Matthews Pacific Tiger Fund (Trades, Portfolio) added to its stake in China Resources Beer (HKSE:00291) in the second quarter at an average price of 16.14 Hong Kong dollars ($2.08 in U.S. currency) per share.
The trade had a 0.19% impact on the fund’s portfolio. It now owns 50,502,000 shares in the company.
China Resources Beer is a subsidiary of China Resources Snow Breweries Ltd. It is China’s largest beer producer. Since 2008, its brand Snow beer has become the world’s top-selling brand. China Resources Beer brews more than 100 hectolitres of Snow beer each year despite the fact it is largely sold only in China.
According to GuruFocus, China Resources Beer has a financial rating of 5 of 10 with an Altman Z-Score of 1.36 indicating that it is in the distress zone and could possibly file for bankruptcy within the next two years. China Resources Beer also has a 4/10 profitability and growth rating with an ROE of -11.43% ranking it beneath 90% of the 211 companies in the global beverages industry.
Over the previous year the company’s stock price has declined by 30% which may have been an influencing factor for the fund to add to its stake. Since the first quarter of 2011, the fund has lost an estimated 35% on its investment in China Resources Beer. Investing in China Resources Beer is very high variance due to its weak financial statements, low Piotroski F-Score and the fact that the company continues to issue new debt.
Below is a Peter Lynch chart that shows China Resources Beer is trading above its intrinsic value.
The Matthews Pacific Tiger Fund (Trades, Portfolio) invests in all countries and markets in Asia, including developed, emerging and frontier countries and markets in the Asian region, excluding Japan.
Cheers to your investment success.
Disclosure: Author does not own any shares in this company.
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