The Matthews China Fund (Trades, Portfolio) reported its second quarter international holdings this morning. The fund’s portfolio consisted of stocks from the United States, China, Taiwan and Hong Kong, and as of June 30, the fund maintained $1.13 billion in assets under management.
The fund’s investment strategy states that they intend to invest in companies capable of sustainable growth based on the fundamental characteristics of those companies, including balance sheet information; number of employees; size and stability of cash flow; and management’s depth. The fund‘s lead manager is Richard H. Gao and its co-managers are Henry Zhang and Winnie Chwang.
As of the close of the second quarter of 2014, most updated portfolio maintains 57 stocks valued at $1.122 billion. Over the past quarter the fund’s managers added one new stock: Jumei International Holding (JMEI). The following five companies are the Matthews China Fund (Trades, Portfolio)’s largest holdings.
Tencent Holdings (HKSE:00700)
Over the past quarter Tencent Holdings was the Matthews China Fund (Trades, Portfolio)’s top holding. The fund held on to 2,838,500 shares of the company’s stock making up for 3.9% of the fund’s total portfolio as well as 0.03% of the company’s shares outstanding.
Over the duration of the second quarter the fund cut their holdings -5.46% by selling a total of 164,000 shares of the stock. They sold these shares near the estimated average quarterly price of HK$304.51 per share. From this average price the price per share has dropped a sizeable -57.8%%.
Matthews China Fund (Trades, Portfolio)’s holding history:
Tencent Holdings is engaged in providing Internet value-added services, mobile and telecommunications value-added services, online advertising services and e-commerce transactions to users in China.
Tencent Holdings’ historical revenue and net income:
The analysis on Tencent reports that the company’s dividend yield is near a 10-year high, its asset growth is currently faster than its revenue growth and its operating margin and gross margin have both been in a long-term decline.
Tencent Holdings has a market cap of HK$1196.41 billion. Its shares are currently trading at around ¥128.50 with a P/E ratio of 51.60, a P/S ratio of 14.68 and a P/B ratio of 14.44. The company had an annual average earnings growth of 39.50% over the past five years.
Lenovo Group (00992)
The Matthews China Fund (Trades, Portfolio)’s second largest position is in Lenovo Group where they hold on to 22,602,000 shares of the company’s stock. This position represents 2.8% of Matthews’ total holdings as well as 0.22% of the company’s shares outstanding.
The fund did not alter their position in Lenovo over the past quarter. In fact, the last move they made was in the first quarter when they sold over a million shares. Since that sell the price per share has increased 19.4%, and over the past five years the fund has seen average gains of 199% on shares bought.
The fund’s historical holding history as of the close of Q2:
Lenovo Group is a personal technology company engaged in manufacturing & marketing of technology products & services such as personal computers, servers, laptops, workstations, mobile Internet devices, tablets & smart phones.
Lenovo’s historical revenue and earnings growth:
The analysis on Lenovo reports that the company’s revenue per share reports predictable revenue and earnings growth, its dividend yield is near a 3-year high and its price is close to a 10-year high.
Lenovo Group has a market cap of HK$109.68 billion. Its shares are currently trading at around HK$10.54 with a P/E ratio of 66.10, a P/S ratio of 0.37 and a P/B ratio of 4.78. The company had an annual average earnings growth of 20.60% over the past ten years.
GuruFocus rated Lenovo the business predictability rank of 3-star.
Mindray Medical International (MR)
The fund’s third largest holding goes to Mindray Medical which is actually not a China-based company. Matthews holds on to 998,168 shares of the company’s stock, representing 2.8% of their total portfolio and 0.84% of the company’s shares outstanding.
The fund did not alter their position in the company over the past quarter. The last move they made in Mindray was in the fourth quarter of 2013, and since then the price per share has dropped approximately -4.4%.
Matthews China Fund (Trades, Portfolio)’s historical holding history:
Mindray Medical International Limited is a developer, manufacturer and marketer of medical devices. Its business is segmented into three - patient monitoring and life support products, in-vitro diagnostic products and medical imaging systems.
Mindray Medical International’s historical revenue and earnings growth:
The analysis on Mindray Medical reports that the company has issued $421.639 million of debt over the past three years, its dividend yield is near a 2-year high, and that its payout ratio is too high – indicating that its dividend payout might not be sustainable. The analysis also notes that the company’s P/E, P/S and P/B ratios are all trading at near 10-year lows.
Check out Mindray Medical in comparison to its competition:
Mindray Medical International Limited has a market cap of $3.59 billion. Its shares are currently trading at around $30.35 with a P/E ratio of 17.50, a P/S ratio of 3.00 and a P/B ratio of 2.50. The company had an annual average earnings growth of 27.10% over the past five years.
China Longyuan Power Group Corp Ltd. (HKSE:00916)
The guru’s fourth largest position is in China Lonyuan Power Group where the fund maintains 26,451,000 shares of the company’s stock. These holdings make up for 2.6% of the fund’s total assets managed as well as 0.33% of the company’s shares outstanding.
Over the past quarter the Matthews Fund cut their position -7.77% by selling off 2,229,000 shares of the company’s stock. They sold these shares in the second quarter price range of HK$7.60 to HK$8.81 with an estimated average quarterly price of HK$8.35. Since their sell the price per share has fallen approximately -6.8%.
The fund’s holding history as of the second quarter:
China Longyuan Power Group Co is involved in wind and coal power generation and sale, coal trading and other related business in the People's Republic of China.
China Longyuan Power’s historical revenue and net income:
The warning signs on the company report that the company has issued HK$22 billion of debt over the past year, its dividend yield is near a 3-year low and its P/B and P/S ratios are trading at near 1-year lows.
The Peter Lynch Chart suggests that the company is currently overvalued:
China Longyuan Power Group has a market cap of HK$62.52 billion. Its shares are currently trading at around HK$7.78 with a P/E ratio of 24.50, a P/S ratio of 2.61and a P/B ratio of 1.32. The company had an annual average earnings growth of 16.90% over the past five years.
China Mengniu Dairy Co Ltd. (HKSE:02319)
The fund’s fifth largest holding goes to China Mengniu Dairy Co Ltd. Matthews China holds on to 6,305,000 shares of the company’s stock, representing 2.6% of the fund’s total holdings and 0.34% of the company’s shares outstanding.
Over the past quarter the fund cut their holdings -3.19% by selling 208,000 shares of the company’s stock. They sold these shares in the second quarter price range of HK$34.40 to HK$42.75 with an estimated average quarterly price of HK$38.74 per share. Since their sell the price per share has dropped approximately -2.3%.
Matthews China Fund (Trades, Portfolio)’s historical holdings as of the second quarter:
China Mengniu Dairy and its subsidiaries are engaged in the manufacture & distribution of dairy products in China. Its products range includes liquid milk products, such as UHT milk, milk beverages and yogurt, ice cream & other dairy products.
China Mengniu Dairy’s historical revenue and net income:
The analysis on China Mengniu Dairy reports that the company’s Sloan Ratio points to a poor quality of earnings, the company has issued HK$13.6 billion of debt, and its asset growth is currently significantly faster than its revenue growth.
China Mengniu Dairy has a market cap of HK$69.46 billion. Its shares are currently trading at around $37.85 with a P/E ratio of 32.80, a P/S ratio of 1.27 and a P/B ratio of 3.00. The company had an annual average earnings growth of 14.40% over the past five years.
You can check out Matthews China Fund’s entire second quarter portfolio listings here. If you cannot see the fund’s portfolio, you might not have the GuruFocus Global Membership. Try a free 7-day trial here!
