Global Stock Writeups

Weakness in the Hungarian economy and increased competition in Serbia and Montenegro continue to depress revenues at Magyar Telekom. While margins are being supported by cost-cutting measures, the stock's free cash flow yield has now fallen below the required 12.7% hurdle rate we use for Hungary. We therefore sold the stock.

Half-owned by Deutsche Telekom, Magyar is Hungary's dominant fixed line and mobile operator. Whilst in a mature market, this is compensated for by a high 8% yield; there will be further modest earnings growth domestically, and stronger numbers from its operations in Montenegro and Macedonia, where it is also the leader. Further out, a re-rating seems likely when Hungary joins the Eurozone. 

Sedol	Type	Price	Date
4577469	Sell	HUF 730.97	23/06/2008
4577469	Buy	HUF 908.38	21/08/2007

Makhteshim Agan Industries is a world leader in crop protection. 75% of revenues come from herbicides and insecticides. The company had a bad experience in Brazil in 2006 when a crop failure led to increased bankruptcies from small farmers, leading to bad debts, lower profits and a large increase in working capital. This now seems to be well and truly behind them. The interim results show booming sales and an increase in margins - trends which should continue.

Sedol	Type	Price	Date
6115607	Buy	ILS 37.813	31/10/2007

Meridian Gold is a Canadian, US listed gold miner whose principal operations are in Chile but who also has development and exploration interests elsewhere in South America and in Nevada (in a JV with Barrick). The company is un-hedged and its main mine in Chile is one of the lowest cost producers in the world, with significant silver and zinc by-products. This mine has significant expansion potential which the company is actively aiming to exploit, and we expect reserve and resource upgrades in the coming 6 months. Elsewhere the company spent $100m in July on another mine in Chile - the value of this is not yet incorporated into the share price as the company has not yet announced its reserve and resource estimates to the market. The company's strong development track record suggests there will be positive risks to the company's valuation from extended drilling at these two mines in Chile, plus there are other exploration projects ongoing elsewhere which represent potential upside when results are announced in 2007. Overall, a large-sized producer with a strong development pipeline and positive catalysts in the coming 6 months. Being un-hedged it is highly geared to the gold price, and based on our 2007 gold price assumption of $650/oz we see sufficient upside value to make this a BUY.

Sedol	Type	Price	Date
2424318	Sell	USD 29.355	25/07/2007
2424318	Buy	USD 29.043	22/11/2006
2424318	Buy	USD 28.139	16/11/2006

Mitsubishi Estate. The prime beneficiary of continuing improvements in the Tokyo commercial property market. This segment contributes 61% of revenue and over 80% of their NAV. New commercial property space in Tokyo is set to dwindle over the next few years, falling from 1.6m sqm. in 2006 to 0.4m in 2010. In contrast to the market, they already have a strong portfolio of new commercial property to launch on the back of their Marunouchi development. They have also been able to hike rents by 10-15% for existing tenants and 15-20% for new ones.

Sedol	Type	Price	Date
6596729	Buy	JPY 3169.948	24/10/2007

Mitsubishi Heavy Industries is one of Japan's largest diversified manufacturers. There are three major earnings drivers, which between them represent over 75% of operating profits. Asian and Middle Eastern expenditure on power stations is set to increase from $15bn to $25bn per annum; as the leading Asian power station construction company MHI, working in conjunction with local contractors, is set to benefit. The company is also Japan's largest defence contractor, providing two-thirds of the airforce's planes and most of the navy's armaments; with the Japanese defence budget on the rise, the outlook is very strong. Finally the company is a major provider of equipment and plant to Japanese manufacturers, and hence a major beneficiary of rising domestic capital expenditure.

Sedol	Type	Price	Date
6597067	Buy	JPY 766.468	04/06/2007

Mitsui Fudosan. Listed Japanese property counters have shrunk so far they have all but disappeared from investors' radar screens; 13 years ago the theoretical land value of the Imperial Palace and Central Tokyo together were worth more than the whole of California. All property prices in Japan have been in freefall for over a decade. However, vacancy rates in prime commercial property are shrinking, new building starts have slowed and yields are now above the cost of borrowing. This last happened in 1981.  The real estate sector offers outstanding value. Mitsui is neither the cheapest nor the most geared to this recovery, but is conservatively run and should continue to rise as conditions improve.

Sedol	Type	Price	Date
6597603	Buy	JPY 2670.80	08/05/2006
6597603	Buy	JPY 1409.167	11/08/2005
6597603	Buy	JPY 1221.875	26/08/2004
6597603	Buy	JPY 1129.50	13/05/2004
6597603	Buy	JPY 1091.50	24/02/2004