Over the year to 31 March 2016, Martin Currie Asia Unconstrained’s net asset value (‘NAV’) of the company fell by 7.9% on a total return basis, while the share price dropped 10.3% as the discount widened from 11.2% to 14.3%. By comparison, the MSCI Asia ex- Japan index fell 8.7%. Subject to shareholders’ approval, a final dividend of 5.25p will be paid on 12 August 2016 to shareholders on the register at 22 July 2016. This brings the total dividend for the year to 7.75p, an increase of 3.3% over the previous year.
The manager’s report says that, at the stock level, Taiwan Semiconductor (‘TSMC’), the single largest contributor to performance, enhanced its competitive advantage in the foundry sector by taking a large market share in new technologies for which it can charge premium prices. Throughout the year, growth and margins for TSMC have been better than expected. The Indian IT consultancy, Infosys, also fared well. Recent new client wins, as well as increased penetration with existing customers, has lent credence to the optimism management has for future business prospects – at the same time it has been clear that profit margins remain robust. Meanwhile, its future product offerings, including its digital and cloud service strategies, have been clearly articulated. Elsewhere, Indian motorcycle and scooter manufacturer, Hero MotoCorp’s most recent quarterly results showed better sales momentum thanks to a pick up in volume growth as well as a rise in average selling prices. At the same time, the much anticipated launch of two new scooter models has been a success, with both being well received, resulting in an increase in market share. These products are now being rolled out nationwide.
Weaker-than-expected first-half results for Television Broadcasts Ltd, resulted in a sharp fall in its share price. Since then, there has been a modest recovery in the stock. They anticipate results remaining weak in the near term, although the TV operator has sufficient excess cash resources to maintain its current level of dividend until the advertising cycle recovers in Hong Kong. HSBC Holdings, which has a large weighting in the portfolio, was the second-greatest detractor from performance over the year. This financial multinational has incurred substantial remediation costs and regulatory fines stemming from past operational and compliance failings. The present management team took control in 2011 in the knowledge that a difficult digestion period lay ahead. What we underestimated is the scale and duration of the costs associated with the new regulatory regime. In their view, many of these issues are running their course and the current valuation is unduly pessimistic. Tsingtao Brewery has been another poor performer and has been negatively affected by the Chinese government’s anti-corruption drive, specifically by the impact on the Chinese restaurant and catering sector, a key channel for the core brand. This has been exacerbated by competition from AB InBev, which is seeking to expand its presence in the premium segment.
MCP : Martin Currie Asia Unconstrained hit by discount widening