Baillie Gifford Shin Nippon has published results for the six months ended 31 July 2015. It was a great period for shareholders in the fund as the net asset value per share (after deducting borrowings at fair value) rose by 17.0% compared to a 6.1% rise in the MSCI Japan Small Cap Index and the share price increased by 29.8%.
The report says stocks that are seen as beneficiaries of the record numbers of Chinese tourists visiting Japan were very strong performers over the period, such as recent purchase Zojirushi, in contrast to companies that have significant exposure to the Chinese domestic economy which appears to be slowing. Sales of Zojirushi’s high-end rice cookers, which are very popular with Asian tourists, continued to rise rapidly.
Amongst the other strongest performers in the portfolio were several of the long-term Internet related holdings. Their focus on rapidly expanding domestic niche markets allowed these businesses to carry on growing. Start Today, which operates the leading online apparel marketplace, Cookpad, the popular recipe sharing website, and Next, a large property information portal, all continued to expand. The business models of these customer facing companies are progressing over time, with new ways to monetise the high volumes of visitors to the websites being developed. On the commercial side, MonotaRO, which operates a website that sells millions of items required by small businesses on a daily basis, and, Infomart, the online restaurant supply ordering system, both continued to grow rapidly. These two companies are displacing existing, less efficient ways of doing business and still have large untapped market opportunities to expand into within Japan. Many of these Internet businesses are reaching the point where they become sufficiently dominant in their niche that it is possible to start increasing the charges that they levy on their customers. If successful, this should increase the profitability of these businesses.
BGS : Baillie Gifford Shin Nippon reports impressive results