Brief highlights below (paraphrased):
- NAV rose by 1.6% in April and the fund is now up 17.6% YTD. 40% of the portfolio is in real estate and >40% is invested in Hong Kong. Average valuation is 8.2x price to earnings, 1.0x price to book with a gross dividend yield of 5.8%.
- Top five current holdings are (in order): Yuzhou Properties, Croesus Retail Trust, Rural Electrification, Skyworth Digital and National Aluminium.
- Company commentary:
- Croesus Retail Trust, the SGX-listed operator of Japanese malls, was approached recently with an offer to purchase all of its assets. Shares were up 10% for the month and an acceptable formal offer will still need to be 10-15% higher than where the share price is now.
- Skyworth Digital’s Shenzhen subsidiary announced a negative profit alert for Q1. Unit is the market leading manufacturer of set top boxes in China. Division management expects first quarter profits to be down by 75% due to industry-wide run up in the price of the key chip set component. Cost pressure is likely to persist for sometime but margins should only be depressed for another quarter as manufacturers are adjusting prices upward.
- The division contributes ~11% of Skyworth’s NAV valued to market. Not insignificant, but doesn’t change the overall investment case given the damage should be transitory. Skyworth’s shares were down by 12%, which seems disproportionate given unit’s valuation relative to that of the overall business.
- The letter also includes updates on Clipan, Total Bangun Persada and Nalco.