Partner and Fund Manager, River Valley Asset Management

Jamshed Desai

Partner and Fund Manager

Singapore-based boutique asset management firm

River Valley Asset Management

River Valley Asset Management is a Singapore-based boutique asset management firm. Our team at RVAM strongly believes in being a trusted steward of our clients' wealth across generations.

Each of our fund managers has years of rich portfolio management experience over multiple market cycles at world-class investment houses. We bring our clients the combined strength of our investment team to manage their financial portfolios and to provide bespoke guidance on all aspects of their financial health.

We offer multi-asset class expert investment advice to accredited investors who are family offices, high net worth individuals and institutional investors to preserve and grow our clients' wealth.

The fund management team of the company includes Homiyar Vasania, Anand Ramachandran and Jamshed Desai.

Thematic (Sector/Industry)

The cement and building materials industry in Asia, more particularly in ASEAN, has seen dramatic additions in capacity over the last decade. Capacity additions have seldom been smooth or orderly in any country.  Overcapacity has led to weak prices across the region. The weakness in each country has been impacted by one or more factors germane to them. While demand growth has sustained in the mid to high single digits, the sheer growth in the number of new players in many markets has meant that pricing discipline has been sacrificed at the altar of volumes.As if the twin blows of overcapacity and weak demand were not enough, coal prices have been rallying hard for over a year now. While ASEAN has a quite a few listed cement companies, given the overcapacity situation prevailing currently, most investors are likely to be put off and adopt a wait-and-watch stance. When industry profitability is at rock-bottom levels, conventional valuation ratios such as P/E often do not help. Given that the industry is a long-cycle one, past experience shows that investors use different metrics at different stages of the cycle. As the industry profitability picks up, investors either move to EV/EBIDTA multiples to value stocks or combine it with P/E as growth becomes palpable, jettisoning EV/ton as a metric, which is perhaps of most use currently. Another strong indication of an industry in the throes of problems is significant consolidation and/or mergers and acquisition activity. There has been talk of some smaller players capitulating to the bigger ones, but we have not heard any concrete announcements yet.The pressure points for the cement stocks are well understood by investors today. A reversal in one or more of the three critical variables (price-volume-costs) will potentially nail a floor to their stock prices. This could happen in the short to medium term in some markets. The key then is to track these closely in what is now a much unloved sector, but where asset values are looking cheap selectively in absolute and relative terms for the first time in a more than a decade.

The cement and building materials industry in Asia, more particularly in ASEAN, has seen dramatic additions in capacity over the last decade. Capacity additions have seldom been smooth or orderly in any country.  Overcapacity has led to weak prices across the region. The weakness in each country has been impacted by one or more factors germane to them. While demand growth has sustained in the mid to high single digits, the sheer growth in the number of new players in many markets has meant that pricing discipline has been sacrificed at the altar of volumes.As if the twin blows of overcapacity and weak demand were not enough, coal prices have been rallying hard for over a year now. While ASEAN has a quite a few listed cement companies, given the overcapacity situation prevailing currently, most investors are likely to be put off and adopt a wait-and-watch stance. When industry profitability is at rock-bottom levels, conventional valuation ratios such as P/E often do not help. Given that the industry is a long-cycle one, past experience shows that investors use different metrics at different stages of the cycle. As the industry profitability picks up, investors either move to EV/EBIDTA multiples to value stocks or combine it with P/E as growth becomes palpable, jettisoning EV/ton as a metric, which is perhaps of most use currently. Another strong indication of an industry in the throes of problems is significant consolidation and/or mergers and acquisition activity. There has been talk of some smaller players capitulating to the bigger ones, but we have not heard any concrete announcements yet.The pressure points for the cement stocks are well understood by investors today. A reversal in one or more of the three critical variables (price-volume-costs) will potentially nail a floor to their stock prices. This could happen in the short to medium term in some markets. The key then is to track these closely in what is now a much unloved sector, but where asset values are looking cheap selectively in absolute and relative terms for the first time in a more than a decade.

ASEAN Cement's Cast of Woes Is Brimming Over…Yet Value Is Surfacing

Indonesia

PT Indocement Tunggal Prakarsa Tbk manufactures cement and building materials. Through its subsidiaries, the Company also manufactures and processes ready-mix cement as well as owns and manages properties and hotels.

PT Solusi Bangun Indonesia Tbk produces cement and operates other related activities. Through its subsidiaries, the Company also manufactures and markets ready-mix concrete, operates stone quarries, and provides transportation services.

PT Semen Baturaja (Persero) Tbk is a cement producer based in Indonesia.

PT. Waskita Beton Precast tbk operates as a construction services company. The Company offers precast concrete for buildings and bridges, retaining walls, drainages, ready-mix concrete, barriers, and rail pads. Waskita Beton Precast serves customers in Indonesia.

PT Wijaya Karya Beton Tbk manufactures and distributes construction products. The Company produces and markets precast concrete structures, including bridge beams, retaining walls, pipes, and bearings. WIKA Beton serves the heavy construction market in Indonesia.

Bumi Resources Minerals Tbk PT is an exploration and exploitation mining company.

Aneka Tambang Persero Tbk PT is a diversified mining and metals company. The Company produces ferronickel, nickel ore, gold, silver, bauxite and coal. Aneka Tambang is currently building a chemical grade alumina smelter and is looking to build  a smelter grade alumina smelter as well as a nickel pig iron smelter.

Pabrik Kertas Tjiwi Kimia Tbk operates a pulp and paper factory in East Java which manufactures a range of printing and writing papers, both coated and uncoated. The Company also produces stationery and office products such as notebooks, writing pads, loose leaf, spirals, envelopes, computer forms, gift wraps, inkjet paper, and carbonless paper.

Impack Pratama Industri Tbk PT produces plastic products in Asia and distributes them worldwide. The Company and it's subsidiaries manufacture building material plastics, PVC products, and fiberglass roofing, among other products.

PT Vale Indonesia Tbk produces nickel in matte, an intermediate product, from lateritic ores at its integrated mining and processing facilities near Soroako, Sulawesi

Tangshan Jidong Cement Co., Ltd. manufactures and markets portland cement and cement clinker.  The company also provides cement machine installation services.

Tangshan Jidong Cement Co, Ltd. (000401 CH)

China Resources Cement Holdings Limited, through its subsidiaries, produces, distributes and sells cement, clinker and concrete.

Goldsun Building Materials Co., Ltd. manufactures building materials. The Company produces pre-mixed concrete, corrugated asbestos sheets, and concrete products. The Company also operates in the real estate development business.

Taiwan Goldsun Building Materials (2504 TT)

Orient Refractories Ltd. fabricates metal products.  The Company manufactures slide gate plates, nozzles and well blocks, tundish nozzles, bottom purging refractories and top purging lances, slag arresting darts, basic spray mass for tundish working lining, and castables.

Lafarge Malaysia Berhad operates as an investment holding company. The Company, through its subsidiaries, manufactures, sells, and distributes cement and clinker. Lafarge Malaysia also manufactures and sells ready-mixed concrete, provides shipping services, leases vessels, and trades building materials.

Birla Corporation Limited is a manufacturing company that produces and sells cement, automobile trim parts, jute goods, synthetic and cotton yarns, and PVC floor coverings and coated fabrics. The Group also manufactures calcium carbide, ferromanganese, silico manganese, oxygen and iron and steel castings.

Adbri Limited supplies construction materials. The Company distributes cement, concrete, aggregates, industrial lime, clinker, and other related products. Adbri serves customers in Australia.

Cementos Molins, S.A. manufactures and distributes ready-mix concrete, portland cements, luminous cements, pre-cast concrete products and other related building materials.  The Company operates portland and luminous factories, two quarries in Vallirana and Palleja and a manufacturing plant in Palleja.

Vicat S.A. manufactures and sells cements, ready-mix concrete, aggregates and concrete pipes, as well as stucco and mortar for use in building construction internationally.  The Company also produces a variety of papers, medium-to-large capacity paper bags and chemicals and provides freight transportation services.

Breedon Group plc manufactures construction materials. The Company offers asphalt, ready-mixed concrete, surfacing and contracting, cement, and concrete products. Breedon Group operates in Jersey, Channel Islands and the United Kingdom.

PT Semen Indonesia (Persero) Tbk manufactures cement including portland cement, oil well cement, and mixed cement. Through its subsidiaries, the Company also develops and operates an industrial estate, mines limestone and clay, and packages and distributes cement.

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Semen Indonesia (Gresik) (SMGR IJ)

ASEAN Cement's Cast of Woes Is Brimming Over…Yet Value Is Surfacing

The cement and building materials industry in Asia, more particularly in ASEAN, has seen dramatic additions in capacity over the last decade....

River Valley Asset Management

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