The Insurgent Mission of Hidden Champions: Willingness to be Misunderstood and Travel Light to Journey Far

Dear Friends,

The Insurgent Mission of Hidden Champions: Willingness to be Misunderstood and Travel Light to Journey Far

Please find attached our latest investment letter as announced on ASX today:

http://8iholdings.com/media/ref_investmentupdate2017.pdf

http://www.asx.com.au/asxpdf/20161130/pdf/43dcb9j3wwwx43.pdf

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Dear Valued Partners,

Your funds in listed Asian equities achieved a 26.3% 12-month rolling return (in SGD terms) as at 30 September 2016 against an increase of 12.8% for the MSCI Asia Pacific index, 8.3% for the Australia All Ord index, 2.8% for Singapore’s FTSE STI index and -5.4% for the Nikkei 225 index over the same period. The cost of the total invested active portfolio in listed Asian equities was S$19.85 million with a market value of S$24.69 million as at 30 September 2016, and a net realised profit of S$0.38 million from closed positions, generating a S$5.21 million overall net investment gain, contributed from S$4.14 million generated in the current interim period from 1 April 2016 to 30 September 2016, and S$0.97 million in the period from 30 September 2015 to 31 March 2016. We would like to express our appreciation for all the support rendered by our members in the 8IH family group of companies and you, our shareholders.

The improvement and outperformance in returns has been developed from an enhancement in the investment strategy and process to pursue an active, bottom-up, research-driven and team-based multi-manager approach since September 2015. Our investment philosophy in value investing is now more defined and deep: our enhanced investment strategy is to focus on investing in successful yet relatively low-profile underappreciated Hidden Champions. These are focused market leaders in sophisticated, hard-to-imitate niche products and valuable critical niche services that are largely invisible to the average consumer yet are indispensable to our well-being in daily life.

This is precisely the time when Hidden Champions and value investors go to work.”

Toni Morrison, American Pulitzer-Prize novelist, recipient of the 1993 Nobel Prize and Professor Emeritus at Princeton University, made a poignant commentary recently about why the task of the artist is a grounding and elevating force in turbulent times from her earlier stunning essay in the 150th Anniversary Special Issue of The Nation. When “artist” is replaced by “Hidden Champions and value investors”, we believe her inspiring words would be applicable for value investors seeking to navigate the turbulent and fragile markets:

“This is precisely the time when artists [our insertion: Hidden Champions and value investors] go to work. There is no time for despair, no place for self-pity, no need for silence, no room for fear. We speak, we write, we do language [our insertion: value investing]. That is how civilizations [our insertion: markets] heal. I know the world is bruised and bleeding, and though it is important not to ignore its pain, it is also critical to refuse to succumb to its malevolence. Like failure, chaos contains information that can lead to knowledge — even wisdom.”

We are thankful to have your patience, trust and support in this journey while we work with deep intense focus. We will continue to travel light like the javelin warriors to journey far in search of the compounding Hidden Champions. Please contact us with any questions, thoughts or comments at: analyst@8investment.com

Warm regards,

KB

 

The Moat Report Asia

www.moatreport.com

A new monthly issue of The Moat Report Asia is now available!

Access the in-depth idea presentation:

http://www.moatreport.com/members/

PS: We are proud to announce the launch of Singapore’s Inter-Varsity Stock Research Challenge: “Unearthing Hidden Champions” – and we have extended the registration deadline to 5 December (Monday) noon to enable more students to cultivate the portable lifelong skill-set of critical thinking ability and the higher order of synthesis and judgment to apply what is learnt into the messy world of reality by forming quality analytical output that has timely relevance and usefulness to the wider business community through this unique platform and opportunity.

You wear them, the Crizal lens on your eyewear. Essilor International is the world’s leading ophthalmic optics company behind the Crizal, Transition, Varilux lens and the company is powered by a unique owner-oriented corporate culture with its inclusive plan to enable 50% of employees worldwide become shareholders, compared to 20% currently. Its share price has compounded 2,000% since 1986.

You touch them, the ASSA Abloy system for your door. ASSA Abloy AB, the global leader in innovative door opening solutions to improve our lives through security, safety and convenience, is up 10,000% since 1994.

You cook with them – peep inside a professional kitchen and you can find a Rational intelligent cooking system on a Norwegian submarine, a Saudi prince’s yacht, as well as in hospitals and restaurants around the globe. Rational AG commands a global 54% market leadership in the world’s professional kitchens that include the Buckingham Palace and the White House, and is behind the success of such famous culinary names as Gordon Ramsay. Rational AG is up 1,000% since 2000.

You may even use them in emergency care situations, the Ambu bag for manual resuscitation in hospitals, by ambulance services – in fact in all kinds of emergency environments all over the world. Ambu A/S, the company whom millions of patients and healthcare professionals worldwide depend upon the functionality and performance of its products, is up 6,000% since 1992.

Essilor, ASSA Abloy AB, Rational AG and Ambu A/S are the successful yet relatively low-profile Hidden Champions who are focused market leaders in sophisticated, hard-to-imitate niche products and valuable critical niches that are largely invisible to the average consumer yet are indispensable to our well-being in daily life. From a value investing perspective, investing at an earlier stage in the long-term growth trajectory path of these Hidden Champions – in Asia – should prove rewarding.

The Challenge’s mission is to promote the study of value investing, to foster intelligent research on Hidden Champions in Asia, and to allow students to advance their analytical skills and earn exposure and recognition in the community of value investors and some of the most notable minds of the investment industry. The winning team of the Challenge will also earn a prize money of S$5,000 and a Trophy engraved with their institution’s name.

The Challenge is held within the 6th Value Investing Summit (VIS) 2017 which is the largest gathering of value investors in Asia Pacific. It is a two-day networking and guest-speaker event held on 14-15 January 2017 at the Singapore Expo. Past and upcoming speakers of Value Investing Summit include Dr. Niwes Hemvachiravarakorn, Mr. Hemant Amin, Ms. Lauren Templeton, Mr. Scott Phillips Jr., Darkhorse Capital CIO/founder Mr. Mohammed Ali-Reda. Started in 2012 with 500 participants, the VIS has since attracted 1,600 participants in our record-breaking VIS 2016.

We have assembled an expert judging panel of highly-respected professional institutional investors and fund managers to assist in determining the winning team. 4 varsity teams will be selected to present to the expert panel and the 1,600-strong audience. Contestants will be judged on the merits of the investment thesis and the depth of research.

Rules and Regulations

  • All team members must be from the same university.
  • Each team should consist of at least 2 members, with a maximum of 3. Please also indicate team leader name.
  • Only one entry will be accepted per team.
  • The registration deadline for teams is 5th December 2016.
  • The Entry Submission deadline is 16th December 2016, 12 noon. Entries received after the deadline will not be considered.
  • Each team may submit ONE company for this challenge. The company must be a public-listed company in the Asia-Pacific region with a market capitalization between US$50 million and US$10 billion as at 31 October 2016. The Asia-Pacific region markets include Singapore, Malaysia, Thailand, Indonesia, Philippines, Vietnam, Hong Kong, China, Taiwan, Korea, Australia, New Zealand, India and Japan.
  • The written report must be submitted with the Calibri font and font size 11 with no spacing between the lines of text or paragraphs. Both the written report and presentation slides must be submitted in the form of PDF.
  • The research thesis must align with the theme of “Unearthing Hidden Champions”. That means finding and analyzing businesses with
  • Wide and durable economic moats that generate superior returns on invested capital;
  • Unique, scalable business model with indestructible intangible know-how to create new categories of growth
  • A long runway to compound growth; and
  • High-integrity, aligned owner-oriented management teams.

Some guiding questions for inclusion in both the written report and presentation slides:

(1) What is the background of the Hidden Champion? What is your one-sentence investment thesis?

(2) What makes it a wide-moat business? Why do you think the business model is unique, scalable and that it gets easier as it gets bigger?

(3) What is the corporate culture, management quality and shareholding structure like?

(4) Why do you think the market value of the company can double in the next 3-5 years?

(5) What are your top 3 dislikes? What are the toxic factors?

Please visit: http://valueinvestingsummit.com/varsitychallenge/

We look forward to your submission and participation in the Inter-Varsity Stock Research Challenge – “Unearthing Hidden Champions”!

Disclaimer: This newsletter is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. This newsletter is distributed for informational purposes only and should not be construed as investment advice or a recommendation to sell or buy any security or other investment, or undertake any investment strategy. It does not constitute a general or personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual investors. The price and value of securities referred to in this newsletter will fluctuate. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of all of the original capital invested in a security discussed in this newsletter may occur. Certain transactions, including those involving futures, options, and other derivatives, give rise to substantial risk and are not suitable for all investors.
“Bamboo Innovators bend, not break, even in the most terrifying storm that would snap the mighty resisting oak tree. It survives, therefore it conquers.”
BAMBOO LETTER UPDATE | Nov 30, 2016
Bamboo Innovator Insight (Issue 130)

  • The weekly insight is a teaser into the opportunities – and pitfalls! – in the Asian capital jungles.
  • Get The Moat Report Asia – a monthly in-depth presentation report of around 30-40 pages covering the business model of the company, why it has a wide moat and why the moat may continue to widen, a special section on “Inside the Leader’s Mind” to understand their thinking process in building up the business, the context – why now (certain corporate or industry events or groundbreaking news), valuations (why it can compound 2-3x in the next 5 years), potential risks and how it is part of the systematic process in the Bamboo Innovator Index of 200+ companies out of 15,000+ in the Asia ex-Japan universe.
  • Our paid Members from North America, Europe, the Oceania and Asia include professional value investors with over $20 billion in asset under management in equities, some of the world’s biggest secretive global hedge fund giants, and savvy private individual investors who are lifelong learners in the art of value investing.
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About bambooinnovator
KB Kee is the Managing Editor of the Moat Report Asia (www.moatreport.com), a research service focused exclusively on highlighting undervalued wide-moat businesses in Asia; subscribers from North America, Europe, the Oceania and Asia include professional value investors with over $20 billion in asset under management in equities, some of the world’s biggest secretive global hedge fund giants, and savvy private individual investors who are lifelong learners in the art of value investing. KB has been rooted in the principles of value investing for over a decade as an analyst in Asian capital markets. He was head of research and fund manager at a Singapore-based value investment firm. As a member of the investment committee, he helped the firm’s Asia-focused equity funds significantly outperform the benchmark index. He was previously the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. KB has trained CEOs, entrepreneurs, CFOs, management executives in business strategy, value investing, macroeconomic and industry trends, and detecting accounting frauds in Singapore, HK and China. KB was a faculty (accounting) at SMU teaching accounting courses. KB is currently the Chief Investment Officer at an ASX-listed investment holdings company since September 2015, helping to manage the listed Asian equities investments in the Hidden Champions Fund. Disclaimer: This article is for discussion purposes only and does not constitute an offer, recommendation or solicitation to buy or sell any investments, securities, futures or options. All articles in the website reflect the personal opinions of the writer.

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