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Matthews Pacific Tiger Fund's Top 4th-Quarter Buys

GuruFocus.com
·5 min read

- By Margaret Moran

Earlier this week, the Matthews Pacific Tiger Fund (Trades, Portfolio) released its portfolio update for the fourth quarter of 2020, which ended on Dec. 31.


The Matthews Pacific Tiger Fund (Trades, Portfolio) seeks sustainable long-term capital appreciation by investing mostly in Asian companies, excluding Japan, with a focus on emerging economies. It evaluates stocks using a bottom-up, fundamentals-based approach with a focus on long-term results. The fund is managed by Sharat Shroff, Raymond Deng and Inbok Song.

Based on its investment criteria, the fund's biggest new buys for the quarter were Yageo Corp. (TPE:2327), China Resources Mixc Lifestyle Services Ltd (HKSE:01209), Xinyi Solar Holdings Ltd (HKSE:00968) and JD.com Inc. (NASDAQ:JD).

Yageo

The fund established a new position worth 7,672,000 shares in Yageo (TPE:2327), impacting the equity portfolio by 1.65%. During the quarter, shares traded for an average price of 420.23 New Taiwan dollars ($14.99).

Taiwan-based Yageo is the world's third-largest manufacturer of passive electronic components. It provides a wide range of resistors, capacitors, wireless components and circuit protection components primarily for the automotive, consumer, energy and telecommunications industries.

On Feb. 10, shares of Yageo traded around NT$588.00 for a market cap of NT$289.83 billion. According to the GuruFocus Value chart, shares are modestly overvalued, though the company could grow into this valuation in the coming years based on analyst estimates.

Matthews Pacific Tiger Fund's Top 4th-Quarter Buys
Matthews Pacific Tiger Fund's Top 4th-Quarter Buys

The company has a financial strength rating of 5 out of 10 and a profitability rating of 8 out of 10. The cash-debt ratio of 0.49 is below the industry median of 1.29, but the Piotroski F-Score of 6 out of 9 is typical of a financially stable company. The operating margin of 24.97% and net margin of 16.52% have taken a hit in recent years, though both are still higher than 90% of industry peers.

Matthews Pacific Tiger Fund's Top 4th-Quarter Buys
Matthews Pacific Tiger Fund's Top 4th-Quarter Buys

China Resources Mixc Lifestyle Services

The fund also took a new stake of 21,165,430 shares in China Resources Mixc Lifestyle Services (HKSE:01209), which had a 1.14% impact on the equity portfolio. Shares traded for an average price of 33.16 Hong Kong dollars ($4.28) during the quarter.

China Resources offers property management services for clients throughout Hong Kong. Its services include residential property management, community value added services, commercial operational services and commercial subleasing services, among others.

On Feb. 10, shares of China Resources traded around HK$47.80 for a market cap of HK$111.51 billion. The share price has risen 70% since the company went public in December of 2020.

Matthews Pacific Tiger Fund's Top 4th-Quarter Buys
Matthews Pacific Tiger Fund's Top 4th-Quarter Buys

The company has a financial strength rating of 5 out of 10 and a profitability rating of 3 out of 10. The cash-debt ratio of 0.28 is near the industry median of 0.29, while the interest coverage ratio of 11.11 outperforms 68% of the industry. The return on invested capital is 15.87% compared to the weighted average cost of capital of 7.05%, indicating a value-creating company.

Matthews Pacific Tiger Fund's Top 4th-Quarter Buys
Matthews Pacific Tiger Fund's Top 4th-Quarter Buys

Xinyi Solar Holdings

The fund invested in 36,406,000 shares of Xinyi Solar Holdings (HKSE:00968), impacting the equity portfolio by 1.11%. During the quarter, shares traded for an average price of HK$14.32.

Xinyi Solar is a Chinese investment holding company that primarily manufactures and sells solar glass. It is also involved in the operation of utility-scale solar farms and provides engineering, procurement and construction services for solar farms.

On Feb. 10, shares of Xinyi Solar traded around HK$19.60 for a market cap of HK$174.78 billion. According to the GuruFocus Value chart, shares are significantly overvalued, meaning the company will need to grow faster than analysts estimate in order to be worth the current price.

Matthews Pacific Tiger Fund's Top 4th-Quarter Buys
Matthews Pacific Tiger Fund's Top 4th-Quarter Buys

The company has a financial strength rating of 6 out of 10 and a profitability rating of 8 out of 10. The cash-debt ratio of 0.34 is lower than the industry median of 1.57, but the Altman Z-Score of 11.91 indicates the company is not in financial distress. The three-year revenue growth rate is 8.8%, while the three-year Ebitda growth rate is 7.6%.

Matthews Pacific Tiger Fund's Top 4th-Quarter Buys
Matthews Pacific Tiger Fund's Top 4th-Quarter Buys

JD.com

The fund bought 945,800 shares of JD.com (NASDAQ:JD), which had a 0.96% impact on the equity portfolio. Shares traded for an average price of $83.60 during the quarter.

JD.com, also known as Jingdong and formerly called 360buy, is one of the two largest business-to-consumer e-commerce companies in China in terms of transaction volume and revenue, the other being Alibaba's (BABA) Tmall. The majority of its revenue is derived from online direct sales.

On Feb. 10, shares of JD.com traded around $98.77 for a market cap of $153.08 billion. According to the GuruFocus Value chart, shares are significantly overvalued, meaning the company will need to grow faster than analysts estimate in order to be worth the current price.

Matthews Pacific Tiger Fund's Top 4th-Quarter Buys
Matthews Pacific Tiger Fund's Top 4th-Quarter Buys

The company has a financial strength rating of 7 out of 10 and a profitability rating of 4 out of 10. The cash-debt ratio of 3.58 and Piotroski F-Score of 7 out of 9 indicate a fortress-like balance sheet. The three-year revenue growth rate is 27.7%, while the three-year Ebitda growth rate is 106.2%.

Matthews Pacific Tiger Fund's Top 4th-Quarter Buys
Matthews Pacific Tiger Fund's Top 4th-Quarter Buys

Portfolio overview

As of the quarter's end, the fund held shares in 63 stocks valued at a total of $8.57 billion. The top holdings were Samsung Electronics Co. Ltd. (XKRX:005930) with 6.43% of the equity portfolio, Tencent Holdings Ltd. (HKSE:00700) with 5.59% and Taiwan Semiconductor Manufacturing Co. Ltd. (TPE:2330) with 5.52%.

In terms of sector weighting, the fund was most invested in technology, financial services and consumer defensive.

Matthews Pacific Tiger Fund's Top 4th-Quarter Buys
Matthews Pacific Tiger Fund's Top 4th-Quarter Buys

Disclosure: Author owns no shares in any of the stocks mentioned. The mention of stocks in this article does not at any point constitute an investment recommendation. Portfolio updates reflect only common stock positions as per the regulatory filings for the quarter in question and may not include changes made after the quarter ended.

Read more here:

  • Top 4th-Quarter Trades of the Smead Value Fund

  • 3 Industrial Stocks Trading Near Their GF Value

  • Estee Lauder: Global Growth Fuels Stellar 2nd Quarter



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This article first appeared on GuruFocus.