Insight Provider, CrossASEAN Research

Nicolas Van Broekhoven

Was on the buyside for 15 years, most recently at a medium-sized boutique asset management firm. I grew up in Europe, went to university in the US and have been living in Singapore for the last 7 years which has given me a broad scope on the world and investing in general.

Consider myself a generalist investor with a preference for small and mid-cap companies and special situations. However, a large cap that has gone temporarily out of favor might also pique my interest. 

My style of investing could be categorized as more of value investor, rather than growth at any cost. Learning from Charlie Munger on the importance of quality of a company has been of tremendous value over the years.I like businesses with real earnings, cash flows, dividends, book value and insider ownership.

Insight Provider

VMS: Solid Growth in This Info Tech Venture

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Equity Bottom-Up

Last month KKR<a href="https://www.dealstreetasia.com/stories/kkr-asia-fund-2-162853/" target="_blank" rel="noopener"> raised a record 12.5B USD</a> for a new Asian buyout fund. Slightly lower amounts, but still jointly totaling billions, were raised by TPG, Bain, Hillhouse, and others. PE funds make money when they can put those dollars to work hence the question is: where will they look?Singapore would be a natural location to start hunting given its index has been the second-worst performer in ASEAN (Malaysia was the worst) over the past decade. In general, we think Singapore offers good value on any number of metrics we look at.Large funds need to hunt for "elephants" to move the needle. Looking at the Straits Times Index we note that most companies are no-go zones as they are 1) banks, 2) semi-government controlled entities, 3) REITs or 4) large holding companies with clear family control.One stock is notably different: <a href="https://www.smartkarma.com/entities/venture-corp-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:9251:1">Venture Corp (VMS SP)</a>. <a href="https://www.smartkarma.com/entities/venture-corp-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:9251:1">Venture Corp (VMS SP)</a> has many attributes that make it suitable to be privatized by a PE fund:<ul>
<li>The founder, Ngit Liong Wong, is 78 years old and has no family succession</li>
<li>3.3 billion USD market cap and 93% free float</li>
<li>2018 short-seller episode tanked stock and deeply frustrated founder</li>
<li>18% of market cap is cash, the balance sheet can be leveraged at record low-interest rates</li>
<li>The decades-long history of strong CF generation, important to PE funds who use leverage</li>
<li>Long-standing relationships with multiple Top Tier customers</li>
<li>Strong footprint in SE Asia makes it attractive go-to-player in Trade War world</li>
<li>Public markets fail to award best-in-class ROE, ROA with adequate multiple</li>
<li>Venture is trading 1 sd below its 10-year average EV/EBITDA</li>
</ul>Should no M&amp;A materialize investors are paid to wait with a near 4.4% annual dividend yield. The dividend of Venture is important. Since its listing in 1992, it has paid over 2 billion SGD in cumulative dividends to its shareholders.The sell-side is worried about weak 4Q19 and 70% of recommendations are either HOLD or SELL. For contrarian investors, this might be the time to look at Venture once again.

Last month KKR raised a record 12.5B USD for a new Asian buyout fund. Slightly lower amounts, but still jointly totaling billions, were raised by TPG, Bain, Hillhouse, and others. PE funds make money when they can put those dollars to work hence the question is: where will they look?Singapore would be a natural location to start hunting given its index has been the second-worst performer in ASEAN (Malaysia was the worst) over the past decade. In general, we think Singapore offers good value on any number of metrics we look at.Large funds need to hunt for "elephants" to move the needle. Looking at the Straits Times Index we note that most companies are no-go zones as they are 1) banks, 2) semi-government controlled entities, 3) REITs or 4) large holding companies with clear family control.One stock is notably different: Venture Corp (VMS SP). Venture Corp (VMS SP) has many attributes that make it suitable to be privatized by a PE fund:
The founder, Ngit Liong Wong, is 78 years old and has no family succession
3.3 billion USD market cap and 93% free float
2018 short-seller episode tanked stock and deeply frustrated founder
18% of market cap is cash, the balance sheet can be leveraged at record low-interest rates
The decades-long history of strong CF generation, important to PE funds who use leverage
Long-standing relationships with multiple Top Tier customers
Strong footprint in SE Asia makes it attractive go-to-player in Trade War world
Public markets fail to award best-in-class ROE, ROA with adequate multiple
Venture is trading 1 sd below its 10-year average EV/EBITDA
Should no M&amp;A materialize investors are paid to wait with a near 4.4% annual dividend yield. The dividend of Venture is important. Since its listing in 1992, it has paid over 2 billion SGD in cumulative dividends to its shareholders.The sell-side is worried about weak 4Q19 and 70% of recommendations are either HOLD or SELL. For contrarian investors, this might be the time to look at Venture once again.

Venture Corp (VMS SP): Next M&A Target in 2020?