Jardine and Samsung help Aberdeen New Dawn outperform. Aberdeen New Dawn says its net asset value (“NAV”) total return for the year was 39.0%, ahead of the total return of 36.4% from the MSCI All Countries Asia Pacific ex Japan Index. The share price total return was 38.8%, with the share price of 212.0p at the end of the year representing a discount of 12.3% to the NAV per share (excluding current year income).
The Board is also pleased to announce a final dividend of 3.0p per share (2016: 2.9p), making a total dividend for the year of 4.0p per share (2016: 3.9p), an increase of 2.6% on last year.
The chairman says that the portfolio performed well compared to the benchmark, most notably in Hong Kong, Singapore and Korea. He says that, within these markets, they have a particular focus on businesses with wide regional exposure rather than those that are dependent on their domestic economies.
Manager’s report
The following is an extract from the manager’s report: “The portfolio’s holdings in Hong Kong and Korea were notable contributors to performance. In Hong Kong, Jardine Strategic’s share price was supported by expectations that the outlook for its subsidiaries will continue to improve. In particular, its Indonesian unit, Astra International, should benefit from the recovery in its mining services, plantations and financial services businesses. At the same time, its retail arm, Dairy Farm, has achieved higher profit margins by shutting down non-performing stores, while also expanding its more lucrative fresh food segment. In addition, Jardine Strategic’s inclusion into the MSCI AC World Index helped its share price. The portfolio also benefited from the performance of HSBC Holdings, which is experiencing an improvement in net interest margins as well as its management’s commitment to returning capital to shareholders via a series of share buybacks. ASM Pacific Technology also performed well. We continue to like the company for its market leadership, robust balance sheet and commitment to investing through the business cycle that has helped it maintain its market-leading position.
In Korea, the holding in Samsung Electronics was aided by its share buyback and cancellation programme. We have engaged with management over the need to return excess cash to shareholders, and were pleased when it announced a substantial share buyback programme and agreed to return a portion of its free cashflow to shareholders on an ongoing basis. Samsung also cancelled shares held in treasury, removing the risk of potential dilution.
On the downside, the portfolio’s underweight exposure to China and Taiwan was detrimental to performance. The lack of direct exposure to Chinese internet companies, Tencent and Alibaba, in addition to the tech-heavy Taiwanese stockmarket, impacted performance. Chinese equities, along with those in the technology sector, rebounded on the back of improved market stability. However, in the first half of the year, we initiated a position in the Aberdeen Global – China A Share Fund which rose over the course of the year. The A Share Fund provides the portfolio with an exposure to China, while offering some measure of diversification. The introduction of this position reflects our increased comfort with holding mainland companies, having seen improvements in both their quality of earnings and corporate governance standards. This also allowed us to initiate a direct holding in newly-listed Yum China in the second half of the year. A spin off from Yum Brands, it offers direct exposure to the Chinese consumer. It is one of the largest restaurant operators on the mainland, running the KFC, Pizza Hut, East Dawning and Little Sheep chains. Its 7,200 outlets generate US$6.9 billion in revenue. It is backed by a strong balance sheet and high cashflow.
In addition to the portfolio changes referred to in the Half-Yearly Report, we recently initiated a holding in Singapore-based hospital operator Raffles Medical Group. Its long-term growth prospects appear attractive, with healthcare spending in Asia expected to grow for the foreseeable future. Raffles Medical has established itself as an efficient healthcare provider in the domestic market, where it has a solid operational history and a well-recognised brand. The group is not only expanding capacity at home but also venturing abroad, with a focus on China where it has invested in two hospital projects – in Shanghai and Chongqing. Together, these will add 1,100 beds to the group’s overall capacity and should contribute to profits from 2018.”
ABD : Jardine and Samsung help Aberdeen New Dawn outperform