REG - abrdn Asia Focus plc - Half-year Report
28/03/2024 07:00
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RNS Number : 5884I abrdn Asia Focus plc 28 March 2024
abrdn Asia Focus plc
Legal Entity Identifier (LEI): 5493000FBZP1J92OQY70
ANNOUNCEMENT OF UNAUDITED HALF YEARLY RESULTS
for the six months ended 31 January 2024
Performance Highlights
Net asset value total return (diluted)(AB) Net Asset Value per share (diluted)
Six months ended 31 January 2024 As at 31 January 2024
-0.7% 301.2p
Year ended 31 July 2023 +7.6% As at 31 July 2023 308.9p
Share price total return(A) Share price
Six months ended 31 January 2024 As at 31 January 2024
-0.2% 258.0p
Year ended 31 July 2023 +7.3% As at 31 July 2023 264.0p
MSCI AC Asia ex Japan Small Cap Index total return(C) Total assets
Six months ended 31 January 2024 As at 31 January 2024
+4.5% £538.5m
Year ended 31 July 2023 +8.0% As at 31 July 2023 £556.5m
Net asset value total return since inception (diluted)(ABD) Discount to net asset value(AB)
To 31 January 2024 As at 31 January 2024
+2278.7% 14.3%
To 31 July 2023 +2283.6% As at 31 July 2023 14.5%
(A) Considered to be an Alternative Performance Measure (see below).
(B) Presented on a diluted basis as the Convertible Unsecured Loan Stock
(CULS) is "in the money".
(C) Currency adjusted, capital gains basis.
(D) Inception being 19 October 1995.
Financial Highlights
Capital values 31 January 2024 31 July 2023 % change
Total assets less current liabilities(A) £538,536,000 £556,466,000 -3.2
Net asset value per share (basic) 302.05p 310.49p -2.7
Net asset value per share (diluted) 301.18p 308.93p -2.5
Share price (mid market) 258.00p 264.00p -2.3
Discount to net asset value (basic)(B) 14.6% 15.0%
Discount to net asset value (diluted)(B) 14.3% 14.5%
Net gearing(B) 10.3% 12.1%
Ongoing charges ratio(B) 0.91% 0.92%
(A) Total assets less current liabilities (excluding prior charges such as
bank loans) as per the Statement of Financial Position.
(B) Considered to be an Alternative Performance Measure.
Chair's Statement
I am once again pleased to present to shareholders the half-yearly results for
abrdn Asia Focus plc (the "Company"). Asian small-caps showed considerable
resilience over the period despite continued worries over a potential global
recession, with the MSCI AC Asia Pacific ex Japan Small Cap index delivering a
total return of 4.5% compared to the wider MSCI AC Asia ex Japan index, which
fell 7.3%. This extends the material outperformance of smaller companies in
the region over their larger counterparts which over a 5 year period to the
end of January 2024, has returned around 53% compared to the large cap index's
11% in total return terms. It is evidence of the inherent potential of the
asset class.
Investment Performance
Over the period, the Company's net asset value (NAV) total return per share
fell 0.7% in sterling terms, thereby lagging its closest comparator
benchmark. In the short term, the active nature of the portfolio can often
lead to divergence from the index. The share price total return was down
0.2%, with the discount to NAV narrowing over the period to 14.3% from 14.5%
at end December 2023.
The Board is firm in its conviction around Asia's long-term growth story,
particularly within the small-cap universe. Your Manager's disciplined,
bottom-up stock picking approach, focused on identifying businesses with
durable competitive advantages, healthy balance sheets and significant
earnings growth should enable them to compound returns at an attractive rate
over the long-term.
This is a differentiated portfolio made up of interesting, less well-known
companies, often under researched in the market. The active share of the
portfolio is 97.5% and the long-term performance of the Company remains
impressive. According to the Association of Investment Companies (AIC), as
the 25(th) anniversary of the inception of the Individual Savings Account
(ISA) approaches, the Company is ranked third best performing investment
trust. Based upon a single investment of the full £7,000 ISA allowance on 6
April 1999, the day ISAs came into existence, with dividends reinvested until
5 March 2024, an investment in the Company's shares would have generated a tax
free pot of £273,758.
Revenue and Dividends
The Board recognises the importance of the Company's dividend income for many
shareholders. The Ordinary share dividend has been maintained or raised
every year since 1998, and your Board is firmly committed to the enhanced and
progressive dividend policy which was approved by shareholders in 2022.
Underlying earnings per share for the period amounted to 3.4p (2023: 4.3p) and
revenue from the portfolio continues to comfortably cover the Ordinary
dividend, with the shares yielding 2.5%, as of 31 January 2024 (3.5% including
special dividends).
Two interim dividends have been paid in the first six months of the Company's
financial year. These interim dividends of 1.6p per Ordinary share were paid
on 20 December 2023 and 21 March 2024. The Board has set a target dividend
of at least 6.41p per Ordinary Share for the financial year ending 31 July
2024. The Board plans to maintain the progressive policy of the last 28 years
in order to provide shareholders with a regular dividend and dependable level
of income alongside capital growth prospects.
Share Capital Management and Gearing
The Board is pleased to note the current abrdn initiative to reinvest six
months' worth of its management fees back into the Company by purchasing
shares in the market, in an effort to further align itself with the
shareholder base and to demonstrate the significant on-going commitment to its
listed closed end funds business which currently ranks third globally.
The Board is conscious that the discount to NAV remains wide and has stepped
up share buybacks during the period, in the belief that this is in the best
interest of shareholders. During the period the Ordinary shares have traded at
an average discount of 15.75% and we have bought back 2,022,500 Ordinary
shares in the market at a discount to the prevailing NAV per share (six months
to 31 January 2023: nil). The Board will continue to consider the judicious
use of share buybacks to both reduce the volatility of any discount and to
modestly enhance the NAV per share for shareholders.
The Company's net gearing at 31 January 2024 was 10.3% with the debt provided
by the £30 million unsecured Loan Notes 2035 and the £36.6m Convertible
Unsecured Loan Stock. The Board is very aware of the 31 May 2025 maturity
date for the CULS and is actively considering available options for replacing
or retiring that debt. As at 27 March 2024, the latest practicable date, the
Company's net gearing stood at 13.4%.
Your Investment Manager
The Board would like to thank Hugh Young for his long service to the Company,
which he leaves in good hands: Flavia Cheong, abrdn's Head of Equities, Asia
Pacific, Gabriel Sacks and Xin-Yao Ng. Your Manager's extensive
on-the-ground coverage, experienced management team, and commitment to
delivering long-term value amid the dynamic and varied Asian small-cap
universe should lend confidence in the continued long-term prospects for the
Company. Indeed, at a time when many asset managers are making cuts, the
Board is very pleased that abrdn has strengthened the investment team in Asia
during the reporting period with the recruitment of four new research
analysts.
Responsible Investing
While the Company's investment objective does not specifically include
environmental, social and governance ("ESG") and the investment process does
not exclude exposure to certain industries, your Manager firmly believes that
the best companies are also sustainable companies, and hence it integrates a
comprehensive assessment of ESG factors into its bottom-up stock picking
investment process. Informed and constructive engagement also helps foster
better companies, protecting and enhancing the value of the Company's
investments.
This is clearly reflected in the carbon footprint of the Company's portfolio,
for example, which compares favourably against that of the benchmark. The
portfolio's relative carbon intensity (as at 31 December 2023, including scope
1 and 2 emissions) was only 23.3% of the benchmark. Further detailed
information can be found in the 31 December 2023 Taskforce on Climate-related
Financial Disclosures (TCFD) Report in the Literature section of the Company's
website.
Board Composition
I would like to re-iterate my thanks to Randal McDonnell, the Earl of Antrim,
who stepped down from the Board at the last AGM and has been a great asset to
us with his wise contributions over the last nine years. We also welcome two
new Board members, Lucy Macdonald who replaces Randal, and Davina Curling who
joined with effect from 1 March 2024 as Senior Independent Director. Both
bring considerable investment management experience to the Board.
Outlook
Asia's distinct growth story, with so much untapped potential for long-term
investors, remains intact. Asia is projected to contribute more than two
thirds of global growth, underscoring its undeniable economic might. Although
there may be political uncertainty, with 2024 being a significant year for
elections in Asia, you are likely to see relative stability and calm in the
largest democracies potentially in stark contrast to the upcoming US
presidential elections.
In India, renewed capex, real estate and credit cycles are driving strong
economic growth. Should Prime Minister Modi win the upcoming elections in
India, he is likely to continue to proceed with his vision for India as a
leading global economy. China's post-Covid recovery has not been as smooth nor
as fast as hoped, but there are signs of positive momentum including official
policy shifts towards domestic demand, while the country's huge consumer base
and advances in technology remain pillars of its long-term potential.
South East Asia is often overlooked as a rich source of quality smaller
companies. Your Manager continues to regard these countries as beneficiaries
of shifting global supply chains with supportive government policies and
favourable cost structures, and they also represent a large consumer market of
about 700 million people on a combined basis. Vietnam is an emerging
powerhouse in apparel and electronics manufacturing and is seeing rapid
urbanisation, while Indonesia is gaining traction in areas of the commodity
supply chain that creates increasing value for the local economy.
Asia's rising middle classes and advancing technology provide fertile ground
for innovative small-cap companies, offering substantial potential for value
creation. As ever, your Company is focused on high-quality companies with
excellent long-term track records and strong fundamentals, exploring thematic
opportunities in structural growth trends like domestic consumption,
digitisation and the green energy transition. The future is bright for smaller
companies in Asia and we expect that shareholders will benefit from this via
their investment in abrdn Asia Focus.
Krishna Shanmuganathan
Chair
27 March 2024
Investment Manager's Review
Overview
Asian small caps posted positive returns over the six month review period
whilst proving more resilient than their large-cap peers to a volatile
backdrop of concerns around the global economy, geopolitical tensions and US
monetary policy developments
Indian small-caps were the best performers by a large margin, boosted by a
positive domestic economic backdrop, a buoyant property sector and state
election outcomes that strengthened Modi's ruling government. Taiwanese small
caps also performed remarkably well, leveraging off the strength of the US
technology giants and rising momentum around the development of artificial
intelligence (AI). In contrast, small caps in China and Hong Kong were among
the heaviest losers, bearing the brunt of consumer and property concerns,
together with regulatory noise both domestically and externally, with newsflow
around more US trade curbs on its biotech and tech sectors. This was despite
targeted policy and liquidity support from the central bank and government.
Portfolio Review
The portfolio underperformed its closest reference benchmark over the review
period by 5.2% partly due to the strength of the Indian rally. India is the
biggest country position in the portfolio at 19%, though this is less than its
weight in the benchmark.
The Indian market is home to many attractive companies with competitive
business models, high returns and fantastic long-term growth prospects. We
have high conviction in our holdings, which overall performed better than the
market average, but we intend to maintain valuation discipline in our
purchases. Prestige Estates posted solid earnings results with pre-sales
growth in its residential projects more than doubling year-on-year. We see the
business continuing to cement its position as one of the country's most
prominent developers amid a clear trend towards industry consolidation.
Engineering and IT services provider Cyient continued to execute well with its
operating margins expanding on the back of productivity improvements and
utilisation gains, along with healthy order flows. Healthcare diagnostics
group Vijaya Diagnostics Centre also added to relative performance, given its
superior delivery against peers both in terms of revenue and profit growth.
Elsewhere, with Chinese consumption recovering slower than expected, sentiment
towards local equity markets deteriorated further and valuations de-rated.
Electric Vehicle (EV) gear maker Zhejiang Shuanghuan Driveline sold-off on
concerns over slowing demand for EVs, as did Sinoma Science & Technology
Co, an advanced materials business involved in the broader renewable energy
supply chain. We remain positive on both companies' prospects as we expect
Shuanghuan to be a key beneficiary of the trends towards electrification, with
customer diversification and potential overseas expansion likely to offset any
domestic slowdown in sales. Sinoma, on the other hand, is well-placed to
benefit from the growth of wind energy capacity globally, supported by the
company's strong technology and research and development capabilities.
Renewable energy is a key area of development for the Chinese government and
Sinoma has a diversified business that caters to this demand. Some of our
other mainland holdings in other sectors also lagged on the back of broader
industry concerns. Joinn Laboratories, a company that specialises in drug
safety evaluation for the pharmaceutical industry, fell alongside the broader
healthcare sector. While we are positive on Joinn's leading position in the
pre-clinical drug assessment space and its solid financial position, the
company has been affected by policy uncertainty and the softer domestic
funding environment which has led to slower growth in its order book. It is
fair to say that investors are now incorporating a higher risk premium for
Chinese equities given uncertainty over the broad direction of government
policy and the role of the private sector in the economy. Overall, including
companies listed in Hong Kong, our Chinese holdings performed marginally
better than the local market. Meanwhile, from a sectoral perspective,
technology was among the best performing sectors through the review period,
driven by optimism over AI and a turnaround in the semiconductor cycle. This
lifted the tech-heavy market of Taiwan, and our lighter exposure there
detracted from portfolio returns. While the market is home to several
interesting businesses, particularly in IT, we have been highly selective in
our approach and focused on owning only the best-quality small-cap companies
that we can find. We are optimistic about the future of technology in Asia and
the portfolio is well-positioned to exploit opportunities emerging from the
advancement of AI. This includes one of our technology hardware holdings,
Taiwan Union Technology, which is among the leading suppliers of high-speed
copper clad laminates, a core material used for printed circuit boards. The
company is seeing a pick-up in orders from AI-related customers which in turn
is driving a change in their sales mix towards higher-margin products.
Elsewhere in Singapore, on the other hand, semiconductor equipment maker AEM
Holdings' share price fell after the company indicated that it would adjust
its inventory and pre-tax profit downwards for the fourth quarter of 2023. We
immediately engaged with the company on this issue and believe it is a one-off
incident.
ASEAN is an often overlooked part of the region amid the significant attention
given to China and India. But it is nevertheless a rich source of good-quality
small-caps. Some of our ASEAN holdings were among the key contributors to
performance over the review period. In Indonesia, logistics and supply chain
company AKR Corporindo, a main player in industrial fuel, was boosted by
greater clarity around potential acceleration in land sales in the Java
Integrated Industrial and Ports Estate. Elsewhere, our Vietnamese holding, FPT
Corp, a software services company, continued to deliver impressive earnings.
We feature a deeper case study on FPT Corp below.
Since 2022, we no longer have a market cap restriction on new additions to the
portfolio though we remain focused on finding smaller companies that are at
the bottom quartile of our investible universe. Our intention is to invest in
a diversified portfolio of around 50 companies that have an exceptional
industry position. To this end, we continue to refresh the portfolio by
reducing smaller, legacy positions to those with better growth prospects and
clearer earnings visibility.
In the technology sector, for instance, we switched from Korea's Koh Young
Technology to Taiwan-based Chroma ATE, a strong player that excels in the core
power testing industry with high entry barriers, growing exposure to exciting
industries like electric vehicles, 3D testing and semiconductors. Similarly,
we sold our holding in Taiwan-based manufacturer of bicycle and motorcycle
chains KMC Kuei Meng International in favour of better opportunities
elsewhere.
Meanwhile, we refined our India positioning by selling out of healthcare
company Sanofi India and taking profits on other Indian holdings that have
performed well. In their place, we introduced three new holdings with
attractive growth prospects. Aptus Value Housing Finance offers loans in the
affordable housing segment, a growing market with a strong foothold in south
India. It fares well against peers in asset quality, loan yields and return
ratios, supported by a conservative management team. We also participated in a
share placement offered at a considerable discount by Apar Industries. Apar
produces conductors, specialty oil lubricants and cables primarily to the
power industry. We view Apar as a play on the electrification of the Indian
economy and rising investment in transmission and renewables globally, with
half of its revenues from India and the rest from exports to the US, Europe
and Australia. Finally, we invested in KFin Technologies, a registrar and
transfer agent for local mutual funds that should benefit from deepening
capital markets in India. As a duopoly, the industry structure is highly
attractive with high barriers to entry and significant growth potential.
Elsewhere, in Vietnam we initiated a new holding in Military Commercial Joint
Stock Bank (MBB), given its strong profitability metrics, excellent track
record in managing asset quality and robust outlook for loan growth. MBB is
one of the leading domestic banks in Vietnam and we regard it as well-managed
with its prudent culture stemming from its military background, but dynamic
enough to innovate and capitalise on opportunities. The bank enjoys a key
competitive edge with its lower funding cost, which is a result of its strong
brand and quasi state-owned enterprise status. The share prices of banks in
Vietnam have generally been weak as a result of an anti-corruption probe in
the property sector, which gave us the opportunity to buy a quality franchise
at an attractive valuation.
Outlook
The investment climate remains one of sluggish global economic growth,
inflationary risks and concerns over the impact of policy moves by major
central banks. China continues to be a key source of worry, amid a slow-moving
recovery. Against this prevailing uncertain backdrop, the portfolio is
well-positioned, exhibiting strong fundamentals and a return profile that
should stand it in good stead. Dividend yield, growth and return on equity
metrics are higher than the reference benchmark, while the debt-to-equity
ratio is comparatively lower also. Our stock-specific insights are derived
from our rigorous bottom-up due diligence, backed by our in-house research
capabilities and well-resourced team across Asia. The profile of the portfolio
also reflects our belief that quality small-cap companies with solid balance
sheets and sustainable earnings prospects will emerge stronger in tougher
times. More broadly, we are finding the best opportunities around key
structural drivers of growth across Asia. Domestic consumption, especially in
the premium segment, is set to grow in line with rising affluence.
Infrastructure spending and urbanisation will boost real estate and
financials. The rapid advance of all things tech, including AI, means a bright
future for both direct and ancillary plays on gaming, internet, fintech,
semiconductors and tech services like the cloud and software-as-a-service.
ASEAN, meanwhile, has been a winner of the China-plus-one strategy, in which
multinationals are moving their supply chains away from China due to
geopolitical tensions. Asia is also at the forefront of the green transition
with plays on renewable energy, batteries, EVs, its related infrastructure and
environmental management. In this context , we see smaller companies as the
more direct beneficiaries of some of these key trends, with the portfolio well
placed to deliver sustainable returns for shareholders over the long run.
Gabriel Sacks, Flavia Cheong &
Xin Yao Ng
abrdn Asia Limited
27 March 2024
Ten Largest Investments
As at 31 January 2024
Park Systems Corporation Bank OCBC NISP
4.4% 4.4%
Total assets Total assets
The Korean company is the leading developer of atomic force microscopes, a An Indonesian listed banking and financial services company, which is a steady
nascent technology that could have broad industrial application in sectors consistent performer backed by healthy
such as chip-making and biotechnology.
asset quality.
AKR Corporindo Cyient
3.7% 3.6%
Total assets Total assets
AKR is one of the main players in industrial fuel in Indonesia, which has a The Indian company provides engineering and IT services to clients in
high entry barrier. Its key strength is its extensive infrastructure and developed markets, competing primarily on quality of service and cost of
logistic facilities throughout the country. delivery.
FPT Corporation Aegis Logistics
3.4% 3.1%
Total assets Total assets
FPT is a diversified technology group with a fast-growing software outsourcing A strong and conservative player in India's gas and liquids logistics sector,
business. It also owns a telecoms unit, an electronics retailing company, and with a first mover advantage in key ports and a fair amount of capacity
has interests in other sectors, such as education. expansion to come. The government's push for the adoption of cleaner energy is
also boosting its liquefied natural gas business.
John Keells Holdings Prestige Estates Projects
3.0% 2.9%
Total assets Total assets
A respected and reputable Sri Lanka conglomerate with a healthy balance sheet Prestige is one of the leading property developers in India with a significant
and good execution, John Keells has a hotels and leisure segment that includes land bank and benefitting from a positive residential upcycle that should
properties in the Maldives. It has other interests in consumer, transportation still have some years to run. It has a stronghold in Bangalore, India's
and financial services. leading IT hub, but it has also been successful expanding into other top-tier
cities.
Mega Lifesciences Taiwan Union
2.8% 2.7% Taiwan Union Technology Corp is a leading maker of copper clad laminate (CCL),
a key base material used to make printed circuit boards. With a strong
Total assets Total assets commitment to R&D,
it has moved up the value chain through
the years.
The Thai group produces, sells and distributes health supplements and
pharmaceutical products, mostly in the under-penetrated but fast-growing
frontier and emerging markets.
Park Systems Corporation
4.4%
Total assets
Bank OCBC NISP
The Korean company is the leading developer of atomic force microscopes, a
nascent technology that could have broad industrial application in sectors
such as chip-making and biotechnology.
An Indonesian listed banking and financial services company, which is a steady
consistent performer backed by healthy
asset quality.
3.7%
Total assets
AKR Corporindo
3.6%
Total assets
Cyient
AKR is one of the main players in industrial fuel in Indonesia, which has a
high entry barrier. Its key strength is its extensive infrastructure and
logistic facilities throughout the country.
The Indian company provides engineering and IT services to clients in
developed markets, competing primarily on quality of service and cost of
delivery.
3.4%
Total assets
FPT Corporation
3.1%
Total assets
Aegis Logistics
FPT is a diversified technology group with a fast-growing software outsourcing
business. It also owns a telecoms unit, an electronics retailing company, and
has interests in other sectors, such as education.
A strong and conservative player in India's gas and liquids logistics sector,
with a first mover advantage in key ports and a fair amount of capacity
expansion to come. The government's push for the adoption of cleaner energy is
also boosting its liquefied natural gas business.
3.0%
Total assets
John Keells Holdings
2.9%
Total assets
Prestige Estates Projects
A respected and reputable Sri Lanka conglomerate with a healthy balance sheet
and good execution, John Keells has a hotels and leisure segment that includes
properties in the Maldives. It has other interests in consumer, transportation
and financial services.
Prestige is one of the leading property developers in India with a significant
land bank and benefitting from a positive residential upcycle that should
still have some years to run. It has a stronghold in Bangalore, India's
leading IT hub, but it has also been successful expanding into other top-tier
cities.
2.8%
Total assets
Mega Lifesciences
2.7%
Total assets
Taiwan Union
Taiwan Union Technology Corp is a leading maker of copper clad laminate (CCL),
a key base material used to make printed circuit boards. With a strong
commitment to R&D,
it has moved up the value chain through
the years.
The Thai group produces, sells and distributes health supplements and
pharmaceutical products, mostly in the under-penetrated but fast-growing
frontier and emerging markets.
Portfolio
As at 31 January 2024
Total
Valuation assets
Company Industry Country £'000 %
Park Systems Corporation Electronic Equipment, Instruments & Components South Korea 23,911 4.4
Bank OCBC NISP Banks Indonesia 23,520 4.4
AKR Corporindo Oil, Gas & Consumable Fuels Indonesia 19,726 3.7
Cyient IT services India 19,452 3.6
FPT Corporation IT Services Vietnam 18,568 3.4
Aegis Logistics Oil, Gas & Consumable Fuels India 16,707 3.1
John Keells Holdings Industrial Conglomerates Sri Lanka 16,286 3.0
Prestige Estates Projects Real Estate Management & Development India 15,651 2.9
Mega Lifesciences (Foreign) Pharmaceuticals Thailand 14,845 2.8
Taiwan Union Electronic Equipment, Instruments & Components Taiwan 14,717 2.7
Top ten investments 183,383 34.0
Nam Long Invest Corporation Real Estate Management & Development Vietnam 13,515 2.5
M.P. Evans Group Food Products United Kingdom 13,392 2.5
LEENO Industrial Semiconductors & Semiconductor Equipment South Korea 13,224 2.5
Sporton International Professional Services Taiwan 13,022 2.4
Affle India Media India 12,276 2.3
Cebu Real Estate Management & Development Philippines 12,209 2.3
Asian Terminals Transportation Infrastructure Philippines 11,601 2.2
Precision Tsugami China Machinery China 11,477 2.1
AEM Holdings Semiconductors & Semiconductor Equipment Singapore 10,926 2.0
Medikaloka Hermina Health Care Providers & Services Indonesia 10,763 2.0
Top twenty investments 305,788 56.8
Autohome - ADR Interactive Media & Services China 10,270 1.9
Dah Sing Financial Banks Hong Kong 10,106 1.9
Ultrajaya Milk Industry & Trading Food Products Indonesia 9,510 1.8
Oriental Holdings Automobiles Malaysia 9,107 1.7
Hana Microelectronics (Foreign) Electronic Equipment, Instruments & Components Thailand 9,043 1.7
Vijaya Diagnostic Centre Health Care Providers & Services India 9,037 1.7
UIE Food Products Denmark 8,857 1.6
ChaCha Food - A Food Products China 8,761 1.6
Sinoma Science & Technology - A Chemicals China 8,608 1.6
Apar Industries Industrial Conglomerates India 8,541 1.5
Top thirty investments 397,628 73.8
Zhejiang Shuanghuan Driveline - A Auto Components China 7,888 1.5
Chroma ATE Electronic Equipment, Instruments & Components Taiwan 7,883 1.5
Sunonwealth Electric Machinery Industry Machinery Taiwan 7,776 1.4
Millenium & Copthorne Hotels New Zealand (A) Hotels, Restaurants & Leisure New Zealand 7,445 1.4
AEON Credit Service (M) Consumer Finance Malaysia 7,246 1.4
United Plantations Food Products Malaysia 7,227 1.3
Joinn Laboratories China - H Life Sciences Tools & Services China 6,685 1.2
CE Info Systems Software India 6,271 1.2
MOMO.com Broadline Retail Taiwan 6,107 1.1
Pentamaster International Semiconductors & Semiconductor Equipment Malaysia 6,061 1.1
Top forty investments 468,217 86.9
Syngene International Life Sciences Tools & Services India 5,914 1.1
KFin Technologies Capital Markets India 5,744 1.1
SINBON Electronics Electronic Equipment, Instruments & Components Taiwan 5,298 1.0
Andes Technology Semiconductors & Semiconductor Equipment Taiwan 4,938 0.9
Kerry Logistics Air Freight & Logistics Hong Kong 4,146 0.8
Thai Stanley Electric (Foreign) Auto Components Thailand 3,503 0.7
Shangri-La Hotels Malaysia Hotels, Restaurants & Leisure Malaysia 2,989 0.6
Convenience Retail Asia Consumer Staples Distribution Hong Kong 2,963 0.5
Aptus Value Housing Finance Financial Services India 2,941 0.5
Credit Bureau Asia Professional Services Singapore 2,851 0.5
Top fifty investments 509,504 94.6
Bukit Sembawang Estates Real Estate Management & Development Singapore 2,812 0.5
Tisco Financial (Foreign) Banks Thailand 2,765 0.5
Yoma Strategic Real Estate Management & Development Myanmar 2,719 0.5
Manulife Insurance Malaysia 1,320 0.3
Humanica (Foreign) Professional Services Thailand 794 0.2
First Sponsor Group (Warrants 21/03/2029) Real Estate Management & Development Singapore 223 -
Military Commercial Joint Stock Bank Banks Vietnam 123 -
AEON Stores Hong Kong Multiline Retail Hong Kong 98 -
First Sponsor Group (Warrants 30/05/2024) Real Estate Management & Development Singapore - -
G3 Exploration Oil, Gas & Consumable Fuels China - -
Total investments 520,358 96.6
Net current assets 18,178 3.4
Total assets(B) 538,536 100.0
(A) Holding includes investment in both common and preference lines.
(B) Total assets less current liabilities.
Investment Case Studies
Prestige Estates (India)
In which year did we first invest?
April, 2019
How has Prestige Estates done since we invested in it?
Since we invested in it on April 2019, the share price of Prestige Estates has
risen close to about 340% in GBP terms (total returns), compared to the MSCI
AC Asia ex Japan Small Cap Index's gain of about 47%.
% Holding:
2.92%
Where is their head office?
Bengaluru, Karnataka, India
What is their web address?
prestigeconstructions.com
What does the company do?
It is a leading South Indian developer with a good reputation for executing
and completing projects, covering segments such as residential, commercial,
retail, hospitality and property management.
Why do we like the company?
We regard Prestige Estates as a quality developer with a strong track record
of residential housing development and a growing investment property
portfolio. Founded in 1986, the group has completed more than 290 projects
through the years. It has continued to show decent growth in pre-sales,
completions, launches and rental income. Having been a leading player in South
India, Prestige is looking to drive growth by diversifying from its base in
Bangalore to other parts of India, such as Mumbai and New Delhi. Its expansion
strategy has been sensible, as it is opting to add new projects through
tie-ups with developers in other regions.
Prestige has more than 150 million sq ft of real estate space in its pipeline
and around a quarter of this is in locations outside south India. Its most
recent updates have highlighted a new asset creation cycle as the company is
planning an aggressive scaling up across all its business segments over the
next five years, including the rebuilding of its office and shopping mall
pipeline. Capital discipline is key and we closely monitor how the company has
been executing its plans so that it does not compromise its balance sheet,
albeit operating cash flows have been strong and pre-sales momentum remains
positive. There is also support from a substantial improvement in the
company's liquidity position, following a spin-off of assets to Blackstone and
a stake sale in one of its office blocks.
More broadly, the government's bold housing programme is taking shape with
affordable homes being built across the country, while sector reform such as
the Real Estate (Regulation and Development) Act (RERA) has triggered
large-scale consolidation in the industry, with the strongest impact on the
residential segment. We expect good quality developers with strong balance
sheets and brands, such as Prestige Estates, to benefit the most. The
consolidation theme is happening at pace with Prestige getting good land deals
from banks offloading their assets. We also see urbanisation and population
growth, combined with increasing disposable income and the increase in nuclear
families, as fuelling the overall demand for housing over the longer term.
When did we last engage Prestige on ESG?
We last met Prestige in June 2023.
What were the key areas of engagement?
We have been engaging Prestige on its environmental impact, including efforts
in green building and water management. We also continue to engage with
management around its board composition and gaps in skillsets, as well as
employee welfare and improvements
in disclosure.
What is the result of our engagement?
Prestige Estates has yet to have an MSCI ESG rating, but we are encouraged by
the company's efforts towards a greener planet. The company is committed to
designing and delivering assets with "green building" certification, while
also incorporating water conservation and waste recycling. For instance, the
company has installed rainwater harvesting mechanisms at all its project
locations. Compared with conventional buildings, overall Prestige has
conserved more than 30% of water in its portfolio of green buildings. Its
freshwater consumption also fell by 19% in FY2022. The company also recycled
22% of its overall waste in FY2023.
As for the social aspect, in terms of talent management, Prestige uses online
learning resources to enhance the skills of its workforce, with a learning
platform that has videos, articles, podcasts and TED Talks on various topics
and interests. In addition, it has in place an employee well-being policy and
Prevention of Sexual Harassment policy that applies to all employees. We have
also seen some progress in corporate governance. Independent representation on
the board of directors is about 56%, while Prestige increased the number of
female directors on the nine-member board to two in FY2020 from one
previously.
When do we next meet the company and what will be on the ESG agenda?
We plan to meet Prestige in mid-2024 for a business update and to check on
progress on the material ESG issues highlighted above.
FPT Corporation
In which year did we first invest?
2019
How has FPT Corp done since we invested in it?
Since we invested in it on 5 April 2019, the share price of FPT Corp has risen
close to 350% in GBP terms (total returns), compared to the MSCI AC Asia
Pacific ex Japan Small Cap Index's gain of about 44%.
% Holding:
3.44%
Where is their head office?
Hanoi, Vietnam
What is their web address?
FPT.com
What does the company do?
FPT is the biggest technology and IT services group in Vietnam with three core
businesses in IT services, telecommunications, as well as education and
investment.
Why do we like the company?
FPT exemplifies the type of company that we like. Despite operating in what is
still deemed to be a frontier market, FPT has been entrepreneurial in
capitalising on growth opportunities while at the same time demonstrating
prudence in building diversified revenue streams without compromising its
balance sheet. A number of the company's original founders remain core
shareholders and are highly involved in the business and we believe they
deserve credit for their vision, execution and transparency with investors. We
also like the governance structure that has been put in place where key
management personnel rotate across the different divisions and develop a deep
understanding of each business before joining the board.
FPT's technology arm is the key driver of its revenue and profits. Their IT
services division has become a global business and saw its revenue top US$1
billion for the first time in 2023 on the back of rising demand for digital
transformation. FPT originally found its niche in serving Japanese
multinationals but has been successful in growing its client base elsewhere in
the Asia-Pacific, US and European Union. The company aims to be in the top 50
global leading digital transformation (DX) solutions and services providers by
2030, with a revenue target of US$5 billion, and it has been instrumental in
putting Vietnam on the map for technology outsourcing services.
The industry is attractive with structural growth tailwinds and a huge market.
FPT believes demand growth will ride on new technologies, such as cloud, AI,
big data analytics and robotic process automation. Most recently, it acquired
an 80% stake in AOSIS, a French IT consulting firm, that will increase its
customer base and improve its capabilities in offering solutions to the
aerospace, aviation and logistics sectors. It also launched its automotive
technology subsidiary FPT Automotive in Texas in the US, in view of rising
global demand for software-defined
vehicles (SDVs).
Across its other businesses, the education segment is the most profitable and
management expects this division to continue to deliver consistently strong
revenue growth. Most of the software engineers in Vietnam hail from FPT's
university, which also offers synergies with its broader IT business.
Elsewhere, its telecom business is stable and defensive, supported by growth
in broadband services.
This should provide a good buffer and healthy cash-flows in times of weak
macroeconomic conditions.
The group is generally well aligned with the growth story of Vietnam.
Investments are flowing into higher-tech sectors, while the population is
becoming more educated and productive. The country is also gaining in
importance as an alternative production base amid the diversification of
global supply chains on the back of geopolitics. It is emerging as a
manufacturing powerhouse, especially in textiles, electronics, and footwear,
with competitive labour costs among its key competitive advantages. As one of
the country's leading conglomerates and most forward-thinking enterprises, FPT
is well-placed to benefit from these trends and capitalise on emerging
business opportunities, such as the development of local datacentre
capabilities or semiconductor manufacturing.
When did we last engage FPT on ESG?
We last met FPT in May 2023.
What were the key areas of engagement?
We view cybersecurity, talent management and the company's broader
environmental impact as some of the material risks for the company. As such,
we continue to engage with management around better disclosure on data
privacy, employee welfare - given the stiff competition for tech talent - as
well as the setting of targets to track its progress around its carbon
footprint and renewable energy mix.
What is the result of our engagement?
Although FPT has yet to set up an ESG board committee, the company has
implemented ESG initiatives for its business sustainability. It has also
started to embed its ESG reporting within its annual reports from 2021. The
board approves ESG policies, with specific goals established and then cascaded
down to the subsidiary level. It also oversees the implementation of
sustainable goals.
FPT's environmental record is clean. FPT has fully complied with waste and
emissions management regulations, with no related violations recorded in the
30 years since its establishment. However, FPT has not set any trackable
carbon emissions reduction or renewable energy targets. That said, it is
working to increase the use of renewable energy, such as solar, as well as
ground water and rain water in its buildings. FPT Complex Danang, for
instance, has been awarded the EDGE by the World Bank for reducing energy,
water and material usage by 20%. We are also urging the company to track its
carbon footprint better.
Meanwhile, cybersecurity and talent management are key areas of focus. Given
that cybersecurity is a major operating risk, FPT has developed cybersecurity
products such as CyRadar and FPT. EagleEye to supplement outsourced systems.
However, disclosures about data privacy and cybersecurity are limited, and we
continue to engage with the company on better transparency.
In talent management, we think the company has done a good job in managing
employee welfare so far. FPT also maintains good diversity in its workforce.
Female employees accounted for 38.1% in 2022 vs 36.1% in 2017. At the
executive level, women made up 34.6%.
FPT has one of the most developed board structures in Vietnam. Its
seven-member board has three independent directors and one female. Inside
shareholders and major shareholders hold only 17.8% and 12.8% stake
respectively. In response to shareholders' feedback, FPT changed auditor to
PwC from Deloitte in 2021.
While MSCI has yet to rate FPT Corp for its ESG standards, overall we regard
the company as a good ESG stewardship example in Vietnam.
When do we next meet the company and what will be on the ESG agenda?
We plan to meet FPT in the first half of 2024 to discuss its business and
progress on the material ESG issues highlighted above.
Condensed Statement of Comprehensive Income (unaudited)
Six months ended Six months ended
31 January 2024 31 January 2023
Revenue Capital Total Revenue Capital Total
Notes £'000 £'000 £'000 £'000 £'000 £'000
(Losses)/gains on investments - (5,499) (5,499) - 9,989 9,989
Income 2 6,989 - 6,989 8,162 - 8,162
Exchange losses - (337) (337) - (181) (181)
Investment management fees (377) (1,131) (1,508) (376) (1,128) (1,504)
Administrative expenses (714) - (714) (601) (16) (617)
Net return before finance costs and taxation 5,898 (6,967) (1,069) 7,185 8,664 15,849
Finance costs (249) (746) (995) (252) (755) (1,007)
Net return before taxation 5,649 (7,713) (2,064) 6,933 7,909 14,842
Taxation 3 (362) (3,118) (3,480) (249) (588) (837)
Net return after taxation 5,287 (10,831) (5,544) 6,684 7,321 14,005
Return per share (pence) 4
Basic 3.40 (6.96) (3.56) 4.26 4.66 8.92
Diluted 3.20 (6.28) (3.08) 3.99 4.44 8.43
The total column of this statement represents the profit and loss account of
the Company.
There is no other comprehensive income and therefore the net return after
taxation is also the total comprehensive income for the period.
All revenue and capital items in the above statement derive from continuing
operations.
The accompanying notes are an integral part of the condensed financial
statements.
Condensed Statement of Financial Position (unaudited)
As at As at
31 January 2024 31 July 2023
Notes £'000 £'000
Fixed assets
Investments at fair value through profit or loss 520,358 549,672
Current assets
Debtors and prepayments 2,133 2,237
Cash and cash equivalents 17,812 5,807
19,945 8,044
Creditors: amounts falling due within one year
Other creditors (1,767) (1,250)
Net current assets 18,178 6,794
Total assets less current liabilities 538,536 556,466
Non-current liabilities
2.25% Convertible Unsecured Loan Stock 2025 7 (36,276) (36,175)
3.05% Senior Unsecured Loan Note 2035 6 (29,902) (29,898)
Deferred tax liability on Indian capital gains (5,857) (4,609)
(72,035) (70,682)
Net assets 466,501 485,784
Capital and reserves
Called up share capital 8 10,436 10,435
Capital redemption reserve 2,062 2,062
Share premium account 60,464 60,441
Equity component of 2.25% Convertible Unsecured Loan Stock 2025 7 1,057 1,057
Capital reserve 377,145 393,238
Revenue reserve 15,337 18,551
Equity shareholders' funds 466,501 485,784
Net asset value per share (pence) 9
Basic 302.05 310.49
Diluted 301.18 308.93
The accompanying notes are an integral part of the condensed financial
statements.
Condensed Statement of Changes in Equity (unaudited)
Six months ended 31 January 2024
Capital Share Equity
Share redemption premium component Capital Revenue
capital reserve account CULS 2025 reserve reserve Total
Notes £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 31 July 2023 10,435 2,062 60,441 1,057 393,238 18,551 485,784
Conversion of 2.25% Convertible Unsecured Loan Stock 2025 8 1 - 23 - - - 24
Return after taxation - - - - (10,831) 5,287 (5,544)
Return of Ordinary shares for treasury 8 - - - - (5,262) - (5,262)
Dividends paid 5 - - - - - (8,501) (8,501)
Balance at 31 January 2024 10,436 2,062 60,464 1,057 377,145 15,337 466,501
Six months ended 31 January 2023
Capital Share Equity
Share redemption premium component Capital Revenue
capital reserve account CULS 2025 reserve reserve Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 31 July 2022 10,435 2,062 60,428 1,057 375,450 14,964 464,396
Conversion of 2.25% Convertible Unsecured Loan Stock 2025 8 - - 6 - - - 6
Return after taxation - - - - 7,321 6,684 14,005
Dividends paid 5 - - - - - (7,533) (7,533)
Balance at 31 January 2023 10,435 2,062 60,434 1,057 382,771 14,115 470,874
The accompanying notes are an integral part of the condensed financial
statements.
Condensed Statement of Cash Flows (unaudited)
Six months ended Six months ended
31 January 2024 31 January 2023
£'000 £'000
Cash flows from operating activities
Return before finance costs and tax (1,069) 15,849
Adjustments for:
Dividend income (6,735) (8,125)
Interest income (109) (37)
Dividends received 6,075 8,260
Interest received 121 37
Interest paid (870) (871)
Losses/(gains) on investments 5,499 (9,989)
Foreign exchange movements 337 181
Increase in prepayments (2) (8)
Decrease in other debtors 20 10
Increase/(decrease) in other creditors 74 (975)
Overseas withholding tax suffered (2,258) (297)
Net cash inflow from operating activities 1,083 4,035
Cash flows from investing activities
Purchase of investments (46,982) (28,361)
Sales of investments 71,833 24,739
Net cash inflow/(outflow) from investing activities 24,851 (3,622)
Cash flows from financing activities
Equity dividends paid (8,501) (7,533)
Buyback of Ordinary shares (5,091) -
Net cash outflow from financing activities (13,592) (7,533)
Increase/(decrease) in cash and cash equivalents 12,342 (7,120)
Analysis of changes in cash and short term deposits
Opening balance 5,807 9,471
Increase/(decrease) in cash and cash equivalents 12,342 (7,120)
Foreign exchange movements (337) (181)
Closing balance 17,812 2,170
Represented by:
Money market funds 11,432 -
Cash and short term deposits 6,380 2,170
17,812 2,170
The accompanying notes are an integral part of the condensed financial
statements.
Notes to the Financial Statements
For the six months ended 31 January 2024
1. Accounting policies
Basis of accounting. The condensed financial statements have been prepared in
accordance with Financial Reporting Standard 104 (Interim Financial Reporting)
and with the Statement of Recommended Practice (SORP) for 'Financial
Statements of Investment Trust Companies and Venture Capital Trusts', issued
in July 2022 (The AIC SORP). They have also been prepared on a going concern
basis and on the assumption that approval as an investment trust will continue
to be granted.
2. Income
Six months ended Six months ended
31 January 2024 31 January 2023
£'000 £'000
Income from investments
Overseas dividends 6,514 7,914
UK dividend income 221 211
6,735 8,125
Other income
Deposit interest 111 37
Interest from money market funds 143 -
254 37
Total income 6,989 8,162
3. Taxation
The taxation charge for the period allocated to revenue represents withholding
tax suffered on overseas dividend income. The taxation charge for the period
allocated to capital represents capital gains tax arising on the sale of
Indian equity investments.
4. Return per share
Six months ended Six months ended
31 January 2024 31 January 2023
p p
Basic
Revenue return 3.40 4.26
Capital return (6.96) 4.66
Total return (3.56) 8.92
The figures above are based on the following:
£'000 £'000
Revenue return 5,287 6,684
Capital return (10,831) 7,321
Total return (5,544) 14,005
Weighted average number of shares in issue(A) 155,633,556 156,954,206
Six months ended Six months ended
31 January 2024 31 January 2023
Diluted(B) p p
Revenue return 3.20 3.99
Capital return (6.28) 4.44
Total return (3.08) 8.43
The figures above are based on the following:
£'000 £'000
Revenue return 5,376 6,753
Capital return (10,563) 7,529
Total return (5,187) 14,282
Number of dilutive shares 12,499,408 12,505,379
Diluted shares in issue(AB) 168,132,964 169,459,585
(A) Calculated excluding shares held in treasury.
(B) The calculation of the diluted total, revenue and capital returns per
Ordinary share is carried out in accordance with IAS 33, "Earnings per Share".
For the purpose of calculating total, revenue and capital returns per Ordinary
share, the number of Ordinary shares used is the weighted average number used
in the basic calculation plus the number of Ordinary shares deemed to be
issued for no consideration on exercise of all 2.25% Convertible Unsecured
Loan Stock 2025 (CULS). The calculations indicate that the exercise of CULS
would result in an increase in the weighted average number of Ordinary shares
of 12,499,408 (31 January 2023 - 12,505,379) to 168,132,964 (31 January 2023
- 169,459,585) Ordinary shares.
For the six months ended 31 January 2024 the assumed conversion for potential
Ordinary shares was dilutive to the revenue return per Ordinary share (31
January 2023 - dilutive) and non-dilutive to the capital return per Ordinary
share (31 January 2023 - dilutive). Where dilution occurs, the net returns are
adjusted for interest charges and issue expenses relating to the CULS (31
January 2024 - £357,000; 31 January 2023 - £277,000). Total earnings for the
period are tested for dilution. Once dilution has been determined individual
revenue and capital earnings are adjusted.
5. Dividends
Six months ended Six months ended
31 January 2024 31 January 2023
£'000 £'000
Special dividend for 2023 - 2.25p (2022 - 1.6p) 3,498 2,511
Interim dividend for 2023 - 1.61p (2022 - 1.6p) 2,515 2,511
Interim dividend for 2024 - 1.6p (2023 - 1.6p) 2,488 2,511
8,501 7,533
6. Senior Unsecured Loan Note
On 1 December 2020 the Company issued a £30,000,000 15 year Loan Note at a
fixed rate of 3.05%. Interest is payable in half yearly instalments in June
and December and the Loan Note is due to be redeemed at par on 1 December
2035. The issue costs of £118,000 will be amortised over the life of the loan
note. The Company has complied with the Note Purchase Agreement that the ratio
of total borrowings to adjusted net assets will not exceed 0.20 to 1.00, that
the ratio of total borrowings to adjusted net liquid assets will not exceed
0.60 to 1.00, that net tangible assets will not be less than £225,000,000 and
that the minimum number of listed assets will not be less than 40.
The fair value of the Senior Unsecured Loan Note as at 31 January 2024 was
£27,070,000, the value being based on a comparable quoted debt security.
7. 2.25% Convertible Unsecured Loan Stock 2025 ("CULS")
Liability Equity
Nominal component component
£'000 £'000 £'000
Balance at beginning of period 36,629 36,175 1,057
Conversion of CULS into Ordinary shares (24) (24) -
Notional interest on CULS - 77 -
Amortisation of issue expenses - 48 -
Balance at end of period 36,605 36,276 1,057
The 2.25% Convertible Unsecured Loan Stock 2025 ("CULS") can be converted at
the election of holders into Ordinary shares during the months of May and
November each year throughout its life until 31 May 2025 at a rate of 1
Ordinary share for every 293.0p nominal of CULS. Interest is paid on the CULS
on 31 May and 30 November each year.
In the event of a winding-up of the Company the rights and claims of the
Trustee and CULS holders would be subordinate to the claims of all creditors
in respect of the Company's secured and unsecured borrowings, under the terms
of the Trust Deed.
During the period ended 31 January 2024 the holders of £24,012 of 2.25% CULS
2025 exercised their right to convert their holdings into Ordinary shares.
Following the receipt of the exercise instructions, the Company converted
£24,012 (31 July 2023 - £12,753) nominal amount of CULS into 8,191 (31 July
2023 - 4,347) Ordinary shares.
As at 31 January 2024, there was £36,605,647 (31 July 2023 - £36,629,659)
nominal amount of CULS in issue.
8. Called-up share capital
During the six months ended 31 January 2024 2,022,500 Ordinary shares were
bought back to be held in treasury at a total cost of £5,262,000 (31 January
2023 - £nil). During the six months ended 31 January 2024 an additional 8,191
(31 July 2023 - 4,347) Ordinary shares were issued after £24,012 nominal
amount of 2.25% Convertible Unsecured Loan Stock 2025 were converted at 293.0p
each (31 July 2023 - £12,753). The total consideration received was £nil (31
July 2023 - £nil). At the end of the period there were 208,710,759 (31 July
2023 - 208,702,568) Ordinary shares in issue, of which 54,267,090 (31 July
2023 - 52,244,590) were held in treasury.
Subsequent to the period end, 495,000 Ordinary shares have been bought back to
be held in treasury at a cost of £1,297,000.
9. Net asset value per share
As at As at
31 January 2024 31 July 2023
Basic
Net assets attributable £466,501,000 £485,784,000
Number of shares in issue(A) 154,443,669 156,457,978
Net asset value per share 302.05p 310.49p
Diluted(B)
Net assets attributable £502,776,000 £521,959,000
Number of shares 166,937,064 168,959,568
Net asset value per share 301.18p 308.93p
(A) Excludes shares in issue held in treasury.
(B) The diluted net asset value per Ordinary share has been calculated on the
assumption that £36,605,647 (31 July 2023 - £36,629,659) 2.25%
Convertible Unsecured Loan Stock 2025 ("CULS") are converted at 293.0p per
share, giving a total of 166,937,064 (31 July 2023 - 168,959,568) Ordinary
shares. Where dilution occurs, the net assets are adjusted for items relating
to the CULS.
Net asset value per share - debt converted. In accordance with the Company's
understanding of the current methodology adopted by the AIC, convertible
financial instruments are deemed to be 'in the money' if the cum income net
asset value ("NAV") exceeds the conversion price of 293.0p per share. In such
circumstances a net asset value is produced and disclosed assuming the
convertible debt is fully converted. At 31 January 2024 the cum income NAV was
302.07p and thus the CULS were 'in the money' (31 July 2023 - same).
10. Transaction costs
During the period expenses were incurred in acquiring or disposing of
investments classified as fair value through profit or loss. These have been
expensed through capital and are included within gains on investments in the
Condensed Statement of Comprehensive Income. The total costs were as follows:
Six months ended Six months ended
31 January 2024 31 January 2023
£'000 £'000
Purchases 49 49
Sales 131 61
180 110
11. Analysis of changes in net debt
At At
31 July Currency Cash Non-cash 31 January
2023 differences flows movements 2024
£'000 £'000 £'000 £'000 £'000
Cash and cash equivalents 5,807 (337) 12,342 - 17,812
Debt due after more than one year (70,682) - - (1,353) (72,035)
(64,875) (337) 12,342 (1,353) (54,223)
At At
31 July Currency Cash Non-cash 31 January
2022 differences flows movements 2023
£'000 £'000 £'000 £'000 £'000
Cash and cash equivalents 9,471 (181) (7,120) - 2,170
Debt due within one year (68,516) - - (662) (69,178)
(59,045) (181) (7,120) (662) (67,008)
A statement reconciling the movement in net funds to the net cash flow has not
been presented as there are no differences from the above analysis.
12. Fair value hierarchy
FRS 102 requires an entity to classify fair value measurements using a fair
value hierarchy that reflects the significance of the inputs used in making
the measurements. The fair value hierarchy has the following classifications:
Level 1: unadjusted quoted prices in an active market for identical assets or
liabilities that the entity can access at the measurement date.
Level 2: inputs other than quoted prices included within Level 1 that are
observable (ie developed using market data) for the asset or liability, either
directly or indirectly.
Level 3: inputs are unobservable (ie for which market data is unavailable) for
the asset or liability.
The financial assets measured at fair value in the Condensed Statement of
Financial Position are grouped into the fair value hierarchy at the reporting
date as follows:
Level 1 Level 2 Level 3 Total
As at 31 January 2024 £'000 £'000 £'000 £'000
Financial assets at fair value through profit or loss
Quoted equities 505,249 - 12,209 517,458
Quoted preference shares - - 2,677 2,677
Quoted warrants - 223 - 223
Net fair value 505,249 223 14,886 520,358
Level 1 Level 2 Level 3 Total
As at 31 July 2023 £'000 £'000 £'000 £'000
Financial assets at fair value through profit or loss
Quoted equities 536,515 - 9,958 546,473
Quoted preference shares - - 2,835 2,835
Quoted warrants - 247 117 364
Net fair value 536,515 247 12,910 549,672
Quoted equities. The fair value of the Company's investments in quoted
equities has been determined by reference to their quoted bid prices at the
reporting date. Quoted equities included in Fair Value Level 1 are actively
traded on recognised stock exchanges.
Quoted preference shares and quoted warrants. The fair value of the Company's
investments in quoted preference shares and quoted warrants has been
determined by reference to their quoted bid prices at the reporting date.
Investments categorised as Level 2 are not considered to trade as actively as
Level 1 assets.
Six months ended Year ended
31 January 2024 31 July 2023
Level 3 Financial assets at fair value through profit or loss £'000 £'000
Opening fair value 12,910 9,664
Transfer from level 2 - 2,952
Total gains or losses included in losses on investments in the Statement of
Comprehensive Income:
- assets held at the end of the year 1,976 294
Closing balance 14,886 12,910
At the period end, the Company's investee, CEBU Holdings was awaiting final
regulatory approval to merge with another company, Ayala Land, and new shares
are expected to be issued in Ayala Land in due course to satisfy the
transaction by a share conversion. The valuation methodology employed is based
on the underlying quoted price of Ayala Land and the implied conversion ratio
providing a value of £12,209,000 (31 July 2023 - £9,958,000). Subsequent to
the period, final regulatory approval was received and the Company's holding
in CEBU merged into Ayala Land, which is classified as a Level 1 asset.
13. Related party disclosures
Transactions with the Manager. The investment management fee is payable
monthly in arrears based on the market capitalisation of the Company
multiplied by the number of shares in issue (less those held in treasury) at
the month end. The annual management fee has been charged at 0.85% for the
first £250,000,000, 0.60% for the next £500,000,000 and 0.50% over
£750,000,000 . During the period £1,508,000 (31 January 2023 - £1,504,000)
of investment management fees were charged, with a balance of £510,000 (31
January 2023 - £990,000) being payable to aFML at the period end. Investment
management fees are charged 25% to revenue and 75% to capital.
The Company also has a management agreement with aFML for the provision of
both administration and promotional activities services. The administration
fee is payable quarterly in advance and is adjusted annually to reflect the
movement in the Retail Price Index. It is based on a current annual amount of
£119,000 (31 January 2023 - £105,000). During the period £60,000 (31
January 2023 - £52,000) of fees were charged, with a balance of £60,000 (31
January 2023 - £52,000) payable to aFML at the period end. The promotional
activities costs are based on a current annual amount of £219,000 (31 January
2023 - £219,000), payable quarterly in arrears. During the period £110,000
(31 January 2023 - £128,000) of fees were charged, with a balance of
£128,000 (31 January 2023 - £128,000) being payable to aFML at the period
end.
14. Segmental information
The Company is engaged in a single segment of business, which is to invest in
equity securities and debt instruments. All of the Company's activities are
interrelated, and each activity is dependent on the others. Accordingly, all
significant operating decisions are based on the Company as one segment.
15. Half-Yearly Report
The financial information in this Report does not comprise statutory accounts
within the meaning of Section 434 - 436 of the Companies Act 2006. The
financial information for the year ended 31 July 2023 has been extracted from
published accounts that have been delivered to the Registrar of Companies and
on which the report of the auditors was unqualified and contained no statement
under Section 498 (2), (3) or (4) of the Companies Act 2006. The condensed
interim financial statements have been prepared using the same accounting
policies as the preceding annual financial statements.
16. This Half-Yearly Report was approved by the Board and authorised for issue on
27 March 2024.
Alternative Performance Measures ("APMs")
Alternative Performance Measures ("APMs") are numerical measures of the
Company's current, historical or future performance, financial position or
cash flows, other than financial measures defined or specified in the
applicable financial framework. The Company's applicable financial framework
includes FRS 102 and the AIC SORP. The Directors assess the Company's
performance against a range of criteria which are viewed as particularly
relevant for closed-end investment companies.
Discount to net asset value per Ordinary share
The difference between the share price and the net asset value per Ordinary
share expressed as a percentage of the net asset value per Ordinary share.
This has been presented on a diluted basis as the Convertible Unsecured Loan
Stock ("CULS") is "in the money".
31 January 2024 31 July 2023
NAV per Ordinary share (p) a 301.18 308.93
Share price (p) b 258.00 264.00
Discount (a-b)/a 14.3% 14.5%
Net gearing
Net gearing measures the total borrowings less cash and cash equivalents
divided by shareholders' funds, expressed as a percentage. Under AIC reporting
guidance cash and cash equivalents includes net amounts due from and to
brokers at the period end as well as cash and short term deposits.
31 January 2024 31 July 2023
Borrowings (£'000) a 66,178 66,073
Cash and cash equivalents (£'000) b 17,812 5,807
Amounts due to brokers (£'000) c 445 -
Amounts due from brokers (£'000) d 583 1,343
Shareholders' funds (£'000) e 466,501 485,784
Net gearing (a-b+c-d)/e 10.3% 12.1%
Ongoing charges
The ongoing charges ratio has been calculated in accordance with guidance
issued by the AIC as the total of investment management fees and
administrative expenses and expressed as a percentage of the average published
daily net asset values with debt at fair value throughout the year. The ratio
as at 31 January 2024 is based on forecast ongoing charges for the year ending
31 July 2024.
31 January 2024 31 July 2023
Investment management fees (£'000) 3,016 3,012
Administrative expenses (£'000) 1,324 1,328
Less: non-recurring charges (£'000)(A) (23) (67)
Ongoing charges (£'000) 4,317 4,273
Average net assets (£'000) 472,964 462,127
Ongoing charges ratio 0.91% 0.92%
(A) Professional fees comprising corporate and legal fees considered unlikely
to recur.
The ongoing charges ratio provided in the Company's Key Information Document
is calculated in line with the PRIIPs regulations, which includes finance
costs and transaction charges.
Total return
NAV and share price total returns show how the NAV and share price has
performed over a period of time in percentage terms, taking into account both
capital returns and dividends paid to shareholders. NAV and share price total
returns are monitored against open-ended and closed-ended competitors, and the
Reference Index, respectively.
Share
Six months ended 31 January 2024 NAV Price
Opening at 1 August 2023 a 308.93p 264.00p
Closing at 31 January 2024 b 301.18p 258.00p
Price movements c=(b/a)-1 -2.5% -2.3%
Dividend reinvestment(A) d 1.8% 2.1%
Total return c+d -0.7% -0.2%
Share
Year ended 31 July 2023 NAV Price
Opening at 1 August 2022 a 295.25p 254.00p
Closing at 31 July 2023 b 308.93p 264.00p
Price movements c=(b/a)-1 4.6% 3.9%
Dividend reinvestment(A) d 3.0% 3.4%
Total return c+d +7.6% +7.3%
NAV total return from inception (19 October 1995) to 31 January 2024 31 July 2023
Opening NAV a 20.00p 20.00p
Closing NAV b 301.18p 308.93p
Price movements c=(b/a)-1 1405.9% 1444.7%
Dividend reinvestment(A) d 872.8% 838.9%
Total return c+d +2278.7% +2283.6%
(A) NAV total return involves investing the net dividend in the NAV of the
Company with debt at fair value on the date on which that dividend goes
ex-dividend. Share price total return involves reinvesting the net dividend in
the share price of the Company on the date on which that dividend goes
ex-dividend.
Copies of the Company's Half Yearly Report for the six months ended 31 January
2024 will be posted to shareholders in April 2024 and will be available
thereafter on the Company's website: asia-focus.co.uk *.
Please note that past performance is not necessarily a guide to the future and
that the value of investments and the income from them may fall as well as
rise and may be affected by exchange rate movements. Investors may not get
back the amount they originally invested.
* Neither the content of the Company's website nor the content of any website
accessible from hyperlinks on the Company's website (or any other website) is
(or is deemed to be) incorporated into, or forms (or is deemed to form) part
of this announcement.
abrdn Holdings Limited
Secretaries
27 March 2024
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