Emerging Markets Stock Writeups

Carlsberg Malaysia has been a serial underperformer. Even with strong growth in the wider Malaysian economy, it has failed to deliver. There are at present far better consumer stocks in Malaysia, across Asia and in Emerging Markets in general, hence the sale.

Carlsberg Malaysia. The Kuala Lumpur listed subsidiary of the major Danish brewer. Growth will always be pedestrian, but an extremely strong balance sheet and a relatively high yield for that market make it a very steady value play. Medium term, we do expect the company to exist; legislation in Malaysia is likely to change before the end of 2004 and we believe that Carlsberg (the parent) will privatise the company, as they have already stated that they want to wholly own all their Asian subsidiaries.

Sedol	Type	Price	Date
B09FGC9	Sell	MYR 4.876	02/08/2007
B09FGC9	Buy	MYR 4.943	15/06/2006
B09FGC9	Buy	MYR 5.00	19/05/2006
B09FGC9	Buy	MYR 10.442	27/10/2004
B09FGC9	Buy	MYR 10.911	25/05/2004

Celestial Nutrifoods is facing a margin squeeze as soy bean prices rise. It has not been able to pass on these increases to consumers, as originally hoped, so is facing years of profit stagnation despite higher revenues. Management seems to be more concerned with increasing market share than profitability, giving a further reason to cut the position.

Celestial Nutrifoods is China's leading manufacturer of soybean products. The branded consumer products are experiencing rapid growth due to a combination of effective brand-building by the company, increased Chinese consumption expenditure, and economies of distribution as the number of supermarkets proliferates. The industrial division benefits from the growth in animal feed demand, as meat consumption increases. Corporate governance is better than most companies in China, and the managers are owners of the business.

Sedol	Type	Price	Date
6728760	Sell	SGD 1.317	10/08/2007
6728760	Buy	SGD 1.491	21/12/2006

The Brazilian toll-road operator was sold after reviewing the stock. We were struggling to see further upside in valuations given earnings growth over the next couple of years.

CCR is Brazil's largest toll-road operator; it also has the concessions to the best roads in Sao Paulo and along the coast. Traffic volume is rising with GDP and costs are mostly fixed, leading to strong margin and profit improvement. As cash flow increases, so too does the dividend. The company is expected to win further concessions and, as a final kicker, recently won the license to operate a public-private partnership on the Sao Paulo subway.

Sedol	Type	Price	Date
2840970	Sell	BRL 27.474	24/04/2008
2840970	Buy	BRL 26.443	20/03/2007

The Brazilian utility performed strongly, with the stock price reaching our target price. Given rising inflation reducing Brazil's ability to cut interest rates, we saw no reason to upgrade, hence the sale.

Cia de Transmissao has an effective monopoly on the transmission of electricity in Sao Paulo. Privatised in June 2006, the company's new management announced in December that it was laying off a massive 65% of its staff. This rationalisation is will lead to a large improvement in profits, after an initial charge in 2006 for redundancies. The company is working with the regional government to extend electricity coverage of the city - providing a further source of revenue growth. As an additional benefit, it has a policy of paying out the majority of free cash flow as a dividend - leading to a 10%+ yield.

Sedol	Type	Price	Date
2440972	Sell	BRL 37.467	02/01/2008
2440972	Buy	BRL 28.00	20/03/2007

Cheung Kong. Despite our expectation for further carnage in the global property market, the prospects for an appreciation in Hong Kong real estate prices look rosy. Wages are rising, affordability is good and interest rates are falling. In nominal terms, prices remain below where they were over 14 years ago. Thus, trading at a 32% discount to NAV, Cheung Kong looks a very attractive proposition. The company has a strong balance sheet, with good exposure to the Hong Kong residential market. Historically it has traded at an average discount of 16%.

Sedol	Type	Price	Date
6190273	Buy	HKD 123.45	23/01/2008

The stock price has performed exceptionally well in the downturn, as dedicated Asian investors searched for cash-rich, safe havens. As a consequence, it hit its target price and was sold before it went ex-dividend. Subsequent to the sale, earnings disappointed.

Chunghwa Telecom (ADR) is better managed following its privatisation in 2005. The challenges that this Taiwanese integrated telecom provider faces are familiar to telecom companies globally. Costs are being cut and revenue is stable. Operating margins are also stable, leading to strong free cashflow generation and a dividend yield of 7%.

Sedol	Type	Price	Date
2885120	Sell	USD 22.412	07/10/2008
2885120	Buy	USD 18.444	25/10/2006
2885120	Buy	USD 17.775	10/10/2006

CLP Holdings. The utility has two arms. One division services virtually 70% of Hong Kong's power requirement through a regulated contractual agreement with the Hong Kong government. Through the Scheme of Control, it is allowed a return of 15% on its net average fixed assets. The second division, CLP Power Asia, wholly/partly owns utilities in Australia, China, India, Taiwan and Thailand. As interest rates keep falling in Hong Kong, given their peg to the Dollar, CLP's reliable cash flow stream will become an increasingly valuable asset.

Sedol	Type	Price	Date
6097017	Buy	HKD 59.00	23/01/2008

Compal Electronics has a 20% market share in the global laptop market, manufacturing and assembling for leading players such as Dell, HP and Toshiba. The development of low-cost laptops (under $200) is driving demand in Asia and Latin America and leading to very strong sales growth. In addition the company is increasing market share and has just won large orders from both Dell and Toshiba at the expense of its competitors. Management are shareholder-focussed and have consistently targeted improving return of equity and payouts - leading to a high (6%+) and well covered dividend yield.

Sedol	Type	Price	Date
6225774	Sell	TWD 38.203	06/12/2007
6225774	Buy	TWD 38.564	25/07/2007