abrdn Asia Focus plc
Legal Entity Identifier
(LEI): 5493000FBZP1J92OQY70
ANNOUNCEMENT OF UNAUDITED HALF YEARLY
RESULTS
for the six months ended 31 January
2024
Performance Highlights
Net asset value total return
(diluted)AB
|
|
Net Asset Value per share
(diluted)
|
Six months ended 31 January
2024
|
|
|
As at 31 January 2024
|
|
-0.7%
|
|
301.2p
|
Year ended 31 July 2023
|
+7.6%
|
|
As at 31 July 2023
|
308.9p
|
|
|
|
|
|
Share price total
returnA
|
|
|
Share price
|
|
Six months ended 31 January
2024
|
|
|
As at 31 January 2024
|
|
-0.2%
|
|
258.0p
|
Year ended 31 July 2023
|
+7.3%
|
|
As at 31 July 2023
|
264.0p
|
|
|
|
|
|
MSCI AC Asia ex Japan Small Cap
Index total returnC
|
|
Total assets
|
|
Six months ended 31 January
2024
|
|
|
As at 31 January 2024
|
|
+4.5%
|
|
£538.5m
|
Year ended 31 July 2023
|
+8.0%
|
|
As at 31 July 2023
|
£556.5m
|
|
|
|
|
|
Net asset value total return since
inception (diluted)ABD
|
|
|
Discount to net asset
valueAB
|
|
To 31 January 2024
|
|
|
As at 31 January 2024
|
|
+2278.7%
|
|
14.3%
|
To 31 July 2023
|
+2283.6%
|
|
As at 31 July 2023
|
14.5%
|
A Considered to be an
Alternative Performance Measure (see below).
|
B Presented on a diluted
basis as the Convertible Unsecured Loan Stock (CULS) is "in the
money".
|
C Currency adjusted,
capital gains basis.
|
D Inception being 19
October 1995.
|
Financial Highlights
Capital values
|
31
January 2024
|
31 July
2023
|
%
change
|
Total assets less current
liabilitiesA
|
£538,536,000
|
£556,466,000
|
-3.2
|
Net asset value per share
(basic)
|
302.05p
|
310.49p
|
-2.7
|
Net asset value per share
(diluted)
|
301.18p
|
308.93p
|
-2.5
|
Share price (mid market)
|
258.00p
|
264.00p
|
-2.3
|
Discount to net asset value
(basic)B
|
14.6%
|
15.0%
|
|
Discount to net asset value
(diluted)B
|
14.3%
|
14.5%
|
|
Net gearingB
|
10.3%
|
12.1%
|
|
Ongoing charges
ratioB
|
0.91%
|
0.92%
|
|
A Total assets less
current liabilities (excluding prior charges such as bank loans) as
per the Statement of Financial Position.
|
B Considered to be an
Alternative Performance Measure.
|
Chair's Statement
I am once again pleased to present
to shareholders the half-yearly results for abrdn Asia Focus plc
(the "Company"). Asian small-caps showed considerable resilience
over the period despite continued worries over a potential global
recession, with the MSCI AC Asia Pacific ex Japan Small Cap index
delivering a total return of 4.5% compared to the wider MSCI AC
Asia ex Japan index, which fell 7.3%. This extends the material
outperformance of smaller companies in the region over their larger
counterparts which over a 5 year period to the end of January 2024,
has returned around 53% compared to the large cap index's 11% in
total return terms. It is evidence of the inherent potential of the
asset class.
Investment Performance
Over the period, the Company's net
asset value (NAV) total return per share fell 0.7% in sterling
terms, thereby lagging its closest comparator benchmark. In
the short term, the active nature of the portfolio can often lead
to divergence from the index. The share price total return
was down 0.2%, with the discount to NAV narrowing over the period
to 14.3% from 14.5% at end December 2023.
The Board is firm in its conviction
around Asia's long-term growth story, particularly within the
small-cap universe. Your Manager's disciplined, bottom-up stock
picking approach, focused on identifying businesses with durable
competitive advantages, healthy balance sheets and significant
earnings growth should enable them to compound returns at an
attractive rate over the long-term.
This is a differentiated portfolio
made up of interesting, less well-known companies, often under
researched in the market. The active share of the portfolio
is 97.5% and the long-term performance of the Company remains
impressive. According to the Association of Investment
Companies (AIC), as the 25th anniversary of the
inception of the Individual Savings Account (ISA) approaches, the
Company is ranked third best performing investment trust. Based
upon a single investment of the full £7,000 ISA allowance on 6
April 1999, the day ISAs came into existence, with dividends
reinvested until 5 March 2024, an investment in the Company's
shares would have generated a tax free pot of £273,758.
Revenue and Dividends
The Board recognises the importance
of the Company's dividend income for many shareholders. The
Ordinary share dividend has been maintained or raised every year
since 1998, and your Board is firmly committed to the enhanced and
progressive dividend policy which was approved by shareholders in
2022. Underlying earnings per share for the period amounted to 3.4p
(2023: 4.3p) and revenue from the portfolio continues to
comfortably cover the Ordinary dividend, with the shares yielding
2.5%, as of 31 January 2024 (3.5% including special
dividends).
Two interim dividends have been paid
in the first six months of the Company's financial year. These
interim dividends of 1.6p per Ordinary share were paid on 20
December 2023 and 21 March 2024. The Board has set a target
dividend of at least 6.41p per Ordinary Share for the financial
year ending 31 July 2024. The Board plans to maintain the
progressive policy of the last 28 years in order to provide
shareholders with a regular dividend and dependable level of income
alongside capital growth prospects.
Share Capital Management and
Gearing
The Board is pleased to note the
current abrdn initiative to reinvest six months' worth of its
management fees back into the Company by purchasing shares in the
market, in an effort to further align itself with the shareholder
base and to demonstrate the significant on-going commitment to its
listed closed end funds business which currently ranks third
globally.
The Board is conscious that the
discount to NAV remains wide and has stepped up share buybacks
during the period, in the belief that this is in the best interest
of shareholders. During the period the Ordinary shares have traded
at an average discount of 15.75% and we have bought back 2,022,500
Ordinary shares in the market at a discount to the prevailing NAV
per share (six months to 31 January 2023: nil). The Board
will continue to consider the judicious use of share buybacks to
both reduce the volatility of any discount and to modestly enhance
the NAV per share for shareholders.
The Company's net gearing at 31
January 2024 was 10.3% with the debt provided by the £30 million
unsecured Loan Notes 2035 and the £36.6m Convertible Unsecured Loan
Stock. The Board is very aware of the 31 May 2025 maturity
date for the CULS and is actively considering available options for
replacing or retiring that debt. As at 27 March 2024, the
latest practicable date, the Company's net gearing stood at
13.4%.
Your Investment Manager
The Board would like to thank Hugh
Young for his long service to the Company, which he leaves in good
hands: Flavia Cheong, abrdn's Head of Equities, Asia Pacific,
Gabriel Sacks and Xin-Yao Ng. Your Manager's extensive
on-the-ground coverage, experienced management team, and commitment
to delivering long-term value amid the dynamic and varied Asian
small-cap universe should lend confidence in the continued
long-term prospects for the Company. Indeed, at a time
when many asset managers are making cuts, the Board is very pleased
that abrdn has strengthened the investment team in Asia during the
reporting period with the recruitment of four new research
analysts.
Responsible Investing
While the Company's investment
objective does not specifically include environmental, social and
governance ("ESG") and the investment process does not exclude
exposure to certain industries, your Manager firmly believes that
the best companies are also sustainable companies, and hence it
integrates a comprehensive assessment of ESG factors into its
bottom-up stock picking investment process. Informed and
constructive engagement also helps foster better companies,
protecting and enhancing the value of the Company's
investments.
This is clearly reflected in the
carbon footprint of the Company's portfolio, for example, which
compares favourably against that of the benchmark. The portfolio's
relative carbon intensity (as at 31 December 2023, including scope
1 and 2 emissions) was only 23.3% of the benchmark. Further
detailed information can be found in the 31 December 2023 Taskforce
on Climate-related Financial Disclosures (TCFD) Report in the
Literature section of the Company's website.
Board Composition
I would like to re-iterate my thanks
to Randal McDonnell, the Earl of Antrim, who stepped down from the
Board at the last AGM and has been a great asset to us with his
wise contributions over the last nine years. We also welcome two
new Board members, Lucy Macdonald who replaces Randal, and Davina
Curling who joined with effect from 1 March 2024 as Senior
Independent Director. Both bring considerable investment management
experience to the Board.
Outlook
Asia's distinct growth story, with
so much untapped potential for long-term investors, remains intact.
Asia is projected to contribute more than two thirds of global
growth, underscoring its undeniable economic might. Although there
may be political uncertainty, with 2024 being a significant year
for elections in Asia, you are likely to see relative stability and
calm in the largest democracies potentially in stark contrast to
the upcoming US presidential elections.
In India, renewed capex, real estate
and credit cycles are driving strong economic growth. Should Prime
Minister Modi win the upcoming elections in India, he is likely to
continue to proceed with his vision for India as a leading global
economy. China's post-Covid recovery has not been as smooth nor as
fast as hoped, but there are signs of positive momentum including
official policy shifts towards domestic demand, while the country's
huge consumer base and advances in technology remain pillars of its
long-term potential.
South East Asia is often overlooked
as a rich source of quality smaller companies. Your Manager
continues to regard these countries as beneficiaries of shifting
global supply chains with supportive government policies and
favourable cost structures, and they also represent a large
consumer market of about 700 million people on a combined basis.
Vietnam is an emerging powerhouse in apparel and electronics
manufacturing and is seeing rapid urbanisation, while Indonesia is
gaining traction in areas of the commodity supply chain that
creates increasing value for the local economy.
Asia's rising middle classes and
advancing technology provide fertile ground for innovative
small-cap companies, offering substantial potential for value
creation. As ever, your Company is focused on high-quality
companies with excellent long-term track records and strong
fundamentals, exploring thematic opportunities in structural growth
trends like domestic consumption, digitisation and the green energy
transition. The future is bright for smaller companies in Asia and
we expect that shareholders will benefit from this via their
investment in abrdn Asia Focus.
Krishna
Shanmuganathan
Chair
27 March 2024
Investment Manager's
Review
Overview
Asian small caps posted
positive returns over the six month review period whilst proving
more resilient than their large-cap peers to a volatile backdrop of
concerns around the global economy, geopolitical tensions and US
monetary policy developments
Indian small-caps were the best
performers by a large margin, boosted by a positive domestic
economic backdrop, a buoyant property sector and state election
outcomes that strengthened Modi's ruling government. Taiwanese
small caps also performed remarkably well, leveraging off the
strength of the US technology giants and rising momentum around the
development of artificial intelligence (AI). In contrast,
small caps in China and Hong Kong were among the heaviest losers,
bearing the brunt of consumer and property concerns, together with
regulatory noise both domestically and externally, with newsflow
around more US trade curbs on its biotech and tech sectors. This
was despite targeted policy and liquidity support from the central
bank and government.
Portfolio Review
The portfolio underperformed its
closest reference benchmark over the review period by 5.2% partly
due to the strength of the Indian rally. India is the biggest
country position in the portfolio at 19%, though this is less than
its weight in the benchmark.
The Indian market is home to many
attractive companies with competitive business models, high returns
and fantastic long-term growth prospects. We have high conviction
in our holdings, which overall performed
better than the market average, but we intend to maintain valuation
discipline in our purchases. Prestige
Estates posted solid earnings results with
pre-sales growth in its residential projects more than doubling
year-on-year. We see the business continuing to cement its position
as one of the country's most prominent developers amid a clear
trend towards industry consolidation. Engineering and IT services
provider Cyient continued to execute well with its operating margins expanding
on the back of productivity improvements and utilisation gains,
along with healthy order flows. Healthcare diagnostics group
Vijaya Diagnostics Centre also added to relative performance, given its superior
delivery against peers both in terms of revenue and profit
growth.
Elsewhere, with Chinese consumption
recovering slower than expected, sentiment towards local equity
markets deteriorated further and valuations de-rated. Electric
Vehicle (EV) gear maker Zhejiang Shuanghuan
Driveline sold-off on concerns over slowing
demand for EVs, as did Sinoma Science &
Technology Co, an advanced materials
business involved in the broader renewable energy supply chain. We
remain positive on both companies' prospects as we expect
Shuanghuan to be a key beneficiary of the trends towards
electrification, with customer diversification and potential
overseas expansion likely to offset any domestic slowdown in sales.
Sinoma, on the other hand, is well-placed to benefit from the
growth of wind energy capacity globally, supported by the company's
strong technology and research and development capabilities.
Renewable energy is a key area of development for the Chinese
government and Sinoma has a diversified business that caters to
this demand. Some of our other mainland holdings in other sectors
also lagged on the back of broader industry concerns.
Joinn Laboratories, a
company that specialises in drug safety evaluation for the
pharmaceutical industry, fell alongside the broader healthcare
sector. While we are positive on Joinn's leading position in the
pre-clinical drug assessment space and its solid financial
position, the company has been affected by policy uncertainty and
the softer domestic funding environment which has led to slower
growth in its order book. It is fair to say that investors are now
incorporating a higher risk premium for Chinese equities given
uncertainty over the broad direction of government policy and the
role of the private sector in the economy. Overall, including
companies listed in Hong Kong, our Chinese holdings performed
marginally better than the local market. Meanwhile, from a
sectoral perspective, technology was among the best performing
sectors through the review period, driven by optimism over AI and a
turnaround in the semiconductor cycle. This lifted the tech-heavy
market of Taiwan, and our lighter exposure there detracted from
portfolio returns. While the market is home to several interesting
businesses, particularly in IT, we have been highly selective in
our approach and focused on owning only the best-quality small-cap
companies that we can find. We are optimistic about the future of
technology in Asia and the portfolio is well-positioned to exploit
opportunities emerging from the advancement of AI. This includes
one of our technology hardware holdings, Taiwan Union Technology, which is
among the leading suppliers of high-speed copper clad laminates, a
core material used for printed circuit boards. The company is
seeing a pick-up in orders from AI-related customers which in turn
is driving a change in their sales mix towards higher-margin
products. Elsewhere in Singapore, on the other hand, semiconductor
equipment maker AEM Holdings'
share price fell after the company
indicated that it would adjust its inventory and
pre-tax profit downwards for the fourth quarter of 2023. We
immediately engaged with the company on this issue and believe it
is a one-off incident.
ASEAN is an often overlooked part of
the region amid the significant attention given to China and India.
But it is nevertheless a rich source of good-quality small-caps.
Some of our ASEAN holdings were among the key contributors to
performance over the review period. In Indonesia, logistics and
supply chain company AKR
Corporindo, a main player in industrial
fuel, was boosted by greater clarity around potential acceleration
in land sales in the Java Integrated Industrial and Ports Estate.
Elsewhere, our Vietnamese holding, FPT
Corp, a software services company,
continued to deliver impressive earnings. We feature a deeper case
study on FPT Corp below.
Since 2022, we no longer have a
market cap restriction on new additions to the portfolio though we
remain focused on finding smaller companies that are at the bottom
quartile of our investible universe. Our intention is to invest in
a diversified portfolio of around 50 companies that have an
exceptional industry position. To this end, we continue to refresh
the portfolio by reducing smaller, legacy positions to those with
better growth prospects and clearer earnings visibility.
In the technology sector, for
instance, we switched from Korea's Koh Young Technology to
Taiwan-based Chroma ATE,
a strong player that excels in the core power
testing industry with high entry barriers, growing exposure to
exciting industries like electric vehicles, 3D testing and
semiconductors. Similarly, we sold our holding in Taiwan-based
manufacturer of bicycle and motorcycle chains KMC Kuei Meng
International in favour of better opportunities
elsewhere.
Meanwhile, we refined our India
positioning by selling out of healthcare company Sanofi India and
taking profits on other Indian holdings that have performed well.
In their place, we introduced three new holdings with attractive
growth prospects. Aptus Value Housing
Finance offers loans in the affordable
housing segment, a growing market with a strong foothold in south
India. It fares well against peers in asset quality, loan yields
and return ratios, supported by a conservative management team. We
also participated in a share placement offered at a considerable
discount by Apar
Industries. Apar produces conductors,
specialty oil lubricants and cables primarily to the power
industry. We view Apar as a play on the electrification of the
Indian economy and rising investment in transmission and renewables
globally, with half of its revenues from India and the rest from
exports to the US, Europe and Australia. Finally, we invested
in KFin Technologies, a registrar and transfer agent for local mutual funds that
should benefit from deepening capital markets in India. As a
duopoly, the industry structure is highly attractive with high
barriers to entry and significant growth potential.
Elsewhere, in Vietnam we initiated a new holding in
Military Commercial Joint Stock Bank
(MBB), given its strong profitability metrics,
excellent track record in managing asset quality and robust outlook
for loan growth. MBB is one of the leading domestic banks in
Vietnam and we regard it as well-managed with its prudent culture
stemming from its military background, but dynamic enough to
innovate and capitalise on opportunities. The bank enjoys a key
competitive edge with its lower funding cost, which is a result of
its strong brand and quasi state-owned enterprise status. The share
prices of banks in Vietnam have generally been weak as a result of
an anti-corruption probe in the property sector, which gave us the
opportunity to buy a quality franchise at an attractive
valuation.
Outlook
The investment climate remains one
of sluggish global economic growth, inflationary risks and concerns
over the impact of policy moves by major central banks. China
continues to be a key source of worry, amid a slow-moving recovery.
Against this prevailing uncertain backdrop, the portfolio is
well-positioned, exhibiting strong fundamentals and a return
profile that should stand it in good stead. Dividend yield, growth
and return on equity metrics are higher than the reference
benchmark, while the debt-to-equity ratio is comparatively lower
also. Our stock-specific insights are derived from our rigorous
bottom-up due diligence, backed by our in-house research
capabilities and well-resourced team across Asia. The profile of
the portfolio also reflects our belief that quality small-cap
companies with solid balance sheets and sustainable earnings
prospects will emerge stronger in tougher times. More
broadly, we are finding the best opportunities around key
structural drivers of growth across Asia. Domestic consumption,
especially in the premium segment, is set to grow in line with
rising affluence. Infrastructure spending and urbanisation will
boost real estate and financials. The rapid advance of all things
tech, including AI, means a bright future for both direct and
ancillary plays on gaming, internet, fintech, semiconductors and
tech services like the cloud and software-as-a-service. ASEAN,
meanwhile, has been a winner of the China-plus-one strategy, in
which multinationals are moving their supply chains away from China
due to geopolitical tensions. Asia is also at the forefront of the
green transition with plays on renewable energy, batteries, EVs,
its related infrastructure and environmental management. In this
context , we see smaller companies as the more direct
beneficiaries of some of these key trends, with the portfolio well
placed to deliver sustainable returns for shareholders over the
long run.
Gabriel Sacks, Flavia Cheong
&
Xin Yao Ng
abrdn Asia Limited
27 March 2024
Ten Largest Investments
As at 31 January 2024
|
Park Systems Corporation
|
|
|
Bank OCBC NISP
|
The Korean company is the leading
developer of atomic force microscopes, a nascent technology that
could have broad industrial application in sectors such as
chip-making and biotechnology.
|
|
An Indonesian listed banking and
financial services company, which is a steady consistent performer
backed by healthy
asset quality.
|
|
|
|
|
|
|
AKR Corporindo
|
|
|
Cyient
|
AKR is one of the main players in
industrial fuel in Indonesia, which has a high entry barrier. Its
key strength is its extensive infrastructure and logistic
facilities throughout the country.
|
|
The Indian company provides
engineering and IT services to clients in developed markets,
competing primarily on quality of service and cost of
delivery.
|
|
|
|
|
|
|
FPT Corporation
|
|
|
Aegis Logistics
|
FPT is a diversified technology
group with a fast-growing software outsourcing business. It also
owns a telecoms unit, an electronics retailing company, and has
interests in other sectors, such as education.
|
|
A strong and conservative player in
India's gas and liquids logistics sector, with a first mover
advantage in key ports and a fair amount of capacity expansion to
come. The government's push for the adoption of cleaner energy is
also boosting its liquefied natural gas business.
|
|
|
|
|
|
|
John Keells Holdings
|
|
|
Prestige Estates Projects
|
A respected and reputable Sri Lanka
conglomerate with a healthy balance sheet and good execution, John
Keells has a hotels and leisure segment that includes properties in
the Maldives. It has other interests in consumer, transportation
and financial services.
|
|
Prestige is one of the leading
property developers in India with a significant land bank and
benefitting from a positive residential upcycle that should still
have some years to run. It has a stronghold in Bangalore, India's
leading IT hub, but it has also been successful expanding into
other top-tier cities.
|
|
|
|
|
|
|
Mega Lifesciences
|
|
|
Taiwan Union
Taiwan Union Technology Corp is a
leading maker of copper clad laminate (CCL), a key base material
used to make printed circuit boards. With a strong commitment to
R&D,
it has moved up the value chain through
the years.
|
The Thai group produces, sells and
distributes health supplements and pharmaceutical products, mostly
in the under-penetrated but fast-growing frontier and emerging
markets.
|
|
Portfolio
As at 31 January
2024
|
|
|
|
|
Total
|
|
|
|
Valuation
|
assets
|
Company
|
Industry
|
Country
|
£'000
|
%
|
Park Systems Corporation
|
Electronic Equipment, Instruments
& Components
|
South Korea
|
23,911
|
4.4
|
Bank OCBC NISP
|
Banks
|
Indonesia
|
23,520
|
4.4
|
AKR Corporindo
|
Oil, Gas & Consumable
Fuels
|
Indonesia
|
19,726
|
3.7
|
Cyient
|
IT services
|
India
|
19,452
|
3.6
|
FPT Corporation
|
IT Services
|
Vietnam
|
18,568
|
3.4
|
Aegis Logistics
|
Oil, Gas & Consumable
Fuels
|
India
|
16,707
|
3.1
|
John Keells Holdings
|
Industrial Conglomerates
|
Sri Lanka
|
16,286
|
3.0
|
Prestige Estates Projects
|
Real Estate Management &
Development
|
India
|
15,651
|
2.9
|
Mega Lifesciences
(Foreign)
|
Pharmaceuticals
|
Thailand
|
14,845
|
2.8
|
Taiwan Union
|
Electronic Equipment, Instruments
& Components
|
Taiwan
|
14,717
|
2.7
|
Top ten investments
|
|
|
183,383
|
34.0
|
Nam Long Invest
Corporation
|
Real Estate Management &
Development
|
Vietnam
|
13,515
|
2.5
|
M.P. Evans Group
|
Food Products
|
United Kingdom
|
13,392
|
2.5
|
LEENO
Industrial
|
Semiconductors & Semiconductor
Equipment
|
South Korea
|
13,224
|
2.5
|
Sporton International
|
Professional Services
|
Taiwan
|
13,022
|
2.4
|
Affle India
|
Media
|
India
|
12,276
|
2.3
|
Cebu
|
Real Estate Management &
Development
|
Philippines
|
12,209
|
2.3
|
Asian Terminals
|
Transportation
Infrastructure
|
Philippines
|
11,601
|
2.2
|
Precision Tsugami China
|
Machinery
|
China
|
11,477
|
2.1
|
AEM Holdings
|
Semiconductors & Semiconductor
Equipment
|
Singapore
|
10,926
|
2.0
|
Medikaloka Hermina
|
Health Care Providers &
Services
|
Indonesia
|
10,763
|
2.0
|
Top twenty investments
|
|
|
305,788
|
56.8
|
Autohome - ADR
|
Interactive Media &
Services
|
China
|
10,270
|
1.9
|
Dah Sing Financial
|
Banks
|
Hong Kong
|
10,106
|
1.9
|
Ultrajaya Milk Industry &
Trading
|
Food Products
|
Indonesia
|
9,510
|
1.8
|
Oriental Holdings
|
Automobiles
|
Malaysia
|
9,107
|
1.7
|
Hana Microelectronics
(Foreign)
|
Electronic Equipment, Instruments
& Components
|
Thailand
|
9,043
|
1.7
|
Vijaya Diagnostic
Centre
|
Health Care Providers &
Services
|
India
|
9,037
|
1.7
|
UIE
|
Food Products
|
Denmark
|
8,857
|
1.6
|
ChaCha Food - A
|
Food Products
|
China
|
8,761
|
1.6
|
Sinoma Science & Technology -
A
|
Chemicals
|
China
|
8,608
|
1.6
|
Apar Industries
|
Industrial Conglomerates
|
India
|
8,541
|
1.5
|
Top thirty investments
|
|
|
397,628
|
73.8
|
Zhejiang Shuanghuan Driveline -
A
|
Auto Components
|
China
|
7,888
|
1.5
|
Chroma
ATE
|
Electronic Equipment, Instruments
& Components
|
Taiwan
|
7,883
|
1.5
|
Sunonwealth Electric Machinery
Industry
|
Machinery
|
Taiwan
|
7,776
|
1.4
|
Millenium & Copthorne Hotels New
Zealand (A)
|
Hotels, Restaurants &
Leisure
|
New Zealand
|
7,445
|
1.4
|
AEON Credit Service (M)
|
Consumer Finance
|
Malaysia
|
7,246
|
1.4
|
United Plantations
|
Food Products
|
Malaysia
|
7,227
|
1.3
|
Joinn Laboratories China -
H
|
Life Sciences Tools &
Services
|
China
|
6,685
|
1.2
|
CE Info Systems
|
Software
|
India
|
6,271
|
1.2
|
MOMO.com
|
Broadline Retail
|
Taiwan
|
6,107
|
1.1
|
Pentamaster International
|
Semiconductors & Semiconductor
Equipment
|
Malaysia
|
6,061
|
1.1
|
Top forty investments
|
|
|
468,217
|
86.9
|
Syngene International
|
Life Sciences Tools &
Services
|
India
|
5,914
|
1.1
|
KFin
Technologies
|
Capital Markets
|
India
|
5,744
|
1.1
|
SINBON Electronics
|
Electronic Equipment, Instruments
& Components
|
Taiwan
|
5,298
|
1.0
|
Andes
Technology
|
Semiconductors & Semiconductor
Equipment
|
Taiwan
|
4,938
|
0.9
|
Kerry Logistics
|
Air Freight &
Logistics
|
Hong Kong
|
4,146
|
0.8
|
Thai Stanley Electric
(Foreign)
|
Auto Components
|
Thailand
|
3,503
|
0.7
|
Shangri-La Hotels
Malaysia
|
Hotels, Restaurants &
Leisure
|
Malaysia
|
2,989
|
0.6
|
Convenience Retail Asia
|
Consumer Staples
Distribution
|
Hong Kong
|
2,963
|
0.5
|
Aptus Value Housing
Finance
|
Financial Services
|
India
|
2,941
|
0.5
|
Credit Bureau Asia
|
Professional Services
|
Singapore
|
2,851
|
0.5
|
Top fifty investments
|
|
|
509,504
|
94.6
|
Bukit Sembawang Estates
|
Real Estate Management &
Development
|
Singapore
|
2,812
|
0.5
|
Tisco Financial (Foreign)
|
Banks
|
Thailand
|
2,765
|
0.5
|
Yoma Strategic
|
Real Estate Management &
Development
|
Myanmar
|
2,719
|
0.5
|
Manulife
|
Insurance
|
Malaysia
|
1,320
|
0.3
|
Humanica
(Foreign)
|
Professional Services
|
Thailand
|
794
|
0.2
|
First Sponsor Group (Warrants
21/03/2029)
|
Real Estate Management &
Development
|
Singapore
|
223
|
-
|
Military Commercial Joint Stock
Bank
|
Banks
|
Vietnam
|
123
|
-
|
AEON Stores Hong Kong
|
Multiline Retail
|
Hong Kong
|
98
|
-
|
First Sponsor Group (Warrants
30/05/2024)
|
Real Estate Management &
Development
|
Singapore
|
-
|
-
|
G3 Exploration
|
Oil, Gas & Consumable
Fuels
|
China
|
-
|
-
|
Total investments
|
|
|
520,358
|
96.6
|
Net current assets
|
|
|
18,178
|
3.4
|
Total assetsB
|
|
|
538,536
|
100.0
|
A Holding includes
investment in both common and preference lines.
|
B Total assets less
current liabilities.
|
Investment Case Studies
Prestige Estates (India)
In which year did we first
invest?
April, 2019
How has Prestige Estates done since
we invested in it?
Since we invested in it on April
2019, the share price of Prestige Estates has risen close to about
340% in GBP terms (total returns), compared to the MSCI AC Asia ex
Japan Small Cap Index's gain of about 47%.
% Holding:
2.92%
Where is their head
office?
Bengaluru, Karnataka,
India
What is their web
address?
prestigeconstructions.com
What does the company do?
It is a leading South Indian
developer with a good reputation for executing and completing
projects, covering segments such as residential, commercial,
retail, hospitality and property management.
Why do we like the
company?
We regard Prestige Estates as a
quality developer with a strong track record of residential housing
development and a growing investment property portfolio. Founded in
1986, the group has completed more than 290 projects through the
years. It has continued to show decent growth in pre-sales,
completions, launches and rental income. Having been a leading
player in South India, Prestige is looking to drive growth by
diversifying from its base in Bangalore to other parts of India,
such as Mumbai and New Delhi. Its expansion strategy has been
sensible, as it is opting to add new projects through tie-ups with
developers in other regions.
Prestige has more than 150 million
sq ft of real estate space in its pipeline and around a quarter of
this is in locations outside south India. Its most recent updates
have highlighted a new asset creation cycle as the company is
planning an aggressive scaling up across all its business segments
over the next five years, including the rebuilding of its office
and shopping mall pipeline. Capital discipline is key and we
closely monitor how the company has been executing its plans so
that it does not compromise its balance sheet, albeit operating
cash flows have been strong and pre-sales momentum remains
positive. There is also support from a substantial improvement in
the company's liquidity position, following a spin-off of assets to
Blackstone and a stake sale in one of its office blocks.
More broadly, the government's bold
housing programme is taking shape with affordable homes being built
across the country, while sector reform such as the Real Estate
(Regulation and Development) Act (RERA) has triggered large-scale
consolidation in the industry, with the strongest impact on the
residential segment. We expect good quality developers with strong
balance sheets and brands, such as Prestige Estates, to benefit the
most. The consolidation theme is happening at pace with Prestige
getting good land deals from banks offloading their assets. We also
see urbanisation and population growth, combined with increasing
disposable income and the increase in nuclear families, as fuelling
the overall demand for housing over the longer term.
When did we last engage Prestige on
ESG?
We last met Prestige in June
2023.
What were the key areas of
engagement?
We have been engaging Prestige on
its environmental impact, including efforts in green building and
water management. We also continue to engage with management around
its board composition and gaps in skillsets, as well as employee
welfare and improvements
in disclosure.
What is the result of our
engagement?
Prestige Estates has yet to have an
MSCI ESG rating, but we are encouraged by the company's efforts
towards a greener planet. The company is committed to designing and
delivering assets with "green building" certification, while also
incorporating water conservation and waste recycling. For instance,
the company has installed rainwater harvesting mechanisms at all
its project locations. Compared with conventional buildings,
overall Prestige has conserved more than 30% of water in its
portfolio of green buildings. Its freshwater consumption also fell
by 19% in FY2022. The company also recycled 22% of its overall
waste in FY2023.
As for the social aspect, in terms
of talent management, Prestige uses online learning resources to
enhance the skills of its workforce, with a learning platform that
has videos, articles, podcasts and TED Talks on various topics and
interests. In addition, it has in place an employee well-being
policy and Prevention of Sexual Harassment policy that applies to
all employees. We have also seen some progress in corporate
governance. Independent representation on the board of directors is
about 56%, while Prestige increased the number of female directors
on the nine-member board to two in FY2020 from one
previously.
When do we next meet the company and
what will be on the ESG agenda?
We plan to meet Prestige in mid-2024
for a business update and to check on progress on the material ESG
issues highlighted above.
FPT Corporation
In which year did we first
invest?
2019
How has FPT Corp done since we
invested in it?
Since we invested in it on 5 April
2019, the share price of FPT Corp has risen close to 350% in GBP
terms (total returns), compared to the MSCI AC Asia Pacific ex
Japan Small Cap Index's gain of about 44%.
% Holding:
3.44%
Where is their head
office?
Hanoi, Vietnam
What is their web
address?
FPT.com
What does the company do?
FPT is the biggest technology and IT
services group in Vietnam with three core businesses in IT
services, telecommunications, as well as education and
investment.
Why do we like the
company?
FPT exemplifies the type of company
that we like. Despite operating in what is still deemed to be a
frontier market, FPT has been entrepreneurial in capitalising on
growth opportunities while at the same time demonstrating prudence
in building diversified revenue streams without compromising
its balance sheet. A number of the company's original
founders remain core shareholders and are highly involved in the
business and we believe they deserve credit for their vision,
execution and transparency with investors. We also like the
governance structure that has been put in place where key
management personnel rotate across the different divisions and
develop a deep understanding of each business before joining the
board.
FPT's technology arm is the key
driver of its revenue and profits. Their IT services division has
become a global business and saw its revenue top US$1 billion for
the first time in 2023 on the back of rising demand for digital
transformation. FPT originally found its niche in serving Japanese
multinationals but has been successful in growing its client base
elsewhere in the Asia-Pacific, US and European Union. The company
aims to be in the top 50 global leading digital transformation (DX)
solutions and services providers by 2030, with a revenue target of
US$5 billion, and it has been instrumental in putting Vietnam on
the map for technology outsourcing services.
The industry is attractive with structural growth tailwinds and a
huge market. FPT believes demand growth will ride on new
technologies, such as cloud, AI, big data analytics and robotic
process automation. Most recently, it acquired an 80% stake in
AOSIS, a French IT consulting firm, that will increase its customer
base and improve its capabilities in offering solutions to the
aerospace, aviation and logistics sectors. It also launched its
automotive technology subsidiary FPT Automotive in Texas in the US,
in view of rising global demand for software-defined
vehicles (SDVs).
Across its other businesses, the
education segment is the most profitable and management expects
this division to continue to deliver consistently strong revenue
growth. Most of the software engineers in Vietnam hail from FPT's
university, which also offers synergies with its broader IT
business. Elsewhere, its telecom business is stable and defensive,
supported by growth in broadband services.
This should provide a good buffer
and healthy cash-flows in times of weak macroeconomic
conditions.
The group is generally well aligned
with the growth story of Vietnam. Investments are flowing into
higher-tech sectors, while the population is becoming more educated
and productive. The country is also gaining in importance as an
alternative production base amid the diversification of global
supply chains on the back of geopolitics. It is emerging as a
manufacturing powerhouse, especially in textiles, electronics, and
footwear, with competitive labour costs among its key competitive
advantages. As one of the country's leading conglomerates and most
forward-thinking enterprises, FPT is well-placed to benefit from
these trends and capitalise on emerging business opportunities,
such as the development of local datacentre capabilities or
semiconductor manufacturing.
When did we last engage FPT on
ESG?
We last met FPT in May
2023.
What were the key areas of
engagement?
We view cybersecurity, talent
management and the company's broader environmental impact as some
of the material risks for the company. As such, we continue to
engage with management around better disclosure on data privacy,
employee welfare - given the stiff competition for tech talent - as
well as the setting of targets to track its progress around its
carbon footprint and renewable energy mix.
What is the result of our
engagement?
Although FPT has yet to set up an
ESG board committee, the company has implemented ESG initiatives
for its business sustainability. It has also started to embed its
ESG reporting within its annual reports from 2021. The board
approves ESG policies, with specific goals established and then
cascaded down to the subsidiary level. It also oversees the
implementation of sustainable goals.
FPT's environmental record is clean.
FPT has fully complied with waste and emissions management
regulations, with no related violations recorded in the 30 years
since its establishment. However, FPT has not set any trackable
carbon emissions reduction or renewable energy targets. That said,
it is working to increase the use of renewable energy, such as
solar, as well as ground water and rain water in its buildings. FPT
Complex Danang, for instance, has been awarded the EDGE by the
World Bank for reducing energy, water and material usage by 20%. We
are also urging the company to track its carbon footprint
better.
Meanwhile, cybersecurity and talent
management are key areas of focus. Given that cybersecurity is a
major operating risk, FPT has developed cybersecurity products such
as CyRadar and FPT. EagleEye to supplement outsourced systems.
However, disclosures about data privacy and cybersecurity are
limited, and we continue to engage with the company on better
transparency.
In talent management, we think the
company has done a good job in managing employee welfare so far.
FPT also maintains good diversity in its workforce. Female
employees accounted for 38.1% in 2022 vs 36.1% in 2017. At the
executive level, women made up 34.6%.
FPT has one of the most developed
board structures in Vietnam. Its seven-member board has three
independent directors and one female. Inside shareholders and major
shareholders hold only 17.8% and 12.8% stake respectively. In
response to shareholders' feedback, FPT changed auditor to PwC from
Deloitte in 2021.
While MSCI has yet to rate FPT Corp
for its ESG standards, overall we regard the company as a good ESG
stewardship example in Vietnam.
When do we next meet the company and
what will be on the ESG agenda?
We plan to meet FPT in the first
half of 2024 to discuss its business and progress on the material
ESG issues highlighted above.
Condensed Statement of Comprehensive
Income (unaudited)
|
|
Six months ended
|
Six months ended
|
|
|
31 January 2024
|
31 January 2023
|
|
|
Revenue
|
Capital
|
Total
|
Revenue
|
Capital
|
Total
|
|
Notes
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
(Losses)/gains on
investments
|
|
-
|
(5,499)
|
(5,499)
|
-
|
9,989
|
9,989
|
Income
|
2
|
6,989
|
-
|
6,989
|
8,162
|
-
|
8,162
|
Exchange losses
|
|
-
|
(337)
|
(337)
|
-
|
(181)
|
(181)
|
Investment management
fees
|
|
(377)
|
(1,131)
|
(1,508)
|
(376)
|
(1,128)
|
(1,504)
|
Administrative expenses
|
|
(714)
|
-
|
(714)
|
(601)
|
(16)
|
(617)
|
Net return before finance costs and
taxation
|
|
5,898
|
(6,967)
|
(1,069)
|
7,185
|
8,664
|
15,849
|
|
|
|
|
|
|
|
|
Finance costs
|
|
(249)
|
(746)
|
(995)
|
(252)
|
(755)
|
(1,007)
|
Net return before
taxation
|
|
5,649
|
(7,713)
|
(2,064)
|
6,933
|
7,909
|
14,842
|
|
|
|
|
|
|
|
|
Taxation
|
3
|
(362)
|
(3,118)
|
(3,480)
|
(249)
|
(588)
|
(837)
|
Net return after taxation
|
|
5,287
|
(10,831)
|
(5,544)
|
6,684
|
7,321
|
14,005
|
|
|
|
|
|
|
|
|
Return per share (pence)
|
4
|
|
|
|
|
|
|
Basic
|
|
3.40
|
(6.96)
|
(3.56)
|
4.26
|
4.66
|
8.92
|
Diluted
|
|
3.20
|
(6.28)
|
(3.08)
|
3.99
|
4.44
|
8.43
|
|
|
|
|
|
|
|
|
The total column of this statement
represents the profit and loss account of the Company.
|
There is no other comprehensive
income and therefore the net return after taxation is also the
total comprehensive income for the period.
|
All revenue and capital items in the
above statement derive from continuing operations.
|
The accompanying notes are an
integral part of the condensed financial statements.
|
Condensed Statement of Financial
Position (unaudited)
|
|
As
at
|
As
at
|
|
|
31
January 2024
|
31 July
2023
|
|
Notes
|
£'000
|
£'000
|
Fixed assets
|
|
|
|
Investments at fair value through
profit or loss
|
|
520,358
|
549,672
|
|
|
|
|
Current assets
|
|
|
|
Debtors and prepayments
|
|
2,133
|
2,237
|
Cash and cash equivalents
|
|
17,812
|
5,807
|
|
|
19,945
|
8,044
|
|
|
|
|
Creditors: amounts falling due
within one year
|
|
|
|
Other creditors
|
|
(1,767)
|
(1,250)
|
Net current assets
|
|
18,178
|
6,794
|
Total assets less current
liabilities
|
|
538,536
|
556,466
|
|
|
|
|
Non-current liabilities
|
|
|
|
2.25% Convertible Unsecured Loan
Stock 2025
|
7
|
(36,276)
|
(36,175)
|
3.05% Senior Unsecured Loan Note
2035
|
6
|
(29,902)
|
(29,898)
|
Deferred tax liability on Indian
capital gains
|
|
(5,857)
|
(4,609)
|
|
|
(72,035)
|
(70,682)
|
Net assets
|
|
466,501
|
485,784
|
|
|
|
|
Capital and reserves
|
|
|
|
Called up share capital
|
8
|
10,436
|
10,435
|
Capital redemption
reserve
|
|
2,062
|
2,062
|
Share premium account
|
|
60,464
|
60,441
|
Equity component of 2.25%
Convertible Unsecured Loan Stock 2025
|
7
|
1,057
|
1,057
|
Capital reserve
|
|
377,145
|
393,238
|
Revenue reserve
|
|
15,337
|
18,551
|
Equity shareholders'
funds
|
|
466,501
|
485,784
|
|
|
|
|
Net asset value per share
(pence)
|
9
|
|
|
Basic
|
|
302.05
|
310.49
|
Diluted
|
|
301.18
|
308.93
|
|
|
|
|
The accompanying notes are an
integral part of the condensed financial statements.
|
Condensed Statement of Changes in
Equity (unaudited)
Six months ended 31 January
2024
|
|
|
|
Capital
|
Share
|
Equity
|
|
|
|
|
|
Share
|
redemption
|
premium
|
component
|
Capital
|
Revenue
|
|
|
|
capital
|
reserve
|
account
|
CULS
2025
|
reserve
|
reserve
|
Total
|
|
Notes
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
Balance at 31 July 2023
|
|
10,435
|
2,062
|
60,441
|
1,057
|
393,238
|
18,551
|
485,784
|
Conversion of 2.25% Convertible
Unsecured Loan Stock 2025
|
8
|
1
|
-
|
23
|
-
|
-
|
-
|
24
|
Return after taxation
|
|
-
|
-
|
-
|
-
|
(10,831)
|
5,287
|
(5,544)
|
Return of Ordinary shares for
treasury
|
8
|
-
|
-
|
-
|
-
|
(5,262)
|
-
|
(5,262)
|
Dividends paid
|
5
|
-
|
-
|
-
|
-
|
-
|
(8,501)
|
(8,501)
|
Balance at 31 January
2024
|
|
10,436
|
2,062
|
60,464
|
1,057
|
377,145
|
15,337
|
466,501
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended 31 January
2023
|
|
|
|
Capital
|
Share
|
Equity
|
|
|
|
|
|
Share
|
redemption
|
premium
|
component
|
Capital
|
Revenue
|
|
|
|
capital
|
reserve
|
account
|
CULS
2025
|
reserve
|
reserve
|
Total
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
Balance at 31 July 2022
|
|
10,435
|
2,062
|
60,428
|
1,057
|
375,450
|
14,964
|
464,396
|
Conversion of 2.25% Convertible
Unsecured Loan Stock 2025
|
8
|
-
|
-
|
6
|
-
|
-
|
-
|
6
|
Return after taxation
|
|
-
|
-
|
-
|
-
|
7,321
|
6,684
|
14,005
|
Dividends paid
|
5
|
-
|
-
|
-
|
-
|
-
|
(7,533)
|
(7,533)
|
Balance at 31 January
2023
|
|
10,435
|
2,062
|
60,434
|
1,057
|
382,771
|
14,115
|
470,874
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an
integral part of the condensed financial statements.
|
Condensed Statement of Cash Flows
(unaudited)
|
Six
months ended
|
Six
months ended
|
|
31
January 2024
|
31
January 2023
|
|
£'000
|
£'000
|
Cash flows from operating
activities
|
|
|
Return before finance costs and
tax
|
(1,069)
|
15,849
|
Adjustments for:
|
|
|
Dividend income
|
(6,735)
|
(8,125)
|
Interest income
|
(109)
|
(37)
|
Dividends received
|
6,075
|
8,260
|
Interest received
|
121
|
37
|
Interest paid
|
(870)
|
(871)
|
Losses/(gains) on
investments
|
5,499
|
(9,989)
|
Foreign exchange
movements
|
337
|
181
|
Increase in prepayments
|
(2)
|
(8)
|
Decrease in other debtors
|
20
|
10
|
Increase/(decrease) in other
creditors
|
74
|
(975)
|
Overseas withholding tax
suffered
|
(2,258)
|
(297)
|
Net cash inflow from operating
activities
|
1,083
|
4,035
|
|
|
|
Cash flows from investing
activities
|
|
|
Purchase of investments
|
(46,982)
|
(28,361)
|
Sales of investments
|
71,833
|
24,739
|
Net cash inflow/(outflow) from
investing activities
|
24,851
|
(3,622)
|
|
|
|
Cash flows from financing
activities
|
|
|
Equity dividends paid
|
(8,501)
|
(7,533)
|
Buyback of Ordinary
shares
|
(5,091)
|
-
|
Net cash outflow from financing
activities
|
(13,592)
|
(7,533)
|
Increase/(decrease) in cash and cash
equivalents
|
12,342
|
(7,120)
|
|
|
|
Analysis of changes in cash and
short term deposits
|
|
|
Opening balance
|
5,807
|
9,471
|
Increase/(decrease) in cash and cash
equivalents
|
12,342
|
(7,120)
|
Foreign exchange
movements
|
(337)
|
(181)
|
Closing balance
|
17,812
|
2,170
|
|
|
|
Represented by:
|
|
|
Money market funds
|
11,432
|
-
|
Cash and short term
deposits
|
6,380
|
2,170
|
|
17,812
|
2,170
|
|
|
|
The accompanying notes are an
integral part of the condensed financial statements.
|
Notes to the Financial
Statements
For the six months ended 31 January
2024
1.
|
Accounting policies
|
|
Basis of accounting.
The condensed financial statements have been
prepared in accordance with Financial Reporting Standard 104
(Interim Financial Reporting) and with the Statement of Recommended
Practice (SORP) for 'Financial Statements of Investment Trust
Companies and Venture Capital Trusts', issued in July 2022 (The AIC
SORP). They have also been prepared on a going concern basis and on
the assumption that approval as an investment trust will continue
to be granted.
|
2.
|
Income
|
|
|
|
|
Six
months ended
|
Six
months ended
|
|
|
31
January 2024
|
31
January 2023
|
|
|
£'000
|
£'000
|
|
Income from investments
|
|
|
|
Overseas dividends
|
6,514
|
7,914
|
|
UK dividend income
|
221
|
211
|
|
|
6,735
|
8,125
|
|
|
|
|
|
Other income
|
|
|
|
Deposit interest
|
111
|
37
|
|
Interest from money market
funds
|
143
|
-
|
|
|
254
|
37
|
|
Total income
|
6,989
|
8,162
|
3.
|
Taxation
|
|
The taxation charge for the period
allocated to revenue represents withholding tax suffered on
overseas dividend income. The taxation charge for the period
allocated to capital represents capital gains tax arising on the
sale of Indian equity investments.
|
4.
|
Return per share
|
|
|
|
|
Six
months ended
|
Six
months ended
|
|
|
31
January 2024
|
31
January 2023
|
|
|
p
|
p
|
|
Basic
|
|
|
|
Revenue return
|
3.40
|
4.26
|
|
Capital return
|
(6.96)
|
4.66
|
|
Total return
|
(3.56)
|
8.92
|
|
|
|
|
|
The figures above are based on the
following:
|
|
|
|
|
£'000
|
£'000
|
|
Revenue return
|
5,287
|
6,684
|
|
Capital return
|
(10,831)
|
7,321
|
|
Total return
|
(5,544)
|
14,005
|
|
|
|
|
|
Weighted average number of shares in
issueA
|
155,633,556
|
156,954,206
|
|
|
|
|
|
|
|
|
|
|
Six
months ended
|
Six
months ended
|
|
|
31
January 2024
|
31
January 2023
|
|
DilutedB
|
p
|
p
|
|
Revenue return
|
3.20
|
3.99
|
|
Capital return
|
(6.28)
|
4.44
|
|
Total return
|
(3.08)
|
8.43
|
|
|
|
|
|
The figures above are based on the
following:
|
|
|
|
|
£'000
|
£'000
|
|
Revenue return
|
5,376
|
6,753
|
|
Capital return
|
(10,563)
|
7,529
|
|
Total return
|
(5,187)
|
14,282
|
|
|
|
|
|
Number of dilutive shares
|
12,499,408
|
12,505,379
|
|
Diluted shares in
issueAB
|
168,132,964
|
169,459,585
|
|
A Calculated excluding
shares held in treasury.
|
|
|
|
B The calculation of the
diluted total, revenue and capital returns per Ordinary share is
carried out in accordance with IAS 33, "Earnings per Share". For
the purpose of calculating total, revenue and capital returns per
Ordinary share, the number of Ordinary shares used is the weighted
average number used in the basic calculation plus the number of
Ordinary shares deemed to be issued for no consideration on
exercise of all 2.25% Convertible Unsecured Loan Stock 2025 (CULS).
The calculations indicate that the exercise of CULS would result in
an increase in the weighted average number of Ordinary shares of
12,499,408 (31 January 2023 - 12,505,379) to 168,132,964 (31
January 2023 - 169,459,585) Ordinary shares.
|
|
For the six months ended 31 January
2024 the assumed conversion for potential Ordinary shares was
dilutive to the revenue return per Ordinary share (31 January 2023
- dilutive) and non-dilutive to the capital return per Ordinary
share (31 January 2023 - dilutive). Where dilution occurs, the net
returns are adjusted for interest charges and issue expenses
relating to the CULS (31 January 2024 - £357,000; 31 January 2023 -
£277,000). Total earnings for the period are tested for dilution.
Once dilution has been determined individual revenue and capital
earnings are adjusted.
|
5.
|
Dividends
|
|
|
|
|
Six
months ended
|
Six
months ended
|
|
|
31
January 2024
|
31
January 2023
|
|
|
£'000
|
£'000
|
|
Special dividend for 2023 - 2.25p
(2022 - 1.6p)
|
3,498
|
2,511
|
|
Interim dividend for 2023 - 1.61p
(2022 - 1.6p)
|
2,515
|
2,511
|
|
Interim dividend for 2024 - 1.6p
(2023 - 1.6p)
|
2,488
|
2,511
|
|
|
8,501
|
7,533
|
6.
|
Senior Unsecured Loan
Note
|
|
On 1 December 2020 the Company
issued a £30,000,000 15 year Loan Note at a fixed rate of 3.05%.
Interest is payable in half yearly instalments in June and December
and the Loan Note is due to be redeemed at par on 1 December 2035.
The issue costs of £118,000 will be amortised over the life of the
loan note. The Company has complied with the Note Purchase
Agreement that the ratio of total borrowings to adjusted net assets
will not exceed 0.20 to 1.00, that the ratio of total borrowings to
adjusted net liquid assets will not exceed 0.60 to 1.00, that net
tangible assets will not be less than £225,000,000 and that the
minimum number of listed assets will not be less than
40.
|
|
The fair value of the Senior
Unsecured Loan Note as at 31 January 2024 was £27,070,000, the
value being based on a comparable quoted debt security.
|
7.
|
2.25% Convertible Unsecured Loan
Stock 2025 ("CULS")
|
|
|
|
Liability
|
Equity
|
|
|
Nominal
|
component
|
component
|
|
|
£'000
|
£'000
|
£'000
|
|
Balance at beginning of
period
|
36,629
|
36,175
|
1,057
|
|
Conversion of CULS into Ordinary
shares
|
(24)
|
(24)
|
-
|
|
Notional interest on CULS
|
-
|
77
|
-
|
|
Amortisation of issue
expenses
|
-
|
48
|
-
|
|
Balance at end of period
|
36,605
|
36,276
|
1,057
|
|
|
|
|
|
|
The 2.25% Convertible Unsecured Loan
Stock 2025 ("CULS") can be converted at the election of holders
into Ordinary shares during the months of May and November each
year throughout its life until 31 May 2025 at a rate of 1 Ordinary
share for every 293.0p nominal of CULS. Interest is paid on the
CULS on 31 May and 30 November each year.
|
|
In the event of a winding-up of the
Company the rights and claims of the Trustee and CULS holders would
be subordinate to the claims of all creditors in respect of the
Company's secured and unsecured borrowings, under the terms of the
Trust Deed.
|
|
During the period ended 31 January
2024 the holders of £24,012 of 2.25% CULS 2025 exercised their
right to convert their holdings into Ordinary shares. Following the
receipt of the exercise instructions, the Company converted £24,012
(31 July 2023 - £12,753) nominal amount of CULS into 8,191 (31 July
2023 - 4,347) Ordinary shares.
|
|
As at 31 January 2024, there was
£36,605,647 (31 July 2023 - £36,629,659) nominal amount of CULS in
issue.
|
8.
|
Called-up share capital
|
|
During the six months ended 31
January 2024 2,022,500 Ordinary shares were bought back to be held
in treasury at a total cost of £5,262,000 (31 January 2023 - £nil).
During the six months ended 31 January 2024 an additional 8,191 (31
July 2023 - 4,347) Ordinary shares were issued after £24,012
nominal amount of 2.25% Convertible Unsecured Loan Stock 2025 were
converted at 293.0p each (31 July 2023 - £12,753). The total
consideration received was £nil (31 July 2023 - £nil). At the end
of the period there were 208,710,759 (31 July 2023 - 208,702,568)
Ordinary shares in issue, of which 54,267,090 (31 July 2023 -
52,244,590) were held in treasury.
|
|
Subsequent to the period end,
495,000 Ordinary shares have been bought back to be held in
treasury at a cost of £1,297,000.
|
9.
|
Net asset value per share
|
|
|
|
|
As
at
|
As
at
|
|
|
31
January 2024
|
31 July
2023
|
|
Basic
|
|
|
|
Net assets attributable
|
£466,501,000
|
£485,784,000
|
|
Number of shares in
issueA
|
154,443,669
|
156,457,978
|
|
Net asset value per share
|
302.05p
|
310.49p
|
|
|
|
|
|
DilutedB
|
|
|
|
Net assets attributable
|
£502,776,000
|
£521,959,000
|
|
Number of shares
|
166,937,064
|
168,959,568
|
|
Net asset value per share
|
301.18p
|
308.93p
|
|
A Excludes shares in
issue held in treasury.
|
|
|
|
B The diluted net asset
value per Ordinary share has been calculated on the assumption that
£36,605,647 (31 July 2023 - £36,629,659) 2.25%
Convertible Unsecured Loan Stock 2025 ("CULS") are converted at
293.0p per share, giving a total of 166,937,064 (31 July 2023 -
168,959,568) Ordinary shares. Where dilution occurs, the net assets
are adjusted for items relating to the CULS.
|
|
Net asset value per share - debt
converted. In accordance with the Company's understanding of the
current methodology adopted by the AIC, convertible financial
instruments are deemed to be 'in the money' if the cum income net
asset value ("NAV") exceeds the conversion price of 293.0p per
share. In such circumstances a net asset value is produced and
disclosed assuming the convertible debt is fully converted. At 31
January 2024 the cum income NAV was 302.07p and thus the CULS
were 'in the money' (31 July 2023 - same).
|
10.
|
Transaction costs
|
|
|
|
During the period expenses were
incurred in acquiring or disposing of investments classified as
fair value through profit or loss. These have been expensed through
capital and are included within gains on investments in the
Condensed Statement of Comprehensive Income. The total costs were
as follows:
|
|
|
|
|
|
|
Six
months ended
|
Six
months ended
|
|
|
31
January 2024
|
31
January 2023
|
|
|
£'000
|
£'000
|
|
Purchases
|
49
|
49
|
|
Sales
|
131
|
61
|
|
|
180
|
110
|
11.
|
Analysis of changes in net
debt
|
|
|
At
|
|
|
|
At
|
|
|
31
July
|
Currency
|
Cash
|
Non-cash
|
31
January
|
|
|
2023
|
differences
|
flows
|
movements
|
2024
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
|
Cash and cash equivalents
|
5,807
|
(337)
|
12,342
|
-
|
17,812
|
|
Debt due after more than one
year
|
(70,682)
|
-
|
-
|
(1,353)
|
(72,035)
|
|
|
(64,875)
|
(337)
|
12,342
|
(1,353)
|
(54,223)
|
|
|
|
|
|
|
|
|
|
At
|
|
|
|
At
|
|
|
31
July
|
Currency
|
Cash
|
Non-cash
|
31
January
|
|
|
2022
|
differences
|
flows
|
movements
|
2023
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
|
Cash and cash equivalents
|
9,471
|
(181)
|
(7,120)
|
-
|
2,170
|
|
Debt due within one year
|
(68,516)
|
-
|
-
|
(662)
|
(69,178)
|
|
|
(59,045)
|
(181)
|
(7,120)
|
(662)
|
(67,008)
|
|
|
|
|
|
|
|
|
A statement reconciling the movement
in net funds to the net cash flow has not been presented as there
are no differences from the above analysis.
|
12.
|
Fair value hierarchy
|
|
|
|
|
|
FRS 102 requires an entity to
classify fair value measurements using a fair value hierarchy that
reflects the significance of the inputs used in making the
measurements. The fair value hierarchy has the following
classifications:
|
|
Level 1: unadjusted quoted prices in
an active market for identical assets or liabilities that the
entity can access at the measurement date.
|
|
Level 2: inputs other than quoted
prices included within Level 1 that are observable (ie developed
using market data) for the asset or liability, either directly or
indirectly.
|
|
Level 3: inputs are unobservable (ie
for which market data is unavailable) for the asset or
liability.
|
|
The financial assets measured at
fair value in the Condensed Statement of Financial Position are
grouped into the fair value hierarchy at the reporting date as
follows:
|
|
|
|
|
|
|
|
|
Level
1
|
Level
2
|
Level
3
|
Total
|
|
As at 31 January 2024
|
£'000
|
£'000
|
£'000
|
£'000
|
|
Financial assets at fair value
through profit or loss
|
|
|
|
|
|
Quoted equities
|
505,249
|
-
|
12,209
|
517,458
|
|
Quoted preference shares
|
-
|
-
|
2,677
|
2,677
|
|
Quoted warrants
|
-
|
223
|
-
|
223
|
|
Net fair value
|
505,249
|
223
|
14,886
|
520,358
|
|
|
|
|
|
|
|
|
Level
1
|
Level
2
|
Level
3
|
Total
|
|
As at 31 July 2023
|
£'000
|
£'000
|
£'000
|
£'000
|
|
Financial assets at fair value
through profit or loss
|
|
|
|
|
|
Quoted equities
|
536,515
|
-
|
9,958
|
546,473
|
|
Quoted preference shares
|
-
|
-
|
2,835
|
2,835
|
|
Quoted warrants
|
-
|
247
|
117
|
364
|
|
Net fair value
|
536,515
|
247
|
12,910
|
549,672
|
|
|
|
|
|
|
|
Quoted equities. The fair value of the Company's investments in quoted
equities has been determined by reference to their quoted bid
prices at the reporting date. Quoted equities included in Fair
Value Level 1 are actively traded on recognised stock
exchanges.
|
|
Quoted preference shares and quoted
warrants. The fair value of the Company's
investments in quoted preference shares and quoted warrants has
been determined by reference to their quoted bid prices at the
reporting date. Investments categorised as Level 2 are not
considered to trade as actively as Level 1 assets.
|
|
|
|
|
|
|
|
|
|
|
Six
months ended
|
Year
ended
|
|
|
|
|
31
January 2024
|
31 July
2023
|
|
Level 3 Financial assets at fair
value through profit or loss
|
|
|
£'000
|
£'000
|
|
Opening fair value
|
|
|
12,910
|
9,664
|
|
Transfer from level 2
|
|
|
-
|
2,952
|
|
Total gains or losses included in
losses on investments in the Statement of Comprehensive
Income:
|
|
|
|
|
|
- assets held at the end of the
year
|
|
|
1,976
|
294
|
|
Closing balance
|
|
|
14,886
|
12,910
|
|
|
|
|
|
|
|
At the period end, the Company's
investee, CEBU Holdings was awaiting final regulatory approval to
merge with another company, Ayala Land, and new shares are expected
to be issued in Ayala Land in due course to satisfy the transaction
by a share conversion. The valuation methodology employed is based
on the underlying quoted price of Ayala Land and the implied
conversion ratio providing a value of £12,209,000 (31 July 2023 -
£9,958,000). Subsequent to the period, final regulatory approval
was received and the Company's holding in CEBU merged into Ayala
Land, which is classified as a Level 1 asset.
|
|
|
|
|
|
|
|
| |
13.
|
Related party disclosures
|
|
Transactions with the
Manager. The investment management
fee is payable monthly in arrears based on the market
capitalisation of the Company multiplied by the number of shares in
issue (less those held in treasury) at the month end. The annual
management fee has been charged at 0.85% for the first
£250,000,000, 0.60% for the next £500,000,000 and 0.50% over
£750,000,000 . During the period £1,508,000 (31 January 2023 -
£1,504,000) of investment management fees were charged, with a
balance of £510,000 (31 January 2023 - £990,000) being payable to
aFML at the period end. Investment management fees are charged 25%
to revenue and 75% to capital.
|
|
The Company also has a management
agreement with aFML for the provision of both administration and
promotional activities services. The administration fee is payable
quarterly in advance and is adjusted annually to reflect the
movement in the Retail Price Index. It is based on a current annual
amount of £119,000 (31 January 2023 - £105,000). During the period
£60,000 (31 January 2023 - £52,000) of fees were charged, with a
balance of £60,000 (31 January 2023 - £52,000) payable to aFML at
the period end. The promotional activities costs are based on a
current annual amount of £219,000 (31 January 2023 - £219,000),
payable quarterly in arrears. During the period £110,000 (31
January 2023 - £128,000) of fees were charged, with a balance of
£128,000 (31 January 2023 - £128,000) being payable to aFML at the
period end.
|
14.
|
Segmental information
|
|
The Company is engaged in a single
segment of business, which is to invest in equity securities and
debt instruments. All of the Company's activities are interrelated,
and each activity is dependent on the others. Accordingly, all
significant operating decisions are based on the Company as one
segment.
|
15.
|
Half-Yearly Report
|
|
The financial information in this
Report does not comprise statutory accounts within the meaning of
Section 434 - 436 of the Companies Act 2006. The financial
information for the year ended 31 July 2023 has been extracted from
published accounts that have been delivered to the Registrar of
Companies and on which the report of the auditors was unqualified
and contained no statement under Section 498 (2), (3) or (4) of the
Companies Act 2006. The condensed interim financial statements have
been prepared using the same accounting policies as the preceding
annual financial statements.
|
16.
|
This Half-Yearly Report was
approved by the Board and authorised for issue on 27 March
2024.
|
Alternative Performance Measures
("APMs")
Alternative Performance Measures
("APMs") are numerical measures of the Company's current,
historical or future performance, financial position or cash flows,
other than financial measures defined or specified in the
applicable financial framework. The Company's applicable financial
framework includes FRS 102 and the AIC SORP. The Directors assess
the Company's performance against a range of criteria which are
viewed as particularly relevant for closed-end investment
companies.
|
Discount to net asset value per
Ordinary share
|
The difference between the share
price and the net asset value per Ordinary share expressed as a
percentage of the net asset value per Ordinary share. This has been
presented on a diluted basis as the Convertible Unsecured Loan
Stock ("CULS") is "in the money".
|
|
|
|
|
|
|
31
January 2024
|
31 July
2023
|
NAV per Ordinary share
(p)
|
a
|
301.18
|
308.93
|
Share price (p)
|
b
|
258.00
|
264.00
|
Discount
|
(a-b)/a
|
14.3%
|
14.5%
|
|
|
|
|
Net gearing
|
|
|
|
Net gearing measures the total
borrowings less cash and cash equivalents divided by shareholders'
funds, expressed as a percentage. Under AIC reporting guidance cash
and cash equivalents includes net amounts due from and to brokers
at the period end as well as cash and short term deposits.
|
|
|
|
|
|
|
31
January 2024
|
31 July
2023
|
Borrowings (£'000)
|
a
|
66,178
|
66,073
|
Cash and cash equivalents
(£'000)
|
b
|
17,812
|
5,807
|
Amounts due to brokers
(£'000)
|
c
|
445
|
-
|
Amounts due from brokers
(£'000)
|
d
|
583
|
1,343
|
Shareholders' funds
(£'000)
|
e
|
466,501
|
485,784
|
Net gearing
|
(a-b+c-d)/e
|
10.3%
|
12.1%
|
|
|
|
|
Ongoing charges
|
|
|
|
The ongoing charges ratio has been
calculated in accordance with guidance issued by the AIC as the
total of investment management fees and administrative expenses and
expressed as a percentage of the average published daily net asset
values with debt at fair value throughout the year. The ratio as at
31 January 2024 is based on forecast ongoing charges for the year
ending 31 July 2024.
|
|
|
|
|
|
|
31
January 2024
|
31 July
2023
|
Investment management fees
(£'000)
|
|
3,016
|
3,012
|
Administrative expenses
(£'000)
|
|
1,324
|
1,328
|
Less: non-recurring charges
(£'000)A
|
|
(23)
|
(67)
|
Ongoing charges (£'000)
|
|
4,317
|
4,273
|
Average net assets
(£'000)
|
|
472,964
|
462,127
|
Ongoing charges ratio
|
|
0.91%
|
0.92%
|
A Professional fees
comprising corporate and legal fees considered unlikely to
recur.
|
|
|
|
|
The ongoing charges ratio provided
in the Company's Key Information Document is calculated in line
with the PRIIPs regulations, which includes finance costs and
transaction charges.
|
Total return
|
|
|
|
NAV and share price total returns
show how the NAV and share price has performed over a period of
time in percentage terms, taking into account both capital returns
and dividends paid to shareholders. NAV and share price total
returns are monitored against open-ended and closed-ended
competitors, and the Reference Index, respectively.
|
|
|
|
|
|
|
|
Share
|
Six months ended 31 January
2024
|
|
NAV
|
Price
|
Opening at 1 August 2023
|
a
|
308.93p
|
264.00p
|
Closing at 31 January
2024
|
b
|
301.18p
|
258.00p
|
Price movements
|
c=(b/a)-1
|
-2.5%
|
-2.3%
|
Dividend
reinvestmentA
|
d
|
1.8%
|
2.1%
|
Total return
|
c+d
|
-0.7%
|
-0.2%
|
|
|
|
|
|
|
|
Share
|
Year ended 31 July 2023
|
|
NAV
|
Price
|
Opening at 1 August 2022
|
a
|
295.25p
|
254.00p
|
Closing at 31 July 2023
|
b
|
308.93p
|
264.00p
|
Price movements
|
c=(b/a)-1
|
4.6%
|
3.9%
|
Dividend
reinvestmentA
|
d
|
3.0%
|
3.4%
|
Total return
|
c+d
|
+7.6%
|
+7.3%
|
|
|
|
|
NAV total return from inception (19
October 1995) to
|
|
31
January 2024
|
31 July
2023
|
Opening NAV
|
a
|
20.00p
|
20.00p
|
Closing NAV
|
b
|
301.18p
|
308.93p
|
Price movements
|
c=(b/a)-1
|
1405.9%
|
1444.7%
|
Dividend
reinvestmentA
|
d
|
872.8%
|
838.9%
|
Total return
|
c+d
|
+2278.7%
|
+2283.6%
|
A NAV total return
involves investing the net dividend in the NAV of the Company with
debt at fair value on the date on which that dividend goes
ex-dividend. Share price total return involves reinvesting the net
dividend in the share price of the Company on the date on which
that dividend goes ex-dividend.
|
Copies of the Company's Half Yearly
Report for the six months ended 31 January 2024 will be posted to
shareholders in April 2024 and will be available thereafter on the
Company's website: asia-focus.co.uk *.
Please note that past performance
is not necessarily a guide to the future and that the value of
investments and the income from them may fall as well as rise and
may be affected by exchange rate movements. Investors may not
get back the amount they originally invested.
* Neither the content of the
Company's website nor the content of any website accessible from
hyperlinks on the Company's website (or any other website) is (or
is deemed to be) incorporated into, or forms (or is deemed to form)
part of this announcement.
abrdn Holdings Limited
Secretaries
27 March 2024