Adamas Finance Asia (ADAM) aims to be the leading London-quoted pan-Asian focused diversified SME investment holding vehicle. It targets above average income and capital growth, with a stated objective to provide shareholders with unique access to a diversified portfolio with access to high-growth Asian economies.
Over the last 16 months, its new Investment Manager, Harmony Capital Investors Limited (“Harmony Capital”), has begun to reposition ADAM to address its past underperformance. It has restructured and stabilised its legacy portfolio and built a pipeline of new potential investments which fit with ADAM’s revised investment policy.
We set out the investment case in this note and how ADAM plans to leverage its competitive positioning to build a portfolio that supports progressive income distributions and capital gains. It has sourced predominantly private opportunities and, subject to securing access to the necessary capital, has a pipeline of income generating assets which fit its new investment strategy.
Although ADAM is sector agnostic, that pipeline includes potential investments in Internet & Technology, Healthcare & Life Sciences, Property, Industrials, Energy and Resources and Education across Asia. A common theme is likely to be a focus on SME ‘special situations’ which seek growth capital but are unsuitable or too complex for most traditional financing methods available in their local markets.
The recent interims reflected the ongoing transition, disposals of non-core, legacy assets and reinvestment in new income generating assets. ADAM reported a 1.5% increase in consolidated NAV to US$95m (FY17: US$93.6m) and concluded its first new investment since Harmony Capital’s appointment, a US$2m stake in DocDoc Pte. via a convertible bond.
ADAM’s legacy portfolio has been stabilised and is held at fair value. The shares are currently c.50% below 116c NAV/share at end Sept (unaudited). We believe that discounts any perceived risks and offers attractive potential upside as the investment manager builds growth momentum and credibility over the next 12-18 months.