Emerging Markets Stock Writeups

Kalina is a relatively small, local cosmetics manufacturer but with a significant market share across Russia. The company has a strong local distribution base and sales force, which is expensive and difficult for foreign competitors to emulate. Rapidly rising local consumer expenditure is fast spilling over into 'fripperies' and Kalina, with its mid-to-low market brands, is in a very strong position to benefit. The company has little debt, is lowly rated, yet producing high teens growth at the EPS level. To any foreign competitor keen to expand, it is an obvious take-out (similar to the recent acquisition of Lebedyansky (juices) by PepsiCo).

Sedol	Type	Price	Date
7130922	Buy	USD 33.40	31/03/2008

We have sold due to excessive debt exposure in the Korean economy, coupled with the fact that the stock had hit our target price.

Kangwon Land. When the coal mining industry dried up, the mountainous South Korean region of Kangwon fell upon hard times. Kangwon Land, which is 51% government-owned, is attempting to redevelop the area. The showcase is Korea's largest casino - the world's most profitable. A ski resort opened in December 2006 (after three years of work) which should draw ever more visitors to the casino, which is also being expanded. In addition a new road, which knocks an hour off the driving time from Seoul, is scheduled to open in June. The combination of these two factors, together when a large drop in capital expenditure now the ski slopes are finished, should provide a large kicker to revenues, profits and cashflow, making this stock a buy.

Sedol	Type	Price	Date
6683449	Sell	KRW 24,643.75	20/12/2007
6683449	Buy	KRW 18,976.50	20/04/2007

Komatsu. The world's second largest supplier of mining and construction equipment is experiencing a boom driven more by Asian infrastructure spending than strong commodity prices. Export sales to Asia and Russia are going 'gangbusters' (up over 40% so far this year). In addition cost control has been excellent - leading to rising margins and hence even greater profits.

Sedol	Type	Price	Date
6496584	Buy	JPY 3948.361	11/10/2007

KPJ was bought in the expectation that, after several years of multiple acquisitions, it would now focus on running its existing hospitals. However, since then it has acquired an additional three hospitals and looks set to continue buying more. This eats up cash flow and drags down margins as new centres are integrated. Furthermore labour costs are rising, putting extra pressure on profits, hence we sold. 

KPJ is Malaysia's largest private hospital operator. Earnings per share in 2007 are at an inflection point, as they should surpass levels seen in 2002 for the first time; this was when KPJ purchased nine hospitals, which acted as a drag on earnings. The pace of expansion is to be more sensibly managed, and KPJ is experiencing solid revenue growth, driven by favourable demographics, an improvement in the economy, a move to private health insurance and a pick-up in heath tourism, particularly from the Middle East.

Sedol	Type	Price	Date
6493585	Sell	MYR 3.26	29/08/2007
6493585	Buy	MYR 2.948	17/04/2007