Value Investing in Asia: The Definitive Guide to Investing in Asia

PRAISE FOR
VALUE INVESTING IN ASIA

"The book is a great contribution to the investing society. Stanley and Mun Hong have been able to put together the valuable experiences and wisdom of many outstanding Asian fund managers!"
—Dr. Tan Chong Koay, Executive Chairman, Pheim Asset Management Sdn Bhd

"This is not just a book about value investing. Instead, it is a manual for value investing with an Asian twist that investors with an eye on the fastest–growing region in the world will reach for whenever they have questions that need answers."
—Dr. David Kuo, CEO, The Motley Fool Singapore Pte. Ltd.

"Stanley Lim and Mun Hong have skillfully woven three things together in this book for the Asian investor: the key principles of value investing, where to identify the investment opportunities and the mine fields to side step in Asia. With these skills, the investor can start investing in Asia."
—Wong Kok Hoi, CFA, Founder & CIO, APS Asset Management Pte. Ltd.

"In the search for value in Asia, discipline is key. Through easy–to–understand concepts and plenty of real life case studies, Stanley and Mun Hong have concisely detailed an investing process, incorporating quantitative and also qualitative factors to aid investors in their navigation through these waters."
—Tan Chin Hwee, CFA, CA, Author of Asian Financial Statement Analysis

"Investing in Asia is never easy because it′s like navigating through a jungle. Stanley and Mun Hong have penned down a road map on how you can get in and out of the jungle safely—with your treasure intact."
—Victor Chng and Rusmin Ang, Co–founders of FifthPerson.com; Authors of Value Investing in Growth Companies

Disclaimer vii

Foreword xiii

Preface xv

Acknowledgments xix

About the Authors xxi

Chapter 1 Value Investing in Asia 1

Finding Value

The Investor and the Market

Why Value Investing Works

Three Types of Value to Be Found

Chapter 2 Key Developments in Asia 11

What Is in Asia?

What Has Happened in Asia?

Chapter 3 Uniquely Asia 31

What Asia Has Going for It

Corporate Governance in Asia

Shareholder Structure

Succession

Disclosure and Transparency

“Smart” Money Gets Hit Too

Government – The Elephant in the Room

Don’t Bet Your House on Legal Prosecution

Activism and Shorting

Chapter 4 The Future of Investing in Asia 75

ASEAN, Pushing Ahead

The Wall Street of Asia

From ‘‘Guanxi’’ to Transparency

The Future of Healthcare

The Asian Consumer Story Lives On

Chapter 5 Using the Right Process 89

Asset Value

Current Earning Power Value

Growth Value

Special Situations

Narrow Your Search – Screening

Screen Your Screens

The 5–Fingers Rule

The Importance of the 5–Fingers Rule

Chapter 6 Research Like a Businessman 115

Getting the Right Data

Annual Reports Are Your Best Friend

Making Sense of an Annual Report

Don’t Stop at One

Why Should I Read a Competitor’s Annual Report?

Who Do I Speak To?

It is More Than Just the Numbers

Chapter 7 Finding Red Flags 141

What are Red Flags?

Auditor’s Opinion

Financial Red Flags

Non–Financial Red Flags

Chapter 8 Three Simple Valuation Techniques to Live By 161

Price–to–Book Ratio

Price–to–Earnings Ratio

Discounted Cash Flow

Always Remember Your Margin of Safety

Chapter 9 How Everything Comes Together 185

Value Through Assets – Hongkong Land Holdings Limited

Current Earning Power – Tingyi (Cayman Islands) Holdings Corporation

Growth in Cyclicality – First Resources Limited

Special Situation – Dalian Wanda Commercial Properties Co., Limited

High Growth – Tencent Holdings Limited Conclusion 221

Interviews 225

An Interview with Wong Kok Hoi of APS Asset Management

An Interview with Tan Chong Koay of Pheim Asset Management

An Interview with Wong Seak Eng, Kevin Tok and Eric Kong of Aggregate Asset Management

An Interview with Yeo Seng Chong of Yeoman Capital Management

An Interview with David Kuo of Motley Fool Singapore

Index 265

STANLEY LIM PEIR SHENQ, CFA, has worked in the investment industry for many years. Most recently, he was an analyst for The Motley Fool Singapore. He has written close to 2,000 investment articles online. Stanley is currently the chief editor for ValueInvestAsia.com.

CHEONG MUN HONG, CFA, started his career as an investment analyst at a Singapore–licensed Trust Company. Over the course of his work, he has dealt with investments involving public and privately held entities. Mun Hong sits on the boards of listed companies.