The Matthews Pacific Tiger Fund (Trades, Portfolio) recently disclosed its portfolio updates on its website for the first quarter of 2023, which ended on March 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, fundamental-based approach with a focus on long-term results. The fund is managed by Sharat Shroff, Inbok Song, Winnie Chwang and Andrew Mattock.
As China continued to roll back Covid restrictions and the country’s economic outlook for the year improved, the Matthews Pacific Tiger Fund (Trades, Portfolio) upped its stakes in Chinese housing transactions platform KE Holdings Inc. (BEKE, Financial), high-tech ceramic materials company Shandong Sinocera Functional Material Co. Ltd. (SZSE:300285, Financial) and e-paper creator E Ink Holdings Inc. (ROCO:8069, Financial). The fund also reduced its stakes in property manager China Resources Mixc Lifestyle Services Ltd. (HKSE:01209, Financial) and food company Uni-President Enterprises Corp. (TPE:1216, Financial).
Investors should be aware that portfolio updates for mutual funds do not necessarily provide a complete picture of a guru’s holdings. The data is sourced from the quarterly updates on the website of the fund(s) in question. This usually consists of long equity positions in U.S. and foreign stocks. All numbers are as of the quarter’s end only; it is possible the guru may have already made changes to the positions after the quarter ended. However, even this limited data can provide valuable information.
KE Holdings
The fund increased its stake in KE Holdings (BEKE, Financial) by 77.82%, which had an impact of 0.63% on the equity portfolio at the quarter’s average share price of $18.51. As of the quarter’s end, the holding was worth 2,889,559 shares.
KE Holdings is a holding company that operates China's leading online real estate platform, which integrates online and offline transaction services for buying and renting properties. The company aims to reinvent the way houses are sold and how housing-related service providers connect with customers,
The company has grown its revenue by 9.9% per year and its earnings per share by 23.6% per year over the past three years, though that growth is not yet generating value for shareholders, as shown by how the weighted average cost of capital is typically higher than the return on invested capital.
On May, 3, shares of KE Holdings traded around $15.36 with a forward price-earnings ratio of 17.3. The GF Value chart rates the stock as fairly valued.
Shandong Sinocera Functional Material
The fund also upped its stake in Shandong Sinocera Functional Material (SZSE:300285, Financial) by 41.5% for a total of 11,964,928 shares, which had an impact of 0.38% on the equity portfolio. During the quarter, shares traded for an average price of 30.76 Chinese yuan ($4.45).
Shandong Sinocera Functional Material is a high-tech company specializing in the research, development and production of ceramic electronic and optical materials, such as touch panels, optical films and thermal interface materials.
Shandong Sinocera has a high GF Score of 90 out of 100, indicating outperformance potential based on a historical study by GuruFocus. Financial strength and profitability are both rated 9 out of 10, while growth is rated 10 out of 10.
According to the Peter Lynch chart, the stock is trading above its historical median valuation levels, which could indicate overvaluation at Wednesday’s share price of 29.45 yuan.
E Ink Holdings
The third-largest buy was an addition to E Ink Holdings (ROCO:8069, Financial) of 32.09%, which had an impact of 0.28% on the equity portfolio. The fund ended the quarter with 7,174,000 shares. Shares averaged 185.89 New Taiwan dollars ($6.06) for the three-month period.
E Ink Holdings is a leading innovator of electronic ink technology, offering solutions for displays, signage and smart surfaces in various industries such as publishing, retail and logistics. The Taiwan-based company is the original creator of ePaper technology, a type of digital interface that mimics real paper and is easier on the eyes than LCD screens.
E Ink has achieved high revenue and earnings per share in recent years, driven by an incredible operating margin of 30.6% and a net margin of 32.97%, both of which outperform 97% of industry peers.
Shares of E Ink traded around NT$197 as of this writing with a price-earnings ratio of 22.96, but the GF Value chart rates the stock as significantly overvalued because historical valuations were lower.
China Resources Mixc Lifestyle Services
The Matthews Pacific Tiger Fund (Trades, Portfolio)'s top sell was a 32.43% reduction to its China Resources Mixc Lifestyle Services (HKSE:01209, Financial) investment, which had an impact of -0.89% on the equity portfolio at the quarter’s average share price of 42.85 Hong Kong dollars ($5.46). The fund still held 13,470,830 shares at quarter’s end.
China Resources Mixc Lifestyle Services is a subsidiary of the state-owned China Resources Group that focuses on the operation of commercial properties as well as urban planning in China. The company offers various services to many business-to-consumer industries, including real estate, retail and entertainment.
What is interesting to note with this company is revenue and earnings growth slowed down significantly not long after the company went public. However, the company still has a solid return on capital at 451.67%.
Shares traded around HK$40.65 on May 5 with a price-earnings ratio of 37.23. Shares have gained 35% since the company went public in December 2020.
Uni-President Enterprises
Lastly, the fund cut its stake in Uni-President Enterprises (TPE:1216, Financial) by 33%, ending the quarter with 11,072,000 shares. The trade had an impact of -0.32% on the equity portfolio at the average share price of NT$68.03 for the quarter.
Uni-President Enterprises is a food manufacturing, marketing and distribution company headquartered in Taiwan with operations in China, Southeast Asia and the United States. It is the largest food production company in Taiwan with significant market shares in dairy, snacks and beverages.
The company’s growth has been mostly flat over the past three years, and its margins are low with an operating margin of just 5.53%. The main bright side to the stock is the dividend yield of 3.65%. Dividends per share amounted to NT$2.70 in 2022.
Wednesday’s stock price traded around NT$73.50 with a price-earnings ratio of 24.42 and a price-sales ratio of 0.8.
See also
As of the quarter’s end, the fund held shares of 52 common stocks valued at a total of $3.82 billion. The turnover rate for the quarter was 2%.
The top holding was Taiwan Semiconductor (TPE:2330, Financial) with a 6.62% equity portfolio weight, followed by Samsung Electronics (XKRX:005930, Financial) with 5.22% and Tencent Holdings Ltd. (HKSE:00700, Financial) with 5.14%.
In terms of sector weighting, the fund was most invested in the technology, consumer cyclical and financial services industries.
