Aberdeen New Thai lags its benchmark – Aberdeen New Thai says that, for the year ended 28 February 2021, it produced an NAV total return of +1.2%, underperforming the Stock Exchange of Thailand Index by 8.9%. Should the performance over the three years to 28 February 2023 not show outperformance of the SET Index, the board will undertake a full review of the company’s investment management arrangements which may include, but is not limited to, an option for shareholders to redeem shares for cash.
The return to shareholders was 4.5%. The dividend is maintained at 19p but this required a transfer from reserves of 4.4p per share.
Favouring utilities over technology held back returns as the manager’s report shows.
Extract from the manager’s report
The “net asset value returned 1.2% in sterling total return terms for the Year, whereas the benchmark Stock Exchange of Thailand index (“SET Index”) rose by 10.1%.
This was disappointing and due principally to the portfolio’s positioning. Your Company’s holdings lagged the SET Index, primarily owing to the volatility witnessed in utilities earlier in the Year, followed by an unprecedented rally in the technology sector towards the end of the financial year.
A significant detractor to performance was the lack of exposure to Delta Electronics (Thailand) (“Delta”) whose share price soared over seven-fold in the Year on optimism generated by accelerated global electronics demand, such as from data centres. This was compounded by the relatively low free float which restricted the availability of Delta’s shares. Despite the promising growth prospects, we believe the company’s share price had become excessively optimistic. At its share price peak, Delta’s market capitalisation exceeded even that of its parent company and major shareholder. Within this peer group, we prefer Hana Microelectronics as being more sensibly valued and offering quality exposure to consumer electronics and microelectronics demand, particularly in mobile devices, which continue to grow at a robust rate.
In the energy sector, your Company’s sizeable exposure proved costly, and again, the pandemic was the primary factor in disrupting these infrastructure investments. At the stock level, Electricity Generating Public Co lagged as a relatively low growth outlook limited its capacity to pay dividends. The company’s well-diversified portfolio includes natural gas, coal, biomass, hydro, solar, wind and geothermal fuel sources, but a lack of clarity around its expansion plans weighed on its share price. Nevertheless, we remain optimistic about the company as we believe its robust balance sheet and cash flow, as well as solid shareholder backing, should help it overcome these concerns. Moreover, it offers exposure to projects across various countries in the Asia Pacific rim. Encouragingly, its portfolio investments support Thailand’s transition to a lower carbon economy which, in the longer term, stands to benefit from the push towards ambitious climate targets by regional governments.
Conversely, mitigating the poor performance were the Company’s holdings in the services sector, which remains the portfolio’s largest sectoral exposure. Haad Thip’s new and efficient soft-drinks factory, as well as other productivity improvements, supported its share price. The company is the sole bottler and distributor of Coca-Cola in southern Thailand, as well as the market leader for non-alcoholic drinks. It remained financially and operationally sound throughout the pandemic and was able to maintain its dividend.
Another services holding that performed well was Mega Lifesciences, which manufactures prescription drugs, over-the-counter products and nutraceuticals. Not only has it developed an extensive local network, but it also offers exposure to interesting emerging and frontier markets, including Myanmar, Vietnam, and Cambodia. The company experienced robust revenue growth, supported by recurring orders from hospitals. Near term concerns arising from COVID-19 also boosted the sales of health supplements.
In the financial sector, we were encouraged that the overall asset quality of the portfolio’s underlying holdings was maintained, defying the slow economic turnaround. Reported earnings from both Tisco Financial Group and AEON Thana Sinsap beat market expectations with a sharp decline in provisions for bad debts.”
ANW : Aberdeen New Thai lags its benchmark