Quality-Value Investing

Marc Melendez, CFA

Emerging Market Small and Mid Cap Equities

Reperio Capital

Reperio Capital Research was founded in 2013 with the goal of better serving the investment community with in-depth, high quality, value oriented research.

Reperio means to discover in latin. Using value investing principles, we aim to discover a minimum of 12 investment opportunities per year within the Emerging Markets Small and Mid Cap universe.

We take a business owners perspective with a long term investment horizon. We conduct bottom up, fundamental research. We focus on downside risks and require a significant margin of safety in any investment to prevent the permanent loss of capital. All factors differentiating our research from the short term, trading focus of traditional research providers.

Equity Bottom-Up

China Machinery Engineering / Equity Bottom-Up

<p><a href="https://www.smartkarma.com/entities/10998" target="_blank" data-smartkarma-citation="entities:10998:1">China Machinery Engineering (1829 HK)</a> (CMEC) is a Chinese state-owned construction and engineering company. It is project manager subcontracting most project activities to qualified suppliers. CMEC is consistently profitable with an average return on operating asset of 14.5% since 2012. It has a negative invested capital position and a large net cash position. Despite its quality, CMEC’s market cap. is below the company’s net cash position. There is 83% upside to the conservative bear case, which values operating assets at 8 times after tax free cash flow and discounts financial assets by 50%. The downside is limited with an asset reproduction value 8.8% below the current share price. The company’s primary assets are receivables with a historic impairment rate of 0.9% and cash and investments.</p>

China Machinery Engineering (1829 HK) (CMEC) is a Chinese state-owned construction and engineering company. It is project manager subcontracting most project activities to qualified suppliers. CMEC is consistently profitable with an average return on operating asset of 14.5% since 2012. It has a negative invested capital position and a large net cash position. Despite its quality, CMEC’s market cap. is below the company’s net cash position. There is 83% upside to the conservative bear case, which values operating assets at 8 times after tax free cash flow and discounts financial assets by 50%. The downside is limited with an asset reproduction value 8.8% below the current share price. The company’s primary assets are receivables with a historic impairment rate of 0.9% and cash and investments.

China Machinery Engineering Corp (1829:HK)- Quality Business Trading Below Net Cash Value