The Matthews Pacific Tiger Fund (Trades, Portfolio) disclosed it established two new positions and closed three others when it released its first-quarter portfolio last week.
Managed by Sharat Shroff and Rahul Gupta, the fund seeks long-term capital appreciation by investing in Asian companies, with the exception of Japan, that are capable of producing sustainable growth.
The fund established positions in E-Mart Inc. (XKRX:139480, Financial) and PT Mitra Keluarga Karyasehat Tbk (ISX:MIKA, Financial) during the quarter and exited its Yum Brands Inc. (YUM, Financial), Orion Corp. (XKRX:271560, Financial) and Hyflux Ltd. (SGX:600, Financial) holdings.
E-Mart
The Pacific Tiger Fund invested in 174,749 shares of E-Mart for an average price of 281,719 won ($263.64) per share, giving it 0.46% portfolio space.
The South Korean hypermarket retailer has a market cap of 7.16 trillion won; its shares closed at 270,000 won on Thursday with a price-earnings ratio of 104.81, a price-book ratio of 0.87 and a price-sales ratio of 0.47.
The Peter Lynch chart below shows the stock is trading below its fair value, suggesting it is undervalued.
GuruFocus rated E-Mart’s financial strength 6 out of 10. While the company’s interest coverage meets Benjamin Graham’s standard of 5, its Altman Z-Score of 1.77 indicates it is under financial pressure. Despite the fact its operating margin is in decline, the company’s profitability and growth was rated 7 out of 10 as it has a high Piotroski F-Score of 9.
The fund holds 0.63% of the company’s outstanding shares.
PT Mitra Keluarga Karyasehat
The fund purchased a 70 million-share stake in Mitra Keluarga Karyasehat for an average price of 2,001.08 Indonesian rupiahs (14 cents) per share, expanding the portfolio 0.11%.
The Indonesian company, which owns and operates hospitals, has a market cap of 28.01 trillion rupiahs; its shares closed at 1,780 rupiahs on Monday with a price-earnings ratio of 40.96, a price-book ratio of 7.56 and a price-sales ratio of 11.22.
According to the Peter Lynch chart below, the stock is overpriced as it is trading higher than its fair value.
Mitra Keluarga’s financial strength was rated 9 out of 10 by GuruFocus, boosted by its comfortable level of interest coverage and a high Altman Z-Score of 18.83. Its Beneish M-Score of -1.91, however, implies the company manipulates its financial statements. Its profitability and growth was rated 6 out of 10 as its operating margin outperforms 97% of competitors and it has a moderate Piotroski F-Score of 5.
The fund holds 0.48% of the company’s outstanding shares.
Yum Brands
The fund sold its 579,910 remaining shares for an average price of $81.97 per share. The trade had an impact of -0.5% on the portfolio. GuruFocus estimates the fund has gained an estimated 45% on the investment since the fourth quarter of 2014.
The Kentucky-based restaurant operator, which owns KFC, Pizza Hut and Taco Bell, has a market cap of $27.64 billion; its shares were trading around $84.54 on Thursday with a price-earnings ratio of 19.75 and a price-sales ratio of 5.07.
Based on the Peter Lynch chart below, the stock appears to be overpriced as it is trading above its fair value.
Since the company has been issuing new long-term debt for the past several years, GuruFocus rated Yum Brands’ financial strength 4 out of 10. In addition, its Altman Z-Score of 2.90 indicates it is under minor financial stress. Its profitability and growth was rated 5 of 10 as it has an expanding operating margin and a high Piotroski F-Score of 7. It also has a one-star business predictability rating (out of five).
With 0.65% of outstanding shares, Pioneer Investments (Trades, Portfolio) is the company’s largest guru shareholder. Other gurus that have positions in the company are Jim Simons (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), Lee Ainslie (Trades, Portfolio), Ken Fisher (Trades, Portfolio), Jeff Auxier (Trades, Portfolio), Caxton Associates (Trades, Portfolio) and Tom Russo (Trades, Portfolio).
Orion
The Pacific Tiger fund sold its remaining 211,758 shares of Orion for an average price of 113,477 won per share, impacting the portfolio by -0.22%. According to GuruFocus, the fund has made an estimated 24% gain on the investment since the third quarter of 2017.
The South Korean confectioner has a market cap of 5.2 trillion won; its shares closed at 130,500 won on Thursday with a price-earnings ratio of 68.77 and a price-book ratio of 3.86.
The chart below shows the stock has climbed nearly 60% since its initial public offering last July. Year to date, it is up about 25%.
GuruFocus rated Orion’s financial strength 5 out of 10. While its interest coverage meets Graham’s threshold of 5, it does not meet GuruFocus’ standard of 10. Its profitability and growth was rated 2 of 10 despite the fact its operating margin outperforms 78% of competitors.
No other gurus own the stock.
Hyflux
The fund exited its stake in Hyflux, selling its remaining 1.8 million shares for 0.24 Singapore dollars (18 cents) per share. The transaction had an impact of -0.01% on the portfolio. GuruFocus data shows the fund lost an estimated 17% on the investment since the first quarter of 2016.
The Singapore-based utility company, which provides water and fluid treatment solutions, has a market cap of S$164.91 million; its shares closed at 21 cents on Thursday with a price-book ratio of 0.17 and a price-sales ratio of 0.48.
According to the Peter Lynch chart below, the stock is trading near its fair value.
As the company has issued a lot of new long-term debt over the past several years, Hyflux’s financial strength was rated 4 out of 10 by GuruFocus. In addition, its Altman Z-Score of 0.40 indicates it could face bankruptcy in the near future. Its profitability and growth was also rated 4 of 10, pulled down by a declining operating margin and a moderate Piotroski F-Score of 4. The company does, however, have a two-star business predictability rating.
No other gurus hold the stock.
Other trades
During the quarter, the fund also added to its positions in Yum China Holdings Inc. (YUMC), China Resources Land Ltd. (HKSE:01109), Public Bank Bhd (XKLS:1295) and several others. It also reduced its Alibaba Group Holdings Ltd. (BABA) and Ping An Insurance (Group) Co. of China Ltd. (HKSE:02318) holdings, among others.
The $9.56 billion portfolio, which is composed of 66 holdings, is largely invested in the financial services and consumer defensive sectors. According to its fact sheet, the fund slightly underperformed its benchmark, the MSCI All Country Asia ex Japan Index, in 2017 with a return of 39.96%. The index posted a 41.72% return.
Disclosure: No positions.
