Waverton Southeast Asian Fund recently published their June 2017 letter, which is available for download from their website. The fund’s investment objective is to generate capital growth by investing in a concentrated portfolio of no more than 30 listed Southeast Asian equities. They look, in particular, for growth companies at a reasonable price. The fund was launched in March 2011 and is led by Brook Tellwright, who previously co-founded and worked at Ton Poh Capital.

The fund currently has ~60% of its portfolio invested across three countries: Indonesia, Thailand and the Philippines. Approximately half of the fund’s assets are invested in the consumer, financial services and telecoms sectors and ~20% is in cash & cash equivalents.

Some highlights from the letter below (paraphrased):

• They have had a substantial overweight position in Vietnam since 2012 but have recently been taking some money off the table because many stocks are starting to look expensive.
  • Exited from Military Commercial Bank in June. Had been the fund’s top performing position in 2017, rising ~55% from the start of the year through early June. Valuation had risen to ~1.5x book at time of sale and they can find better opportunities elsewhere.
• Also sold out of their position in Total Access Communications in Thailand, which rose ~40% this year. They added two new positions in Thailand:
  • Intouch, a holding company that owns a ~40% stake in Advance Info Service, the leading Thai telco (~48% revenue market share, ~41m subscribers).
  • Thai Beverage, a consumer staples franchise (their flagship product is Chang Beer) with high margins and return on equity combined with stable cash flow growth. The shares have underperformed this year due to weak alcohol sales, caused by restrictions on nightlife imposed during the period of mourning for the late King. This will end in October.
• In terms of their macro outlook for the region, they feel that Southeast Asian economies are undoubtedly in better shape than 20 years ago and therefore likely to be more resilient come the next crisis. Unfortunately, the next crisis will also be different in nature and “nothing can wholly insulate Southeast Asia against the growing risks of an external economic shock.”