Emerging Markets Stock Writeups

The stock had not yet reached target price, but the shares were sold with a gain of 30%, not including dividends. The reason for the sale was first, the bank's sensitivity to any worsening political situation; even optimists would be hard-pressed to argue with much credibility that risks in the region have abated. Secondly, by the bank's own admission, a sizeable chunk of the loan book is invested in US syndicated loans, with little in the way of reserves set aside against any worsening credit risk. The syndicated loans may or may not have exposure to the sub-prime loan fiasco in the US, but this risk combined with the domestic political risks, mean that the shares are no longer attractive on a risk/reward basis.

Bank Hapoalim is Israel's largest bank. Loan growth has been minimal, but the bank has seen sharply reduced provisions as its loan book (74% of which is corporate) has improved. The economy and hence the Bank had been affected by both the collapse of the TMT bubble and the political tensions. The stock is priced defensively at 1.1X Price to Book, and has a forecast dividend yield of 8.7%. We see 38% upside in the stock.

Sedol	Type	Price	Date
6075808	Sell	ILS 19.206	20/03/2007
6075808	Sell	ILS 20.212	17/01/2007
6075808	Buy	ILS 17.116	19/09/2005
6075808	Buy	ILS 14.975	20/07/2005

Bezeq hit target price and, after a review of the company model yielded no upgrades, was sold.

Bezeq is Israel's leading integrated telecom provider. The company has recently been privatised, and the controlling shareholder is a private equity consortium. The exit of the State of Israel will give the new owners greater room for manoeuvre in tackling the cost base, which is bloated compared to its peers. Margins appear to have bottomed in 2005, and against the backdrop of an improved economic situation in Israel, we believe that the strong free cashflow generation will allow the resumption of dividends, with a yield of 6.7% in 2006.

Sedol	Type	Price	Date
6098032	Sell	ILS 7.21	31/05/2007
6098032	Buy	ILS 6.149	19/09/2005
6098032	Buy	ILS 5.641	18/07/2005
6098032	Buy	ILS 5.55	14/07/2005

BAT Malaysia has over a 90% ROE and over 7% yield. It is not cheap on any valuation measures but the share price could rise to MR44 and the dividend yield would still be a very high 6%. The company has undergone rationalisation and restructuring since its merger in 1999, the capex is now over and debt is falling. The company is hugely cash generative and due to the structure of the company there is nowhere for that cash to go but back to the shareholders.

Sedol	Type	Price	Date
6752349	Buy	MYR 43.82	27/11/2006
6752349	Buy	MYR 39.882	19/05/2006
6752349	Buy	MYR 40.25	05/01/2006
6752349	Buy	MYR 45.484	27/10/2004

Bunge is the world's leading oilseed processor and one of the world's largest soybean products producers, which means they should benefit from the rising demand for biofuels. Based primarily in Brazil, it is also the main producer and supplier of fertilisers to the Latin American markets. The last 18 months have almost been the perfect storm for the company due to farmer protests in Brazil, losses taken on freight contracts which were locked in at crazy prices, plus excess capacity in Argentina. To tackle these issues, the company is cutting costs (10% of headcount, closing 5 soya processing plants and 7 fertiliser mixing facilities), cutting stock levels and replacing old factories with new, more efficient ones. In addition, the unfavourable freight contracts have almost ended, to be replaced by improved terms. From an external perspective the major catalyst is a significant aid package for farmers put together by the Brazilian government, which should help kick-start the local market. Hence 2006 should represent the trough in earnings and cash flow, and on a price to sales of 0.24x, we believe that even a modest recovery should see a significant re-rating for this major player in the global agricultural marketplace.

Sedol	Type	Price	Date
2788713	Sell	USD 79.162	21/05/2007
2788713	Buy	USD 55.375	21/08/2006