Value Investing in Asia Value Investing in Asia The Definitive Guide to Investing in Asia Stanley Lim Peir Shenq Cheong Mun Hong This edition first published 2018 © 2018 Stanley Lim Peir Shenq and Cheong Mun Hong Registered office John Wiley & Sons Ltd, The Atrium, Southern Gate, Chichester, West Sussex, PO19 8SQ, United Kingdom For details of our global editorial offices, for customer services and for information about how to apply for permission to reuse the copyright material in this book please see our website at www.wiley.com All rights reserved No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, except as permitted by the UK Copyright, Designs and Patents Act 1988, without the prior permission of the publisher Wiley publishes in a variety of print and electronic formats and by print-ondemand Some material included with standard print versions of this 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publisher is not engaged in rendering professional services and neither the publisher nor the author shall be liable for damages arising herefrom If professional advice or other expert assistance is required, the services of a competent professional should be sought Library of Congress Cataloging-in-Publication Data is Available ISBN 978-1-119-39118-0 (paperback) ISBN 978-1-119-39121-0 (ePDF) ISBN 978-1-119-39120-3 (ePub) ISBN 978-1-119-39127-2 (Obk) 10 Cover Design: Wiley Cover Image: © Lisa Kolbasa/Shutterstock Set in 11/13pt NewBaskervilleStd by SPi Global, Chennai, India Printed in Great Britain by TJ International Ltd, Padstow, Cornwall, UK For Jo Ying, Howey and Hong Vee Remember to let money be the tool that helps you work towards your happiness, rather than being the reason for your happiness – Stanley For my wife, Sze Wing, who has always believed in me And for Sonia, may this book inspire you to have the courage, convictions, and perseverance to chase your dreams Even if you want to be a princess with a pet unicorn – Mun Hong DISCLAIMER A ll views or opinions articulated in this book are expressed in the Authors’ personal capacity and not in any way represent those of the company, their employers and other related entities This book is based on the study and research of the Authors, and represents the written collection of the Authors’ opinions and ideas As such, the information in this book are for educational purposes and/or for study or research only For all intents and purposes, the contents of this book are not intended to be, and does not constitute financial, investment or any other form of advice or recommendations to buy or sell any shares, securities or other instruments Information used in the publication of this book has been compiled from publicly available sources that are believed to be reliable Hence, the Authors not take responsibility for any factual inaccuracies made Any expression of opinion (which may be subject to change without notice) is personal to the Authors, and the Authors make no guarantee of any sort regarding the accuracy or completeness of any information or analysis supplied It is also important to bear in mind that any investment involves the taking of substantial risks, including but not limited to the complete loss of capital The Authors not take responsibility whatsoever for any loss or damage of any kind incurred from the views or opinions articulated in this book Finally, it goes without saying that the Authors’ views and opinions should never be regarded by the readers as a substitute for the ­exercise of their own judgement As every investor has different investment objectives, goals, strategies, risk tolerances, time frames and financial situation, you are advised to perform your own independent checks, research or study before making any investment decisions Always remember, YOU are ultimately responsible for your own investments Note: The Authors have investment positions in some of the companies discussed in this book vii Contents Disclaimer vii Foreword xiii Preface xv Acknowledgments xix About the Authors Chapter xxi Value Investing in Asia Finding Value The Investor and the Market Why Value Investing Works Three Types of Value to Be Found Chapter Key Developments in Asia 11 What Is in Asia? What Has Happened in Asia? Chapter Uniquely Asia 31 What Asia Has Going for It Corporate Governance in Asia Shareholder Structure Succession ix x Contents Disclosure and Transparency “Smart” Money Gets Hit Too Government – The Elephant in the Room Don’t Bet Your House on Legal Prosecution Activism and Shorting Chapter The Future of Investing in Asia 75 ASEAN, Pushing Ahead The Wall Street of Asia From ‘‘Guanxi’’ to Transparency The Future of Healthcare The Asian Consumer Story Lives On Chapter Using the Right Process 89 Asset Value Current Earning Power Value Growth Value Special Situations Narrow Your Search – Screening Screen Your Screens The 5-Fingers Rule The Importance of the 5-Fingers Rule Chapter Research Like a Businessman 115 Getting the Right Data Annual Reports Are Your Best Friend Making Sense of an Annual Report Don’t Stop at One Why Should I Read a Competitor’s Annual Report? Who Do I Speak To? It is More Than Just the Numbers Chapter Finding Red Flags What are Red Flags? Auditor’s Opinion Financial Red Flags Non-Financial Red Flags 141 Contents xi Chapter Three Simple Valuation Techniques to Live By 161 Price-to-Book Ratio Price-to-Earnings Ratio Discounted Cash Flow Always Remember Your Margin of Safety Chapter How Everything Comes Together 185 Value Through Assets – Hongkong Land Holdings Limited Current Earning Power – Tingyi (Cayman Islands) Holdings Corporation Growth in Cyclicality – First Resources Limited Special Situation – Dalian Wanda Commercial Properties Co., Limited High Growth – Tencent Holdings Limited Conclusion 221 Interviews 225 An Interview with Wong Kok Hoi of APS Asset Management An Interview with Tan Chong Koay of Pheim Asset Management An Interview with Wong Seak Eng, Kevin Tok and Eric Kong of Aggregate Asset ­Management An Interview with Yeo Seng Chong of Yeoman Capital Management An Interview with David Kuo of Motley Fool Singapore Index 265 Foreword E veryone wants to buy a dollar-worth of assets for 50 cents That is at the very heart of value investing – to buy an asset at a price that could be valued at significantly more But what exactly is value? Are they always shares that are trading below the sum of their net assets? Or are they shares in stable companies that have been underappreciated by the market? There is another way of looking at value – they could be shares in fast-growing companies where the potential for growth has been underestimated for a variety of reasons The concept of separating price and value is handled with surgical precision by Lim Peir Shenq and Cheong Mun Hong They draw on their vast stock market experience to take readers on a whistlestop tour around six Asian bourses in search of value investments They touch on the thorny topic of corporate governance and why it should matter when we invest Peir Shenq and Mun Hong pay special attention to the use of strategies While there is no one-size-fits-all approach for value investing, the use of a consistent approach to identifying value cannot be stressed strongly enough In other words, if you don’t know what you are looking for, then how can you possibly know when you have found it? The two writers cleverly categorise value under three main headings, namely, asset value, current earning power value and growth value Through a step-by-step process, they provide a useful guide to help readers to understand the different ways to identify value and when a company could be considered to be undervalued There is also a useful discussion of screens and how they can be used with good effect to help separate out the wheat from the chaff Peir Shenq and Mun Hong also provide some useful tips on how to reduce the number of shares that need to be filtered xiii xiv Foreword The 5-Finger Rule is a clever way that they have developed to remember the basics of investing, and not just value investing The rule behind the Rule is that an investor should only consider investigating a business further if it fulfills at least half the criteria There is a very instructive chapter on how to read annual reports Most investors can find the once-a-year tome from companies quite a chore to plough through But Peir Shenq and Mun Hong show you how to get to the nub of any report quickly What exactly should we look out for when we read the letter to shareholders? How honest and candid is the letter? Does it tell shareholders everything that has gone on at the company, warts and all? The two writers pepper the book generously with real examples that readers can use as case studies for their own investments This is not just a book about value investing Instead, it is a manual for value investing with an Asian twist that investors with an eye on the ­fastest-growing region in the world will reach for whenever they have ­questions that need answers David Kuo CEO, The Motley Fool Singapore Pte Ltd • • • • • • Interviews 259 strong balance sheet, preferably in net cash good return on equity history no major losses in its operating history has a history of positive free cash flow has a long listing history no history of large dilution to shareholders Once they have found a shortlist of companies to investigate further, Mr Yeo starts looking into more qualitative measures This includes looking at the ability of the management He prefers companies with a strong leader, someone with a long-term vision of the company Mr Yeo avoids companies with directors who have ­questionable backgrounds As regards what type of companies or industries Mr Yeo avoids, he replied that it is simply the opposite of what he screened for in a company Companies with high capital expenditure, low return on equity and who not pay a dividend not make the cut into his shortlist One industry that is notorious for possessing some of these traits is the airline industry Due to the large number of stocks in his portfolio (ranging from 60–80 securities), Mr Yeo tends to avoid interacting too much with the managements He likes to let the data speak for itself; interacting too much with the management might result in more noise ­However, if possible, the team will still schedule a company visit Mr Yeo is very careful when it comes to asset sizing He normally allocates a portfolio weight of between 0.5% and 1.5% to each stock selected From then on, he will only add to the position after monitoring its performance and management performance for a few reporting periods When to Sell a Stock The average holding period for Yeoman Capital is around five years So when does he sell a company? For Mr Yeo, there might be a few reasons For one, he would definitely sell out an investment if he comes to the realisation that a mistake was made Possible mistakes include investing in a fraudulent company or finding that the thesis of the investment did not pan out He would also consider selling when a company reaches its full value or when a better opportunity comes along Mr Yeo commented that “Everybody wants to get a prestigious name such as Apple or 260 Interviews Google in their portfolio and they will pay any price, any valuation to get their wish, but a good business at a high price or high valuation does not always mean a good investment, in my opinion.” Therefore, he has thought out this 3-Rights strategy, which has served him well so far On What Makes Asia Unique One key reason why Mr Yeo does not hold on to his investment for a very long term (i.e forever), as preached by legendary investor Warren Buffett, is due to the business environment in Asia Asia by itself is a very diverse market, it is not just one big market Cultures are very different when we compare country to country For instance, in heavily populated places such as India and China, not only is there a ­difference in culture between regions, even the language used might not be the same! Therefore, it is much harder for companies in Asia to duplicate their business model and scale up, as many ­companies in places like the United States of America Because of this, Mr Yeo felt that selling out of a fully valued ­company and investing back into another undervalued stock is the right way to address the situation here Advice for New Investors Before leaving his office, we asked Mr Yeo for his advice to investors He gave the question some thought and responded that it is very important for investors to their own research instead of relying on others Doing our own research allows us to gain a better understanding of the company Not only that, this process will also enable us to improve our investing skill and it will give us more confidence if we are to invest in the company In parting, Mr Yeo added, “Don’t rely too much on projections, projections tell more about the projector than the future” For further information, readers may look up the company’s website at www.yeomancap.com An Interview with David Kuo of Motley Fool Singapore I Know what you buy and why you buy them — Dr David Kuo n October 2014, in a crowded and noisy Chinese restaurant, we sat down with the Chief Executive Officer of The Motley Fool ­Singapore, Dr David Kuo The Motley Fool Singapore is a registered investment advisor with the Monetary Authority of Singapore (MAS) The company provides free investing education articles and paid stock ­recommendations to subscribing members through its website, http://www.fool.sg The Motley Fool is an international investment advisor, started from the United States by co‐founders Tom and David Gardner Today, The Motley Fool has offices in the US, Canada, United ­Kingdom, Germany, Australia and Singapore Dr Kuo has been with The Motley Fool UK for more than 16 years before coming back to Singapore to kick‐start the first Asian office for The Motley Fool Dr Kuo also appears regularly in the media, speaking about his views on the market and investing He is well‐known to have a unique way of describing investing, filled with unforgettable metaphors and funny stories He started late in becoming an investor He only started active investing after he completed his PhD in Chemistry Even after that, Dr Kuo admitted that he made many mistakes along the way before finding the investment style that suits him best; being an income investor We talked to Dr Kuo about his investment style and what he thinks of investing in Asia Dr Kuo often describes himself as an income investor This means that he is focused on dividend‐paying companies He looks for companies with strong cash flow generation and tends to avoid commodity‐like businesses 261 Value Investing in Asia: The Definitive Guide to Investing in Asia, First Edition., Stanley Lim Peir Shenq and Cheong Mun Hong © 2018 Stanley Lim Peir Shenq and Cheong Mun Hong Published 2018 by John Wiley & Sons, Ltd 262 Interviews We asked Dr Kuo to describe more about his investment process and how he generates investment ideas According to him, as he is a strict dividend investor, he tends to look for stocks with high dividend and then analyse if the dividend is sustainable If the same company is something with a low price‐to‐book ratio, all the better He commonly values his investment based on the dividend discount model or using ratios like the price‐to‐earnings or price‐to‐book That is why in Asia, he is particularly interested in the Real Estate Investment Trust (REIT) market, given their higher yield and recurring revenue model We asked for his view about what would he consider to be his most‐ or least‐preferred type of investments Dr Kuo stated that he does not believe in finding the best investment in the market This is because it is impossible for an investor to know which investment will end up giving them the best return This is why he emphasises diversification It is important for any investor to have a diversified portfolio so that they will not be caught out by huge losses just because one sector or company is not doing well Having said that, Dr Kuo tries to avoid commodity‐like business, as he feels that these businesses not have pricing power in their products and might easily be affected by macro factors As Dr Kuo has generally invested in the European market in the past, we wanted to know what he thinks is the key difference between Asian companies and companies from the western markets Dr Kuo replied that he does not feel that there is a huge difference between the two However, in Asia, there are still many companies that have majority shareholders with an extremely large stake This means that these major shareholders might be too big, implying that there is little need for them to prioritise the interests of minority shareholders Investors in Asia need to be aware of this For Dr Kuo, he avoids such companies altogether We wondered if he felt that it is a challenge for Asian firms to expand outside of their home countries due to the rich cultural diversity in Asia However, Dr Kuo does not see it this way Instead, he felt that expanding regionally or even internationally is not a barrier to Asian firms Most companies that have successfully globalised, he observed, require a very strong local base before they can attempt to expand outside their home countries One example is the banks in Singapore Although all three Singapore‐based banks can be considered as regional banks, they are extremely dominant in Singapore, which gave them the resources and confidence to v­ enture overseas Interviews 263 Given his experienced investing in multiple markets, we sought his opinion on what he thinks are the key misconceptions about investing in Asia With a cheeky smile, he replied that people still see the Asian market as a big casino Moreover, he felt that many investors still tend to believe that there is a secret formula that can make us a great investor straight away Dr Kuo believes that it is very important for investors to understand that there are no magic formulas The market will reward you if you are disciplined enough in your process and have a long-term horizon to your investment In our research, we came across many companies listed in Asia that are almost perpetually trading at a huge discount in terms of their book value We sought Dr Kuo’s advice on why he feels this is happening Dr Kuo described these companies as value traps He reminded us that not all “cheap” companies are great investments Many of them are traps for investors and we should avoid them He said common reasons for their perpetual discounts can vary, but typically some of these companies might have issues including very poor liquidity, no growth or cases where the main shareholders have such a large stake in the company that minority investors would be completely at their mercy We learned a great deal during our two-hour chat with him Before we parted, we asked if he has some advice for investors who just starting out David thought about that question for a while and gave us four investing tips we can all live by: Know why you buy and what you buy Start an investing diary to keep track of your thoughts and reasons for investing in a company Refer to it regularly to see how your thought process changes Be patient with investing Study, understand and hold your investment for the long term Do not rush into an investment Always invest with your spare cash Do not invest with leverage or cash that you might need in the next few months Index 3M Company 215 auditor opinion 121–2 balance sheet 123, 144 Checklist 128–9 competitor’s 129–30 directors and key management 126 Financial Statements 122–4, 143 Letter to Shareholders 118–19 management discussion and analysis (MD&A; Operational and Financial Review in Asia) 119–21 Notes to Financial Statement 124–5, 144 past decisions in 127–8 shareholders 126–7 Anonymous Analytics 144, 154 Anta Sports Products Limited 16, 145 Apple Inc 9, 25, 215 APS Asset Management Private Limited 89, 157, 225–36 advice to investors 236 Asia’s investment outlook 234 awards 226 company visits 232–4 “Four Alpha‐Hats” Investment Approach 227–9 APS hat 229 Benjamin Graham hat 228 Businessman hat 228 Sherlock Holmes hat 228–9, 235 investment process 229–32 long‐only strategies 226 long‐short strategies 226 on market exuberance 236 on reviewing of positions 235 on spotting red flags 235 on transparency and disclosures 236 5‐Fingers Rule 106–10, 115, 133 ABCD companies 19 Aberdeen Asset Management Asia Limited 89 ABR Holding Limited 83 Ackman, Bill 64 Activision Blizzard Inc 26, 213 activism 64–6 Adidas AG 18 Aggregate Asset Management 251–5 detecting red flags 254 investment process 252‐3 investment strategy 252 investment universe 253–4 investors’ advice 255 on what makes Asia unique 254 when to sell stocks 254 Agricultural Bank of China Limited (“ABC”) 78 AIA Group 251 AirAsia Berhad 54–5, 132 Airports of Thailand Public Company 14, 60 Ajinomoto Malaysia Berhad 132 Alibaba Group Holding Limited 24–6, 210 alpha 227–8, 230–31, 235 combinations 232 Alphabet Inc (Google) 213 Amazon 235 Anhui Conch Cement Company Limited 19 Annual Reports 117–27, 143 265 Value Investing in Asia: The Definitive Guide to Investing in Asia, First Edition., Stanley Lim Peir Shenq and Cheong Mun Hong © 2018 Stanley Lim Peir Shenq and Cheong Mun Hong Published 2018 by John Wiley & Sons, Ltd 266 Index Aquascutum 16 Arab‐Malaysian Merchant Bank 237 Archer Daniels Midland Company 19 Arthur Andersen 121 Asahi Breweries Limited 196 Ascendas Real Estate Investment Trust 22 ASEAN 34, 36, 37, 76–7, 245 ASEAN economic community (AEC) 34 A‐Shares 12, 98, 226 Asia consumer story 34 Asia Infrastructure Investment Bank (AIIB) 36 Asia Pacific Breweries Limited 99, 101 Asia Unit Trusts Bhd 237 Asian Development Bank 34 Asian Financial Crisis 239 Asian Plantations Limited 203 asset enhancement initiatives 21 asset value 8, 90, 91–5 Association of Southeast Asian Nations see ASEAN Auchan 35 auditor opinion 121–2 Aung San Suu Kyi 77 Autonomy 58 available‐for‐sale financial assets (AFS) 164–5 Baidu Inc 9, 24, 210 balance sheet 123, 144 Bank of China Limited 12, 78 Barry Callebaut AG 169 BAT 210 Belle International Holdings Limited 83 Bennedsen, Morten and Joseph Fan: Family Business Map, The 40 Berkshire Hathaway Inc 16, 118, 197 Bintang Retail Industries 134 Black Monday crash (1987) 237 Blackrock Inc 207, 208 Block, Carson 66 Bloomberg 105 116 Bolton, Anthony 58, 59 Bossini International Holdings Limited 147 Bottega Veneta 15 bottom-up approach 106, 227, 252 Breadtalk Group Limited 83 Brookstone 168 Buffett, Warren 2, 3, 8, 16, 108, 118, 142, 180 Bulgari 15 Bumitama Agri Limited 200, 202 Bunge Limited 19 Burger King 36 Bursa Malaysia Berhad 13 BYD Company Limited 105 Café de Coral Holdings Limited 173 CapitaLand Commercial Trust 22 CapitaLand Limited 13, 22 CapitaLand Mall Trust 22, 47–51, 83 Cargill, Inc 19 Carlsberg Brewery Malaysia Berhad 136 Cartier 15 cash flow statement 123, 144 Caterpillar Inc 58 Centrepoint Properties Limited 257 Channel News Asia 116 Chaoda Modern Agriculture (Holdings) Limited 154 Cheah Cheng Hye 2, 89 China Animal Healthcare Limited 155–6 China Construction Bank Corporation (“CCB”) 78 China Holdings Limited 196 China Integrated Energy, Inc 58 China Life Insurance Company Limited 208 China Mengniu Dairy Company Limited 104 China National Offshore Oil Corporation Limited 12 China Petroleum & Chemical Corp (Sinopec Limited) 20 China Securities Regulatory Commission 12, 78 Index 267 Chinese consumers, growth in 14–18 Chinese stock market crash (2015) 98 Chow Sang Sang Holdings International Limited 105 Chow Tai Fook Jewellery Group Limited 80, 105 Chowking and Greenwich 35–6 cigar–butt investing 91 CIMB Group Holdings Berhad 59 Cirque du Soleil 82 Citibank Hong Kong 225 Citigroup Inc 208, 209 Cititrust Japan 225 City Development Limited 22, 39 CK Hutchison Holdings Limited 12, 39 Clash of Clans 26 Club Med 82 CNBC 116 CNOOC Limited 20 Coca-Cola Company, The 16, 35, 197 Coca-Cola Company for Singapore and Malaysia, The 101 ComfortDelGro Corporation Limited 60, 132 commodity supercycle 18–20 Compagnie Financière Richemont SA 15 consumer staples 35 consumers 82–4 Chinese 14–18 consumption, increasing 34–6 Cordlife Group Limited 82 corporate governance 38 Cross-Harbour Holdings Limited, The 96–8 cross-shareholdings 41 current earning power value 90, 96–8 current earning value 8–9 Dairy Farm International Holdings Limited 84, 133–5 Dali Foods Group Company Limited 104 Dalian Wanda Commercial Properties Company Limited 186, 206–9 data external sources 116–17 internal sources 117 trusting 131–3 Dato’ Chin Chan Leong 63 decision matrix 116 Del Monte Pacific Limited 151–2 Deng Xiaoping 31 ‘Open Door Policy’ 14 Diageo Plc 135 Dialog Group Berhad 244 Didi Chuxing 213 Dimon, Jamie 78 Din Tai Fung 83 directors 126 disclosure 46–7 discounted cash flow (DCF) 162, 175–80 utility of 179–80 Disneyland 197 dividend discount model 176, 262 Dodd, David dotcom bubble 98 Dunhill 15 DuPont formula 150 Dutch Lady Milk Industries Berhad 132 Dynamic alpha 227, 230–31, 235 earnings before interests and tax (EBIT) 151 earnings yield (E/P) 167 economic alpha 228, 231 Edge, The (Singapore and Malaysia) 116 efficient market hypothesis Eight Capital Inc 205 Einhorn, David Electronic Arts Inc 212, 213 Enron Corp 66, 121 ERA Mining Machinery Limited 58 Eratat Lifestyle Limited 55, 56–7, 153 expected growth Ezion Holdings Limited 20 Ezra Holdings Limited 20 268 Index Facebook Inc 25, 178, 213 Facebook Messenger 210 Factset 116 Fairwood Holdings Limited 173–174 Felda Global Ventures Berhad 203 FerroChina Limited 55 Fidelity China Special Situations 58 Fidelity Special Situations 58 Financial Statements 122–4, 143 Financial Times 105 Financial Times Equity Screener 103, 105, 188 First Pacific Company Limited 39 First Real Estate Investment Trust 39 First Resources Limited 186, 199–209 Fisher, Philip: Common Stocks and Uncommon Profits 110, 129–30 Food Empire Holdings Limited 137 Fosun International Limited 82 Fountain View Development Berhad 63 Franklin, Benjamin 221 Fraser and Neave, Limited 77, 100–2 Frasers Centrepoint Limited 101 Fullerton Healthcare Corporation Limited 82 Fung, Spencer 44 Fung, William 44, 45 GAPL Private Limited, 135 Gardner, Tom and David 261 Geahin Engineering Berhad 242–3 Geithner, Timothy Stress Tests: Reflections on Financial Crises Genting Berhad 40–41 Genting Malaysia Berhad 40–41 Genting Plantations Berhad 40 Genting Singapore PLC 41 Gieves & Hawkes 16 Gilead Sciences, Inc 81 Global Brands Group Holdings Limited 45 Global Financial Crisis (2008) 5, 15, 18, 78, 99 Global Yellow Pages Limited 177–8 Golden Agri-Resources Limited 13, 200 goodwill 39, 166, 187 Google Finance 105 Google Finance Stock Screener 103 Google Inc 25, 32, 116, 178 Gordon Growth Model see dividend discount model government 59–60 Government of Singapore Investment Corporation (GIC) 238 Graham, Benjamin 180 Intelligent Investor, The (with David Dodd) 3, 4, 8, 214 Security Analysis (with David Dodd) 1, 8, 91 Great Group Holdings Limited 122 Greenblatt, Joel Greenwald, Bruce Competition Demystified 195 Value Investing: From Graham to Buffett and Beyond 90 growth value 90, 98–100 Guanxi 79–80 Guinness Anchor Berhad see Heineken Malaysia Berhad Guppy, Daryl 33 H.J Heinz Company 16 Hana Microelectronics 243 Hang Seng Index 12 Hanjin Shipping Co., Limited 151 Harvey Norman Holdings Limited 235 Haw Par Corporation Limited 147–8, 163–6 adjusted shareholders’ equity 165–6 assets 163–4 available-for-sale financial assets (AFS) 164–5 cash 164 investment properties 165 liabilities 165 utiity of P/B method 166 healthcare 81–2 Index 269 Heineken Holding N.V 99 Heineken Malaysia Berhad (previously Guinness Anchor Berhad) 99–100, 135–6 Heineken N.V 101 Hengan International Group Company Limited 36, 132, 195 Hengdeli Holdings Limited 80, 105 Hewlett-Packard 58 Hiew Yoke Lan 63 high-yield (junk) bonds 24 Ho, Stanley 39, 43–4 Hong Kong Stock Exchange (HKEX) 2, 11–12, 15–16 Hong Leong Group 39 Hongkong Land Holdings Limited 41–42, 133, 186–93 hostile takeovers 65 Hour Glass Limited (SGX), The 132 HSBC Holding PLC (Hong Kong) 12 H-Shares 12, 207, 208 Hua Han Health Industry Holdings Limited 164 Huabao International Holdings Limited 144, 145 Huawei Technologies Co Limited 24, 25 Hush Puppies 102 Hutchison Port Holdings Trust 13 Hyundai Motor Company 84 IBM Corp 24, 25 Icahn, Carl 64 IHH Healthcare Berhad 59, 82 Inari Amertron Bhd 244 income statement 123, 144 Indofood Agri Resources Limited 202 Industrial and Commercial Bank of China (ICBC) 78 infrastructure 36–8 Initial Public Offerings (IPO) 122, 173, 208, 242–6, 254 InnoPac Holdings Limited 146, 149–50 intangible assets 154, 166, 187 intellectual property 166 interest coverage ratio 151 International Healthway Corporation Limited 82 investment vs speculation 1–2 IOI Corporation Berhad 200, 203 ISEC Healthcare Limited 82 Itochu Corporation 196 Jardine Group 41, 42, 192 Jardine Matheson Group 133, 134, 186, 188 Jardine Matheson Holdings Limited 41–2 Jardine Strategic Holdings Limited 41, 192 Jayaraman, Bobby: Building Wealth Through REITS 24 JD.com 213 Jollibee Foods Corporation 35, 36 JP Morgan Chase & Co 78 Jutaria Gemilang Sdn Berhad 134 Kabushiki mochiai (mutual aid shareholdings; crossshareholdings) 41 Kahn, Irving Kentucky Fried Chicken (KFC) 16, 47 Keppel Corporation Limited 20, 22, 59 Keppel DC REIT 22 Kering 15 Kerry Group 39 Kewalram Chanrai Group 66 Khazanah Nasional Berhad 59 Kingboard Copper Foil Holdings Limited 156–7 Kirin Holdings Company, Limited 101 KKR & Co 151 KLSE Screener Mobile App 103 Kong, Eric 257–61 Korea Fair Trade Commission 42 Kraft Food 16 Kuala Lumpur Composite Index 13 Kuala Lumpur Kepong Berhad 200 270 Index Kuala Lumpur Stock Exchange 13 Kuo, David 261–4 Kuok, Robert 20, 39 Kuwait Investment Authority 208 Kweichow Moutai Co., Limited (SHSE) 132, 211 Land Transport Authority of Singapore 170 large-cap stocks Lee Foundation 40 Lenovo Group Limited 24, 25, 84 Letter to Shareholders 118–19 leveraged buy-out 152 LG Corporation 84 Li & Fung Limited 44 Li Ka-shing 39 Li Ning Co Limited 16, 18, 145 Lippo Group 39 Loeb, Daniel 64 London Metal Exchange 11 Louis Dreyfus Company 19 Louis Vuitton 15 Lucky Supermarket 134 Luk Fook Holdings (International) Limited 105 LVMH Moët Hennessy Louis Vuitton SE 15 Lynch, Peter 135, 138, 213 Ma, Jack 75 Ma Huateng 210, 213 Malayan Breweries Limited (now Asia Pacific Breweries Limited) 101 management discussion and analysis (MD&A) 119–21 margin of safety 5–7, 180–2, 253 Marks, Howard 5, Most Important Thing Illuminated, The 203, 204 Mars Incorporated 199 Master Kong brand 16 McDonald’s Corporation 35 MCP Supermarket 134 Metech International Limited 122 Metro Holdings Limited 257 Microsoft Corporation 211, 213 Moët & Chandon 15 Mondelez International 199 Monetary Authority of Singapore (MAS) 261 Montblanc 15 Morgan, John Pierpont (J.P.) Morningstar 105 mortgage mispricing 117 Motley Fool Singapore 261–4 Muddy Waters LLC 66–8 Myanmar market 76–7 Naspers Limited 213 National Basketball Association 212 Nestlé (Malaysia) Berhad 137, 178–9 Nestlé SA 32 net property income (NPI) 49 Netflix, Inc 213 New Britain Palm Oil Limited 203 Ng Chin Siau, Dr 31 Nike Inc 16, 56 Nissan Motor Corporation Limited 84 Noble Group Limited 171 non-performing loan (NPL) ratio 234 Nooyi, Indra 194 Notes to Financial Statement 124–5, 144 Novartis AG 81 oil crisis (2015) 108 Olam International Limited 19, 66–8, 171 Old Chang Kee Limited 83 Old Town Berhad 137 Olympic Games, Beijing (2008) 17, 233 one belt one road initiative 36 online advertising 212 Operational and Financial Review 119–21 Opportunistic alpha 228 Orient Overseas (International Ltd) (OOIL) Oriental Century Limited 55 Index 271 OSIM International Limited 168–9 OTO Holdings Limited now Tempus Holdings Limited) 91–5 OUE Limited 39 Oversea-Chinese Banking Corporation 40, 101 Overseas Union Enterprise Limited 101 Oversea-Chinese Banking Corporation Limited 39, 44 PACC Offshore Services Holdings Limited 20 Paulson & Co 66 Paypal Holdings Inc 213 PepsiCo, Inc 16, 193–8 Perennial Real Estate Holdings Limited 82 Petra Foods Limited (now Delfi Limited) 169 PetroChina Company Limited 12, 20 Petroliam Nasional Berhad (PETRONAS) 20 Pfizer Inc 81 Pheim Asset Management 2, 89, 237–49 funds 240–1 unique qualities of 239 Pheim Asset Management (Asia) Pte Ltd 237 Pheim Asset Management Sdn Bhd 237 Ping An Insurance (Group) Company of China Limited 12 Pizza Hut 17 political risk 59–60 Popham, Peter: Lady and the General, The 76 population China 81, 83 Indonesia 83, 84 Japan 81 Malaysia 83 Philippines 83 Vietnam 83, 84 Power Root Berhad 137 Prada S.p.A 15, 105 price-to-book ratios 106, 162, 163–6, 192, 262 price-to-earnings ratio 106, 162, 166–75, 231, 262 earnings 168–9 factors affecting valuation 170–1 future earnings 173 low 171–5 multiple 169–70 price-to-earnings multiples 231 Procter & Gamble Company 35, 209 property valuation 162 Prudential Asset Management (Singapore) Limited 101 PSE Composite Index 76 PT Astra Agro Lestari Tbk 244 PT Hero Supermarket 134 PT Salim Ivomas Pratama Tbk 202 PT Tempo Scan Pacific Tbk 244 PTT Public Company Limited 13, 60 Pua Seck Guan 126 Public Bank Berhad 13 Q & M Dental Group (Singapore) Limited 31, 82, 132 QQ 210 Raffles Medical Group Limited 82 Rappaport, Alfred: Creating Shareholder Value: A Guide for Managers and Investors 145 Real Estate Investment Trust (“REIT”) 21–2, 47–9, 51, 83, 126–7, 262 red flags 141–58 auditor’s opinion 143 checklist 158 definition 142–3 financial 143–53 abnormally high margins 144 assets 144 companies in a dilutive mood 148–50 consistent excessive fair value gains 147–8 272 Index red flags (Continued) inventory growing faster than revenue 146–7 leverage 150–2 profits 144 seemingly unnecessary borrowings 152–3 trade receivables growing faster than revenue 145–7 non-financial 153–7 company’s officers 154 infamous directors and major shareholders 155 innovative business deals 157 related party transactions 156–7 stock tips 157 substantial shareholders 156 vanishing financial documents 155–6 relative valuation 169, 175 research and development (“R&D”) 196 return on equity (ROE) 109, 150 Rockowitz, Bruce 44 Rose Pharmacy 134 RT-Mart 35 Rustan Supermarket 134 S&P Capital IQ 105, 116 Saint Laurent Paris 15 Samsonite International S.A 49–54, 83 Samsung Card Co Limited 42 Samsung Electronics Co Limited 25, 42, 84 Samsung Everland Inc (currently Cheil Industries Inc.) 42 Samsung Group 42–3 Samsung Life Insurance Co Limited 42 Sands China Limited 132 Sanyo Foods Co., Ltd 196, 197 Saudi Arabian Oil Company (Saudi Aramco) 20 S-chips 55–6 Schloss, Walter 2, 181 screening 102–6 scuttlebutt 129 Seeking Alpha 116 SembCorp Industries Limited 257 Sembcorp Marine Limited 20 SGX Stockfacts 103 Shanghai Disney Resort 193 Shanghai Disneyland 16 Shanghai Index 78 Shanghai Stock Exchange 12 Shanghai–Hong Kong Stock Connect 12, 79 Shangri-la Asia Limited 39 shareholder structure 38–43 shareholders 126–7 Sheng Siong Group Limited 167 Shenzhen International Holdings Limited 231 Shenzhen Stock Exchange 12 short-selling 64–6 Siam Cement Public Company 14 Sime Darby Berhad 13, 19, 200, 203 Singapore Airlines Limited 59 Singapore Exchange Limited 12, 13 Singapore Investment Corporation 225 Singapore Medical Group Limited 82 Singapore O&G Limited 82 Singapore Press Holdings Limited 22 Singapore Stock Exchange (SGX) 12–13 Singapore Technologies Industrial Corp 257 Singapore Telecommunications Limited 5, 59 Sino Techfibre Limited 155 Sino-Forest 66 Sirivadhanabhakdi, Charoen 100 small-cap stocks SMRT Corporation Limited 60–2, 170 Sony Corporation 84 South China Morning Post 116 South East Asia Development Corporation 237 SPDR Straits Times Index ETF 189 Spier, Guy Index 273 Starbucks 197 State Grid Corporation of China 37 statements of changes in equity: 123 State-owned Enterprise (SOE) 60 stewardship 65 Stock Exchange of Malaysia 13 Stock Exchange of Thailand (SET) 13–14 Stockhut Mobile App 103 Straits Times Index 13, 22 Structural alpha 227, 230 Studwell, Joe: Asian Godfathers 39 succession 43–6 Sun Art Retail Group Limited 35 Sun Hung Kai & Co Limited 57 Super Group Limited 120, 137–8 Supercell Oy 26, 213 Swensen’s, Singapore 83 Swire Group 12 Swire Pacific Limited 12 SWOT 119–20 Taco Bell 17 Talkmed Group Limited 82 Tan Chin Hwee and Thomas R Robinson: Asian Financial Statement Analysis 157 Tan Chong Koay 2, 89, 237–49 advice to investors 248–9 awards 238 investment philosophy 241–2 investment process 242 investment universe 244 on Asia vs US investing 246 on company visits 246–7 on corporate governance in Asia 247 on exchange-traded funds (ETF) 247–8 on market timing 244–5 on what makes Asia unique 245–6 Rising Above Financial Storms 237 see also Pheim Asset Management Tan Sri Lim Kok Thay 40 Tao Heung Holdings Limited 173 TaoKaeNoi Food & Marketing PCL 132 Target Asset Management Private Limited 2, 89 Temasek Holdings (Private) Limited 59, 60, 62, 66–8 Tenaga Nasional Berhad 13, 59 Tencent Holdings Limited 12, 24, 170, 177, 186, 210–14 Riot Games 26 League of Legends 26 Teng Ngiek Lian 2, 89 Thai Beverage Public Company Limited 13, 100 Thein Sein 77 Thomas Cook 82 Thompson, Klay 16 Thomson Reuters 105, 116 Tianhe Chemicals Group Limited 122 Timberland 102 Tingyi (Cayman Islands) Holding Corporation 16, 35, 104, 186, 193–8 Tingyi-Asahi Beverage Holding Co., Ltd 198 Tok, Kevin 251–255 top-down approach 41, 75, 193, 245 Toyota Motor Corporation 84 Tracker Fund of Hong Kong 189–90 Tradewinds Plantation Berhad 203 transparency 46–7 Trinity Limited 16 Tsingtao Brewery Company Limited 104 Tsui Wah Holdings Limited 173, 174 Tumi Holdings, Inc 52 Twitter 25 Unico-Desa Plantations Berhad 203 Unilever 32, 199 Uni-President China Holdings Limited 16, 104 Unisem (M) Berhad 243, 244 United Industrial Corporation Limited 164 274 Index United Overseas Bank Limited 39, 147, 164, 251 UOL Group Limited 164 US Del Monte Foods, Inc 151 valuation 161–82 Value Chambers 116 value investors Value Investors Club 116 Value Partners Group Limited 2, 89 Value-added Services 212 Venustech Group Inc 230 Vietnam Dairy Products JSC, - known as Vinamilk 77 Vitasoy International Holdings Limited 83, 104 volatility Wade, Dwyane 16 Wal-Mart Stores Inc 35 Walt Disney Co 193 Walter & Edwin Schloss Associates LP 109 Wang Jianlin 208 Want Want China Holdings Limited 104, 124–5, 171–2, 195 WeChat 210 Wei Ing-Chou 194, 196 Western Harbour Tunnel Company Limited 97 Whatsapp 213 Williams, John Burr Theory of Investment Value, The Wilmar International Limited 19, 39, 126, 171, 200 Wong Kok Hoi 89, 157, 225–36 advice to investors 236 on Asia’s investment outlook 234 on banking sector 234–5 on “Four Alpha-Hats” Investment Approach 227–8 on market exuberance 236 on reviewing of positions 235 on spotting red flags 235 on transparency and disclosures 236 see also APS Asset Management Wong Seak Eng 251–5 World Trade Organization 14 Xi Jinping 80, 238 Xiaomi Corp 25 Xtep International Holdings Limited 16 Yahoo Finance 105 Yamada Green Resources Limited 178 Yangon Stock Exchange 77 Yeh V-Nee Yeo Seng Chong 89, 257–60 Yeo Yong-Boon, George 126 Yeoman Capital Management Private Limited 89, 257–60 “3-Rights” approach 258, 260 advice for new investors 260 investment philosophy and strategy 257–8 investment process 258–9 on what makes Asia unique 260 when to sell a stock 259–60 YGM Trading Limited 16 Yoma Strategic Holdings Limited 77 Yonghui Superstores Co., Limited 134 Young, Hugh 89 Yum! 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