark, with a hurdle rate of 6% per annum, distributed quarterly, payable to the manager. Custodian fees: 0.1% p.a. plus transaction fees. Dealing Days: Monthly Valuations, Subscriptions, and Redemptions on final business day of each month. Minimum subscription: US$ equivalent of EUR 125,

25 CONTACT For further details, please contact: FMG Capital Ltd (part of the FMG Group) Floor 6, Airways House Gaiety Lane Sliema, SLM1549 Malta, Europe Tel: Website: FMG Capital Ltd is authorised and regulated by the Malta Financial Services Authority 25

26 APPENDIX 26