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Upward Toiling of Our Hidden Champions Issue 2 Surge: Nonlinear Growth in Hidden Champions – Super-Cycle in MCUs; Sydney’s Multimillion Blue Highway; India’s Water (Conservation) War

Dear Clients and Partners,

Surge: Nonlinear Growth in Hidden Champions – Super-Cycle in MCUs; Sydney’s Multimillion Blue Highway; India’s Water (Conservation) War

Exponential non-linear growth is a topic of discussion with one of our high net-worth clients who is also an astute C-suite executive at an American MNC. This client shared, “I always ask my teams what High Value Problems (HVP) are they solving for our customers…there will be no inflection if we are not focus on solving HVP.”

This business and investing wisdom by our client is akin to Larry Page’s gospel of 10x. Most companies would be happy to improve a product by 10%. Not the CEO and cofounder of Google. The way Page sees it, a 10% improvement means that you’re doing the same thing as everybody else. You probably won’t fail spectacularly, but you are guaranteed not to succeed wildly. That’s why Page expects his employees to create products and services that are ten times better than the competition. That means he isn’t satisfied with discovering a couple of hidden efficiencies or tweaking code to achieve modest gains. Thousand-per-cent improvement requires rethinking problems, exploring what’s technically possible and having fun in the process.

Understanding surge – the nonlinear flourishes of intensive growth activity preceded or followed by periods of lull – can yield deep insights for value investors and entrepreneurs to have a fresh perspective on nonlinear growth and sustained value creation. We explore three potential surge situations with HVP in Asia: (1) the super-cycle in microcontrollers (MCUs); (2) Sydney’s multimillion Blue Highway; (3) India’s multimillion water (conservation) war.


HVP #1: Are we in the early stage of a super-cycle for microcontroller (MCU), the microchip that enable the growing Internet-of-Things (IoT) world of interconnected household and industrial devices?

Everyday products and machines can now be embedded with sensor technology to process data or interact with other electronic devices, from Amazon’s voice-enabled smart speaker to smart toys, drones and medical equipment. This quiet super-cycle in demand for connected devices has powered the IoT microcontroller market to expand from $1.98 billion in 2016 to an estimated $6.49 billion by 2024.

Nyquest Technology (GTSM: 6494), Taiwan’s innovative fabless consumer IC designer specializing in the design and development of voice controllers and MCUs for toys, learning machines, medical equipment, electric cars and other consumer electronics products, has announced on 10 July 2017 that it is expected to report a record EPS for 2Q2017 when revenues also hit a record high of NT$306 million (news link). Nyquest posted consolidated revenues of NT$109 million in the month of June 2017, up 28.9% on year and hitting an all-time high. Nyquest has enjoyed robust shipments of its 8-bit MCUs, of which its shipments for the first five months of 2017 already exceeded the total for all of 2016. Strong demand for 8-bit MCUs, as well as demand for high-end 32-bit MCUs, will buoy further Nyquest’s sales and profits for the third quarter.

Nyquest generates a higher ROE at 24% than Microchip and NXP, but trades at an attractive EV/EBIT of 9.67x with downside protection from a 5.7% dividend yield backed by healthy operating cashflow and a strong balance sheet with zero debt and net cash position that’s 20% of its market value. Nyquest’s ex-dividend date was July 4 and the cash dividend payment of NT$3 per share is on July 25 – this means at the current share price of NT$52 is NT$55 if the dividends are included. As one of the top shareholders in Nyquest, the Hidden Champions Fund look forward to reinvesting the 5.7% cash dividends which we will receive the payment on July 25.


HVP #2: How much is a Blue Highway worth?

In Italy, Netherlands and Japan, there is a structural trend of forward-looking initiatives and action to move domestic freight traffic off highways into high-speed ferries traversing across the Blue Highway.

Recently on 30 June 2017, Sealink Travel Group (ASX: SLK), Australia’s largest tourism and ferry transport company servicing over 8 million customers annually, announced that the NSW State Government had granted permission for it to expand its Captain Cook Cruises ferry service operations in Sydney to and from the new International Convention Centre (ICC) wharf, Barangaroo and Circular Quay. This new daily route provides a simple yet innovative transport solution that cuts traveling time substantially and helps reduce traffic in and around Sydney’s CBD.

Jeff Ellison, MD of Sealink Travel, commented, “Captain Cook Cruises is delighted to be starting the ICC ferry service, with further route options under active consideration. It will provide a simple transport solution that will cut travelling time for delegates and visitors to and from Circular Quay and the Barangaroo/King Street Wharf to the ICC. The new service is consistent with our strategy to further extend “blue highway” opportunities on Sydney Harbour.”

[Read Press release and ASX announcement]

Sydney’s new ICC was opened in December 2016. Built at a $1.5 billion price tag, it is estimated to generate at least $5 billion in economic benefits for NSW over the next 25 years by enticing more events, concerts and conventions to Sydney. At full capacity, it can host three conventions simultaneously & comfortably hold 30,000 people across the three venues. ICC have over 400 events already booked, everything from rock concerts to international conferences, summits, sporting events, and plenty more to come. ICC Sydney also sits at the heart of the $3.4 billion revitalisation of Darling Harbour.

Australia demonstrated yet again its structural rise as the new mecca for global tourism in the latest tourist arrival data released on 14 July 2017 by the Australia Bureau of Statistics, paving a long runway of growth for Sealink Travel. There were 579,100 visitor arrivals during May, an increase of 6.8% relative to the same period of the previous year. This brings us to 8.49 million visitor arrivals for year ending May 2017, an increase of 9.2% relative to the previous year. This represents an extra 713,000 visitors on the previous year.

Australia is on the brink of its biggest tourism boom since the influx of Japanese tourists in the 1980s, as a rising Asian middle class and new aircraft technology encourages airlines to launch hundreds of new flights and re-map the traditional aviation hubs linking the country with the rest of the world. A dramatic shake-up of Qantas and Virgin Australia’s international routes, at a time when a record number of foreign airlines are opening new routes into Australia, will spur the growth and further cut airfares, which have fallen 30% over the last decade. International aviation capacity in Australia has grown 30% over the last five years.

Virgin Australia chief executive John Borghetti, on board his airline’s first Melbourne to Hong Kong flight, commented, “I used to say Australia was geographically challenged, now I think it is geographically privileged because it is only one sector away from the biggest population in the world which is transforming so much.” The Australian government is in talks with a host of countries to secure more liberalised air services agreements. Australia could also become an important hub for Latin America into Asia.

The industry is particularly excited about the possibility of direct routes to Europe and North America for the first time in Australia’s history. This should open up markets such as the United States east coast where travellers have traditionally been put off by the prospect of taking two long flights. “I remember growing up and having to fly via Singapore-Bahrain and into London. We are becoming more and more part of the international community and it is a very exciting time. The tourism industry now is becoming more about technology. It has been one of the most disrupted industries since the advent of the low-cost carrier. Every time it is disrupted, it throws something out that makes it easier for the consumer”, Tourism Australia managing director John O’Sullivan said.

Meanwhile, an Australian Museum of Underwater Art off Townsville could boost the region’s tourism visitation by hundreds of thousands of people a year. Acclaimed British international sculptor Jason deCaires Taylor visited Townsville in July to assess the feasibility of establishing underwater sculpture at four sites. Taylor’s underwater museum off Cancun, Mexico, listed among the Top 25 Wonders of the World – which would be of a similar scale to the Townsville proposal – attracted an additional 400,000 tourists every year. SeaLink Queensland general manager Paul Victory said a budget of about $2 million was being considered for the underwater museum. The Morris Group, which owns The Ville Resort-Casino and the Orpheus Island Resort, has pledged $200,000. This project is hailed a possible “game-changer” for the region’s marine tourism industry, a win-win for Sealink Queensland which runs the Magnetic and Palm Island ferry services and a boost to the local economy.

Walkways and associated infrastructure similar to that on Kangaroo Island, Tasmania and in New Zealand are expected to open up previously inaccessible parts of Magnetic Island, according to Queensland Parks and Wildlife Service who have identified tracks and lookouts to help attract visitors from the adventure tourism market as key recreational opportunities for the island.  Walks that include stunning scenery and high-quality infrastructure have been hugely successful in attracting tourists in Australia and overseas.

For readers who are traveling to Sydney in the upcoming months ahead, Captain Cook Cruises have partnered with Taronga Zoo to offer an enticing Sydney wildlife package for animal lovers — a Taronga Zoo and whale-watching-cruise combo deal that will operate daily until November 1. Catch a rocket ferry from Circular Quay or Darling Harbour to Taronga Zoo, then take the Sky Safari cable-car to the top of the park before spending the morning visiting the zoo’s 4000 animals, including the new Asian elephant male calf. Then spend the afternoon on the Captain Cook whale-watching cruise, heading through the Heads and into open water where a guide will provide expert commentary on a variety of marine life including humpbacks, southern rights, orcas and minke whales, seals, albatross and fairy penguins. Dolphins nearly always accompany the cruise, with some pods numbering up to 100 individuals. Captain Cook Cruises offers every passenger a whale guarantee— if a whale is not spotted, passengers can cruise again for free. The combo deals are priced at $99 per adult and $55 per child. Visit www.captaincook.com.au for more details.


HVP #3: India is in a Water (Conservation) War battle mode.

With about 2.4% of the world’s land area, India supports 15% of the world’s population, but has only 4% of the world’s water resources. World Bank data shows that only 35% of India’s agricultural land is irrigated. This means that a huge 65% of the farming community in the country depends on rains. 25% to 60% of India’s renewable fresh water capacity has been depleted. Access to water, hit by successive droughts and erratic monsoons, also paints a worrying picture with over nine-tenth of the country experiencing either physical or economic water stress. There is a clear divide between the water stress experienced in south India, which is physical stress due to water shortages, and that in north India, where access to water is limited by a lack of capital and resources.

In India’s water wars, rivers are a resource to be harnessed and extracted for each riparian party’s maximum benefit. Very little emphasis has been placed on conserving and protecting existing water sources. Big infrastructure programs, such as the Indian river-linking plan, envision large-scale water transfer from one river basin to another, again seeking to augment supply rather than conserve water. Indian Governments have done little to conserve water for off-season use. Sadly, despite the construction of 4,525 large and small dams, the country has managed to create per capita storage of only 213 cubic meters; compared to 6,103 cubic meters by Russia; 4,733 cubic meters by Australia; 1,964 cubic meters by the US; and China’s 1,111 cubic meters. Agriculture consumes 83% of India’s national freshwater resources. A staggering $52.7 billion has been expended on major and medium irrigation projects from the first Five-Year Plan (1951-1956) to the 11th plan (2007-12) periods, but irrigation has reached only 45% of India’s net sown area. India’s wells are running dry, fast and it needs to act now. Drought is expected to affect at least eight states in 2017.

Emmbi Industries (NSE: EMMBI), one of India’s largest technical textile specialist who has leveraged upon its intangible know-how in woven fabric to create new categories of growth in innovative water conservation products that include technical textile-based pond liners and flexible water tanks, has announced on 29 June 2017 the incorporation of Emmbi WatCon LLP to undertake turnkey water conservation contracts including provision and installation of canal liners for various government irrigation corporations, which will be using the Canal Liner fabric manufactured by Emmbi.

[Read News release and BSE announcement]

Bombay Stock Exchange (BSE) recently announced for the period ending 30 June 2017 that the Hidden Champions Fund is the top foreign portfolio investors in Emmbi Industries with nearly 4% stake. We had first invested in Emmbi in March 2017 and have since increased our position further. BSE also announced on 13 July 2017 that Alchemy Capital Management, of which the co-founder is Rakesh Jhunjhunwala, dubbed “India’s Warren Buffett”, is holding a one-to-one meeting with Emmbi.


How to prepare for crisis? Time the market? Buy put options? (Costly..) Buy “safe haven” bonds?

In an intriguing empirical investigation titled “The Best Strategies for the Worst Crises”, evidence was reported that an investment strategy in quality stocks benefit from a “flight to quality” effect during crises: “While quality stocks logically deserve a higher price-to-book ratio, in reality they do not always exhibit such a premium. Towards the end of the bull market, quality stocks often looked underpriced. Then, when the market has a drawdown, these stocks have outperformed, benefiting from the so-called flight-to-quality effect.” Specifically, the quality factor delivered 43.7% returns when markets were down -45.3% in crisis periods.

At the Hidden Champions Fund, we aim to protect and grow capital by positioning for and capitalizing on the upcoming downturn in the global/economic business cycle. We believe the time is now for investors to consider allocating to, or adding to strategies that can protect and preserve – strategies like those of Hidden Champions Fund.

We expect to outperform as the current market hype over the “flight to junk” carry trade that’s groping for yield subsides and the overall market retreats – our Fund tends to do better when the overall market is tepid and lacklustre. For instance, in 2016, when MSCI and STI were flattish to down at +2.5% and -0.1% respectively, the Hidden Champions Fund is up 14.3%.

Our Value-to-Quality ratio has been far superior by 150% against Asian comparables – our portfolio companies continue to achieve strong growth in sales and profits and we believe our fund is substantially undervalued. As the CIO of the Hidden Champions Fund, a majority of my personal savings is invested in the Fund along the same terms and fees as the incoming external client.

If you believe you are successful in your work and life (congrats!), and you would like to push the knowledge lever to scale up to achieve something far more valuable than wealth – sustainable growth, serenity, and resilience – please join us and other like-minded professionals, business owners and entrepreneurs who have already participated in our Initial Launch Offering of the Hidden Champions Fund and they all qualify for a Founding Partnership Cash Bonus. We will be doing a soft close of the Fund by 30 September 2017.

Warm regards,
KEE Koon Boon | Chief Investment Officer & CEO
Hidden Champions Fund
8 Capital Pte Ltd

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Upward Toiling of Our Hidden Champions – Issue 1

“The heights by great men reached and kept were not attained by sudden flight, but they, while their companions slept, were toiling upward in the night.”
– Henry Wadsworth Longfellow in The Ladder of St. Augustine

Mountains are often seen as great obstacles that are difficult to overcome, but offer great heights to those that meet the challenge. We have not wings, we cannot soar, but we have feet to scale and climb. Intelligent entrepreneurs know that piles of challenges give us something to build on and out of the ashes of our mistakes, we learn wisdom. And that struggle, that toiling upward and triumph will allow us to rise.

Welcome to the first issue of the “Upward Toiling” newsletter where we highlight inspirational and unusual stories and the latest corporate developments of Hidden Champions creating and compounding value in Asia – before they are widely known and popular.

Consider the upward toil of Microchip Technology Inc, a fabless IC and microcontroller designer which compounded 12,300% since listing in 1993 to a market value of over US$19 billion. What did Microchip’s founder Steve Sanghi do differently in toiling upward to rise against the odds? From the brink of financial ruin in 1989-1993, Steve focused his attention on the microcontroller market which accounted for only 10% of its sales. Microcontrollers are used for all sorts of electronic control applications, ranging from consumer applications to industrial applications, automotive, telecommunications and office automation type of applications. Even though everybody talks about digital all the time, sound/voice, music, video, temperature, etc., are all analog functions, and there is a large and increasing amount of analog required to convert the signals from analog to digital and then process them within a microcontroller — and then, at the end, you still need to convert it back to analog to light a bulb, to make a sound, to turn a power switch on, to fly a drone — in other words, to control something. The world forgets that the real world is analog. The real world does not operate merely in zeros and ones. Therefore, there is a continuous need for analog microcontrollers that Microchip continues to benefit from. Steve added design programmability to their products and development tools to provide the unmatchable offers and technical support to customers they need to succeed, something which the prevailing industry players in the marketplace did not have.

By focusing on microcontrollers that help power up Amazon’s voice-controlled Echo and other Internet-of-Things (IoT) devices, another fabless IC designer NXP Semiconductors had compounded 680% since 2010 to a market value of over US$38 billion.

The challenge in value investing is that stocks are categorized into economic moats after they are obvious and when the share price has run up substantially. We hope by using the Hidden Champions mental model and framework to examine the underlying source of the wide moat, how they are created and sustained, and not the type/category of the wide moat when they are obvious, the value investor will be imbued with an analytical advantage over others.

Is there a similar emerging story to Microchip and NXP that is happening in Asia?

In our latest year end letter, we highlighted Taiwan’s innovative fabless IC designer Nyquest Technology (GTSM: 6494) which is behind the winning story of Hasbro and the survival of many other toymakers in supplying value-added consumer ICs, including the voice-synthesizer chip, to give smart toys a voice and a soul. Nyquest has market leadership in the niche market for voice-synthesizer ICs and MCUs (microcontrollers) for smart toys which is experiencing a rising recurring demand. In the latest interview (in traditional Chinese) of Nyquest CEO,  Guo Qiuli commented that not only did the company achieve a record high revenue last year and breaking record highs for three consecutive months in March to May this year, they are expecting a double-digit growth this year on the back of growing orders in higher value-added products from existing and new customers that include Hasbro, Mattel, Fisher-Price, Spin Master (Hatchimals) etc.

Catalysts ahead include new product shipment to a household appliance customer in its NY8 series and its NY9T touch controller series at the end of June 2017; its higher-end 32 bit NX microcontroller solution to major toy makers in 3Q2017; and its NY8L LCD microcontroller series for educational devices and consumer electronics products.

Nyquest generates a higher ROE at 24% than Microchip and NXP, but trades at an attractive EV/EBIT of 9.68x with downside protection from a 5.7% dividend yield backed by healthy operating cashflow and a strong balance sheet with zero debt and net cash position that’s 20% of its market value. Note that its ex-dividend date is July 4 and the cash dividend payment of NT$3 per share is on July 25 – this means that if the stock is purchased before July 4, the investor qualifies to receive the cash payment yield of 5.7% on July 25.

Latest interview of Nyquest CEO: 《專訪》九齊董座:今年營運拚雙位數成長,產品向高階邁進


Is the innovative Wrinkle Shot Medical Serum, launched in January 2017, a bigger blockbuster than P&G’s high-margin billion-dollar brand SK-II? Launched by Pola Orbis Holdings (TSE: 4927), Wrinkle Shot is the first-of-its-kind medicinal cosmetic wrinkle-improving quasi-drug. At ¥15,000 (US$130) for 20 grams, the serum’s sales reached ¥6 billion in the January to March quarter, which is 30% higher than an initial target, giving the company confidence to raise the forecasted yearly sales from ¥10 to 12.5 billion. With the launch of Winkle Shot, new customers at the department stores increased by a staggering 40% while new customers for the overall Pola brand increased by 20%. The idea of diminishing wrinkles not only tickles the minds of women who seek beauty but also attracted men with high aesthetic awareness, who account for 10% of the Wrinkle Shot sales. The virtues of focus and persistence of Hidden Champions is again exemplified in Pola Orbis who took over 15 years from the beginning of research to succeed in commercializing the Wrinkle Shot. Wrinkle Shot also uses a new ingredient that can be applied in other new innovative products after the first two years following Japan’s regulation, providing a pipeline of blockbusters to propel sales growth. Catalysts ahead include: Pola plans to launch new products that incorporate their own beauty extract in their “BA” high-prestige anti-aging cosmetic line in August 2017. From 2Q2017 onwards, Pola Orbis will also consistently launch five new products every month, including limited items, for the brand’s 30th anniversary. Pola Orbis is also experiencing strong sales for its Decencia sensitive skin brand of Enrich Booster Serum new product since its launch in March 2017.

Latest interview of Pola Orbis director Akira Fuji: The driving force of Pola Wrinkle Shot Medical Serum

 


Tourism dollars from local and international travellers in Australia has cracked $100 billion for the first time and across a broad-base growth across tourists from China, India, Europe, Southeast Asia and America in the latest figures released by the government (news, data), demonstrating yet again the structural rise of Australia as the new mecca for global tourism and a long runway for growth for Sealink Travel Group (ASX: SLK), the largest tourism and transport company in Australia.

Latest developments of Sealink include: (1) Sealink spearheads research into the feasibility of an underwater art museum off Townsville which is being hailed as a “game changer” for the region’s marine tourism industry. The first of its kind is in Mexico which has become the Top 20 Wonders of the World and resulted in an increase of annual visitor numbers of almost 400,000. The far-sighted ecosystem strategy undertaken by Sealink’s CEO Jeff Ellison in developing island tourism is a win-win for both the local tourism economy of Townsville and Sealink, who operates the ferries to Magnetic Island & Palm Island; (2) Sealink was appointed the initial integration partner of the OPAL cashless ticketing project on 28 March 2017 and ready for operation in 2018. Used on public bus and train services, this enables commuter to pay for ferry services directly by tapping their Opal cards or credit cards, similar to the Singapore’s EZ-Link, London’s Oyster or Hong Kong’s Octopus. It integrates Sealink’s ferries into NSW government’s public transport payment system; (3) Sealink also continually seeks earning accretive and synergistic acquisitions and is potentially looking to expand its reach to New Zealand.

A key operational strength of SeaLink is its constant investment in IT to protect and grow earnings and the government was also impressed by the in-house IT capabilities of Sealink in its decision. Not to be seen as a mere asset operator, Sealink is a technology champion utilizing dynamic pricing, growing e-commerce sales, and machine learning pricing predictions, using its tech platform to scale up with online and mobile ticketing sales now contributing over 23% of total revenue. The resiliency of Sealink is supported by long government contracts and delivery of critical services to provide essential, stable, and long recurring cash flows – even in bad times. It has monopoly in most of the routes it services, including Kangaroo Island, similar to Jungfraubahn Holding AG’s railway monopoly to Swiss mountains.

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Continued safety scandals in food and pharmaceuticals resulted in the new US FDA guidelines recommending the use of food- and pharma-grade material for packaging for the entire value chain of food and pharmaceuticals. A key beneficiary of this structural trend is Emmbi Industries (NSE: EMMBI), one of India’s largest technical textile and specialty polymer processing company manufacturing who has leveraged upon its intangible know-how in technical textiles to create new categories of growth in advanced composites of pharma and food grade, such as anti-carcinogenic, anti-bacterial, anti-corrosive and tapered-proof FIBC, with an R&D center Emmbi Innovation Lab recognized in Apr 2016 by India’s Department of Scientific and Industrial Research (DSIR) to differentiate from its other peers in the fragmented industry, as well as water conservation products that include technical textile-based pond liners, flexible water tanks, car covers used in water conservation.

Emmbi recently inaugurated the world’s widest width pond lining facility at its Silvassa plant in Gujarat in April 2017. Emmbi will produce 4,380 pond liners per year under “Jalasanchay Brand”, creating an extra water storage capacity of 48 million liters per day for rural India. The states of Maharashtra and Rajasthan where the company is presently active in the business, has a plan to produce 110,000 & 50,000 pond liners per year respectively for the next five years. This is the new market segment for Emmbi with a potential size of Rs2,000 crore (US$310 million). Emmbi is a top 3 players in pond liner business and aspires to get 10% of the market share of pond lining business in the coming years. Emmbi is also working with five banks to make funds available for farmers for its pond-liner business, which the management expects to bring in huge opportunities going forward. Emmbi has also started a 15-day certificate course for building a team of Emmbi certified pond lining operators who are the distributors to penetrate the market. Emmbi’s founder and CEO Makrand Appalwar commented that “We are creating a complete ecosystem around it. We have a toll-free number where we run and advise people that how to make a pond, what should be your size of the pond, what crop you are taking, if this particular crop has to be taken, then what is the return on investment for you, one season or two seasons, how fast you will get the money. So all these organizational and operational things must be understood before we go in with a much larger scale of operation, because when we have this pulse of knowledge in the business, success is closer.”

Another new innovative advanced composite product launched recently in June 2017 is the ‘Aroma Lock’ technology that used an aluminium liner to seal the aroma of products like coffee. Emmbi has created a 1-tonner to 10-tonner larger-size bulk packaging transport. Makrand-ji commented, “I am glad that Emmbi has now been active in touching your lives every morning through a strong cup of coffee.” Thus, the DNA to innovate and adapt to changing market needs gives visibility on long term sales growth and profitability.

Catalysts ahead include: (1) Emmbi’s positive pressure integrated clean room facility for manufacturing of food and pharmaceutical grade FIBC (flexible intermediate bulk containers) packaging material at Silvassa to tap the exports market will go live in the coming weeks of end June to early July 2017; (2) New advanced composites products such as e-commerce tamper evident multi trip packaging, infrastructure road & roofing underlayment, fire retardant scaffolding; (3) Continued growth in its water conservation products with retail distribution of pond liners, flexi tanks; canal liners, check dams, lapeta pipes; (4) New agro-polymers products in export substitution crop protection, mulch films, silage incubators, agro sheds. Emmbi is also one of the key beneficiaries from PM Modi’s export vision and dream of building a global supply chain and exploring the potential for growth of technical textiles in India and the Textile India 2017 mega exhibition, the world’s first B2B event, in June 2017, will be an important event to showcase innovative hidden champions such as Emmbi to the world.

Presentation of Hidden Champions Fund

We are organizing an Investor’s Presentation for our privileged clients, and would like to invite you to join us on the 28th June 2017 (Wednesday), 7:30pm @ Goldbell Towers, 47 Scotts Road, #03-03, Singapore 228233. We look forward to seeing you.

Warm regards,
KEE Koon Boon | Chief Investment Officer & CEO
Hidden Champions Fund
8 Capital Pte Ltd

Self-Regulation: A Star Leader’s Secret Weapon; Want a Loyal Team? Choose Kindness Over Toughness

Bamboo Innovator Daily Insight: 9 Jan (Fri) – The Power of Asking Pivotal Questions; Mahatma Gandhi and the Art of Travel

Life

The Power of Asking Pivotal Questions: MIT Sloan

Mahatma Gandhi and the Art of Travel: Bloomberg

Can’t get satisfaction? Be entrepreneurial: FT

Why Our Brains Don’t Respond To Our Attempts At Habit Change; We often try to change our behavior by reinforcing negative actions. Here’s how to reframe your motivation and finally follow through: FastCo

How Lego Became The Apple Of Toys; After a decade-long slump, Lego has rebuilt itself into a global juggernaut. An exclusive look inside the company’s top-secret Future Lab: FastCo

In divvying up assets in bankruptcies, Hong Kong liquidators need sensitive touch; Mat Ng is the liquidator currently handling fallen chief secretary Hui’s bankruptcy, selling his music record collection and other assets to repay his creditors. SCMP

Liquidator runs after mistress of bankrupt former HK chief secretary: “I have the duty to chase all assets of Mr. Hui to return to his creditors”: SCMP

The Type of Innovation That Builds Nations: HBR

Family-run jeweller K.M. Oli Mohamed stands the test of a century: TheStar

Grandson’s quest to revive faded Tibor brand’ Sam Reich’s challenge is to restore the famous designer textile name: FT

The lessons learnt by early high flyers: What is it like to achieve extraordinary success at a tender age?Life – The lessons learnt by early high flyers: FT

Integrity Is Free: Strategy&

The Impact of Anand Mahindra’s Nanhi Kali project; These schools focus on skill development of students out of colleges and polytechnic institutes and prepare them for jobs; Forbes

Santander chairman casts aside late father’s strategy: FT

Yuan-dynasty landscapes: Even better than the real thing: Economist

From $1000 to $10 million in a decade; Bashiry’s company, Broadband Solutions, was a one-man start-up in 2005; a broadband voice and data company catering specifically for small businesses: TheAge

17 Tips For Writing An Excellent Email Subject Line: BI

What you need to know about success: Success is messy. DWS

Marking the New Year through history: KoreaTimes

Bill Gates says ‘poop water’ is safe: KoreaTimes

Top Ranked Leaders Know This Secret: Ask For Feedback: Forbes

The frustrating hunt for Genghis Khan’s long-lost tomb just got a whole lot easier: WaPo

Mastering the ‘Name Your Product Category’ Game: MIT

Press Enter for Ecstasy: Chemists all over the planet send their recipes to Chinese factories that make the drugs and ship them by airfreight to avoid detection.: WSJ

Colleges Turn to Personality Assessments to Find Successful Students; Some School Are Looking Past SAT or ACT Admission Tests: WSJ

Why Digital-Movie Effects Still Can’t Do a Human Face; Even today, computer animation can’t begin to reproduce the subtle facial expressions that are the key to human communication: WSJ

The Type of Innovation That Builds Nations: HBR

Books

Understanding Context: Environment, Language, and Information Architecture: Amazon

Everyone Communicates, Few Connect: What the Most Effective People Do Differently: Amazon

Five Of The Best Books On Communication: ValueWalk

Investing Process

Tocqueville’s François Sicart: A Devoted Contrarian Needs Patience: Tocqueville

Greater China

Chinese Property Developer Kaisa Group Appears to Default on offshore bonds, in a development that is raising concerns among global investors; Chinese Developer Kaisa On Verge Of $5Bn Default; Who’s Next?: WSJ, ZeroHedge

Li Ka-shing Is Hong Kong’s Richest Man For 17th Consecutive Year: Forbes1, Forbes2

China’s Anticorruption Campaign Drives Out M.B.A. Students: WSJ

China’s courtship of Latin America tested; China’s decelerating economy and crumbling commodity prices are testing its courtship of Latin America and underscores Beijing’s reluctance to commit cash blindly : FT

Far Eastern Air Transport (FAT, 遠東航空) refuted a Chinese-language magazine’s claim that the airline’s president hollowed out about NT$500 million of company assets: ChinaPost

Taiwan prosecutors conducted a search on the residence of Lin Rong-jin (林榮錦), the former chairman of pharmaceutical company TTY Biopharm (東洋製藥), on suspicion of hollowing out company assets. ChinaPost

Taiwan’s high speed train company is reportedly set to go bankrupt in March 2015, but Taiwan’s government is likely to take over the company’s management in January,: ChinaPost

Li Ning issued a profit warning, saying it expects to suffer a net loss of up to 820 million yuan (HK$1.04 billion) in 2014, more than double its net loss of 391.54 million yuan in 2013.: SCMP

Casino Bad Bets Hit Hong Kong Rich Hard: Forbes

Occupy Central Bodes Well For Hong Kong’s Future, Billionaire Lui Che Woo Says: Forbes

For One Hong Kong Billionaire Optimist, Occupy Central Signaled “Buy”: Forbes

Vast Wealth and a So-so Business; Heiress Pansy Ho Weighs In, Again. MGM Macau made Pansy Ho a billionaire many times over, thanks to a deal she capitalized on more than ten years ago when U.S. casino operators were maneuvering for a foothold : Forbes

Will Taiwan Gain From Embracing China Traders? Making it easier for Chinese retail investors to access local shares is a boon for an already buoyant market.: Barron’s

India

The Gujarat model: How Modi-nomics was forged in one of India’s most business-friendly states: Economist

India’s Stagnant Courts Resist Reform: BW

Modi throws open doors to people of Indian origin around the globe: Reuters

Modi’s Chauvinism Problem: ProjectSyndicate

Modi Struggles to Unlock $200 Billion in Stalled Projects: Bloomberg

Japan & Korea

Korean Air ‘Nut-Rage’ Executive Could Be Headed To Prison For 15 Years: BI

Line, a Korea-Japanese messaging app with more than 500 million registered users, is launching a service called Line Taxi, TechInAsia reports.: BI

Korean investors shifting investments from stocks to bonds en masses: Maeil

Lotte’s endangered dream: If Lotte wants to build the world’s most fun building, there’s no reason it can’t make it the safest as well. JA

SK Innovation, Korea’s largest oil refiner, will most likely post an operating loss in 2014, hit by plunging oil prices.: KoreaTimes

GungHo, Nintendo to combine ‘Super Mario Bros.’ and ‘Puzzle and Dragons’: JapanTimes

Japan’s Fight to Change Suicide Culture Hurt by Latest Recession: Bloomberg

ASEAN

Universal Robina wants to satisfy ASEAN tastes: Nikkei

Widodo Plans Land Bank to Quicken Indonesia Infrastructure: Bloomberg

Indonesia may yet steal a march on India in reforming its economy: SCMP

Marina Bay Sands sues chairman of China Packaging Group for S$3.9 million over debts in Hong Kong; The company’s share price plunged 27.4%: SCMP

Fighting dirty: Muhammad Yusuf, the chief of Indonesia’s financial intelligence unit Financial Transaction Report and Analysis Centre (PPATK), is understandably frustrated because law enforcement agencies have not properly followed up: JPost

The movement of the Siamese capital to the area in the late 18th century led to an increase in population and investment in building canals for irrigation and transport. This led to the first great transformation of Bangkok: Nation

SGX panned as a place to raise funds in 2015; Association which says it represents nearly 30 listed firms urges Singapore businesses to consider markets abroad: BT1, BT2

Macro

Move to liquidate student property fund; The offshore fund is one of a string of student property vehicles marketed to retail investors that have fallen foul of liquidity problems over the past two years.: FT

Pivotal Insider Ruling Is Put to Test: At Issue Is Gesture of Friendship Cited by SEC: WSJ

Missing From Most Pimco Stock Funds: Individual Stocks: WSJ

Scammers Target Brokerage Accounts; The Morgan Stanley Data Breach Is a Reminder of the Big Dollars at Risk: WSJ

Capitalism begins at home: Providing better and more affordable housing could be the next “capitalist achievement”: Economist

The magic of mining: Minting the digital currency has become a big, ruthlessly competitive business: Economist

A crack in the vault: Chatter about breaking up large banks goes public: Economist

Lost a fortune, seeking a role; The seven German Landesbanken that survived the financial crisis are still a mess: Economist

Return of the hired gun: How private armies will remake modern warfare: Economist

US still the dominant superpower in derivatives trade: FT

Risks lurk in failure to simplify finance: FT

Deutsche Bank reveals 7 reasons why ‘Canada is in serious trouble,’ starting with a 63% overvalued housing market: FP

DuPont Finds Itself a Target of an Activist: NYT

Beware the Currency Wars of 2015; More aggressive currency devaluations in Asia and Europe could create great systemic risks world-wide.: WSJ

Europe’s Largest Bank Stock Suspended, Admits Need For $8.9 Billion Capital Raise: ZeroHedge

The BRICs Will Be Cut to the ICs if Brazil and Russia Don’t Shape Up, Warns Phrasemaker O’Neill : Bloomberg

TMT

In China, Shirtmaker TAL Uses Data Analysis for Efficiency Boost: BW

Samsung Gets Mugged in Androidland: Bloomberg

Five Rules for Strategic Partnerships in a Digital World: Strategy&

Advanced Micro Devices CEO Lisa Su, Fortune 500’s newest woman CEO, talks about her first 90 days on the job and details her plans for the tech giant. Fortune

Xero Wants All Small Businesses To Do Accounting In The Cloud: Forbes

Meet the market shapers: A new breed of high-tech economist is helping firms crack new markets: Economist

Hidden in the long tail: Consumers reap the benefits of e-commerce in surprising ways: Economist

A Chinese Company Is Already Making Fake Apple Watches And Proudly Displaying Them In Las Vegas; Apple Watch faces attack of the clones at CES: BI, FT

Google Is Losing Its Grip On Search: BI

GoPro expansion to focus on China; GoPro’s Need for Speed; Camera Maker’s Stock Valuation May Be Too Pricey: FT, WSJ

Tech world feels its way through the dark in internet of things: FT

Memo to activist investors: Unless you understand tech, you’ll do more harm than good: Pando

How Flipboard Is The Epitome Of Web 3.0; Every year, Flipboard looks more and more like the future of magazines.: Medium

Online retail share crash heralds bursting of tech bubble: Telegraph

What is Xiaomi?: Stratechery

Amazon Bought This Man’s Company. Now He’s Coming for Them: BW

12 million driverless cars to be on the road by 2035: Reuters

If Mark Zuckerberg is the next Oprah, Facebook is in trouble: WaPo

The Dark Side of Information Technology: MIT

Energy & Commodities

Energy bondholders could lose out in refinance deals; Risk heightened by weaker investor protection written into bonds: FT

Barrick Gold Corp comes under fire, cut to underperform in extensive analyst report: FP

‘No white knight coming’: Distressed natural gas producers hunker down amid new energy reality: FP

Wall Street isn’t feeling so ‘super’ about the oil trade: Fortune

Oil-Price Drop Takes Shine Off Steel Town; Ohio Workers Who Benefited From Energy Boom Now Face Layoffs: WSJ

Cargill Energy-Trading Earnings Rise While Crude Plunges: Bloomberg

Oil Plunge Leaves $27 Billion of Energy Bonds Junk Priced: Bloomberg

Why OPEC Is Talking Oil Down, Not Up, After 48% Selloff: Bloomberg

Oil Slump Giving Asian M&A Predators One-Year Window for Deals: Bloomberg

Healthcare

The Drugs That Companies Promote to Doctors Are Rarely Breakthroughs: NYT

The $3 billion startup that wants to help you to make medicines in your own body: Fortune

Consumer & Others

McDonald’s: When the chips are down; After a long run of success, the world’s largest fast-food chain is floundering-and activist investors are circling; Why slightly more upmarket outlets are eating fast food’s lunch: Economist (Part 1, Part 2)

Soylent’s Magical Milkshake Is Now Worth $100 Million: BI

GameStop Has A Brilliant Plan To Avoid Becoming The Next Blockbuster: BI

LVMH head Ravi Thakran looking to invest in Australia’s ‘hidden gems’: BRW

Fiat has already benefited from spinning off its most valuable brand Ferrari, but can the legendary Italian sports car company find a new gear on its own?: Forbes

Under Armour Overtakes Adidas in U.S. Sportswear Market; Baltimore-Based Company Boosts Sales in Apparel and Footwear at German Rival’s Expense: WSJ

Daily Bamboo Innovator Insight: Tues 25 Nov 2014 – Why You Can’t Invest Like Warren Buffett – And Shouldn’t Try; A non-cheesy guide to gratefulness: What to read and watch

Investing Process

Why You Can’t Invest Like Warren Buffett – And Shouldn’t Try: Forbes

Beware initial euphoria over headline-grabbing deals: BT

Citi Analysts Thought Everyone Knew ‘Hold’ Meant ‘Sell’: Bloomberg

Once Lucky, Always Lucky? Institutional Trading in a Connected World: SSRN

Life

A non-cheesy guide to gratefulness: What to read and watch: TED

How Innovators Think, And What They Do About It; 88% of award-winning projects began with an employee asking, “What difference would people love?” Forbes

Winning teams are tough to find-and even tougher to build. The former captain of New Zealand’s mighty All Blacks rugby team, David Kirk, explains how to develop superlative   McKinaey

Behind the Talent of Artistic Child Prodigies; Why Can Some Children Draw Realistic Pictures at a Young Age Without Any Training? WSJ

The Secret to Resisting Temptation; People who excel at resisting temptation might have a secret strategy: They deliberately avoid situations in which their self-control might fail, says a study.: WSJ

The Unifying Leader; The collaborative leader is willing to step back from the war posture of politics and be vulnerable. The collaborative leader understands the paradox; you have to take off the armor to build strong bonds. NYTimes

Innovation that succeeds by exploiting the past creatively; Gambling that a rare flash of genius will generate a new, viable idea is expensive: FT

Here’s Why ADHD May Have Been An Evolutionary Advantage: BusinessInsider

How Steve Jobs Fouled Up Presentations For The Rest of Us: Forbes

9 Tips To Drive Down The Price Of Just About Anything: BusinessInsider

11 Tricks Steve Jobs, Jeff Bezos, And Other Famous Execs Use To Run Meetings: BusinessInsider

After 96 Loan Rejections, This Guy Built A $750 Million Marketplace For Business Loans: BusinessInsider

IKEA has created a desk that converts from sitting to standing via a simple button: Quartz

Companions in Misery: What can Schopenhauer, philosophy’s best known pessimist, tell us about New Yorkers? NYTimes

Climbing a Glass Building? Try a Gecko’s Sticky Pads: NYTimes

Brains of People with Chronic Fatigue Syndrome Offer Clues About Disorder: NYTimes

Daum Kakao chairman stresses role of startups; Kim suggested the idea of “social impact” as the most important factor to be successful for a start-up. KoreaTimes

Strategist uses Harry Potter magic to lift fortunes of Osaka theme park: JapanTimes

Four conversations to build your team leadership: Nation

Research: Insecure Managers Don’t Want Your Suggestions: HBR

Interpreter of Maladies; For 30 years, Fouad Ajami took Westerners into the heart of Arab civilization, unafraid to show his readers its afflictions and dreams. WSJ

The Beauty of ‘Infrastructure’; Brian Hayes, author of the updated ‘Infrastructure: A Guide to the Industrial Landscape,’ discusses his book documenting the buildings, systems and networks that make everything in our world work: WSJ

Greater China

China rate cut unlikely to halt slowdown, say analysts: FT

Outside Forces Drive China’s Big Flip-Flop: Bloomberg

China Stock Surge Before Rate Cut Raises Investors’ Worries: WSJ

One reminbi to one US dollar in 25 years: Jim Rogers: WantChinaTimes

The Future of Chinese Arts and Creative Industries: Forbes

When You Give Your Team a Goal, Make It a Range: HBR

China Considers Tobacco Advertising Limits, Public-Smoking Ban: WSJ

Currency Wars Reignite As Yuan Tumbles Most In 2 Months And Chinese Bond Market Freezes: ZeroHedge

India

Burger King eyes a big slice of the Indian market: Forbes

Buyers Balk as Stressed Assets Pile Up on Rule: Corporate India: Bloomberg

Japan & Korea

Kuroda Tells Japan Inc. to Stop Hoarding Cash as Costs to Rise: Bloomberg

S. Korean companies squeezed in ‘new nut cracker’ between China and Japan: Maeil

IKEA under probe for overcharging consumers in Korea: KoreaTimes

Park pitches ‘creative economy’ in North Jeolla: KoreaTimes

Korean conglomerates to face tougher regulations in appointing financial CEOs: KoreaTimes

Japan’s young fret as unexpected recession kicks in: JapanTimes

Abe Sales Tax Backfiring With More Debt Not Less: Bloomberg

ASEAN

Indonesia Corruption Watch Gives Attorney General a Long To-Do List: JakartaGlobe

Holding of properties from all over the world by Singapore property trusts means that the market has been able to grow beyond expectations. BT

Should Pemandu scale down and close shop; is it duplicating civil service role? Star

Rural Philippine Call Center Shows Promise of New Business Model: WSJ

World’s Longest Stock Gain Has Top Malaysia Fund Piling Cash: Bloomberg

S’pore must exploit IT advantage to stay ahead: PM: TODAY

Macro

Companies Still Sorting Through Revenue Recognition Rule, Survey Shows: ComplianceWeek

Fears Australian banks ill-prepared for housing-induced crisis: TheAge

BlackRock: Beware of Dividend Stocks; If interest rates rise even modestly in 2015, these defensive plays are likely to perform poorly. Barron’s

The World According to Goldman: Barron’s

The Unsettling Mystery of Productivity; Since 2010 U.S. productivity has grown at a miserable rate. And no one, not even the Fed, seems to understand why. WSJ

New Abnormal Means Relying on Central Banks for Growth: Bloomberg

Hedge Funds Lose Money for Everyone, Not Just the Rich: Bloomberg

Global ‘QE glut’ to brim through 2015 as funds swim with the tide: Reuters

TMT

How Google Glass Helped This Blind 13-Year-Old Dancer Get His Vision Back: BusinessInsider

How to make a fortune without ‘doing’ anything: The Uber, Airbnb story: Fortune

Is Spotify the music industry’s friend or its foe? NewYorker

Huawei aims to turbocharge design of self-driving vehicles: FT

Melbourne, Becoming A World Class Tech Hub: Forbes

A startup planned on the kitchen table is among America’s top 20 web properties: Forbes

Facebook ‘Newspaper’ Spells Trouble for Media: JakartaGlobe

It Won’t Be Easy Making Money Off of Cherry-Picking Shoppers; Successful Retailers Must Create a Better, Memorable Customer Experience: WSJ

Wake Up, Brick-and-Mortar Retailers: The Web Has Opened Shoppers’ Eyes to Selection, Ease, Transparency: WSJ

The End of the Impulse Shopper: The Web Has Made Consumers More Intentional, Smarter: WSJ

Amazon Offers Help Finding Local Handymen; Listing Service in 3 Cities Aims to Connect Customers With Service Providers: WSJ

Uber and a Fraught New Era for Tech; Consumer-Privacy Troubles Are Likely to Transform Silicon Valley: WSJ

Healthcare

Radiologists Are Reducing the Pain of Uncertainty: NYTimes

I Asked 20,000 Doctors About Fitbit And Apple’s HealthKit, And Here’s The Answer: Forbes

Bringing the Customer’s Voice into Medicine: HBR

U.S. Buys Up Ebola Gear, Leaving Little for Africa; Manufacturers Strain to Meet Demand Amid Rising Anxiety: WSJ

More Patients Opt to Replace Ankle Joints Instead of Fusion; Increased Range of Motion; Expect Repeat Surgery a Decade Later: WSJ

Surgical Tool Gets Strongest Warning; Morcellator Used in Hysterectomies Can Spread Undetected Cancer, FDA Says: WSJ

RealView Imaging’s 3D holographic display enables doctors to view a real-time 3D hologram of a patient’s anatomy “floating in the air” and interact with it either by stylus or with their hands: WSJ

Commodities & Energy

Global metals markets are becoming more difficult to regulate as manipulation takes more subtle forms and new trading platforms spring up: FT

Petrobras scam allegations weigh on Brazil as blacklist fears rise: FT

Black hole in mining sector profits leads to ‘vanishing’ returns; FTSE 100 miners are feeling the pain from a collapse in commodity prices as the Chinese economy hits the skids: Telegraph

OPEC Fault Lines Spur Hedge Funds to Trim Bullish Oil Bets: Bloomberg

BHP Billiton digs deep as tough times get tougher: TheAge

Consumer & Others

4 Reasons Nike’s Business Will Explode: BusinessInsider

The boss of Domino’s Pizza Enterprises says his company has “far from peaked”, after he capitalised on the company’s skyrocketing share price to sell $2.2 million worth of shares. TheAge

Bud Crowded Out by Craft Beer Craze: Faded Beer Brand Unhitches Clydesdales in Favor of Fresher Pitches to Young People: WSJ

Supermarket price war now claiming food producers as victims; Cost-cutting by the UK’s largest grocers has squeezed the margins of its suppliers, driving up corporate failure in the sector while it has declined elsewhere: Telegraph

Coca-Cola to release expensive low-sugar milk that will ‘rain money’: Telegraph

Pay per puff? Caffeine stick? E-cigarette boom sparks race for new patents: Reuters

My role model is Fuzukawa Yukichi, the Benjamin Franklin of Japan

http://www.moatreport.com/wp-content/uploads/2013/04/moatreportasia-460x156.png

Bamboo Innovators bend, not break, even in the most terrifying storm that wouldsnap the mighty resisting oak tree. It survives, therefore it conquers.”

BAMBOO LETTER UPDATE | November 3, 2014

Bamboo Innovator Insight (Issue 57)

§  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.

 

Can You Guess This Asian Wide-Moat Company?

“My role model is Fuzukawa Yukichi, the Benjamin Franklin of Japan.”

Q: “Who has influenced you the most? Any role model(s) that you have?”

Mr. H: “There are many people who have influenced me. My role model is … Fuzukawa Yukichi. Yukichi-san is regarded as one of the founders of modern Japan and is called the Voltaire and Benjamin Franklin of Japan. His ideas about government and social institutions made a lasting impression on a rapidly changing Japan during the Meiji Era. He is an author, writer, teacher, translator, journalist, and entrepreneur who also founded the newspaper Jiji-Shinpo and the Institute for Study of Infectious Diseases. He is also a civil rights activist and liberal ideologist, believing that whether one is a child of a samurai or farmer, male or female, they should have the right to be educated. An interesting story about his creativity to overcoming resistance. During his era, Japanese don’t eat beef. Besides religious belief and cultural influences, an aversion to beef is because of its taste. So Fuzukawa added soya sauce, spring onion, sugar into what we now know as the hugely popular Sukiyaki, the Japanese beef hot pot. From this small story, you can see that without Yukichi-san, there is no modern Japan! In those conservative and stifling times, he is able to see Japan a hundred years ahead with incredible foresight. Hence the Japanese commemorate his contributions by putting him on the highest-denomination (¥10,000) of the Japanese yen currency note.”

http://3.bp.blogspot.com/-Zp7NE9Ywsw4/UMha7amXEJI/AAAAAAAADl0/SPSHrN90afk/s1600/scan0001.jpghttp://images.rapgenius.com/a7v9dhs4ei4z6q7kmjlianie7.512x212x1.jpghttps://encrypted-tbn3.gstatic.com/images?q=tbn:ANd9GcS-oEsHiEsSdtGs5jK3QWKtmfNmPid4VuxYPi7w7YbVyJgBdZcAhttp://upload.wikimedia.org/wikipedia/commons/4/4d/Usdollar100front.jpg

Can you guess who is this Asian entrepreneur? Our latest monthly Moat Report Asia for November investigates an Asian-listed company who is the global #3 leader in a product with multiple applications from shale gas to submarines, overtaking General Electric (GE). For a world-class company possessing deep intangible know-how, the company has an undemanding valuation at EV/EBITDA 10.2x and Price-to-book value 1.45x. Its P/B is even lower at 1.2x after taking in account the property revaluation gains from unlocking the value of its land bank near the MRT earmarked for urban renewal and development that would drive up its book value by 21%. The firm’s short-term downside is also protected by its healthy balance sheet with net cash of $230m and a decent dividend yield of 3.23%.

 

From Mr. H’s role model, we get to perhaps examine Kuroda’s massive monetary stimulus from a different perspective by traveling back in time. Japan’s postwar economic miracle was driven especially by companies that exported materials, parts and industrial products – not by consumer-goods companies. Hitachi, Toshiba and NEC have grew after the war by exporting industrial products like locomotives, gas turbines. Now, quietly, some Japanese giants have returned back to their industrial and robotics roots. In recent years, the three – Hitachi, Toshiba, NEC – have shed many consumer operations and doubled down on businesses like heavy machinery, industrial electronics. Take the case of Hitachi. After posting cumulative losses of ¥985bn for four fiscal years ended Mar 2010, Hitachi swung back to a cumulative net income of ¥1.03tr in the four years since then. Panasonic has quit the consumer smartphone market, stopped making plasma screen TV sets and sharply reduced its camera output.

 

Besides Japan, America is also experiencing a manufacturing-industrial renaissance and re-shoring driven by the decline in energy costs, the increase in American labor productivity and the rising wages in China and Asia. American factories are producing more expensive and complicated goods – medical equipment, computer chips, commercial and military jets and oil and gas equipment.

And Mr. H’s products are part of these structural trends that will take place in the years ahead.

Who is Mr. H and his company?

His personification is Fuzukawa Yukichi and Benjamin Franklin – Mr. H is also you.

Warm regards,

KB

Managing Editor

The Moat Report Asia

www.moatreport.com

SMU: http://accountancy.smu.edu.sg/faculty/profile/108141/Kee%20Koon%20Boon

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 have also posted the presentation slides to a talk given by Mr Wai Phyo Kyaw (the technopreneur behind Rebbiz: MyanmarCarsDB, MyanmarJobsDB, MyanmarHouseDB) and Ms Chua Mei Mei (executive director of Beauty Palace) to the students in the Singapore Management University (SMU) for the official course Accounting Study Mission to Myanmar (Dec 2014) upon the invitation of KB Kee, managing editor of The Moat Report Asia and adjunct faculty (accounting) in SMU. Wai Phyo is akin to the early days of Greg Roebuck who founded the highly successful carsales.com.au (CRZ, MV $2.2bn). Beauty Palace, a former distribution partner of Unilever, demonstrates how emerging companies stay relevant and competitive to the extent that they become the targets of MNCs/Unilever who send people to learn from them. Beauty Palace also sheds insights into the dynamics of the listed Asian operations of Unilever –Unilever Indonesia (UNVR IJ, MV $18.9bn), Hindustan Unilever (HUVR IN, MV $25.4bn). KB wrote the following thank-you note to Wai Phyo and Mei Mei on behalf of SMU:

Dear Mei Mei (and Kenneth), Wai Phyo and Ye Lin,

 

Many thanks for coming down to SMU to share with the students your hands-on experience in building up businesses in the rapidly-evolving Myanmar with its distinctive challenges and opportunities.

One thing that all of us felt very strongly from all three of you is the sense of national pride that you have in being involved in the transformational changes gripping the country as both an entrepreneur and a citizen!

Indeed, from urban Yangon/Mandalay to the rural towns/villages, every Burmese desire an improvement in their lot in life, whether they be shampoo-toothpaste or trustworthy information about cars-houses-jobs.

 

Mei Mei: You remind all of us of Hyflux’s Olivia Lum who was the first woman to win the Ernst & Young World Entrepreneur of the Year. Both of you are willing to brave uncertainties and hardship in traveling to far-flung, dangerous places to sell products and forge relationships – Olivia had shared with the world the tale of her trip to Maldives where she was the lone passenger in a boat manned by two men; a storm broke during the four-hour trip to an island and sea water gushed through a crack that had opened up in the bottom of her boat. You have shared with us your inspiring story of courage and grit in traveling to different parts of Myanmar to do business with integrity and values.

·        One question that all of us would like to learn from you in an ongoing conversation is this: Your unique background has shaped your outstanding character, values and success – from having the sense of responsibility as the eldest in the family of five siblings to the heightened sense of business awareness in the family business relationship with Unilever over the years that the foreign partner could go independent one day and hence a need to stay hungry and capable. So how can someone “ordinary” have the drive and grit that you have?

Wai Phyo: Startups are all-consuming and we are thankful for your sharing on the tech startup scene in Myanmar and your inspiring leap of faith (long working hours, commitment, and responsibility) that resulted in your business success in Rebbiz (MyanmarCarsDB, MyanmarJobsDB, MyanmarHouseDB)! Your success remind us of what Facebook co-founder Dustin Moskovitz shared in the photos “What It’s Actually Like” below: “This is an actual scene from Palo Alto, [Mark Zuckerberg] spent a lot of time at this desk, head down and focused…this is just him signaling his intention to be focused and keep working, not be social.”

https://static-ssl.businessinsider.com/image/5422bf37ecad0456680c1bf3-960-720/so-a-scene-from-the-social-network-this-is-us-partying-and-working-at-the-same-timesomebodys-spraying-champagne-everywhere.jpgdustin moskovitz startup entrepreneurship launch advice deck

·        One question that all of us would like to learn from you in an ongoing conversation is this: In building up a Minimum Viable Product (MVP) in a startup to improve from the interaction and feedback from the actual users, how does one overcome the anxiety and fear when bigger, more resourceful rivals (eg Rocket Internet) actually emerge with a seemingly better product, especially since everyday the entrepreneur and his team are fighting fire with limited time and resources?

“In what you burn, you ignite in others.” – We are inspired by your authentic sharing today and all of us look forward to continuing our conversation with you in Yangon in the Alumni Event on 7 Dec! Thank you once again for your valuable time in sharing with all of us your knowledge and wisdom!

 

Warm regards,

KB

Harley-Davidson trades leather and beards for green and clean; premiers prototype of an electric bike, in keeping with the times

Harley-Davidson trades leather and beards for green and clean

Ben Geier

JUNE 23, 2014, 5:31 PM EDT

When you think Harley-Davidson, you probably think about leather, beards, and loud engines. Now, though, you can picture a fully electric bike with a digital display.

The iconic American motorcycle manufacturer held an event in New York City Monday afternoon showing off Project LiveWire, a prototype of the company’s first electric motorcycle. Read more of this post

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