Fidelity Asian Values — Seeking quality companies at the right price

Fidelity Asian Values (FAS)

Last close As at 03/12/2024

499.00

0.00 (0.00%)

Market capitalisation

366m

More on this equity

Research: Investment Companies

Fidelity Asian Values — Seeking quality companies at the right price

Fidelity Asian Values (FAS) is managed by Nitin Bajaj. He employs a very disciplined process, seeking good businesses run by competent management, trading on attractive valuations. The polarisation in the stock market affords him many opportunities to invest in companies that fulfil his investment criteria. While the style bias against value stocks has affected the manager’s relative performance in recent years, FAS has a long-term record of outperformance versus both its previous and new benchmarks. The portfolio is trading on an average forward earnings multiple of less than 10x but has a 15% ROE, showing the manager is ‘seeking value without compromising on quality’. FAS also offers a 2.2% dividend yield, which is the highest in the three-strong AIC Asia Pacific Smaller Companies sector.

Melanie Jenner

Written by

Mel Jenner

Director, Investment Trusts

Investment Companies

Fidelity Asian Values

Seeking quality companies at the right price

Investment trusts
Asian equities

17 February 2020

Price

391.5p

Market cap

£296m

AUM

£298m

NAV*

396.5p

Discount to NAV

1.3%

*Including income. As at 13 February 2020.

Yield

2.2%

Ordinary shares in issue

75.6m

Code

FAS

Primary exchange

LSE

AIC sector

Asia Pacific – Excluding Japan

Benchmark

MSCI AC Asia ex-Japan Small Cap

Share price/discount performance

Three-year performance vs index

52-week high/low

457.5p

379.0p

447.2p

379.7p

**Including income.

Gearing

Gross market gearing*

7.4%

Net market gearing*

0.9%

*At 31 December 2019.

Analysts

Mel Jenner

+44 (0)20 3077 5720

Sarah Godfrey

+44 (0)20 3681 2519

Fidelity Asian Values is a research client of Edison Investment Research Limited

Fidelity Asian Values (FAS) is managed by Nitin Bajaj. He employs a very disciplined process, seeking good businesses run by competent management, trading on attractive valuations. The polarisation in the stock market affords him many opportunities to invest in companies that fulfil his investment criteria. While the style bias against value stocks has affected the manager’s relative performance in recent years, FAS has a long-term record of outperformance versus both its previous and new benchmarks. The portfolio is trading on an average forward earnings multiple of less than 10x but has a 15% ROE, showing the manager is ‘seeking value without compromising on quality’. FAS also offers a 2.2% dividend yield, which is the highest in the three-strong AIC Asia Pacific Smaller Companies sector.

Superior growth prospects in the Asia-Pacific region

Source: International Monetary Fund, Edison Investment Research

The market opportunity

Asia offers the prospect of higher growth versus the advanced and world economies, supported by expanding middle classes and a trend towards more premium products and services. Similar to global markets, there has been a wide dispersion between the performance of momentum and value stocks in Asia, which may provide an opportunity for investors with a longer-term view.

Why consider investing in Fidelity Asian Values?

Well-diversified portfolio of primarily smaller-cap Asian equities.

Disciplined, repeatable investment process focusing on attractively valued, high-quality businesses.

Focus on the preservation and long-term growth of capital.

Long-term outperformance versus benchmarks.

Material increases in the annual dividend in recent years.

Regularly trades close to NAV

FAS is currently trading at a 1.3% discount to cum-income NAV. Over the last 12 months the valuation has ranged from a 10-year premium high of 5.7% to a 2.9% discount, averaging a 2.3% premium. Over the last three, five and 10 years, FAS has traded at average discounts of 1.2%, 5.2% and 7.6% respectively.

Exhibit 1: Trust at a glance

Investment objective and fund background

Recent developments

Fidelity Asian Values aims to generate long-term capital growth principally from the stock markets in the Asia Pacific ex-Japan region. From 1 February 2020, it is benchmarked against the MSCI All Countries Asia ex-Japan Small Cap index (previously the MSCI All Countries Asia ex-Japan index).

30 January 2020: confirmation of benchmark change to the MSCI All Countries Asia ex-Japan Small Cap index, effective 1 February 2020.

29 November 2019: final exercise date for subscription rights.

15 October 2019: results for the year ended 31 July 2019. NAV TR +8.2% versus benchmark TR +3.9%. Share price TR +12.3%. Declaration of 8.8p per share annual dividend.

18 June 2019: announcement of the appointment of Clare Brady as a non-executive director with effect from 1 August 2019.

Forthcoming

Capital structure

Fund details

AGM

December 2020

Ongoing charges

0.98% (FY19)

Group

FIL Investments International

Interim results

April 2020

Net market gearing

0.9%

Manager

Nitin Bajaj

Year end

31 July

Annual mgmt fee

Variable

Address

Beech Gate, Millfield Lane, Lower Kingswood, Tadworth, Surrey, KT20 6RP

Dividend paid

December

Performance fee

None

Launch date

13 June 1996

Trust life

Indefinite, subject to vote

Phone

0800 41 41 10 or 0800 41 41 81 (IFAs)

Continuation vote

Five yearly, next 2021

Loan facilities

None (CFDs used)

Website

fidelity.co.uk/fidelity-asian-values

Dividend policy and history (financial years)

Share buyback policy and history (financial years)

Dividends are paid annually in December.

Renewed annually, FAS has the authority to repurchase up to 14.99% of shares and allot shares up to the equivalent of 10% of the issued share capital. Allotments in the chart below include the exercise of subscription shares.

Shareholder base (at 31 January 2020)

Portfolio exposure by geography (at 31 December 2019)

Top 10 holdings (as at 31 December 2019)

% of NAV

Benchmark weight (%)

Active weight (pp)

Company

Country

Sector

31 Dec 2019

31 Dec 2018*

Power Grid Corp of India

India

Utilities

3.4

3.2

0.1

3.3

Shriram Transport Finance

India

Financials

2.8

N/A

0.1

2.7

Redington India

India

Information technology

2.7

N/A

0.0

2.7

Fufeng Group

China

Materials

2.4

2.2

0.0

2.4

BOC Aviation

China

Industrials

1.9

2.2

0.0

1.9

Cebu Air

Philippines

Industrials

1.8

N/A

0.0

1.8

Tianneng Power International

China

Consumer discretionary

1.8

N/A

0.0

1.8

Cromwell European Real Estate

France

Real estate

1.8

N/A

0.0

1.8

Sinopec Kantons Holdings

China

Energy

1.7

N/A

0.0

1.7

Xingda International

China

Consumer discretionary

1.7

N/A

0.0

1.7

Top 10 (% of NAV)

22.0

22.2

Source: FAS, Edison Investment Research, Bloomberg, Morningstar. Note: *N/A where not in end-December 2018 top 10.

The fund manager: Nitin Bajaj

The manager’s view: Extreme market polarisation

Bajaj explains that at the beginning of the year, all the ingredients looked to be in place for an emerging markets ‘risk-on’ trade – progress in the resolution of the US-China trade dispute, an accommodative Federal Reserve and potential for a weaker US dollar, benefits from Chinese fiscal and monetary stimulus in 2019 and moderate oil price inflation. However, so far this year, markets have come under pressure following the outbreak of the coronavirus. At the beginning of 2020, the base case was for moderate growth in Asia, led by Chinese consumption; economic data were expected to improve following the Chinese New Year. This has now been called into question due to the coronavirus outbreak, which is undoubtedly having a negative impact on economic activity, particularly in the travel and tourism sectors and businesses that involve human interaction.

The manager notes that in 2019 investors enjoyed above-average total returns, but markets rallied primarily due to higher valuations rather than being driven by robust earnings growth and positive estimate revisions. In 2020, there is potential for positive earnings revisions in certain sectors; for example, DRAM manufacturers are undergoing a cyclical recovery and there is robust demand for products used in the rollout of 5G networks. Bajaj also says history shows markets can rally sharply once epidemics are brought under control. Once the number of new cases trends lower, investors tend to focus on normalisation in economies and markets. Of interest, there appears to be a level of pent-up demand for equities. Despite the Chinese stock market falling by c 8% when it reopened following the new-year shutdown, there were net inflows into A shares, as investors sought companies that they considered were oversold.

The manager cites his ‘frustration’ with the style bias in the market. His relative performance has suffered in recent years as investors have continued to focus on growth and momentum rather than value; he feels he is ‘playing in the wrong stadium’. Bajaj notes the companies held in the portfolio continue to have strong fundamentals and good earnings growth prospects, despite their modest valuations. The fund has an aggregate forward P/E multiple of 9.3x, which is very close to the low end of the historical range. It is also at a 45% discount to the broad market, the widest in the last decade. The manager says that to find so many quality companies trading on multiples of less than 10x illustrates the extreme polarisation in the market between momentum and value stocks, which he suggests is not unusual late in a market cycle. However, he highlights that small-cap value stocks have led the Asian market over the long term, as these companies are often ignored, providing a high margin of safety and room for multiples to expand. Bajaj will continue with his process of buying ‘good businesses, run by good management teams, at a good price’.

The portfolio

At end-December 2019, FAS’s top 10 positions made up 22.0% of the trust, which was broadly in line with 22.2% a year earlier; three positions were common to both periods. There are currently c 135 names in the portfolio, which includes a tail of around 15–20 companies that make up less than 5% of the fund. Bajaj is looking to reduce these, bringing the total number of holdings down to around 125. Portfolio turnover over the last 12 months has been at the higher end of the typical 3040% annual range. The manager’s valuation discipline means he has been taking profits when deemed appropriate.

Exhibit 2 shows Bajaj’s small-cap bias, with just c 17% of the fund held in mid- and large-cap companies (£5bn+). The majority of the portfolio is in companies with a market cap below £1bn, which the manager considers a ‘sweet spot’; he says that some of the larger small caps are a ‘crowded trade’ affording a lower margin of safety.

Exhibit 2: Portfolio exposure by market cap (% unless stated)

Portfolio end-
Dec 2019

Portfolio end-
Dec 2018

Change
(pp)

Index
weight

Active weight
vs index (pp)

Trust weight/
index weight (x)

>£10bn

12.4

21.1

(8.7)

67.1

(54.7)

(0.4)

£5–10bn

4.8

3.5

1.2

14.2

(9.5)

(0.4)

£1–5bn

14.9

25.3

(10.4)

14.1

0.8

33.6

£0–1bn

63.3

53.2

10.1

0.6

62.7

0.8

Other index/unclassified*

4.7

(3.2)

7.8

4.0

0.7

(4.9)

100.0

100.0

100.0

Source: Fidelity Asian Values, Edison Investment Research. Note: *Includes short positions.

Bajaj’s unconstrained investment approach is illustrated in Exhibits 3 and 4. Compared with the MSCI All Countries Asia ex-Japan index (FAS’s benchmark until 31 January 2020), the fund has significant overweight exposures to India (+12.2pp) and Indonesia (+7.8pp), with underweights in China (-18.9pp) and Taiwan (-7.5pp), which were particularly strong performers in 2019; the manager finds it more difficult to find attractively valued, high-quality companies in these countries.

Exhibit 3: Portfolio geographic exposure vs benchmark (% unless stated)

Portfolio end-
Dec 2019

Portfolio end-
Dec 2018

Change
(pp)

Index
weight

Active weight
vs index (pp)

Trust weight/
index weight (x)

India

22.3

17.9

4.4

10.1

12.2

2.2

China

21.4

19.6

1.8

40.4

(18.9)

0.5

South Korea

11.0

9.9

1.1

13.8

(2.8)

0.8

Indonesia

10.1

11.8

(1.7)

2.3

7.8

4.4

Taiwan

6.3

11.4

(5.2)

13.8

(7.5)

0.5

USA

5.9

N/S

N/A

0.0

5.9

N/A

Hong Kong

5.3

6.5

(1.3)

9.8

(4.5)

0.5

Philippines

4.5

5.4

(1.0)

1.1

3.4

4.1

Singapore

3.8

4.5

(0.7)

3.6

0.2

1.0

Australia

2.5

4.5

(2.0)

0.0

2.5

N/A

Thailand

N/S

3.2

N/A

N/S

N/A

N/A

Other

7.0

5.1

1.9

5.2

1.8

1.4

100.0

100.0

100.0

Source: FAS, Edison Investment Research. Note: *N/S = not stated. Numbers subject to rounding.

There were only modest changes in sector exposure during 2019. Versus the index, the manager favours industrials (+6.7pp) and consumer discretionary (+6.0pp), while finding fewer attractive investment opportunities in communication services (-9.3pp), IT (-7.0pp) and financials (-6.0pp).

Exhibit 4: Portfolio sector exposure vs benchmark (% unless stated)

Portfolio end-
Dec 2019

Portfolio end-
Dec 2018

Change
(pp)

Index
weight

Active weight
vs index (pp)

Trust weight/
index weight (x)

Consumer discretionary

21.0

18.1

2.9

14.9

6.0

1.4

Financials

17.0

16.2

0.8

23.0

(6.0)

0.7

Industrials

13.4

14.3

(0.9)

6.7

6.7

2.0

Information technology

11.6

13.1

(1.5)

18.5

(7.0)

0.6

Consumer staples

7.7

7.4

0.3

5.1

2.6

1.5

Healthcare

7.1

4.9

2.2

3.0

4.1

2.4

Utilities

6.3

7.8

(1.5)

3.0

3.3

2.1

Materials

5.4

5.4

0.0

4.3

1.1

1.2

Energy

4.4

3.1

1.3

4.0

0.4

1.1

Real estate

3.7

4.4

(0.7)

5.8

(2.1)

0.6

Communication services

2.3

5.1

(2.9)

11.5

(9.3)

0.2

100.0

100.0

100.0

Source: FAS, Edison Investment Research. Note: Numbers subject to rounding.

Bajaj highlights a few new holdings in the fund. Chow Sang Sang is a Hong Kong-listed jewellery company; the majority of its sales are generated in China. The stock sold off following the social unrest in Hong Kong, which provided an attractive buying opportunity. The manager sees a lot of value in the company; it is currently trading on 6.5x forward earnings, offers a 6.2% dividend yield and has a strong balance sheet. Two Indian IT services stocks have been added to the portfolio. L&T Infotech is a well-run mid-sized company. It had an issue with its largest customer, which has been resolved, and the stock has re-valued. The manager is patiently waiting for an opportunity to add to the position. Around half of Tech Mahindra revenues are generated from the telecom sector. Robust demand for its services, supported by the rollout of 5G networks, is leading to a reacceleration in the company’s earnings growth.

Performance: Outperformance over the long term

Exhibit 5: Five-year discrete performance data

12 months ending

Share price
(%)

NAV
(%)

Blended
benchmark* (%)

MSCI AC Asia
ex-Japan (%)

CBOE UK All Companies (%)

31/01/16

(2.9)

(2.0)

(13.0)

(13.1)

(5.3)

31/01/17

54.3

42.1

37.1

37.1

20.9

31/01/18

7.4

8.7

27.3

27.3

11.3

31/01/19

10.8

(0.4)

(7.4)

(7.4)

(3.9)

31/01/20

(7.6)

(3.4)

5.3

5.3

10.5

Source: Refinitiv. Note: All % on a total-return basis in pounds sterling. *Blended benchmark is MSCI AC Far East ex-Japan index to 31 July 2015 and MSCI AC Asia ex-Japan index to 31 January 2020.

Exhibit 6: Investment trust performance to 31 January 2020

Price, NAV and benchmark total return performance, one-year rebased

Price, NAV and benchmark total return performance (%)

Source: Refinitiv, Edison Investment Research. Note: Three, five and 10-year performance figures annualised. Blended benchmark is MSCI AC Far East-ex Japan index to 31 July 2015 and MSCI AC Asia ex-Japan index to 31 January 2020.

FAS’s relative returns are shown in Exhibit 7. The trust has outperformed the MSCI AC Asia ex-Japan index over the last 10 years in NAV terms, and the last five and 10 years in share price terms. Performance in recent years has proved trickier as large-cap technology stocks, which are not represented in the fund, have been a big driver of Asian share price returns.

Given his focus on capital preservation as well as capital growth, the manager is encouraged that there have not been many ‘blow ups’ in the portfolio and the underperformance is more a function of an absence of ‘big winners’.

FAS has outperformed its new benchmark, the MSCI AC Asia ex-Japan Small Cap index over the last three, five and 10 years, particularly so over the longer periods and of interest to UK investors, the trust has also outpaced the UK market in both NAV and share price terms over the last five and 10 years.

Exhibit 7: Share price and NAV total return performance, relative to indices (%)

 

One month

Three months

Six months

One year

Three years

Five years

10 years

Price relative to MSCI AC Asia ex-Japan

(3.5)

(5.5)

(11.9)

(12.2)

(11.4)

11.4

15.0

NAV relative to MSCI AC Asia ex-Japan

(0.6)

(5.1)

(10.1)

(8.2)

(15.8)

(1.6)

5.5

Price relative to MSCI AC Asia ex-Japan Small Cap

(3.5)

(2.5)

(8.8)

(6.3)

7.3

39.4

57.2

NAV relative to MSCI AC Asia ex-Japan Small Cap

(0.6)

(2.1)

(7.0)

(2.0)

2.0

23.2

44.2

Price relative to CBOE UK All Companies

(4.0)

(6.7)

(14.7)

(16.3)

(6.9)

21.9

19.2

NAV relative to CBOE UK All Companies

(1.1)

(6.4)

(12.9)

(12.5)

(11.5)

7.7

9.4

Source: Refinitiv, Edison Investment Research. Note: Data to end-January 2020. Geometric calculation.

Valuation: Trading close to NAV

FAS regularly trades close to NAV; its current 1.3% discount to cum-income NAV compares with the range of a 5.7% premium (a 10-year high) to a 2.9% discount over the last 12 months. Over the last year, FAS has traded at an average premium of 2.3%, compared with average discounts of 1.2%, 5.2% and 7.6% over the last three, five and 10 years respectively.

Approved annually, the board may repurchase up to 14.99% and allot up to 10% of shares in issue to manage a discount or premium.

Exhibit 8: Share price premium/discount to NAV (including income) over three years (%)

Source: Refinitiv, Edison Investment Research

Peer group comparison

Given its significant small-cap exposure, FAS is now classified as a member of the AIC Asia Pacific Smaller Companies sector, rather than the AIC Asia Pacific sector. Its NAV total returns rank first over five years, second over three years and third over the last one and 10 years. It is trading on the narrowest discount of the three funds by quite some margin. FAS has a competitive ongoing charge and no performance fee is payable. It has an average level of gearing and the highest dividend yield in the sector, 0.5pp above the mean.

Exhibit 9: AIC Asia Pacific Smaller Companies sector as at 14 February 2020*

% unless stated

Market
cap £m

NAV TR
1 year

NAV TR
3 year

NAV TR
5 year

NAV TR
10 year

Discount
(cum-fair)

Ongoing charge

Perf.
fee

Net
gearing

Dividend
yield

Fidelity Asian Values

295.9

(1.7)

7.3

51.5

144.2

(1.3)

1.0

No

101

2.2

Aberdeen Standard Asia Focus

347.5

1.0

9.4

32.9

208.7

(11.9)

1.2

No

103

1.8

Scottish Oriental Smaller Cos

286.8

0.2

4.4

29.0

179.4

(12.9)

1.0

Yes

100

1.2

Average (3 funds)

310.1

(0.2)

7.1

37.8

177.4

(8.7)

1.0

101

1.7

FAS rank in sector

2

3

2

1

3

1

3

2

1

Source: Morningstar, Edison Investment Research. Note: *Performance to 13 February 2020 based on ex-par NAV. TR: total return. Net gearing is total assets less cash and equivalents as a percentage of net assets.

General disclaimer and copyright

This report has been commissioned by Fidelity Asian Values and prepared and issued by Edison, in consideration of a fee payable by Fidelity Asian Values. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison). All rights reserved.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Fidelity Asian Values and prepared and issued by Edison, in consideration of a fee payable by Fidelity Asian Values. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison). All rights reserved.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

More on Fidelity Asian Values

View All

Latest from the Investment Companies sector

View All Investment Companies content

Research: Metals & Mining

Gemfields Group — A Valentine’s Day gift for the AIM market

Fittingly for a coloured gemstone company, Gemfields began trading on London’s AIM market on 14 February. We continue to see significant value in this stock, which was previously under the radar, and our updated sum-of-the-parts valuation is US$522m (previously US$449m). The removal of the 15% export duty on Zambian emeralds has a significant positive impact on Kagem, which we now value at US$246m (previously US$153m). We expect Gemfields to generate US$75m in EBITDA in 2020 (previously US$59m), putting it on a 2020e EV/EBITDA of just 1.8x.

Continue Reading

Subscribe to Edison

Get access to the very latest content matched to your personal investment style.

Sign up for free