Below are some portfolio highlights and commentary from the Coupland Cardiff funds for May:
CC Asia Focus
- After tracking sideways for 18 months, the share price of TK Group rose 30% in the month following the issuance of a positive profit warning.
- Remains a long term holding of the fund on account of its high quality customer base, superior moulding technology and strong growth prospects for the company in the auto and tech sectors.
- Shares still trade at a ~11.3x earnings multiple, for a high ROE company that should grow profits at a mid-teens rate over the next few years. Shares yield 4.6%.
- TK Group has been one of my portfolio holdings since January this year, although I have trimmed the position recently. See more commentary here and here.
- Finetex is a Korea-listed company that operates in the nanofiber and renewable energy industry.
- Share price has fallen ~16% in June alone and ~25% YTD. Weakness can be attributed to uninspiring first quarter numbers and poor communication from a management team that is still new to investor relations.
- Communication issues are being addressed, orders have been picking up and management has been buying shares on the open market. Scale of the opportunity should become clear from the second quarter onward.
CC Asian Evolution
- Was a new addition to the portfolio in April. Share price rose ~21% in May following some signs of a turnaround (see below), but still has a long way to run in their view.
- Company had expanded aggressively to over 1,000 outlets across the region but at the expense of profitability. New management is more focused on margins and cash flow.
- Shares are trading at 0.7x EV/Sales; further value could be unlocked via non-core asset sales.