Quick Doctor In Kuwait +2773`7758`557 Kuwait Doha Qatar Dubai Abu Dhabi Sharj...
Investor Day
1. Our
Investment
Strategy:
Inves1ng
With
Convic1on
To
Outperform
in
Times
of
Vola1lity
and
Uncertainty
“Extractors
Vs
Compounders
in
the
Asian
Capital
Jungle”
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Our
Investment
Team
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3
Protect
the
Downside:
Extrac1ng
the
“Extractors”
with
our
Systema1c
and
Disciplined
Investment
Process
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4
Capturing
the
Upside
with
the
Hidden
Champions
in
our
Daily
Life
Presenta>on
at
8I
Networking
Nite
at
MND
in
March
2014
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5
“Paris
BagueIe”:
Up
16-‐Fold
(2004-‐March
2014)
to
Market
Value
US$525
Million
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6
The
Compounding
Power
of
Focused
Entrepreneurs
“Paris
BagueLe”
Up
Another
480%
Since
March
2014
to
US$2.08
Billion
Operates
over
6,000
food
service
outlets
in
Korea
and
globally
The
average
daily
sales
of
a
Paris
BagueLe
outlet
is
around
W1.9-‐2m
($1,800),
at
least
double
that
of
rival;
Singapore
stores
generate
W12-‐13m
($11,000-‐12,000)
in
daily
sales
Largest
industrial
baked
goods
sold
through
convenience
stores,
supermarkets,
grocery
stores
with
dominant
71%
domes>c
market
share
Elas>c
distribu>on
that
uses
hub
systems
(24
DCs)
to
ensure
freshness
The
temperature
and
humidity
at
which
dough
was
thawed
is
the
company’s
secret
Bankrupt
under
leadership
of
brother
during
Asian
Financial
Crisis;
Huh,
second
son
of
the
founder,
acquired
the
company
in
2002
out
of
court
receivership
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7
Two-‐Step
Process
to
PorWolio
Construc1on
OUT:
Poten1al
Accoun1ng
Fraud
OUT:
Corporate
Misgovernance
Indestruc1ble
Intangibles
ü
Proprietary
know-‐how
ü
Trust
and
support
from
community
of
customers,
suppliers,
partners
Core-‐Periphery
Network
Open
Innova1on
ü
Both
internal
and
ezeternal
partners
co-‐develop
new
products
and
services
ü
Scaling
by
empowerment
and
decision-‐
rights
beyond
the
founder
ü
Scaling
by
technology
as
an
enabler
and
embedded
into
the
business
model
design
Inves1ng
Universe
>25,000+
Listed
Stocks
in
Asia
Eliminate
“Extractors”
“Wide-‐Moat
Compounders”
&
Hidden
Champions
Wide-‐Moat
Business
Model
Analysis
Dissec1ng
Corporate
Culture
Step
1:
Elimina1ng
“Extractors”
to
protect
downside
risk
Step
2:
Elimina1ng
value
traps
and
narrow-‐moat
companies
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8
Stock-‐Picking
is
a
Dangerous
Game
A
minority
of
stocks
are
responsible
for
the
majority
of
the
market’s
gains
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9
Disposi1on
Effect
to
Sell
Winners
Too
Early
and
Ride
Losers
for
Too
Long
–
Overcoming
with
Knowledge
and
Convic1on
Reflexive
choice
under
uncertainty
and
reflects
an
aversion
to
loss
realiza>on.
In
our
view,
investors
ride
losers
far
too
long
to
postpone
regret,
hoping
for
a
rebound
in
prices,
and
sell
winners
too
quickly
because
they
want
to
hasten
the
feeling
of
pride
at
having
chosen
correctly
in
the
past.
Market
vola>lity
and
chaos,
mania
and
panic
-‐
they
would
be
our
friend
if
we
have
the
willpower
quo>ent
to
overcome
this
harmful
disposi>on
effect.
This
willpower
comes
from
anchoring
ourselves
with
knowledge
in
iden>fying
and
inves>ng
in
misunderstood,
neglected,
overlooked
and
underappreciated
wide-‐moat
companies
and
sizing
up
the
porholio
bets
with
convic>on
when
the
management
con>nues
to
deliver
in
their
long-‐term
business
plans.
Such
convic>on
requires
intensive
analysis
and
monitoring
of
companies
and
entrepreneurs.
Peter
Lynch:
“Some
people
automa4cally
sell
the
“winners”—
stocks
that
go
up—and
hold
on
to
their
“losers”—stocks
that
go
down
—which
is
about
as
sensible
as
pulling
out
the
flowers
and
watering
the
weeds.”
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10
BuffeI:
Sizing
Up
High-‐Convic1on
Bets
“Charlie
and
I
decided
long
ago
that
in
an
investment
life4me,
it’s
too
hard
to
make
hundreds
of
smart
decisions.
We
adopted
a
strategy
that
required
our
being
smart
only
a
very
few
4mes..
If
you
are
a
know-‐something
investor,
able
to
understand
business
economics
and
to
find
five
to
ten
sensibly-‐priced
companies
that
possess
important
long-‐term
compe44ve
advantages,
conven4onal
diversifica4on
makes
no
sense
for
you.
It
is
apt
simply
to
hurt
your
results
and
increase
your
risk.
I
cannot
understand
why
an
investor
of
that
sort
elects
to
put
money
into
a
business
that
is
his
20th
favorite
rather
than
simply
adding
that
money
to
his
top
choices
–
the
businesses
he
understands
best
and
that
present
the
least
risk,
along
with
the
greatest
profit
poten4al.
In
the
words
of
the
prophet
Mae
West:
Too
much
of
a
good
thing
can
be
wonderful.”
-‐
Warren
BuffeL
in
Berkshire
Hathaway’s
Annual
LeLer
to
Shareholders
in
1993
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11
BuffeI:
42%
of
Fund’s
Asset
in
Amex
in
1964
Amex
Has
Since
Compounded
Over
3,000%
"Charlie
and
I
operated
mostly
with
5
posi4ons.
If
I
were
running
50,
100,
200
million,
I
would
have
80%
in
5
posi4ons,
with
25%
for
the
largest.
In
1964
I
found
a
posi4on
I
was
willing
to
go
heavier
into,
up
to
40%.
I
told
investors
they
could
pull
their
money
out.
None
did.
The
posi4on
was
American
Express
a[er
the
Salad
Oil
Scandal.
In
1951
I
put
the
bulk
of
my
net
worth
into
GEICO.
There
were
various
4mes
I
would
have
gone
up
to
75%,
even
in
the
past
few
years.
If
it's
your
game
and
you
really
know
your
business,
you
can
load
up."
-‐
Warren
BuffeL,
February
25,
2008
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12
Wide-‐Moat
Business
Model
Dynamics:
Lanchester
Strategy
Adopted
by
Toyota,
Denso,
Fast
Retailing
(Uniqlo),
SMC
Corp,
Canon
etc
Market
share
benchmarks
Dominance
(73.9%):
Unassailable
posi>on
Stable
target
(41.7%):
Top
share
can
be
maintained
at
this
level
Minimum
target
(26.1%):
Minimum
share
necessary
for
a
strong
player
to
becoming
the
dominant
player
High-‐level
target
(19.3%):
This
level
normally
ranks
a
company
within
the
top
three,
and
should
be
the
ini>al
target
for
a
“weak
player”
Influence
target
(10.9%):
Level
at
which
a
player
begins
to
influence
the
market;
compe>>on
begins
to
intensify
above
the
level
Presence
target
(6.8%):
Level
at
which
a
player
has
a
presence
in
the
market
Base
target
(2.8%):
Entry
posi>on
Bri>sh
aeronau>cal
engineer
F.W.
Lanchester
(1868-‐1946)
made
important
contribu>ons
to
automo>ve
engineering,
aerodynamics
and
co-‐
invented
the
topic
of
opera>ons
research.
He
is
considered
one
of
the
"big
three"
English
car
engineers,
the
others
being
Harry
Ricardo
and
Henry
Royce.
Lanchester
researched
aLri>on
in
land,
sea
and
air
combat.
Based
on
these
studies,
he
developed
the
Lanchester
Laws
and
the
importance
of
the
scale
of
the
figh>ng
force
in
warfare.
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13
Applica1on
of
Lanchester
Strategy:
Canon
Vs
Xerox
Overwhelming
rival
in
Rank
Xerox
Took
a
foothold
in
the
market
by
first
concentra>ng
its
resources
in
Scotland
Achieved
a
40%
market
share
ALacked
selected
and
>ghtly
defined
regions
in
England
Invested
more
and
more
in
product
development
and
sales
resource
Final
push
into
the
lucra>ve
London
market
Superior
product
and
a
numerically
superior
sales
force.
Rank
Xerox
didn’t
stand
a
chance
Nikkei
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14
Applica1on
of
Lanchester
Strategy:
SMC
Corp
(MV
$17.7Bn)
60%
market
share
in
Japan,
33%
global
market
share,
39%
in
China
Global
leader
in
pneuma>c
machines
with
a
33%
market
share
(60%
market
share
in
Japan,
39%
in
China)
SMC’s
high
profitability
and
market
share
is
due
to
its
ability
to
rapidly
supply
customers
with
630,000
dis>nc>ve
products
combining
parts
from
11,000
basic
shapes.
SMC
can
quickly
supply
products
on
the
day
they
are
ordered,
even
overseas,
and
that
60-‐70%
of
products
can
be
delivered
within
three
days.
Over
two-‐thirds
of
all
products
are
manufactured
at
its
Tsukuba
plant.
Essen>ally,
SMC
engages
in
flexible,
mul>ple,
small-‐lot
produc>on
centered
on
cell
units.
It
constructed
its
own
dis>nc>ve
produc>on
lines
which
automa>cally
receive
detailed
orders
from
marke>ng
staff
via
computer.
SMC
is
founded
in
1959
as
Sintered
Metal
Company
by
S u s u m u
O m u r a
a n d
Yoshiyuki
Takada
(photo)
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16
8IH
Interim
Report
as
at
Sep
2015
Source:
8IH
Interim
Report
on
ASX
hLp://www.asx.com.au/asxpdf/20151102/pdf/432nk9r3hhw4nf.pdf
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17
Major
Cineplex
(SET:
MAJOR):
#1
Lifestyle
Entertainment
Company
in
Thailand
1. What
makes
it
a
wide-‐moat
business?
– Consolidated
the
cinema
market
with
dominant
80%
market
share,
aLrac>ng
30
million
Thai
consumers
to
its
“des>na>on
to
be”
– Adver>sing
services
business
segment
is
crown
jewel
asset
with
underappreciated
network
effect
• Increase
bargaining
power
as
it
gets
bigger;
adver>sers
will
pay
even
more
for
the
consumer
reach
• Addi>onal
revenue
generated
on
exis>ng
assets
with
high
gross
profit
margin
of
86-‐88%
with
minimal
capex
investments
2. Why
it
has
the
poten>al
to
double
in
3-‐5
years?
– Expanding
into
the
provinces
and
regionally
(Cambodia
and
Laos)
• To
double
up
its
capacity
within
5
years
3. Management/Corporate
Culture
– Visionary,
leading
and
shaping
the
Thai
movie
industry
– Poolvaraluck
family
with
~34.5%
ownership
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Price
Chart
Performance
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20
Hartalega
(KLS:
HARTA)
1. What
makes
it
a
wide-‐moat
business?
– World’s
largest-‐scale
nitrile
gloves
manufacturer,
highly
innova>ve,
fastest
speed,
high
quality
• Launched
the
world’s
thinnest
4.7g
nitrile
glove
in
2005
and
subsequently
an
even
thinner
3.7g
nitrile
glove
in
2007
• Before
Hartalega,
nitrile
gloves
were
chiefly
used
in
industrial
applica>ons
and
not
in
the
medical
sector
due
to
their
heavy
weight
and
thickness
• Invested
in
automated
mechanical
stripping
system
that
mimics
the
human
hand
mo>on
of
stripping
gloves
off
and
industrial
bar
code
tech
system
to
scale
up
to
45,000
gloves
an
hour
at
a
lower
cost
– Global
16-‐20%
market
share
2. Why
it
has
the
poten>al
to
double
in
3-‐5
years?
– Reinves>ng
profits
into
widening
the
moat
with
disciplined
capex
growth
plans
in
NGC:
NGC
Plant
1
and
2
up
&
running
3. Management/Corporate
Culture
– Innova>ve
management
who
created
crea>ng
a
pull-‐based
market
in
which
the
nitrile
gloves
can
be
used
by
healthcare
professionals
– Kuan
family
55%
ownership
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Price
Chart
Performance
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23
Target
Weight
in
Types
of
Business
Model
and
By
Country
Source:
8IH
Interim
Report
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24
Investment
Process
Search
• Idea
sources:
Internal
research,
Industry
network
of
entrepreneurs
• Determine
companies
that
qualify
• Understand/
evaluate
the
long-‐
term
“story”
of
the
company,
its
business
model
and
economics
• Visit
and
read
management
to
ascertain
quality
Valua1on
• Provide
independent
base
conserva>ve
valua>on
• Assess
>pping
point
in
business
model
valua>on
PorWolio
Management
• Monitor
the
core
stocks
(news/events,
interims,
annuals)
• Add
stock
posi>on
into
the
porholio
i.e.
has
story
changed
for
the
beLer.
Build
up
stock
posi>ons
progressively
as
the
company
hit
business
milestones
• Reduce
or
Remove
stock
posi>on
from
the
porholio
i.e.
has
story
changed
for
the
worse
• Build
value
with
exis>ng
stocks
eg
advisory
on
business
model
analysis,
corporate
governance
issues
and
financing
solu>ons
to
help
company
grow
further
Search:
Finding
the
Hidden
Champions
Valua1on:
Pivot
of
Value
Between
Search
and
Porholio
Management
PorWolio
Mgmt:
Buy
Enough
and
Hold
Long
Enough
It
is
the
hole
in
the
middle
which
makes
the
wheel
useful
–
Lao-‐Tzu
Investment
“Technology”
+
Teamwork
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We
Are
Cognizant
of
the
Macroeconomic
Risks
Ahead
Uncertainty
surrounding
the
US
Fed
rate
hike
decision
and
its
avermath
on
asset
pricing
and
asset
risk
Sharp
devalua>on
of
EM/
Asian
currencies
X
Highly-‐geared
Asian
companies
loaded
on
dollar-‐based
loans
=
Recipe
for
disaster
for
wave
of
corporate
default
and
profit
warnings.
Fragility
of
China’s
financial
sector.
Demise
of
petrodollar
flows
into
equi>es
and
the
capital
markets.
Commodi>es
bust
and
its
impact
on
the
financial
sector.
Internet
sector
correc>on,
death
of
unicorns
and
the
cooling
of
VC
investment
environment
has
taken
its
toll
on
startups.
Harvard
University
endowment
fund
warns
of
market
“froth”
in
Sep
2015
and
is
looking
to
allocate
funds
into
investment
managers
with
exper>se
as
short-‐sellers.
EBIT-‐debt
coverage:
A
quarter
of
Chinese
firms
with
debt
unable
to
cover
their
annual
interest
expense
currently
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26
Aeon
Bhd:
Best
shopping
mall
in
Malaysia,
wide-‐moat
business
but
narrowing
moat?
FY2013
and
1Q14
results:
Resilient
retailing
segmental
profits
s>ll
ok
We
Are
Vigilant
of
the
Corporate
Developments
and
Management
Execu1on
of
Our
PorWolio
Stocks:
The
Case
of
Aeon
Bhd
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27
We
Are
Vigilant
of
the
Corporate
Developments
and
Management
Execu1on
of
Our
PorWolio
Stocks:
The
Case
of
Aeon
Bhd
1H14
results
announced
on
28
Aug
2014:
Retailing
segmental
profits
showed
significant
deteriora>on
Share
price
performance
aver
PEAD
(post
earnings
announcement
driv)
=
Down
30%
vs
Bursa
index
down
10%
Lesson:
Importance
of
vigilant
monitoring
and
the
power
of
PEAD
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28
Staying
Vigilant
for
Tipping
Point
in
Business
Model
to
Lower
Valua1on
Risk
New
products
or
services,
and
new
markets
and
customers
-‐ Textual
analysis
of
the
companies
with
relevant
keywords
using
linguis>c
databases
e.g.
“new
product(s)”,
“new
development”,
“patents”,
“research
and
development”,
“innova>on”,
etc.
-‐ Monitor
the
ra>o
of
the
sales
contribu>on
from
new
products/services
and
markets/customers.
Robust
improvements
in
capex
execu>on
efficiency
and
cash
conversion
cycle
(CCC)
Significant
corporate
event
in
spin-‐offs,
M&As,
restructuring
Overall
health
of
value
chain
and
ecosystem
Corporate
culture,
strategy,
innova>on,
partnerships:
-‐ (1)
the
management
desire
to
cul>va>ng
a
culture
of
decentraliza>on,
trust
and
coopera>on
to
foster
innova>ve
experimenta>ons,
including
inves>ng
in
a
system
to
cascade
decision
rights
throughout
the
organiza>on;
-‐ (2)
the
management
discipline
in
handling
power
and
wealth;
-‐ (3)
the
management
focus
and
sense
of
urgency
to
build
something
with
a
Purpose
and
commit
to
an
idea
larger
than
themselves
to
care
for
and
serve
others
with
love;
-‐ (4)
the
management
skin
in
the
game
with
aligned
performance-‐based
incen>ves
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29
Comment
on
Concentra1on
Risk
and
Valeant:
An1dote
=
Understanding
Corporate
Culture
Hedge
fund
manager
Bill
Ackman
compared
“plahorm
stock”
Valeant
to
early-‐stage
Berkshire
Hathaway
in
early
2015;
William
Thorndike,
author
of
The
Outsiders,
compared
Valeant’s
CEO
Michael
Person
to
Liberty’s
cable
billionaire
John
Malone.
Valeant’s
share
price
collapsed
in
Oct
2015,
hur>ng
many
sophis>cated
ins>tu>onal
investors
with
concentrated
porholio
bets
on
the
drug
firm.
We
noted
various
ar>cles
back
in
2014
that
shed
insights
about
the
corporate
culture
and
accoun>ng
of
Valeant:
Valeant
CEO
Michael
Pearson
is
known
as
an
aggressive
cost
cuLer.
Valeant’s
corporate
culture
is
that
it
does
not
want
to
spend
money
on
science
and
sees
no
wrong
in
substan>ally
jacking
up
prices
of
drugs
aver
acquiring
them.
Charlie
Munger
in
March
2015:
Companies
like
ITT
Corp.,
made
money
back
in
the
1960s
in
an
“evil
way”
by
buying
businesses
with
low-‐quality
earnings
then
playing
accoun>ng
games
to
push
valua>ons
higher.
“Valeant,
the
pharmaceu>cal
company,
is
ITT
come
back
to
life,”
Munger
said.
“It
wasn’t
moral
the
first
>me.
And
the
second
>me,
it’s
not
beLer.
And
people
are
enthusias>c
about
it.
I’m
holding
my
nose.”
Valeant
relied
on
“gamesmanship”
to
run
up
its
value
and
created
a
“phony
growth
record.”
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BuffeI
on
Valua1on
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31
Tencent
(700
HK):
Always
“Expensive”
in
Valua1on?
PE
20-‐50x;
Market
Value
Compounded
>180X
Since
2004
to
$170Bn
20.0
25.0
30.0
35.0
40.0
45.0
50.0
55.0
60.0
-‐
20
40
60
80
100
120
140
160
180
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
PE
Ra1o
Market
Value
$bn
Market
Value
(LHS)
PE
Ra1o
(RHS)
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32
Valua1on
&
Evolu1on
Path
of
Wide-‐Moat
Compounders
3
7
10
15
Time
(Years)
2.5
2.0
1.5
1.0
0.5
Fundamental
PEG
=
(EV/EBIT)/
ROE
Financial
market
holds
back,
as
company
grew
in
market
cap
too
fast
despite
the
strong
fundamentals
and
growth;
market
panics
and
PEG
falls
As
company
con>nues
to
deliver,
there
is
posi>ve
re-‐
appraisal
of
the
company
and
PE
re-‐ra>ng;
PEG
climbs
back
up
again
PEG
remains
rela>vely
steady
as
company
“milks
the
cow”
for
cashflow
–
or
company
gets
complacent
with
size
and
falters
Stage
I
Stage
II
Stage
III
Stage
IV
Emerging
Leaders
Rides
the
Rising
Tide,
Niche
Poten1al
Transforms
to
Mass
Market
Milks
the
Cow/
Consolida1on
or
“Icarus-‐Faltering”
Dominance/
Legacy/
Build-‐to-‐Last
Growth
slows
down,
but
PEG
climbed
due
to
“dominance”
or
“winners-‐take-‐most”
factor,
resul>ng
in
steady
market
cap
0.8
1.0
0.6
0.4
0.2
PEG
=
PE/
Net
Profits
Growth
Small-‐to-‐Mid
Cap
$300M-‐S$1B
Mid-‐to-‐Large
Cap
$1-‐20B
PE-‐Micro-‐to-‐Small
Cap
<$50M-‐S$300M
Large-‐to-‐Mega
Cap
>$20-‐400B
20X:
$50M
to
$1Bn
20X:
$1B
to
$20Bn
20X:
$20B
to
$400Bn
Compounding
Poten1al
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33. Tencent
(HKG:
700
HK)
0.71
2.36
1.58
2.27
0.57
0.94
0.64
0.51
0.69
1.43
0.94
-‐
0.5
1.0
1.5
2.0
2.5
0
10
20
30
40
50
60
70
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Fundamental
PEG
(x)
“PE”
(x),
“ROE”
(%)
EV/EBIT
("PE")
(LHS)
EBIT
on
Equity
("ROE")
(LHS)
Fundamental
PEG
(RHS)
33
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(HKG:
700
HK)
34
-‐
0.5
1.0
1.5
2.0
2.5
-‐
20
40
60
80
100
120
140
160
180
200
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Fundamental
PEG
(x)
Market
Cap
(USD
Billion)
Market
Cap
(LHS)
Fundamental
PEG
(RHS)
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35
Corporate
Lifecycle
&
Business
Model
%
PorWolio
Weight
Source:
8IH
Interim
Report
hLp://www.asx.com.au/asxpdf/20151102/pdf/432nk9r3hhw4nf.pdf
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36
Lowering
Our
Risk:
Float
Like
BuIerfly,
S1ng
Like
a
Bee
We
have
been
following
closely
a
number
of
entrepreneurs
building
their
enterprises
in
Asia
over
the
years,
observing
up
close
their
struggles
and
their
breakthroughs,
compiling
the
progress
of
their
corporate
lifecycle
dynamics
by
“Stage
1”,
“Stage
2”,
“Stage
3”
in
our
“Watchlist”.
To
lower
our
risk
that
comes
from
inves>ng
in
new
stock
ideas,
we
float
around
like
buLerflies
in
our
“Watchlist”,
obsessively
gathering
relevant
informa>on
about
the
business
model
dynamics,
value
crea>on
levers
and
cri>cal
success
factors,
management
and
corporate
governance
quality.
Before
we
s>ng
like
a
bee
to
jab
in
a
stock
inclusion,
to
guard
against
the
risk
of
confirma>on
bias,
we
insist
on
every
investment
team
member
to
voice
out
and
write
down
their
“Top
3
Dislikes”
about
the
company
–
and
we
make
a
cri>cal
and
calculated
evalua>on
on
whether
the
posi>ves
s>ll
overwhelm
these
“dislikes”.
“What’s
your
Top
3
Dislikes?”
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37
If
All
Else
Fails,
Apply
BuffeI’s
Folksy
“Marriage
Test”
Buffeb:
“Tom
Murphy
and
Don
Burke
[of
Cap
Ci4es]
are
not
only
great
managers,
but
they
are
precisely
the
sort
of
fellows
that
you
would
want
your
daughters
to
marry.”
A
shareholder
who
bought
in
when
Capital
Ci>es
went
public
in
the
late
1950s
would
have
made
a
2,000-‐fold
return
at
its
exit
when
Disney
acquired
the
company.
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38
Our
Own
Folksy
“Proud
Parent”
Acid
Test
If
not,
it’s
probably
a
value
trap…
“Would
you
be
proud
and
happy
for
your
children
if
they
are
working
in
the
company
you
are
going
to
invest
in?”
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No.1
Data
Analy1cs
and
Service
Provider
1. What
makes
it
a
wide-‐moat
business?
– Data
analy>cs
and
service
provider.
Informa>on
cri>cal
for
mul>ple
industries.
(Shipping,
Avia>on,
Land
Transport,
Key
Events,
Mass
Media,
Natural
disaster
management,
Energy,
Investments,
Agriculture,
Travel…)
– Market-‐share:
~70%
overall
domes>c
&
30
%
global
for
shipping
industry.
2. Why
it
has
the
poten>al
to
double
in
3-‐5
years?
– Innova>on
with
out-‐of-‐the-‐box
thinking
that
can
cause
industry
disrup>on.
• Create
new
compe>>ve
advantage,
opportuni>es
&
sales
for
themselves.
• Building
world’s
largest
social
plahorm
for
live
feedback
to
enhance
current
data
analy>cs.
– Venture
into
developing
markets.
3. Management/Corporate
Culture
– Passion
on
value
crea>on,
service
to
humanity
and
saving
lives.
– Hidden
champion
with
near
customer
strategy.
– Nurtures
entrepreneurial
spirit,
dreams
and
passions
of
the
staff.
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42
Leading
FMCG
Company
with
Innova1ve
Health
and
Natural
Food
1. What
makes
it
a
wide-‐moat
business?
– >80%
domes>c
market
share
with
96%
brand
recogni>on
and
leadership.
– Constant
urge
to
want
to
do
beLer
• Relentless
drive
to
be
the
lowest
cost
operator
by
taking
a
thoughhul
look
into
exis>ng
produc>on
lines
and
modifying
it
to
be
beLer
via
incorpora>ng
carefully
selected
systems
and
machines.
• Prides
itself
as
an
innovator
when
it
comes
to
unique
product
packaging
designs
which
create
opportuni>es
for
their
products
to
be
sold
overseas.
• Constant
care
and
aLen>on
given
to
its
suppliers
to
inspire
loyalty,
trust
and
confidence.
2. Why
it
has
the
poten>al
to
double
in
3-‐5
years?
– Entry
to
highly
lucra>ve
export
markets
• Along
with
choosing
the
right
distributors,
it
makes
conscious
decisions
in
seeking
beLer
returns
for
their
products
and
poten>ally
benefi>ng
from
future
falling
trade
barriers.
– Visible
roadmap
to
higher
margins
premium
products
• Developing
its
capability
to
offer
beLer
products
and
to
deliver
material
earnings.
– Ability
to
increase
its
supply
over
the
>me.
3. Management/Corporate
Culture
– Strong
and
highly
passionate
management
who
loves
the
business,
and
demonstrated
their
ability
to
deliver
growth
to
shareholders
despite
the
complexi>es
of
the
business.
– Several
members
of
the
management
are
found
in
company’s
Top
20
shareholders
list.
It
has
a
well-‐known
cornerstone
investor
that
provides
stability
within
the
shareholders’
base.
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44
Connec1ng
People
and
Bringing
Tourism
to
the
World
1. What
makes
it
a
wide-‐moat
business?
– Largest
provider
of
na>onal-‐wide
tourism
and
transporta>on
services
with
quasi-‐monopoly
status
in
certain
services,
rendering
the
company
a
huge
market
share
in
the
industry.
• The
only
operator
with
a
strong
marke>ng
and
sales
infrastructure
to
do
sales
funneling.
• A
strong
track
record
of
reliability
among
its
customers
and
it
owns
certain
iconic
brands
that
have
undeniable
popularity
among
tourists
and
promoted
as
one
of
the
key
experiences.
2. Why
it
has
the
poten>al
to
double
in
3-‐5
years?
– Growing
and
sustainable
appe>te
for
its
service
• The
weakening
of
currency
s>mulated
strong
demand
for
its
service
where
passengers
alike
would
enjoy
to
use
in
order
to
visit
certain
must-‐see
travel
des>na>ons.
• A
restless
a|tude
to
improve
the
overall
u>lisa>on
of
the
vehicle
through
the
introduc>on
of
dynamic
pricing
models
and
secure
newer
routes
to
grow
the
business
further.
• The
relevant
exper>se
to
leverage
on
technology
to
increase
sales
with
a
target
to
generate
more
sales
from
online
sources.
Currently,
it
generates
21%
from
online
sources.
3. Management/Corporate
Culture
– Clear
philosophy
on
the
company’s
family-‐oriented
culture
and
staff
engagement.
– Management
prac>ces
an
“owner-‐operator”
mentality
where
commercial
decisions
are
carefully
deliberated
and
if
necessary,
put
through
extensive
analysis
and
modeling.
– Formed
partnerships
with
the
government
to
grow
the
tourism
sector
together;
strong,
mature,
sensible
culture
with
mutual
respect;
a
healthy
degree
of
trust
within
the
company
is
present
and
there
is
a
constant
monitoring
of
the
business
performance
every
month.
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46
No.1
Consumer
Healthcare
Innovator
1. What
makes
it
a
wide-‐moat
business?
– 50%
domes>c
market
share
in
its
consumer
healthcare
product.
Global
90%
market
share
in
its
industrial
business
niche.
– Highly
innova>ve
and
constantly
widening
its
moat
by
con>nuing
to
introduce
many
first
and
best
in
its
class,
where
high-‐tech
western
peers
are
unable
to
duplicate
its
technology
even
aver
more
than
10
years.
2. Why
it
has
the
poten>al
to
double
in
3-‐5
years?
– Premiumisa>on
of
products
where
their
new
product
is
sold
out
despite
being
priced
400%
more
than
their
previous
best
product.
– For
the
first
>me
in
their
corporate
history,
they
decided
to
invest
in
their
China
produc>on
plant,
so
as
to
directly
serve
their
growing
customer
base
and
grow
their
14%
market
share
in
China.
There
is
a
long
runway
to
grow
as
China’s
usage
rate
is
far
below
that
of
SG
and
HK.
– EBIT
in
1H16
matches
EBIT
FY2015.
3. Management/Corporate
Culture
– Family
owned
business
with
more
than
80
years
of
reputa>on
to
uphold.
– Consistent
dividend
payout
and
share
buyback
for
last
ten
years.
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48
No.1
Premium
Consumer
Product
Ar1san
1. What
makes
it
a
wide-‐moat
business?
– Enjoy
a
60%
global
market
share
where
its
brand
is
synonymous
with
the
best
quality
and
innova>on;
The
Louis
VuiLon
of
its
class.
– The
company
grew
its
moat
with
more
than
50
years
of
innova>on
and
invested
in
extensive
tests
equipment
which
helped
it
designed
many
new
func>onali>es.
It
also
has
a
worldwide
aver-‐sales-‐support
network.
2. Why
it
has
the
poten>al
to
double
in
3-‐5
years?
– Growth
amongst
its
loyal
fans
as
it
rolls
out
its
new
series.
It
is
currently
having
low
valua>ons
and
a
recent
inclusion
into
the
mainboard
should
spur
much
interest
in
it.
3. Management/Corporate
Culture
– It
survived
a
corporate
bankruptcy
when
its
previous
owner
over-‐leveraged
and
diversified
out
of
its
circle
of
competence.
– Current
management
focused
relentlessly
on
Research
&
Development
and
Inventory
&
Manpower
Management;
They
reduced
manpower
by
50%
over
10
years
while
improving
u>lisa>on
rate
of
produc>on
plants
and
improving
the
industry
standards
and
growing
their
global
sales
network.
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51
What
is
a
BeIer
Strategy
-‐
Invest
in
Berkshire,
or
BuffeI's
Stock
Picks?
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52
8I
Hidden
Champions
Fund
Currently,
we
have
the
problem
of
having
more
ac>onable
stock
ideas
than
funds
to
fully
execute
our
investment
process
to
deliver
poten>ally
greater
returns
to
our
shareholders.
We
are
exploring
the
se|ng
up
of
an
offshore
Mauri>us-‐based
fund
structure
to
house
our
investments
to
tap
funds
from
poten>al
external
ins>tu>onal
investors.
New
ins>tu>onal
investors
and
high
net-‐worth
individuals
subscribe
to
get
units
in
the
fund,
like
a
unit
trust
or
mutual
fund.
Fund
registered
with
regulators/agencies
in
various
jurisdic>ons
for
distribu>on
permission
in
US,
UK,
Switzerland
and
HK.
Handling
regulatory
repor>ng
requirements
such
as
issuing
PFIC
statements
for
US
investors.
Tax-‐free
for
both
capital
gains
and
dividend
distribu>on.
Daily
NAV
repor>ng
and
porholio
aLribu>on
analysis;
listed
with
Bloomberg
>cker
code;
compliance
with
regulatory
standards;
external
custodian
&
banker
(Standard
Chartered
Bank),
auditor
(KPMG),
administrator
(Trident
Trust).
Fund
factsheet
and
quarterly
commentary
on
investment
strategy,
porholio
ac>on.
Bamboos
are
among
the
fastest-‐growing
plants
in
the
world.
Remaining
hidden
underground
for
the
first
several
years,
bamboo
has
been
clocked
surging
skywards
as
fast
as
47.6
inches
in
a
24-‐
hour
period.
Had
the
bamboo
not
developed
a
strong
unseen
founda>on
it
could
not
have
sustained
its
life
as
it
grew.
Hidden
Champions,
who
pa>ently
toil
towards
worthwhile
dreams
and
goals,
building
strong
character
while
overcoming
adversity
and
challenge,
grow
the
strong
internal
founda>on
to
handle
and
scale
up
success.
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53
Entrepreneurs
Inves1ng
in
Entrepreneurs
Caring
is
an
exac>ng,
serious
and
demanding
business,
especially
when
it
comes
to
inves>ng
in
another
person’s
financial
assets,
which
are
a
tangible
product
of
his
or
her
life’s
work,
a
repository
of
aspira>ons
for
the
future.
We
do
not
believe
in
pain>ng
rosy
pictures
or
beau>fying
ourselves.
We
tell
cold,
hard
truths
–
with
a
warm
and
devoted
heart.
We
hope
this
will
capture
the
8IH
investment
philosophy
of
entrepreneurs
inves>ng
in
entrepreneurs.
We
are
of
the
convic>on
that
the
future
is
created
one
wide-‐moat
innovator
at
a
>me
and
each
will
flourish
from
their
own
wisdom.
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54
Q&A
Forpersonaluseonly
55. Appendix:
Some
of
Our
Poten1al
Ac1onable
Stock
Ideas
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Crea1ng
Unique
and
Authen1c
Holidays
for
Travellers
1. What
makes
it
a
wide-‐moat
business?
– Exclusive
leases
to
must-‐see
award-‐winning
aLrac>ons
and
key
player
providing
popular
and
essen>al
services
travellers
in
the
country;
and
it
is
the
market
leader
in
its
vehicle
category.
– A
3-‐year
relook
into
its
business
model
resulted
in
successful
execu>on
of
stringent
cost
management,
a
less
capital
intensive
model
and
drama>c
improvement
in
opera>onal
profitability.
2. Why
it
has
the
poten>al
to
double
in
3-‐5
years?
– Well-‐posi>oned
to
focus
on
significant
growth
with
geographical
diversifica>on
and
leading
market
posi>on
with
a
posi>ve
tourism
environment.
– The
embrace
of
technology
to
create
‘shared
economy’
businesses
to
deliver
further
returns
without
running
the
risk
of
high
capital
expenditure,
building
the
AirBnb
equivalent
to
its
version.
– On
the
back
of
suppor>ve
dynamics
for
the
industry,
it
has
the
ability
to
scale
the
business
further
through
value
accre>ve
acquisi>ons
but
at
the
same
>me,
it
has
to
make
sense
in
the
long
term.
3. Management/Corporate
Culture
– Management
is
cognizant
to
the
changing
landscape
of
the
industry,
and
benchmark
themselves
with
world
class
standards.
They
are
never
contented
with
the
performance
and
con>nually
assess
the
categories
and
markets
it
operate
within.
– An
inclusive
culture
that
shares
team
success
and
believes
in
crea>ng
a
culture
with
trust
and
fun.
It
invariably
helps
the
company
to
perform
well
in
its
customer
engagement.
– Management
prac>ces
financial
prudence
and
careful
alloca>on
of
capital.
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58
HungryGoWhere
Equivalent
1. What
makes
it
a
wide-‐moat
business?
– Strong
ecosystem
>e-‐in
with
suppliers,
users
and
customers:
Connect
the
vast
number
of
eateries
to
one
by
the
Internet
and
create
a
"food"
culture
of
the
21st
century
2. Why
it
has
the
poten>al
to
double
in
3-‐5
years?
– Master
the
“art
of
mone>zing”
from
their
users:
direct
visits
by
sales
staff
to
deliver
tailored
services,
the
more
the
owners
see
the
results,
the
higher
they
are
willing
to
spend
on
adver>sing/promo>ons
– Real
>me
online
reserva>on
system
driving
customers
3. Management/Corporate
Culture
– Founder
~37%
ownership
– Various
long
serving
employees:
great
signal
of
intrinsic
mo>va>on
and
confidence
in
the
business
– Place
customer
sa>sfac>on
first
and
provide
fun,
up-‐to-‐date
gourmet
informa>on
to
internet
users
every
day.
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60
World’s
#1
Innovator
of
Money
Handling
Machines
1. What
makes
it
a
wide-‐moat
business?
– Customer-‐centric
business
model
backed
by
a
highly
specialised
intangible
know-‐how
to
con>nuously
roll
out
industry-‐first
high-‐performance
products,
from
single-‐func>on
to
high-‐specifica>ons.
– Undisputable
market
leader
in
certain
product
categories
na>onal-‐wide,
it
con>nues
to
acquire
complimentary,
synergis>c
businesses
to
widen
its
moat.
– A
ver>cally
integrated
business
model
that
creates
a
virtuous
cycle
by
offering
solu>ons
at
different
stages
of
customers’
needs,
enables
cross-‐selling
and
ability
to
generate
higher
revenue
per
customer.
2. Why
it
has
the
poten>al
to
double
in
3-‐5
years?
– There
is
immense
untapped
growth
opportuni>es
in
overseas
markets
where
the
company
previously
could
not
access.
There
is
momentum
and
growing
revenue
contribu>on
from
overseas
market
by
tapping
on
its
recently-‐acquired
subsidiary’s
worldwide
and
impressive
customer
base.
– Compared
to
few
years
ago,
the
company
is
beLer
equipped
with
new
capabili>es
to
upsell
their
high
margin
services
aver
every
point
of
sale
to
each
customer.
– The
exponen>al
increase
in
money
supply,
created
by
unprecedented
quan>ta>ve
easing
(QE),
livs
the
demand
of
its
product
because
it
solves
the
urgent
need
for
speedy
money
handling.
3. Management/Corporate
Culture
– Management
is
cognisant
about
relentless
push
to
innovate
their
products
to
meet
the
needs
of
the
society
and
stay
ahead
of
the
industry.
Value
crea>on
is
in
their
company’s
DNA.
– Employees
are
encouraged
by
a
set
of
guidelines
such
as
collabora>on,
respect,
innova>on,
and
cost-‐
conscious.
The
culture
believes
in
making
the
impossible,
possible.
– The
core
management
team
have
a
combined
long
tenure
in
the
business
and
laid
out
clear
medium
to
long
term
plans
to
grow
the
business.
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#1
Nutri1ous
and
Healthy
Beverage
1. What
makes
it
a
wide-‐moat
business?
– Ability
to
inculcate
the
fondness
for
the
drink
in
the
consumers
at
a
young
age
so
that
it
eventually
develops
into
a
“habit”
consuming
it
– The
beverage
is
more
than
a
casual
drink.
It
represents
quality
and
wholesomeness.
2. Why
it
has
the
poten>al
to
double
in
3-‐5
years?
– Building
factories
to
fund
the
next
stage
of
growth
in
China
– “Tailwind”
of
health
trends
for
nutri>ous
products
– Constant
products
innova>on
and
localiza>on
to
increase
sales
3. Management/Corporate
Culture
– Old
heritage
family
business
with
a
reputa>on
to
upkeep
thus
lowering
corporate
governance
risk
– Family
~15%
ownership
– Idea
larger
than
oneself:
providing
nutri>ous
beverage
for
the
masses
at
the
lowest
possible
price
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64
Hidden
Global
Mo1on
Enabler
1. What
makes
it
a
wide-‐moat
business?
– More
than
50
years
of
innova>on
and
acquired
technologies;
its
solu>ons
are
the
quietest,
lightest
and
have
the
highest
power-‐to-‐weight
ra>o.
– It
has
global
produc>on
facili>es
in
Asia,
Europe
and
the
Americas,
allowing
it
to
have
a
lean
logis>cs
management
solu>on
that
serves
its
clients
very
closely.
Its
Automo>ve
clients
include
premium
brands.
2. Why
it
has
the
poten>al
to
double
in
3-‐5
years?
– Ver>cal
and
horizontal
integra>on
with
synergis>c
M&A,
increasing
their
cross
sales
and
new
sales
poten>al.
– The
US
automo>ve
industry
is
experiencing
a
boom,
and
there
is
a
structural
adop>on
of
motorized
func>onali>es,
in
both
automo>ve
and
industrial
segments.
3. Management/Corporate
Culture
– Family
owned
business
with
more
than
60
years
reputa>on
to
uphold.
– Has
an
excellent
M&A
execu>on
track
record.
All
three
acquisi>ons
turned
out
to
be
their
top
business
units
which
lasted
more
than
10
years,
increasing
their
overall
sales
manifold.
– Increasing
dividends,
very
aggressive
share
buyback
in
last
one
year.
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66
Global
#1
Bus
Manufacturer
1. What
makes
it
a
wide-‐moat
business?
– Having
the
largest
and
the
most
technologically
advanced
manufacturing
base
of
large
and
medium-‐sized
buses
in
the
world.
– Enjoyed
great
economies
of
scale
and
reinvest
substan>ally
back
into
R&D
to
widen
the
edge
over
compe>tors
– Domes>c
market
share
~30%
/
Global
~12%
2. Why
it
has
the
poten>al
to
double
in
3-‐5
years?
– Constant
innova>on
over
the
years.
• Successfully
engineered
the
world
1st
driverless
bus
• New
Energy
Bus
– Further
consolida>on
of
the
market
– Expansion
overseas
3. Management/Corporate
Culture
– 35
years
of
vast
experience
in
the
company
– Worked
his
way
from
a
small
engineer
to
the
CEO
of
the
company
– Management
philosophy:
Customer
and
employees
always
comes
first
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68
#1
Cookware
Company
1. What
makes
it
a
wide-‐moat
business?
– Constant
innova>on
yearly
tailoring
to
the
demand
and
needs
of
the
consumers
– #1
in
its
country:
pressure
cooker,
frying
pan,
wok,
steamer
and
electric
cooker
– #2
in
its
country:
Rice
cooker,
electric
pressure
cooker,
electric
cooker,
electric
keLle
2. Why
it
has
the
poten>al
to
double
in
3-‐5
years?
– Great
synergies
between
European
MNC
owners
whereby
owners
transfer
orders
to
company
to
lower
cost,
the
company
tap
onto
the
owners
network
to
expand
overseas
and
also
exchange
of
technologies
to
improve
on
cookware
produc>on.
– Strong
local
and
overseas
demands
3. Management/Corporate
Culture
– Majority
owned
by
a
European
MNC
with
capable
local
managers
with
“owner
operator”
mindset
– Typical
Berkshire
Hathaway
opera>ng
company
where
owners/managers
have
autonomy
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70
2nd
Largest
Domes1c
Elevator
Maker
1. What
makes
it
a
wide-‐moat
business?
– It
has
a
20%
domes>c
travellator
market
share.
Its
products
are
exported
to
80
countries
globally,
including
US,
EU,
AU,
ME
&
Asia.
Its
clients
include
IKEA,
Carrefour,
Wal-‐Mart,
LVMH
and
Burberry.
– Constant
research
and
innova>on
enables
it
to
recently
rank
on
par
with
high-‐tech
established
peers
with
its
high
speed
and
eco-‐friendly
livs.
– It
has
a
superior
24-‐hour
servicing
capability
that
forms
a
virtuous
cycle
with
its
manufacturing
and
sales
division.
2. Why
it
has
the
poten>al
to
double
in
3-‐5
years?
– Domes>c
market
has
low
liv
density
compared
to
developed
countries,
and
most
of
the
livs
are
old
and
due
for
replacement.
Local
government
enacted
tough
safety
rules
that
requires
replacement
and
servicing.
– Established
a
training
center
to
improve
industry
standards
by
training
and
cer>fying
service
crew.
Implemented
Internet
of
Things
system
onto
its
network
of
livs,
travellators
and
escalators
which
enables
them
to
pre-‐empt
breakdowns
and
servicing
needs
and
have
faster
response
>me.
3. Management/Corporate
Culture
– Humble
management
who
worked
through
the
ranks
over
10
years.
Treats
team
members
as
family
–
Family
has
30%
shareholdings,
veteran
team
members
owns
another
20%.
– Distributed
90%
of
IPO
proceeds
to
shareholders
in
3
years
while
management
were
paid
2%
of
Profit
Before
Tax
(PBT).
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Leading
Healthy
Snack
Company
1. What
makes
it
a
wide-‐moat
business?
– Hidden
Champion
with
62%
domes>c
market
share
in
healthy
snacks
while
expor>ng
to
35
countries.
– Export
revenue
has
been
growing
steadily
and
con>nuously,
which
accoun>ng
for
43%
of
total
sales
now.
– Ability
to
constantly
introduce
new
taste
and
flavor
snack
into
the
market
which
is
well
received.
2. Why
it
has
the
poten>al
to
double
in
3-‐5
years?
– Target
to
be
the
leader
of
the
snack
market
in
Asian
by
2018
– Aggressive
expansion
plans
in
place
to
increase
current
produc>on
line
and
capacity
to
feed
increasing
demand.
3. Management/Corporate
Culture
– Entrepreneur-‐run
business
emphasizing
a
lot
in
innova>on
and
R&D
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Financial
Summary
2012 2013
Gross)Profit)Margin 29.7% 34.5%
EBIT)Margin 6.8% 6.8%
ROE 42.5% 49.9%
Gross)Profit/Total)Assets 72.9% 86.0%
Cash)Conversion)Cycle 22 22
EBIT/CAPEX)(x) 1.6 2.5
Net)Debt)%)of)NTA P133.2% P145.1%
EV/EBIT)(x) P P
EV/EBITDA)(x) P P
Sales 7.2% EBIT 58.9% EBITDA 47.4%
Valuation
3)Year)Growth
P95.3%
P
74.2%
P
2014
34.8%
10.1%
56.3%
17
2.8
Profitability
Operating)Efficiency
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Leading
Fully
Integrated
In-‐land
Logis1cs
Service
Provider
1. What
makes
it
a
wide-‐moat
business?
– Hidden
Champion
owns
and
operates
40
different
warehouses
with
total
space
of
210,000
m2
and
an
area
of
around
557,000m2
for
automakers
to
rent
for
parking
their
cars
before
expor>ng.
– Opera>ons
located
at
the
busiest
port
in
the
country
having
30
years
of
exclusive
rights
to
manage
chemical
&
dangerous
goods
– Has
the
ability
and
know-‐how
in
develop
and
employ
warehouse
management
sovware
to
ensure
maximum
efficiency.
2. Why
it
has
the
poten>al
to
double
in
3-‐5
years?
– Venture
into
neighboring
country
to
capture
exploding
demand
for
logis>cs
services.
– Looking
to
form
a
logis>cs
REITs
to
expand
business
through
M&A
to
gain
more
market
share
– Aim
to
be
ASEAN
leader
by
2019
3. Management/Corporate
Culture
– Entrepreneur
run
business
– Emphasizes
a
lot
on
innova>on.
Developed
strong
know-‐how
and
gained
prac>cal
experiences
for
more
than
35
years
in
warehouse
management
efficiency
– Founder’s
family
holds
50%
of
the
company
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76
No.1
Domes1c
Air-‐con
&
Refrigerator
Maker
1. What
makes
it
a
wide-‐moat
business?
– It
Innovated
an
air-‐con
solu>on
that
addresses
local
needs
and
thus
garnered
a
loyal
following
over
the
past
50
years.
– It
has
a
35%
domes>c
air-‐con
market
share,
and
a
25%
domes>c
refrigerator
market
share.
– It
has
an
unparalleled
extensive
aver-‐sales
service
network.
2. Why
it
has
the
poten>al
to
double
in
3-‐5
years?
– Domes>c
market
has
low
air-‐con
and
refrigerator
densi>es
compared
to
other
Asian
countries.
Thus,
there
is
a
long
runway
to
grow
as
disposable
income
grows.
– Great
focus
to
grow
its
building
management
solu>on
business
which
require
much
higher
barrier
to
entry
and
increases
its
s>ckiness
as
customers
are
>ed
to
their
solu>on
through
the
lives
of
the
buildings.
3. Management/Corporate
Culture
– Family
owned
business
with
more
than
50
years
of
reputa>on
to
uphold.
– Current
management
built
the
current
deep
reach
of
aver-‐sales
servicing,
and
the
new
building
management
solu>on
business.
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Top
Educa1on
Solu1on
Provider
1. What
makes
it
a
wide-‐moat
business?
– Hidden
Champion
with
strong,
leading
posi>on
and
the
only
player
with
ICT
know-‐how
in
educa>on
solu>on
provider
industry
to
win
government
tenders
and
penetrate
into
new
business
segment
and
market.
– Operates
in
a
boring
industry
which
Industry
peers
become
complacent
and
lack
of
commitment
and
innova>ve
ideas
to
grow
their
business
forward.
2. Why
it
has
the
poten>al
to
double
in
3-‐5
years?
– Quietly
consolida>ng
this
fragmented
industry,
taking
over
its
peers
that
has
valuable
Intellectual
Proper>es.
– The
only
player
in
the
industry
that
meets
Government’s
latest
educa>on
material
requirements
making
them
able
to
win
more
tenders.
– Growing
into
ASEAN
market
providing
publishing,
content
crea>on
and
digitaliza>on
services.
3. Management/Corporate
Culture
– Entrepreneur
run
business
– Managing
Director
with
30
years
experience,
while
core
team
members
work
in
the
company
for
more
than
20
years.
Management
hold
>50%
of
the
company.
– Managing
Director:
“This
business
is
not
a
typical
family
business
where
it
will
be
handover
to
my
2nd
genera>on.
I
constantly
tell
my
team
that
anyone
with
extensive
experience
in
this
industry
and
have
the
capabili>es
to
bring
the
company
forward
will
become
the
next
CEO.
This
company
is
aiming
to
become
a
regional
player,
not
just
locally.”
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1. What
makes
it
a
wide-‐moat
business?
– Focus
on
tailor-‐made
elevator
to
differen>ate
itself
with
other
players.
– Synergy
across
3
business
segment
(Manufacturing,
Distribu>on
of
E&E
components,
Maintenances).
By
serving
1
customer,
all
3
segments
has
sales.
– The
maintenances
base
will
con>nue
to
enlarge
because
more
than
90%
of
its
new
manufactured
elevators
are
serviced
by
them
every
year.
– It
is
a
rule
by
government
that
ALL
elevators
must
be
serviced
on
monthly
basis.
2. Why
it
has
the
poten>al
to
double
in
3-‐5
years?
– Increasing
EBIT
contribu>on
from
Services
and
Maintenances
segment
-‐
from
3.2%
in
FY2010
to
22%
in
FY2015
– Aggressive
growing
its
business
in
oversea
market
by
con>nue
M&A.
Their
profit
contribu>on
from
domes>c
and
interna>onally
will
be
50:50
by
FY2020.
3. Management/Corporate
Culture
– 3
Execu>ve
Directors
has
more
than
20
years
experience
in
elevator
business
– Founders
holding
~36%
stake
Leading
Elevator
Manufacturer
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