Over the year to the end of March 2015, Martin Currie Pacific returned 19.3% on net assets and 24.8% on its share price. by contrast, the total return of the MSCI Asia ex Japan Index was 24.7% in sterling terms for the year (but NB this is not the fund’s benchmark). The dividend was maintained at 7.5p per share.
This was the first year that the fund operated under its new “Asia long-term unconstrained” mandate which is supposed to generate absolute returns rather than returns relative to an index. The new portfolio is much more concentrated with just 28 holdings at the end of the period. to reinforce the change the Board is proposing that the name of the fund be changed to “Martin Currie Asia Unconstrained Trust plc”.
The report says AIA Group. Life insurer AIA Group performed well through the year on the back of a strong operating performance. This was reflected in good financial year 2014 results released at the end of February. The company has continued to deliver attractive growth and margin improvement. In keeping with the management goal of a progressive dividend, the company’s dividend-per-share growth was 17.5% year on year (‘yoy’). Infosys, the Indonesian IT service company, benefitted from improved expectations about the new business pipeline, with more business verticals indicating healthy demand. At the same time, analysts believe that Infosys has the greatest potential among peers to return excess cash to shareholders – although there are no imminent decisions likely on this matter. In the manager’s view, while the direction of travel is positive in terms of growth, they expect it to be lumpy on a quarterly basis. Luggage maker Samsonite also performed well. The market has warmed to the new CEO’s long-term vision for the company, despite results that were, at best, only in line with expectations. After an initial fall on the back of results, the stock has risen on positive guidance for 2015. They expect the company to begin to benefit from lower raw material costs from the second half of the year, although some of the cost savings will be reinvested in marketing. China Mobile moved higher as the company continued its improved performance in the 4G era. Finally moving away from its uncompetitive home-grown 3G technology and poor handset line up, China Mobile has continued with the turnaround story they say they had been patiently waiting for. While the stable dividend payout ratio remains a source of frustration to some, they are encouraged by management’s efforts on marketing costs and handset subsidies. The increasing percentage of data traffic being handled on China Mobile’s WiFi network underlines its improvement in network quality.
On the downside, for SJM Holdings, the Macau gaming sector performed poorly due to continuing concerns about falling mass-market table yields and rising labour costs squeezing margins across the sector. The managers believe these issues are at least, in part, cyclical and are manageable. In their view, the long-term potential for SJM, as well as the gaming sector in Macau, is attractive, as the market becomes accessible to a greater number of people, the product offering broadens and additional capacity is added to the market. Valuations are becoming increasingly appealing. With an attractive dividend – albeit pressured somewhat by capex commitments – and a strong brand, they believe SJM is well positioned to weather this turbulent period. A sharp decline in VIP gaming revenues at Genting’s Singapore gaming and leisure asset Resorts World Sentosa in the second half due to a combination of weak Chinese VIP demand and an adverse win ratio underpinned a 12% yoy earnings decline. While VIP demand is likely to remain sluggish, especially as the Singapore operation scales back credit provision, resilient mass market and normalising win ratio should see earnings improve. In Malaysia, capacity additions are underway at Genting’s Malaysian casino resort via the company’s Genting Integrated Tourism Plan, with investment of approximately MYR5 billion (approximately GBP900 million), encompassing new hotel, retail, gaming and theme-park facilities which will progressively open in the second half of 2016. Genting continues to expand its global gaming franchise, with new resorts in the pipeline for Jeju (South Korea) and Las Vegas. We expect the market to gradually focus its attention on these developments as 2015 progresses. They think the company is attractively valued and offers interesting growth angles, a strong balance sheet and improving free cash flow potential. Chinese gas distributor ENN Energy sold off after the company agreed to buy its chairman’s North American liquid natural gas refuelling station business. While they say they are not enthusiastic about these assets in the near term, they believe the stock market overreacted, with the share price falling significantly more than the value of the deal. Some extra decline was warranted, as ENN has jeopardised its solid reputation for capital allocation, but the sell-off seemed excessive. ENN still has a good long-term future and they have retained our position in the stock. They believe the period of heavy investment at ENN has reached its peak and anticipate rising free cash flow over the next several years which should also translate into an increase in ENN’s dividend-payout ratio.
MCP : Martin Currie Pacific plans name change to reflect strategy