Matthews Asia Small Companies Fund Buys 8 Stocks in 1st Quarter

New positions include several Indian financial services companies

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May 08, 2019
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The Matthews Asia Small Companies Fund (Trades, Portfolio) disclosed this week it established holdings in eight companies during the first quarter: DCB Bank Ltd. (BOM:532772, Financial), Yuhan Corp. (XKRX:000100, Financial), Cholamandalam Investment and Finance Co. Ltd. (BOM:511243, Financial), Kuobrothers Corp. (ROCO:8477, Financial), China Beststudy Education Group (HKSE:03978), ICICI Securities Ltd. (BOM:541179), Alchip Technologies Ltd. (TPE:3661) and PT Bank Tabungan Pensiunan Nasional Syariah Tbk (ISX:BTPS).

The fund seeks long-term capital appreciation primarily through small-cap companies that are capable of sustainable growth based on fundamental characteristics like balance sheet strength, size and stability of cash flows, and management’s depth. As of quarter-end, the portfolio contains 62 holdings, of which eight are new positions.

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DCB Bank

The fund purchased 1,010,775 shares of DCB Bank, giving the position 1.71% equity portfolio space. Shares averaged 184.06 rupees ($2.64) during the quarter.

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The Indian regional bank offers retail banking, commercial banking, treasury operations and other services to corporate and retail customers. GuruFocus ranks the bank’s financial strength 4 out of 10: Although the company’s cash-debt ratio of 1.03 outperforms 85.84% of global competitors, DCB Bank’s equity-to-asset ratio of 0.09 underperforms 66.07% of global Asian regional banks.

Yuhan

The fund purchased 10,918 shares of Yuhan, giving the holding 1.32% equity portfolio space. Shares averaged 239,944 won ($204.97) during the quarter.

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The South Korean drug manufacturer offers one-stop custom synthesis services from research and development to commercial production of active pharmaceutical products and intermediates for various disease treatments. GuruFocus ranks the company’s financial strength 8 out of 10 on several positive indicators, which include a strong Altman Z-score of 5.54, a debt-to-equity ratio that outperforms 79.87% of global competitors and interest coverage that is above Benjamin Graham’s required threshold of five.

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Cholamandalam

The fund purchased 102,266 shares of Cholamandalam, giving the position 1.23% equity portfolio space. Shares averaged 1,242.07 rupees during the quarter.

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The Indian credit services company offers various financial products, including vehicle finance, business finance, home equity loans and stock brokering. The company’s financial strength ranks a poor 3 out of 10 on several weak indicators, which include an equity-to-asset ratio that underperforms 84.50% of global competitors and a cash-debt ratio of 0.07.

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Kuobrothers

The fund purchased 1,058,000 shares of Kuobrothers, giving the stake 1.13% equity portfolio space. Shares averaged 51.94 Taiwanese dollars ($1.68) during the quarter.

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GuruFocus ranks the Taiwanese e-commerce company’s financial strength 9 out of 10: Even though the Beneish M-score suggests possible earnings manipulation, Kuobrothers has a strong Piotroski F-score of 8 and a solid Altman Z-score of 6.51. Additionally, the company’s interest coverage is in the triple-digits and outperforms 77% of global competitors.

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China Beststudy Education

The fund purchased 4.25 million shares of China Beststudy Education, giving the position 1.09% equity portfolio space. Shares averaged 2.79 Hong Kong dollars (36 cents) during the quarter.

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GuruFocus ranks the company’s financial strength 8 out of 10 on several positive signs, which include no long-term debt and a strong Piotroski F-score of 7.

ICICI Securities

The fund purchased 388,683 shares of ICICI Securities, giving the holding 0.78% equity portfolio space. Shares averaged 227.32 rupees during the quarter.

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GuruFocus ranks ICICI Securities’ financial strength 6 out of 10: Although the company has a strong Altman Z-score of 4.83, it has a modest Piotroski F-score of 5 and a Beneish M-score that suggests earnings manipulation. Despite this, ICICI Securities’ profitability ranks 9 out of 10 on strong signs like expanding profit margins and a return on assets that is outperforming over 85% of global competitors.

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Alchip Technologies

The fund purchased 548,000 shares of Alchip Technologies, giving the position 0.76% equity portfolio space. Shares averaged NT$78.23 during the quarter.

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Taiwan-based Alchip Technologies provides silicon design and manufacturing services for companies developing complex and high-volume system-on-chip designs. GuruFocus ranks the company’s financial strength 9 out of 10 on several strong signs, which include robust interest coverage, a strong Altman Z-score of 5.94 and a return on invested capital that exceeds the company’s weighted average cost of capital.

PT Bank Tabungan

The fund purchased 7,784,600 shares of PT Bank Tabungan, giving the stake 0.69% equity portfolio space. Shares averaged 2,037.5 rupiah (14 cents) per share.

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GuruFocus ranks the Indonesian regional bank’s financial strength 8 out of 10 on several strong signs, which include no long-term debt and an equity-to-asset ratio of 0.34, outperforming 95.39% of global competitors.

Disclosure: No positions.

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