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Investor Day

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Investor Day

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Investor Day

  1. 1. Our  Investment  Strategy:   Inves1ng  With  Convic1on  To  Outperform   in  Times  of  Vola1lity  and  Uncertainty     “Extractors  Vs  Compounders     in  the  Asian  Capital  Jungle”   Forpersonaluseonly
  2. 2. All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   2   Our  Investment  Team   Forpersonaluseonly
  3. 3. All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   3   Protect  the  Downside:  Extrac1ng  the  “Extractors”  with  our   Systema1c  and  Disciplined  Investment  Process   Forpersonaluseonly
  4. 4. All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   4   Capturing  the  Upside  with  the  Hidden  Champions  in  our  Daily  Life     Presenta>on  at  8I  Networking  Nite  at  MND  in  March  2014     Forpersonaluseonly
  5. 5. All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   5   “Paris  BagueIe”:  Up  16-­‐Fold  (2004-­‐March  2014)  to  Market   Value  US$525  Million   Forpersonaluseonly
  6. 6. All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   6   The  Compounding  Power  of  Focused  Entrepreneurs   “Paris  BagueLe”  Up  Another  480%  Since  March  2014  to  US$2.08  Billion      Operates  over  6,000  food  service  outlets  in  Korea  and  globally      The  average  daily  sales  of  a  Paris  BagueLe  outlet  is  around  W1.9-­‐2m   ($1,800),   at   least   double   that   of   rival;   Singapore   stores   generate   W12-­‐13m  ($11,000-­‐12,000)  in  daily  sales       Largest   industrial   baked   goods   sold   through   convenience   stores,   supermarkets,  grocery  stores  with  dominant  71%  domes>c  market  share      Elas>c  distribu>on  that  uses  hub  systems  (24  DCs)  to  ensure  freshness       The   temperature   and   humidity   at   which   dough   was   thawed   is   the   company’s  secret       Bankrupt   under   leadership   of   brother   during   Asian   Financial   Crisis;   Huh,  second  son  of  the  founder,  acquired  the  company  in  2002  out  of   court  receivership   Forpersonaluseonly
  7. 7. All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   7   Two-­‐Step  Process  to  PorWolio  Construc1on   OUT:  Poten1al   Accoun1ng  Fraud   OUT:  Corporate   Misgovernance   Indestruc1ble   Intangibles   ü   Proprietary  know-­‐how   ü   Trust  and  support  from  community   of  customers,  suppliers,  partners   Core-­‐Periphery  Network   Open  Innova1on   ü   Both  internal  and  ezeternal  partners   co-­‐develop  new  products  and  services   ü   Scaling  by  empowerment  and  decision-­‐ rights  beyond  the  founder   ü   Scaling  by  technology  as  an  enabler  and   embedded  into  the  business  model  design     Inves1ng  Universe   >25,000+  Listed   Stocks  in  Asia   Eliminate   “Extractors”   “Wide-­‐Moat   Compounders”   &  Hidden   Champions   Wide-­‐Moat   Business   Model  Analysis   Dissec1ng   Corporate   Culture     Step  1:  Elimina1ng  “Extractors”   to  protect  downside  risk   Step  2:  Elimina1ng  value  traps   and  narrow-­‐moat  companies   Forpersonaluseonly
  8. 8. All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   8   Stock-­‐Picking  is  a  Dangerous  Game   A  minority  of  stocks  are  responsible  for  the  majority  of  the  market’s  gains   Forpersonaluseonly
  9. 9. All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   9   Disposi1on  Effect  to  Sell  Winners  Too  Early  and  Ride  Losers   for  Too  Long  –  Overcoming  with  Knowledge  and  Convic1on       Reflexive   choice   under   uncertainty   and   reflects   an   aversion  to  loss  realiza>on.         In   our   view,   investors   ride   losers   far   too   long   to   postpone  regret,  hoping  for  a  rebound  in  prices,  and  sell   winners   too   quickly   because   they   want   to   hasten   the   feeling  of  pride  at  having  chosen  correctly  in  the  past.       Market   vola>lity   and   chaos,   mania   and   panic   -­‐   they   would  be  our  friend  if  we  have  the  willpower  quo>ent  to   overcome  this  harmful  disposi>on  effect.        This  willpower  comes  from  anchoring  ourselves  with   knowledge   in   iden>fying   and   inves>ng   in   misunderstood,   neglected,   overlooked   and   underappreciated   wide-­‐moat   companies   and   sizing   up   the   porholio   bets   with   convic>on   when   the   management   con>nues   to   deliver   in   their   long-­‐term   business  plans.         Such   convic>on   requires   intensive   analysis   and   monitoring  of  companies  and  entrepreneurs.     Peter   Lynch:   “Some   people   automa4cally   sell   the   “winners”— stocks  that  go  up—and  hold  on  to   their  “losers”—stocks  that  go  down —which   is   about   as   sensible   as   pulling   out   the   flowers   and   watering  the  weeds.”   The image cannot be displayed. Your computer may not have enough memory to open the image, or the image may have been corrupted. Restart your computer, and then open the file again. If the red x still appears, you may have to delete the image and then insert it again. Forpersonaluseonly
  10. 10. All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   10   BuffeI:  Sizing  Up  High-­‐Convic1on  Bets   “Charlie  and  I  decided  long  ago  that  in  an  investment  life4me,  it’s  too  hard  to  make  hundreds  of  smart  decisions.  We  adopted  a   strategy  that  required  our  being  smart  only  a  very  few  4mes..  If  you  are  a  know-­‐something  investor,  able  to  understand  business   economics  and  to  find  five  to  ten  sensibly-­‐priced  companies  that  possess  important  long-­‐term  compe44ve  advantages,  conven4onal   diversifica4on  makes  no  sense  for  you.  It  is  apt  simply  to  hurt  your  results  and  increase  your  risk.  I  cannot  understand  why  an  investor   of  that  sort  elects  to  put  money  into  a  business  that  is  his  20th  favorite  rather  than  simply  adding  that  money  to  his  top  choices  –  the   businesses  he  understands  best  and  that  present  the  least  risk,  along  with  the  greatest  profit  poten4al.  In  the  words  of  the  prophet   Mae  West:  Too  much  of  a  good  thing  can  be  wonderful.”   -­‐  Warren  BuffeL  in  Berkshire  Hathaway’s  Annual  LeLer  to  Shareholders  in  1993     Forpersonaluseonly
  11. 11. All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   11   BuffeI:  42%  of  Fund’s  Asset  in  Amex  in  1964   Amex  Has  Since  Compounded  Over  3,000%   "Charlie  and  I  operated  mostly  with  5  posi4ons.  If  I  were  running  50,  100,  200   million,   I   would   have   80%   in   5   posi4ons,   with   25%   for   the   largest.   In   1964   I   found  a  posi4on  I  was  willing  to  go  heavier  into,  up  to  40%.  I  told  investors  they   could  pull  their  money  out.  None  did.  The  posi4on  was  American  Express  a[er   the  Salad  Oil  Scandal.  In  1951  I  put  the  bulk  of  my  net  worth  into  GEICO.  There   were  various  4mes  I  would  have  gone  up  to  75%,  even  in  the  past  few  years.  If   it's  your  game  and  you  really  know  your  business,  you  can  load  up."       -­‐  Warren  BuffeL,  February  25,  2008   Forpersonaluseonly
  12. 12. All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   12   Wide-­‐Moat  Business  Model  Dynamics:  Lanchester  Strategy   Adopted  by  Toyota,  Denso,  Fast  Retailing  (Uniqlo),  SMC  Corp,  Canon  etc   Market  share  benchmarks      Dominance  (73.9%):  Unassailable  posi>on       Stable   target   (41.7%):   Top   share   can   be   maintained  at  this  level       Minimum   target   (26.1%):   Minimum   share   necessary   for   a   strong   player   to   becoming   the   dominant  player       High-­‐level   target   (19.3%):   This   level   normally   ranks   a   company   within   the   top   three,   and   should  be  the  ini>al  target  for  a  “weak  player”       Influence   target   (10.9%):   Level   at   which   a   player   begins   to   influence   the   market;   compe>>on  begins  to  intensify  above  the  level      Presence  target  (6.8%):  Level  at  which  a  player   has  a  presence  in  the  market      Base  target  (2.8%):  Entry  posi>on       Bri>sh   aeronau>cal   engineer   F.W.   Lanchester   (1868-­‐1946)   made   important   contribu>ons   to   automo>ve   engineering,   aerodynamics   and   co-­‐ invented   the   topic   of   opera>ons   research.   He   is   considered   one   of   the   "big   three"   English   car   engineers,   the   others   being   Harry   Ricardo   and   Henry  Royce.          Lanchester  researched  aLri>on  in  land,  sea  and   air  combat.  Based  on  these  studies,  he  developed   the   Lanchester   Laws   and   the   importance   of   the   scale  of  the  figh>ng  force  in  warfare.     Forpersonaluseonly
  13. 13. All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   13   Applica1on  of  Lanchester  Strategy:  Canon  Vs  Xerox      Overwhelming  rival  in  Rank  Xerox        Took  a  foothold  in  the  market  by  first   concentra>ng  its  resources  in  Scotland        Achieved  a  40%  market  share        ALacked  selected  and  >ghtly  defined   regions  in  England        Invested  more  and  more  in  product   development  and  sales  resource          Final  push  into  the  lucra>ve  London   market         Superior   product   and   a   numerically   superior  sales  force.  Rank  Xerox  didn’t   stand  a  chance   Nikkei   Forpersonaluseonly
  14. 14. All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   14   Applica1on  of  Lanchester  Strategy:  SMC  Corp  (MV  $17.7Bn)   60%  market  share  in  Japan,  33%  global  market  share,  39%  in  China      Global  leader  in  pneuma>c  machines  with  a  33%  market  share  (60%  market  share  in  Japan,  39%  in  China)      SMC’s  high  profitability  and  market  share  is  due  to  its  ability  to  rapidly  supply  customers  with  630,000   dis>nc>ve  products  combining  parts  from  11,000  basic  shapes.  SMC  can  quickly  supply  products  on  the  day   they  are  ordered,  even  overseas,  and  that  60-­‐70%  of  products  can  be  delivered  within  three  days.        Over  two-­‐thirds  of  all  products  are  manufactured  at  its  Tsukuba  plant.  Essen>ally,  SMC  engages  in  flexible,   mul>ple,  small-­‐lot  produc>on  centered  on  cell  units.  It  constructed  its  own  dis>nc>ve  produc>on  lines  which   automa>cally  receive  detailed  orders  from  marke>ng  staff  via  computer.   SMC  is  founded  in  1959  as   Sintered  Metal  Company  by   S u s u m u   O m u r a   a n d   Yoshiyuki  Takada  (photo)   Forpersonaluseonly
  15. 15. Our  Investments     Forpersonaluseonly
  16. 16. All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   16   8IH  Interim  Report  as  at  Sep  2015   Source:  8IH  Interim  Report  on  ASX   hLp://www.asx.com.au/asxpdf/20151102/pdf/432nk9r3hhw4nf.pdf     Forpersonaluseonly
  17. 17. All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   17   Major  Cineplex  (SET:  MAJOR):   #1  Lifestyle  Entertainment  Company  in  Thailand   1.  What  makes  it  a  wide-­‐moat  business?     –  Consolidated  the  cinema  market  with  dominant  80%  market  share,   aLrac>ng  30  million  Thai  consumers  to  its  “des>na>on  to  be”   –  Adver>sing   services   business   segment   is   crown   jewel   asset   with   underappreciated  network  effect   •  Increase  bargaining  power  as  it  gets  bigger;  adver>sers  will  pay  even  more   for  the  consumer  reach   •  Addi>onal   revenue   generated   on   exis>ng   assets   with   high   gross   profit   margin  of  86-­‐88%  with  minimal  capex  investments   2.  Why  it  has  the  poten>al  to  double  in  3-­‐5  years?     –  Expanding  into  the  provinces  and  regionally  (Cambodia  and  Laos)   •  To  double  up  its  capacity  within  5  years   3.  Management/Corporate  Culture   –  Visionary,  leading  and  shaping  the  Thai  movie  industry   –  Poolvaraluck  family  with  ~34.5%  ownership   Forpersonaluseonly
  18. 18. All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   18   Financial  Summary   2012 2013 2014 TTM Gross,Profit,Margin 32.3% 35.0% 36.5% 35.3% EBIT,Margin 13.6% 15.8% 16.1% 13.5% ROE 10.6% 13.6% 15.4% 18.6% Gross,Profit/Total,Assets 19.8% 19.8% 22.6% 22.6% Cash,Conversion,Cycle 12 15 10 11 EBIT/CAPEX,(x) 2.5 2.1 2.4 0.7 Net,Debt,%,of,NTA 45.5% 80.7% 69.6% 71.0% EV/EBIT,(x) 17.3 13.4 19.2 31.1 EV/EBITDA,(x) 11.7 9.3 12.7 14.3 Sales 23.8% EBIT 28.4% EBITDA 31.1% Profitability Operating,Efficiency Valuation 3,Year,Growth Forpersonaluseonly
  19. 19. All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   19   Price  Chart  Performance     Forpersonaluseonly
  20. 20. All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   20   Hartalega  (KLS:  HARTA)   1.  What  makes  it  a  wide-­‐moat  business?     –  World’s   largest-­‐scale   nitrile   gloves   manufacturer,   highly   innova>ve,   fastest  speed,  high  quality   •  Launched   the   world’s   thinnest   4.7g   nitrile   glove   in   2005   and   subsequently   an   even   thinner  3.7g  nitrile  glove  in  2007   •  Before  Hartalega,  nitrile  gloves  were  chiefly  used  in  industrial  applica>ons  and  not  in  the   medical  sector  due  to  their  heavy  weight  and  thickness   •  Invested  in  automated  mechanical  stripping  system  that  mimics  the  human  hand  mo>on   of  stripping  gloves  off  and  industrial  bar  code  tech  system  to  scale  up  to  45,000  gloves  an   hour  at  a  lower  cost   –  Global  16-­‐20%  market  share   2.  Why  it  has  the  poten>al  to  double  in  3-­‐5  years?     –  Reinves>ng  profits  into  widening  the  moat  with  disciplined  capex  growth   plans  in  NGC:  NGC  Plant  1  and  2  up  &  running   3.  Management/Corporate  Culture   –  Innova>ve   management   who   created   crea>ng   a   pull-­‐based   market   in   which  the  nitrile  gloves  can  be  used  by  healthcare  professionals   –  Kuan  family  55%  ownership   Forpersonaluseonly
  21. 21. All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   21   Financial  Summary   2013 2014 2015 TTM Gross-Profit-Margin 33.6% 33.2% 29.8% 29.2% EBIT-Margin 39.9% 32.5% 22.3% 22.6% ROE 33.7% 27.3% 19.0% 17.9% Gross-Profit/Total-Assets 36.9% 33.1% 23.1% 21.8% Cash-Conversion-Cycle 62 68 94 81 EBIT/CAPEX-(x) 1.6 1.6 0.7 0.7 Net-Cash-%-of-NTA 22.2% 17.8% 5.1% 1.0% EV/EBIT-(x) 11.5 16.7 33.6 30.6 EV/EBITDA-(x) 10.4 14.6 28.9 25.7 Sales 11.0% EBIT Q9.2% EBITDA Q4.2% Profitability Operating-Efficiency Valuation 3-Year-Growth Forpersonaluseonly
  22. 22. All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   22   Price  Chart  Performance     Forpersonaluseonly
  23. 23. All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   23   Target  Weight  in  Types  of  Business  Model  and  By  Country   Source:  8IH  Interim  Report   hLp://www.asx.com.au/asxpdf/20151102/pdf/432nk9r3hhw4nf.pdf     Forpersonaluseonly
  24. 24. All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   24   Investment  Process     Search   •  Idea  sources:  Internal  research,   Industry  network  of   entrepreneurs   •  Determine  companies  that   qualify   •  Understand/  evaluate  the  long-­‐ term  “story”  of  the  company,  its   business  model  and  economics   •  Visit  and  read  management  to   ascertain  quality   Valua1on   •  Provide  independent  base   conserva>ve  valua>on   •  Assess  >pping  point  in  business   model  valua>on   PorWolio  Management   •  Monitor  the  core  stocks   (news/events,  interims,   annuals)   •  Add  stock  posi>on  into  the   porholio  i.e.  has  story   changed  for  the  beLer.   Build  up  stock  posi>ons   progressively  as  the   company  hit  business   milestones   •  Reduce  or  Remove  stock   posi>on  from  the  porholio   i.e.  has  story  changed  for   the  worse   •  Build  value  with  exis>ng   stocks  eg  advisory  on   business  model  analysis,   corporate  governance   issues  and  financing   solu>ons  to  help  company   grow  further   Search:   Finding  the   Hidden   Champions   Valua1on:     Pivot  of  Value  Between   Search  and  Porholio   Management   PorWolio   Mgmt:  Buy   Enough  and   Hold  Long   Enough   It  is  the  hole  in  the  middle   which  makes  the  wheel   useful  –  Lao-­‐Tzu   Investment   “Technology”  +   Teamwork   Forpersonaluseonly
  25. 25. All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   25   We  Are  Cognizant  of  the  Macroeconomic  Risks  Ahead      Uncertainty  surrounding  the  US  Fed  rate  hike  decision  and   its  avermath  on  asset  pricing  and  asset  risk      Sharp  devalua>on  of  EM/  Asian  currencies  X  Highly-­‐geared   Asian   companies   loaded   on   dollar-­‐based   loans   =   Recipe   for   disaster  for  wave  of  corporate  default  and  profit  warnings.      Fragility  of  China’s  financial  sector.        Demise  of  petrodollar  flows  into  equi>es  and  the  capital   markets.        Commodi>es  bust  and  its  impact  on  the  financial  sector.       Internet   sector   correc>on,   death   of   unicorns   and   the   cooling   of   VC   investment   environment   has   taken   its   toll   on   startups.       Harvard   University   endowment   fund   warns   of   market   “froth”   in   Sep   2015   and   is   looking   to   allocate   funds   into   investment  managers  with  exper>se  as  short-­‐sellers.   EBIT-­‐debt  coverage:  A  quarter  of  Chinese  firms  with  debt   unable  to  cover  their  annual  interest  expense  currently   Forpersonaluseonly
  26. 26. All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   26       Aeon   Bhd:   Best   shopping   mall   in   Malaysia,   wide-­‐moat   business   but   narrowing  moat?      FY2013  and  1Q14  results:  Resilient  retailing  segmental  profits  s>ll  ok   We  Are  Vigilant  of  the  Corporate  Developments  and  Management   Execu1on  of  Our  PorWolio  Stocks:  The  Case  of  Aeon  Bhd   Forpersonaluseonly
  27. 27. All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   27   We  Are  Vigilant  of  the  Corporate  Developments  and  Management   Execu1on  of  Our  PorWolio  Stocks:  The  Case  of  Aeon  Bhd      1H14  results  announced  on  28  Aug  2014:  Retailing  segmental  profits  showed   significant  deteriora>on      Share  price  performance  aver  PEAD  (post  earnings  announcement  driv)  =   Down  30%  vs  Bursa  index  down  10%      Lesson:  Importance  of  vigilant  monitoring  and  the  power  of  PEAD   Forpersonaluseonly
  28. 28. All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   28   Staying  Vigilant  for  Tipping  Point  in  Business  Model  to   Lower  Valua1on  Risk      New  products  or  services,  and  new  markets  and  customers   -­‐  Textual   analysis   of   the   companies   with   relevant   keywords   using   linguis>c   databases   e.g.   “new   product(s)”,  “new  development”,  “patents”,  “research  and  development”,  “innova>on”,  etc.     -­‐  Monitor  the  ra>o  of  the  sales  contribu>on  from  new  products/services  and  markets/customers.          Robust  improvements  in  capex  execu>on  efficiency  and  cash  conversion  cycle  (CCC)      Significant  corporate  event  in  spin-­‐offs,  M&As,  restructuring      Overall  health  of  value  chain  and  ecosystem      Corporate  culture,  strategy,  innova>on,  partnerships:     -­‐  (1)   the   management   desire   to   cul>va>ng   a   culture   of   decentraliza>on,   trust   and   coopera>on   to   foster   innova>ve   experimenta>ons,   including   inves>ng   in   a   system   to   cascade   decision   rights   throughout  the  organiza>on;     -­‐  (2)  the  management  discipline  in  handling  power  and  wealth;     -­‐  (3)  the  management  focus  and  sense  of  urgency  to  build  something  with  a  Purpose  and  commit  to  an   idea  larger  than  themselves  to  care  for  and  serve  others  with  love;     -­‐  (4)  the  management  skin  in  the  game  with  aligned  performance-­‐based  incen>ves   Forpersonaluseonly
  29. 29. All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   29   Comment  on  Concentra1on  Risk  and  Valeant:     An1dote  =  Understanding  Corporate  Culture       Hedge   fund   manager   Bill   Ackman   compared   “plahorm   stock”   Valeant   to   early-­‐stage   Berkshire   Hathaway   in   early   2015;  William  Thorndike,  author  of  The  Outsiders,  compared   Valeant’s   CEO   Michael   Person   to   Liberty’s   cable   billionaire   John  Malone.  Valeant’s  share    price  collapsed  in  Oct  2015,   hur>ng   many   sophis>cated   ins>tu>onal   investors   with   concentrated  porholio  bets  on  the  drug  firm.      We  noted  various  ar>cles  back  in  2014  that  shed  insights   about   the   corporate   culture   and   accoun>ng   of   Valeant:   Valeant  CEO  Michael  Pearson  is  known  as  an  aggressive  cost   cuLer.  Valeant’s  corporate  culture  is  that  it  does  not  want  to   spend  money  on  science  and  sees  no  wrong  in  substan>ally   jacking  up  prices  of  drugs  aver  acquiring  them.        Charlie  Munger  in  March  2015:  Companies  like  ITT  Corp.,   made   money   back   in   the   1960s   in   an   “evil   way”   by   buying   businesses  with  low-­‐quality  earnings  then  playing  accoun>ng   games   to   push   valua>ons   higher.   “Valeant,   the   pharmaceu>cal  company,  is  ITT  come  back  to  life,”  Munger   said.  “It  wasn’t  moral  the  first  >me.  And  the  second  >me,  it’s   not  beLer.  And  people  are  enthusias>c  about  it.  I’m  holding   my   nose.”   Valeant   relied   on   “gamesmanship”   to   run   up   its   value  and  created  a  “phony  growth  record.”     Forpersonaluseonly
  30. 30. All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   30   BuffeI  on  Valua1on   Forpersonaluseonly
  31. 31. All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   31   Tencent  (700  HK):  Always  “Expensive”  in  Valua1on?   PE  20-­‐50x;  Market  Value  Compounded  >180X  Since  2004  to  $170Bn   20.0   25.0   30.0   35.0   40.0   45.0   50.0   55.0   60.0    -­‐      20      40      60      80      100      120      140      160      180     2004   2005   2006   2007   2008   2009   2010   2011   2012   2013   2014   PE  Ra1o   Market  Value  $bn   Market  Value  (LHS)   PE  Ra1o  (RHS)   Forpersonaluseonly
  32. 32. All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   32   Valua1on  &  Evolu1on  Path  of  Wide-­‐Moat  Compounders   3   7   10   15   Time   (Years)   2.5   2.0   1.5   1.0   0.5   Fundamental  PEG   =  (EV/EBIT)/  ROE   Financial  market  holds  back,  as   company  grew  in  market  cap   too  fast  despite  the  strong   fundamentals  and  growth;   market  panics  and  PEG  falls     As  company  con>nues  to   deliver,  there  is  posi>ve  re-­‐ appraisal  of  the  company   and  PE  re-­‐ra>ng;  PEG   climbs  back  up  again     PEG  remains  rela>vely   steady  as  company  “milks   the  cow”  for  cashflow  –  or   company  gets  complacent   with  size  and  falters   Stage  I   Stage  II   Stage  III   Stage  IV   Emerging  Leaders   Rides  the  Rising  Tide,  Niche   Poten1al  Transforms    to   Mass  Market   Milks  the  Cow/   Consolida1on  or   “Icarus-­‐Faltering”   Dominance/  Legacy/   Build-­‐to-­‐Last   Growth  slows  down,  but  PEG   climbed  due  to  “dominance”  or   “winners-­‐take-­‐most”  factor,   resul>ng  in  steady  market  cap   0.8   1.0   0.6   0.4   0.2   PEG  =  PE/  Net   Profits  Growth   Small-­‐to-­‐Mid  Cap   $300M-­‐S$1B   Mid-­‐to-­‐Large  Cap   $1-­‐20B   PE-­‐Micro-­‐to-­‐Small  Cap   <$50M-­‐S$300M   Large-­‐to-­‐Mega  Cap   >$20-­‐400B   20X:  $50M  to  $1Bn     20X:  $1B  to  $20Bn     20X:  $20B  to  $400Bn    Compounding  Poten1al   Forpersonaluseonly
  33. 33. Tencent  (HKG:  700  HK)    0.71      2.36      1.58      2.27      0.57      0.94      0.64      0.51      0.69      1.43      0.94      -­‐        0.5      1.0      1.5      2.0      2.5     0   10   20   30   40   50   60   70   2004   2005   2006   2007   2008   2009   2010   2011   2012   2013   2014   Fundamental  PEG  (x)   “PE”  (x),  “ROE”  (%)   EV/EBIT  ("PE")  (LHS)   EBIT  on  Equity  ("ROE")  (LHS)   Fundamental  PEG  (RHS)   33   All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   Forpersonaluseonly
  34. 34. Tencent  (HKG:  700  HK)   34    -­‐        0.5      1.0      1.5      2.0      2.5      -­‐      20      40      60      80      100      120      140      160      180      200     2004   2005   2006   2007   2008   2009   2010   2011   2012   2013   2014   Fundamental  PEG  (x)   Market  Cap  (USD  Billion)   Market  Cap  (LHS)   Fundamental  PEG  (RHS)   All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   Forpersonaluseonly
  35. 35. All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   35   Corporate  Lifecycle  &  Business  Model  %  PorWolio  Weight     Source:  8IH  Interim  Report   hLp://www.asx.com.au/asxpdf/20151102/pdf/432nk9r3hhw4nf.pdf     Forpersonaluseonly
  36. 36. All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   36   Lowering  Our  Risk:  Float  Like  BuIerfly,  S1ng  Like  a  Bee      We  have  been  following  closely  a  number  of  entrepreneurs   building  their  enterprises  in  Asia  over  the  years,  observing  up   close   their   struggles   and   their   breakthroughs,   compiling   the   progress   of   their   corporate   lifecycle   dynamics   by   “Stage   1”,   “Stage  2”,  “Stage  3”  in  our  “Watchlist”.      To  lower  our  risk  that  comes  from  inves>ng  in  new  stock   ideas,   we   float   around   like   buLerflies   in   our   “Watchlist”,   obsessively  gathering  relevant  informa>on  about  the  business   model   dynamics,   value   crea>on   levers   and   cri>cal   success   factors,  management  and  corporate  governance  quality.        Before  we  s>ng  like  a  bee  to  jab  in  a  stock  inclusion,   to  guard  against  the  risk  of  confirma>on  bias,  we  insist   on   every   investment   team   member   to   voice   out   and   write  down  their  “Top  3  Dislikes”  about  the  company  –   and   we   make   a   cri>cal   and   calculated   evalua>on   on   whether  the  posi>ves  s>ll  overwhelm  these  “dislikes”.     “What’s  your  Top  3  Dislikes?”   Forpersonaluseonly
  37. 37. All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   37   If  All  Else  Fails,  Apply  BuffeI’s  Folksy  “Marriage  Test”   Buffeb:  “Tom   Murphy  and  Don   Burke  [of  Cap  Ci4es]   are  not  only  great   managers,  but  they   are  precisely  the   sort  of  fellows  that   you  would  want   your  daughters  to   marry.”   A   shareholder   who   bought   in   when   Capital   Ci>es   went   public   in   the   late   1950s   would   have   made   a   2,000-­‐fold   return   at   its   exit   when  Disney  acquired  the  company.     Forpersonaluseonly
  38. 38. All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   38   Our  Own  Folksy  “Proud  Parent”  Acid  Test   If  not,  it’s  probably  a  value  trap…   “Would  you  be  proud  and   happy  for  your  children  if   they  are  working  in  the   company  you  are  going  to   invest  in?”   Forpersonaluseonly
  39. 39. Recent  Investments   Forpersonaluseonly
  40. 40. 40   No.1  Data  Analy1cs  and  Service  Provider     1.  What  makes  it  a  wide-­‐moat  business?     –  Data  analy>cs  and  service  provider.  Informa>on  cri>cal  for  mul>ple   industries.  (Shipping,  Avia>on,  Land  Transport,  Key  Events,  Mass  Media,   Natural  disaster  management,  Energy,  Investments,  Agriculture,  Travel…)   –  Market-­‐share:  ~70%  overall  domes>c  &  30  %  global  for  shipping  industry.   2.  Why  it  has  the  poten>al  to  double  in  3-­‐5  years?     –  Innova>on  with  out-­‐of-­‐the-­‐box  thinking  that  can  cause  industry   disrup>on.   •  Create  new  compe>>ve  advantage,  opportuni>es  &  sales  for   themselves.   •  Building  world’s  largest  social  plahorm  for  live  feedback  to  enhance   current  data  analy>cs.   –  Venture  into  developing  markets.   3.  Management/Corporate  Culture   –  Passion  on  value  crea>on,  service  to  humanity  and  saving  lives.   –  Hidden  champion  with  near  customer  strategy.   –  Nurtures  entrepreneurial  spirit,  dreams  and  passions  of  the  staff.   All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   Forpersonaluseonly
  41. 41. 41   Financial  Summary   2013 2014 2015 TTM 40.7% 44.1% 44.2% 44.2% 21.2% 24.7% 24.9% 24.4% 19.8% 20.1% 18.9% 19.4% 53.5% 49.4% 45.8% 49.8% 78 76 74 73 4.7 6.1 4.7 4.3 35.2% 55.5% 60.3% 53.7% 7.4 7.4 9.1 11.6 6.1 6.3 7.8 9.9 Sales 10.9% EBIT 27.3% EBITDA 22.2% Net;Cash;%;of;NTA EV/EBIT;(x) EV/EBITDA;(x) Profitability Operating;Efficiency Valuation 3;Year;Growth ROE Gross;Profit;Margin EBIT;Margin Gross;Profit/Total;Assets Cash;Conversion;Cycle EBIT/CAPEX;(x) All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   Forpersonaluseonly
  42. 42. All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   42   Leading  FMCG  Company  with  Innova1ve  Health  and  Natural  Food   1.  What  makes  it  a  wide-­‐moat  business?     –  >80%  domes>c  market  share  with  96%  brand  recogni>on  and  leadership.   –  Constant  urge  to  want  to  do  beLer   •  Relentless  drive  to  be  the  lowest  cost  operator  by  taking  a  thoughhul  look  into  exis>ng  produc>on  lines  and  modifying  it  to  be  beLer  via   incorpora>ng  carefully  selected  systems  and  machines.     •  Prides  itself  as  an  innovator  when  it  comes  to  unique  product  packaging  designs  which  create  opportuni>es  for  their  products  to  be  sold   overseas.   •  Constant  care  and  aLen>on  given  to  its  suppliers  to  inspire  loyalty,  trust  and  confidence.     2.  Why  it  has  the  poten>al  to  double  in  3-­‐5  years?     –  Entry  to  highly  lucra>ve  export  markets   •  Along   with   choosing   the   right   distributors,   it   makes   conscious   decisions   in   seeking   beLer   returns   for   their   products   and   poten>ally   benefi>ng  from  future  falling  trade  barriers.   –  Visible  roadmap  to  higher  margins  premium  products   •  Developing  its  capability  to  offer  beLer  products  and  to  deliver  material  earnings.     –  Ability  to  increase  its  supply  over  the  >me.   3.  Management/Corporate  Culture   –  Strong  and  highly  passionate  management  who  loves  the  business,  and  demonstrated  their   ability  to  deliver  growth  to  shareholders  despite  the  complexi>es  of  the  business.     –  Several  members  of  the  management  are  found  in  company’s  Top  20  shareholders  list.  It  has  a   well-­‐known  cornerstone  investor  that  provides  stability  within  the  shareholders’  base.     Forpersonaluseonly
  43. 43. 2013 2014 2015 TTM Gross-Profit-Margin 30.6% 27.8% 31.2% 31.2% EBIT-Margin 7.4% 7.3% 9.8% 9.8% ROE 9.9% 12.3% 23.3% 23.3% 40.3% 48.0% 54.9% 54.9% Cash-Conversion-Cycle 152 110 103 103 EBIT/CAPEX-(x) 4.4 3.0 3.3 3.3 60.0% 27.0% 14.0% 14.0% EV/EBIT-(x) 7.0 9.5 9.7 17.3 EV/EBITDA-(x) 5.2 7.3 8.5 15.1 Sales 67.4% EBIT 121.7% EBITDA 87.3% Profitability Operating-Efficiency Valuation 3-Year-Growth Gross-Profit/Total-Assets Net-Debt-%-of-NTA All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   43   Financial  Summary   Forpersonaluseonly
  44. 44. All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   44   Connec1ng  People  and  Bringing  Tourism  to  the  World   1.  What  makes  it  a  wide-­‐moat  business?     –  Largest  provider  of  na>onal-­‐wide  tourism  and  transporta>on  services  with  quasi-­‐monopoly   status  in  certain  services,  rendering  the  company  a  huge  market  share  in  the  industry.     •  The  only  operator  with  a  strong  marke>ng  and  sales  infrastructure  to  do  sales  funneling.     •  A  strong  track  record  of  reliability  among  its  customers  and  it  owns  certain  iconic  brands  that  have  undeniable  popularity  among   tourists  and  promoted  as  one  of  the  key  experiences.   2.  Why  it  has  the  poten>al  to  double  in  3-­‐5  years?     –  Growing  and  sustainable  appe>te  for  its  service     •  The  weakening  of  currency  s>mulated  strong  demand  for  its  service  where  passengers  alike  would  enjoy  to  use  in  order  to  visit   certain  must-­‐see  travel  des>na>ons.   •  A  restless  a|tude  to  improve  the  overall  u>lisa>on  of  the  vehicle  through  the  introduc>on  of  dynamic  pricing  models  and  secure   newer  routes  to  grow  the  business  further.     •  The   relevant   exper>se   to   leverage   on   technology   to   increase   sales   with   a   target   to   generate   more   sales   from   online   sources.     Currently,  it  generates  21%  from  online  sources.     3.  Management/Corporate  Culture   –  Clear  philosophy  on  the  company’s  family-­‐oriented  culture  and  staff  engagement.   –  Management   prac>ces   an   “owner-­‐operator”   mentality   where   commercial   decisions   are   carefully  deliberated  and  if  necessary,  put  through  extensive  analysis  and  modeling.   –  Formed   partnerships   with   the   government   to   grow   the   tourism   sector   together;   strong,   mature,  sensible  culture  with  mutual  respect;  a  healthy  degree  of  trust  within  the  company   is  present  and  there  is  a  constant  monitoring  of  the  business  performance  every  month.   Forpersonaluseonly
  45. 45. All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   45   Financial  Summary   2013 2014 2015 TTM Gross-Profit-Margin 28.0% 28.6% 33.7% 33.7% EBIT-Margin 10.2% 11.2% 13.6% 13.6% ROE 23.1% 13.4% 16.1% 14.6% 39.5% 38.3% 41.5% 41.5% Cash-Conversion-Cycle G7 G2 1 1 EBIT/CAPEX-(x) 2.8 0.6 1.3 1.3 59.8% 16.7% 13.1% 55.7% EV/EBIT-(x) G 12.8 11.8 14.9 EV/EBITDA-(x) G 9.8 9.4 11.6 Sales 21.8% EBIT 61.9% EBITDA 52.9% Profitability Operating-Efficiency Valuation 3-Year-Growth Gross-Profit/Total-Assets Net-Debt-%-of-NTA Forpersonaluseonly
  46. 46. All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   46   No.1  Consumer  Healthcare  Innovator     1.  What  makes  it  a  wide-­‐moat  business?     –  50%  domes>c  market  share  in  its  consumer  healthcare  product.  Global  90%   market  share  in  its  industrial  business  niche.   –  Highly   innova>ve   and   constantly   widening   its   moat   by   con>nuing   to   introduce  many  first  and  best  in  its  class,  where  high-­‐tech  western  peers  are   unable  to  duplicate  its  technology  even  aver  more  than  10  years.   2.  Why  it  has  the  poten>al  to  double  in  3-­‐5  years?   –  Premiumisa>on   of   products   where   their   new   product   is   sold   out   despite   being  priced  400%  more  than  their  previous  best  product.   –  For  the  first  >me  in  their  corporate  history,  they  decided  to  invest  in  their   China  produc>on  plant,  so  as  to  directly  serve  their  growing  customer  base   and  grow  their  14%  market  share  in  China.  There  is  a  long  runway  to  grow  as   China’s  usage  rate  is  far  below  that  of  SG  and  HK.   –  EBIT  in  1H16  matches  EBIT  FY2015.   3.  Management/Corporate  Culture   –  Family  owned  business  with  more  than  80  years  of  reputa>on  to  uphold.   –  Consistent  dividend  payout  and  share  buyback  for  last  ten  years.   Forpersonaluseonly
  47. 47. All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   47   Financial  Summary   2013 2014 2015 TTM Gross-Profit-Margin 22.2% 20.8% 22.6% 24.4% EBIT-Margin 6.2% 6.0% 7.7% 7.7% ROE 6.0% 6.8% 9.3% 11.1% Gross-Profit/Total-Assets 21.3% 20.5% 21.9% 24.0% Cash-Conversion-Cycle 70 65 64 63 EBIT/CAPEX-(x) 2.2 2.1 2.2 1.7 Net-Cash-%-of-NTA 11.0% 16.3% 20.3% 19.7% EV/EBIT-(x) 6.5 6.1 14.8 11.1 EV/EBITDA-(x) 4.2 4.2 10.8 8.5 Sales 15.5% EBIT 59.9% EBITDA 31.6% Profitability Operating-Efficiency Valuation 3-Year-Growth Forpersonaluseonly
  48. 48. All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   48   No.1  Premium  Consumer  Product  Ar1san   1.  What  makes  it  a  wide-­‐moat  business?     –  Enjoy   a   60%   global   market   share   where   its   brand   is   synonymous   with   the   best  quality  and  innova>on;  The  Louis  VuiLon  of  its  class.   –  The   company   grew   its   moat   with   more   than   50   years   of   innova>on   and   invested  in  extensive  tests  equipment  which  helped  it  designed  many  new   func>onali>es.  It  also  has  a  worldwide  aver-­‐sales-­‐support  network.   2.  Why  it  has  the  poten>al  to  double  in  3-­‐5  years?     –  Growth   amongst   its   loyal   fans   as   it   rolls   out   its   new   series.   It   is   currently   having  low  valua>ons  and  a  recent  inclusion  into  the  mainboard  should  spur   much  interest  in  it.   3.  Management/Corporate  Culture   –  It  survived  a  corporate  bankruptcy  when  its  previous  owner  over-­‐leveraged   and  diversified  out  of  its  circle  of  competence.   –  Current  management  focused  relentlessly  on  Research  &  Development  and   Inventory  &  Manpower  Management;  They  reduced  manpower  by  50%  over   10  years  while  improving  u>lisa>on  rate  of  produc>on  plants  and  improving   the  industry  standards  and  growing  their  global  sales  network.   Forpersonaluseonly
  49. 49. All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   49   Financial  Summary   2013 2014 2015 TTM Gross-Profit-Margin 33.1% 40.2% 42.2% 42.2% EBIT-Margin 11.6% 19.7% 21.6% 21.6% ROE 10.6% 18.7% 20.3% 20.3% Gross-Profit/Total-Assets 39.3% 46.9% 46.7% 46.7% Cash-Conversion-Cycle 105 84 88 88 EBIT/CAPEX-(x) 3.6 5.6 3.4 3.4 Net-Cash-%-of-NTA 56.1% 69.1% 52.2% 52.2% EV/EBIT-(x) 6.3 6.8 8.0 9.4 EV/EBITDA-(x) 4.6 5.9 6.9 8.0 Sales 27.7% EBIT 139.7% EBITDA 102.1% Profitability Operating-Efficiency Valuation 3-Year-Growth Forpersonaluseonly
  50. 50. 8I  Hidden  Champions  Fund   Forpersonaluseonly
  51. 51. All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   51   What  is  a  BeIer  Strategy  -­‐  Invest  in  Berkshire,     or  BuffeI's  Stock  Picks?   Forpersonaluseonly
  52. 52. All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   52   8I  Hidden  Champions  Fund      Currently,  we  have  the  problem  of  having  more  ac>onable  stock  ideas   than  funds  to  fully  execute  our  investment  process  to  deliver  poten>ally   greater  returns  to  our  shareholders.  We  are  exploring  the  se|ng  up  of   an  offshore  Mauri>us-­‐based  fund  structure  to  house  our  investments  to   tap  funds  from  poten>al  external  ins>tu>onal  investors.        New  ins>tu>onal  investors  and  high  net-­‐worth  individuals  subscribe  to   get  units  in  the  fund,  like  a  unit  trust  or  mutual  fund.  Fund  registered   with   regulators/agencies   in   various   jurisdic>ons   for   distribu>on   permission  in  US,  UK,  Switzerland  and  HK.  Handling  regulatory  repor>ng   requirements  such  as  issuing  PFIC  statements  for  US  investors.        Tax-­‐free  for  both  capital  gains  and  dividend  distribu>on.       Daily   NAV   repor>ng   and   porholio   aLribu>on   analysis;   listed   with   Bloomberg  >cker  code;  compliance  with  regulatory  standards;  external   custodian   &   banker   (Standard   Chartered   Bank),   auditor   (KPMG),   administrator  (Trident  Trust).       Fund   factsheet   and   quarterly   commentary   on   investment   strategy,   porholio  ac>on.   Bamboos  are  among  the  fastest-­‐growing   plants   in   the   world.   Remaining   hidden   underground   for   the   first   several   years,   bamboo   has   been   clocked   surging   skywards  as  fast  as  47.6  inches  in  a  24-­‐ hour   period.   Had   the   bamboo   not   developed  a  strong  unseen  founda>on  it   could   not   have   sustained   its   life   as   it   grew.  Hidden  Champions,  who  pa>ently   toil   towards   worthwhile   dreams   and   goals,   building   strong   character   while   overcoming   adversity   and   challenge,   grow   the   strong   internal   founda>on   to   handle  and  scale  up  success.   Forpersonaluseonly
  53. 53. All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   53   Entrepreneurs  Inves1ng  in  Entrepreneurs       Caring   is   an   exac>ng,   serious   and   demanding   business,   especially   when   it   comes   to   inves>ng   in   another   person’s   financial  assets,  which  are  a  tangible  product  of  his  or  her  life’s   work,  a  repository  of  aspira>ons  for  the  future.         We   do   not   believe   in   pain>ng   rosy   pictures   or   beau>fying   ourselves.  We  tell  cold,  hard  truths  –  with  a  warm  and  devoted   heart.        We  hope  this  will  capture  the  8IH  investment  philosophy  of   entrepreneurs   inves>ng   in   entrepreneurs.   We   are   of   the   convic>on  that  the  future  is  created  one  wide-­‐moat  innovator  at   a  >me  and  each  will  flourish  from  their  own  wisdom.     Forpersonaluseonly
  54. 54. All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   54   Q&A   Forpersonaluseonly
  55. 55. Appendix:  Some  of  Our  Poten1al   Ac1onable  Stock  Ideas   Forpersonaluseonly
  56. 56. All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   56   Crea1ng  Unique  and  Authen1c  Holidays  for  Travellers   1.  What  makes  it  a  wide-­‐moat  business?     –  Exclusive   leases   to   must-­‐see   award-­‐winning   aLrac>ons   and   key   player   providing   popular   and   essen>al  services  travellers  in  the  country;  and  it  is  the  market  leader  in  its  vehicle  category.   –  A   3-­‐year   relook   into   its   business   model   resulted   in   successful   execu>on   of   stringent   cost   management,   a   less   capital   intensive   model   and   drama>c   improvement   in   opera>onal   profitability.     2.  Why  it  has  the  poten>al  to  double  in  3-­‐5  years?     –  Well-­‐posi>oned   to   focus   on   significant   growth   with   geographical   diversifica>on   and   leading   market  posi>on  with  a  posi>ve  tourism  environment.   –  The   embrace   of   technology   to   create   ‘shared   economy’   businesses   to   deliver   further   returns   without  running  the  risk  of  high  capital  expenditure,  building  the  AirBnb  equivalent  to  its  version.   –  On  the  back  of  suppor>ve  dynamics  for  the  industry,  it  has  the  ability  to  scale  the  business  further   through  value  accre>ve  acquisi>ons  but  at  the  same  >me,  it  has  to  make  sense  in  the  long  term.       3.  Management/Corporate  Culture   –  Management  is  cognizant  to  the  changing  landscape  of  the  industry,  and  benchmark  themselves   with   world   class   standards.   They   are   never   contented   with   the   performance   and   con>nually   assess  the  categories  and  markets  it  operate  within.     –  An  inclusive  culture  that  shares  team  success  and  believes  in  crea>ng  a  culture  with  trust  and  fun.   It  invariably  helps  the  company  to  perform  well  in  its  customer  engagement.   –  Management  prac>ces  financial  prudence  and  careful  alloca>on  of  capital.     Forpersonaluseonly
  57. 57. 2013 2014 2015 TTM Gross-Profit-Margin 72.6% 74.3% 74.5% 74.5% EBIT-Margin 6.4% 11.1% 15.6% 15.6% ROE 2.7% 7.0% 11.5% 11.5% 49.4% 55.6% 54.7% 54.7% Cash-Conversion-Cycle 7 F59 F87 F87 EBIT/CAPEX-(x) 5.0 15.7 9.9 9.9 Net-Debt-%-of-NTA 74.8% 49.2% 40.1% 40.1% EV/EBIT-(x) 13.1 8.4 8.4 8.7 EV/EBITDA-(x) 3.3 3.4 4.2 4.6 Sales 2.5% EBIT 159.1% EBITDA 22.7% Profitability Operating-Efficiency Valuation 3-Year-Growth Gross-Profit/Total-Assets All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   57   Financial  Summary   Forpersonaluseonly
  58. 58. All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   58   HungryGoWhere  Equivalent   1.  What  makes  it  a  wide-­‐moat  business?     –  Strong   ecosystem   >e-­‐in   with   suppliers,   users   and   customers:   Connect   the  vast  number  of  eateries  to  one  by  the  Internet  and    create  a  "food"   culture  of  the  21st  century   2.  Why  it  has  the  poten>al  to  double  in  3-­‐5  years?     –  Master   the   “art   of   mone>zing”   from   their   users:   direct   visits   by   sales   staff  to  deliver  tailored  services,  the  more  the  owners  see  the  results,   the  higher  they  are  willing  to  spend  on  adver>sing/promo>ons     –  Real  >me  online  reserva>on  system  driving  customers     3.  Management/Corporate  Culture   –  Founder  ~37%  ownership   –  Various  long  serving  employees:  great  signal  of  intrinsic  mo>va>on  and   confidence  in  the  business   –  Place   customer   sa>sfac>on   first   and   provide   fun,   up-­‐to-­‐date   gourmet   informa>on  to  internet  users  every  day.   Forpersonaluseonly
  59. 59. 2013 2014 2015 TTM Gross-Profit-Margin 73.7% 73.4% 73.5% 74.0% EBIT-Margin 14.5% 15.6% 16.7% 18.1% ROE 13.0% 14.8% 18.9% 22.2% Gross-Profit/Total-Assets 136.4% 123.0% 118.9% 114.9% Cash-Conversion-Cycle 48 56 58 56 EBIT/CAPEX-(x) 1.3 1.9 2.5 2.5 Net-Debt-%-of-NTA 68.8% 75.1% 75.2% 70.8% EV/EBIT-(x) 7.0 14.8 20.2 13.9 EV/EBITDA-(x) 4.4 9.2 13.3 9.5 Sales 19.7% EBIT 71.4% EBITDA 59.0% Profitability Operating-Efficiency Valuation 3-Year-Growth All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   59   Financial  Summary   Forpersonaluseonly
  60. 60. All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   60   World’s  #1  Innovator  of  Money  Handling  Machines   1.  What  makes  it  a  wide-­‐moat  business?     –  Customer-­‐centric  business  model  backed  by  a  highly  specialised  intangible  know-­‐how  to  con>nuously  roll   out  industry-­‐first  high-­‐performance  products,  from  single-­‐func>on  to  high-­‐specifica>ons.   –  Undisputable   market   leader   in   certain   product   categories   na>onal-­‐wide,   it   con>nues   to   acquire   complimentary,  synergis>c  businesses  to  widen  its  moat.     –  A   ver>cally   integrated   business   model   that   creates   a   virtuous   cycle   by   offering   solu>ons   at   different   stages  of  customers’  needs,  enables  cross-­‐selling  and  ability  to  generate  higher  revenue  per  customer.     2.  Why  it  has  the  poten>al  to  double  in  3-­‐5  years?     –  There  is  immense  untapped  growth  opportuni>es  in  overseas  markets  where  the  company  previously   could   not   access.   There   is   momentum   and   growing   revenue   contribu>on   from   overseas   market   by   tapping  on  its  recently-­‐acquired  subsidiary’s  worldwide  and  impressive  customer  base.     –  Compared  to  few  years  ago,  the  company  is  beLer  equipped  with  new  capabili>es  to  upsell  their  high   margin  services  aver  every  point  of  sale  to  each  customer.     –  The  exponen>al  increase  in  money  supply,  created  by  unprecedented  quan>ta>ve  easing  (QE),  livs  the   demand  of  its  product  because  it  solves  the  urgent  need  for  speedy  money  handling.   3.  Management/Corporate  Culture   –  Management   is   cognisant   about   relentless   push   to   innovate   their   products   to   meet   the   needs   of   the   society  and  stay  ahead  of  the  industry.  Value  crea>on  is  in  their  company’s  DNA.   –  Employees  are  encouraged  by  a  set  of  guidelines  such  as  collabora>on,  respect,  innova>on,  and  cost-­‐ conscious.  The  culture  believes  in  making  the  impossible,  possible.     –  The  core  management  team  have  a  combined  long  tenure  in  the  business  and  laid  out  clear  medium  to   long  term  plans  to  grow  the  business.   Forpersonaluseonly
  61. 61. 2013 2014 2015 TTM Gross-Profit-Margin 38.6% 39.8% 39.3% 38.9% EBIT-Margin 7.6% 7.7% 8.5% 9.0% ROE 4.3% 5.3% 6.5% 6.1% 23.1% 25.6% 25.7% 25.7% Cash-Conversion-Cycle 111 119 127 145 EBIT/CAPEX-(x) 2.3 2.8 2.7 2.5 16.0% 6.7% M1.6% M1.4% EV/EBIT-(x) 12.3 10.6 9.6 10.7 EV/EBITDA-(x) 6.3 5.9 5.7 8.6 Sales 18.9% EBIT 32.7% EBITDA 26.8% Profitability Operating-Efficiency Valuation 3-Year-Growth Net-Debt-/-(Cash)-%-of-NTA Gross-Profit/Total-Assets All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   61   Financial  Summary   Forpersonaluseonly
  62. 62. All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   62   #1  Nutri1ous  and  Healthy  Beverage     1.  What  makes  it  a  wide-­‐moat  business?     –  Ability  to  inculcate  the  fondness  for  the  drink  in  the  consumers  at  a   young  age  so  that  it  eventually  develops  into  a  “habit”  consuming  it   –  The  beverage  is  more  than  a  casual  drink.  It  represents  quality  and   wholesomeness.     2.  Why  it  has  the  poten>al  to  double  in  3-­‐5  years?     –  Building  factories  to  fund  the  next  stage  of  growth  in  China   –  “Tailwind”  of  health  trends  for  nutri>ous  products     –  Constant  products  innova>on  and  localiza>on  to  increase  sales   3.  Management/Corporate  Culture   –  Old   heritage   family   business   with   a   reputa>on   to   upkeep   thus   lowering  corporate  governance  risk   –  Family  ~15%  ownership   –  Idea   larger   than   oneself:   providing   nutri>ous   beverage   for   the   masses  at  the  lowest  possible  price   Forpersonaluseonly
  63. 63. 2013 2014 2015 TTM Gross-Profit-Margin 47.5% 48.4% 49.7% 50.6% EBIT-Margin 10.9% 10.4% 10.4% 11.2% ROE 18.6% 17.5% 19.4% 24.1% Gross-Profit/Total-Assets 65.4% 67.1% 69.0% 68.1% Cash-Conversion-Cycle 69 67 69 59 EBIT/CAPEX-(x) 2.6 2.0 1.0 0.9 Net-(Debt)/Cash-%-of-NTA P1.9% 11.4% 9.4% 10.0% EV/EBIT-(x) 20.5 24.6 23.4 22.4 EV/EBITDA-(x) 14.7 17.6 17.0 16.7 Sales 24.7% EBIT 19.2% EBITDA 17.4% Profitability Operating-Efficiency Valuation 3-Year-Growth 63   Financial  Summary   All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   Forpersonaluseonly
  64. 64. All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   64   Hidden  Global  Mo1on  Enabler   1.  What  makes  it  a  wide-­‐moat  business?     –  More  than  50  years  of  innova>on  and  acquired  technologies;  its  solu>ons  are   the  quietest,  lightest  and  have  the  highest  power-­‐to-­‐weight  ra>o.   –  It  has  global  produc>on  facili>es  in  Asia,  Europe  and  the  Americas,  allowing  it   to   have   a   lean   logis>cs   management   solu>on   that   serves   its   clients   very   closely.  Its  Automo>ve  clients  include  premium  brands.   2.  Why  it  has  the  poten>al  to  double  in  3-­‐5  years?     –  Ver>cal   and   horizontal   integra>on   with   synergis>c   M&A,   increasing   their   cross  sales  and  new  sales  poten>al.   –  The  US  automo>ve  industry  is  experiencing  a  boom,  and  there  is  a  structural   adop>on   of   motorized   func>onali>es,   in   both   automo>ve   and   industrial   segments.   3.  Management/Corporate  Culture   –  Family  owned  business  with  more  than  60  years  reputa>on  to  uphold.   –  Has  an  excellent  M&A  execu>on  track  record.  All  three  acquisi>ons  turned   out   to   be   their   top   business   units   which   lasted   more   than   10   years,   increasing  their  overall  sales  manifold.   –  Increasing  dividends,  very  aggressive  share  buyback  in  last  one  year.   Forpersonaluseonly
  65. 65. All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   65   Financial  Summary   2013 2014 2015 TTM Gross-Profit-Margin 27.0% 28.5% 28.6% 28.3% EBIT-Margin 12.0% 11.6% 11.6% 9.1% ROE 14.2% 12.3% 11.3% 11.5% Gross-Profit/Total-Assets 24.7% 23.9% 21.5% 21.2% Cash-Conversion-Cycle 79 66 75 67 EBIT/CAPEX-(x) 3.0 2.5 1.8 1.4 Net-Cash-%-of-NTA 23.4% 30.8% 28.9% 39.3% EV/EBIT-(x) 9.3 11.4 10.9 13.4 EV/EBITDA-(x) 6.8 8.4 7.9 9.0 Sales 3.6% EBIT 22.9% EBITDA 15.9% Profitability Operating-Efficiency Valuation 3-Year-Growth Forpersonaluseonly
  66. 66. All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   66   Global  #1  Bus  Manufacturer   1.  What  makes  it  a  wide-­‐moat  business?     –  Having   the   largest   and   the   most   technologically   advanced   manufacturing   base  of  large  and  medium-­‐sized  buses  in  the  world.   –  Enjoyed  great  economies  of  scale  and  reinvest  substan>ally  back  into  R&D   to  widen  the  edge  over  compe>tors   –  Domes>c  market  share  ~30%  /  Global  ~12%   2.  Why  it  has  the  poten>al  to  double  in  3-­‐5  years?     –  Constant  innova>on  over  the  years.   •  Successfully  engineered  the  world  1st  driverless  bus   •  New  Energy  Bus   –  Further  consolida>on  of  the  market     –  Expansion  overseas   3.  Management/Corporate  Culture   –  35  years  of  vast  experience  in  the  company   –  Worked  his  way  from  a  small  engineer  to  the  CEO  of  the  company   –  Management  philosophy:  Customer  and  employees  always  comes  first   Forpersonaluseonly
  67. 67. 2012 2013 2014 TTM Gross,Profit,Margin 21.2% 21.7% 26.4% 25.0% EBIT,Margin 7.5% 8.4% 10.7% 11.4% ROE 20.5% 20.9% 23.9% 23.9% Gross,Profit/Total,Assets 28.4% 26.9% 26.7% 26.7% Cash,Conversion,Cycle 15 41 32 32 EBIT/CAPEX,(x) 0.8 2.0 1.4 1.4 Net,Cash,%,of,NTA 30.4% 43.1% 35.3% 35.3% EV/EBIT,(x) 10.2 10.2 10.7 14.0 EV/EBITDA,(x) 8.6 7.8 8.6 11.2 Sales 30.0% EBIT 83.8% EBITDA 90.9% Profitability Operating,Efficiency Valuation 3,Year,Growth All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   67   Financial  Summary   Forpersonaluseonly
  68. 68. All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   68   #1  Cookware  Company   1.  What  makes  it  a  wide-­‐moat  business?     –  Constant  innova>on  yearly  tailoring  to  the  demand  and  needs  of  the  consumers   –  #1  in  its  country:  pressure  cooker,  frying  pan,  wok,  steamer  and  electric  cooker   –  #2  in  its  country:  Rice  cooker,  electric  pressure  cooker,  electric  cooker,  electric   keLle     2.  Why  it  has  the  poten>al  to  double  in  3-­‐5  years?     –  Great  synergies  between  European  MNC  owners  whereby  owners  transfer  orders   to  company  to  lower  cost,  the  company  tap  onto  the  owners  network  to  expand   overseas  and  also  exchange  of  technologies  to  improve  on  cookware  produc>on.   –  Strong  local  and  overseas  demands   3.  Management/Corporate  Culture   –  Majority  owned  by  a  European  MNC  with  capable  local  managers  with  “owner   operator”  mindset   –  Typical   Berkshire   Hathaway   opera>ng   company   where   owners/managers   have   autonomy   Forpersonaluseonly
  69. 69. All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   69   Financial  Summary   2012 2013 2014 TTM Gross,Profit,Margin 30.4% 29.6% 30.1% 28.7% EBIT,Margin 8.4% 9.0% 8.9% 9.2% ROE 15.8% 18.1% 18.1% 18.1% Gross,Profit/Total,Assets 42.4% 43.5% 43.2% 43.2% Cash,Conversion,Cycle 73 65 56 56 EBIT/CAPEX,(x) 6.2 7.3 6.8 6.8 Net,Cash,%,of,NTA 39.9% 45.5% 54.2% 54.2% EV/EBIT,(x) 12.5 11.2 10.9 15.2 EV/EBITDA,(x) 10.8 9.9 9.8 13.8 Sales 38.4% EBIT 47.3% EBITDA 41.8% Profitability Operating,Efficiency Valuation 3,Year,Growth Forpersonaluseonly
  70. 70. All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   70   2nd  Largest  Domes1c  Elevator  Maker   1.  What  makes  it  a  wide-­‐moat  business?     –  It  has  a  20%  domes>c  travellator  market  share.  Its  products  are  exported  to  80  countries   globally,  including  US,  EU,  AU,  ME  &  Asia.  Its  clients  include  IKEA,  Carrefour,  Wal-­‐Mart,   LVMH  and  Burberry.   –  Constant   research   and   innova>on   enables   it   to   recently   rank   on   par   with   high-­‐tech   established  peers  with  its  high  speed  and  eco-­‐friendly  livs.   –  It   has   a   superior   24-­‐hour   servicing   capability   that   forms   a   virtuous   cycle   with   its   manufacturing  and  sales  division.   2.  Why  it  has  the  poten>al  to  double  in  3-­‐5  years?     –  Domes>c  market  has  low  liv  density  compared  to  developed  countries,  and  most  of  the   livs  are  old  and  due  for  replacement.  Local  government  enacted  tough  safety  rules  that   requires  replacement  and  servicing.   –  Established   a   training   center   to   improve   industry   standards   by   training   and   cer>fying   service   crew.   Implemented   Internet   of   Things   system   onto   its   network   of   livs,   travellators  and  escalators  which  enables  them  to  pre-­‐empt  breakdowns  and  servicing   needs  and  have  faster  response  >me.   3.  Management/Corporate  Culture   –  Humble   management   who   worked   through   the   ranks   over   10   years.   Treats   team   members   as   family   –   Family   has   30%   shareholdings,   veteran   team   members   owns   another  20%.   –  Distributed  90%  of  IPO  proceeds  to  shareholders  in  3  years  while  management  were  paid   2%  of  Profit  Before  Tax  (PBT).   Forpersonaluseonly
  71. 71. All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   71   Financial  Summary   2013 2014 2015 TTM Gross-Profit-Margin 24.5% 26.9% 28.5% 29.4% EBIT-Margin 8.7% 9.0% 10.0% 9.9% ROE 10.8% 13.0% 15.1% 15.8% Gross-Profit/Total-Assets 26.2% 27.6% 22.1% 29.8% Cash-Conversion-Cycle 28 29 27 27 EBIT/CAPEX-(x) 3.0 2.2 1.6 1.9 Net-Cash-%-of-NTA 79.6% 56.9% 63.1% 43.8% EV/EBIT-(x) 7.2 12.0 10.3 21.4 EV/EBITDA-(x) 6.2 10.5 9.1 18.9 Sales 37.2% EBIT 67.3% EBITDA 59.5% Profitability Operating-Efficiency Valuation 3-Year-Growth Forpersonaluseonly
  72. 72. All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   72   Leading  Healthy  Snack  Company   1.  What  makes  it  a  wide-­‐moat  business?     –  Hidden  Champion  with  62%  domes>c  market  share  in  healthy  snacks   while  expor>ng  to  35  countries.     –  Export   revenue   has   been   growing   steadily   and   con>nuously,   which   accoun>ng  for  43%  of  total  sales  now.   –  Ability   to   constantly   introduce   new   taste   and   flavor   snack   into   the   market  which  is  well  received.   2.  Why  it  has  the  poten>al  to  double  in  3-­‐5  years?     –  Target  to  be  the  leader  of  the  snack  market  in  Asian  by  2018   –  Aggressive   expansion   plans   in   place   to   increase   current   produc>on   line  and  capacity  to  feed  increasing  demand.     3.  Management/Corporate  Culture   –  Entrepreneur-­‐run  business  emphasizing  a  lot  in  innova>on  and    R&D   Forpersonaluseonly
  73. 73. All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   73   Financial  Summary   2012 2013 Gross)Profit)Margin 29.7% 34.5% EBIT)Margin 6.8% 6.8% ROE 42.5% 49.9% Gross)Profit/Total)Assets 72.9% 86.0% Cash)Conversion)Cycle 22 22 EBIT/CAPEX)(x) 1.6 2.5 Net)Debt)%)of)NTA P133.2% P145.1% EV/EBIT)(x) P P EV/EBITDA)(x) P P Sales 7.2% EBIT 58.9% EBITDA 47.4% Valuation 3)Year)Growth P95.3% P 74.2% P 2014 34.8% 10.1% 56.3% 17 2.8 Profitability Operating)Efficiency Forpersonaluseonly
  74. 74. All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   74   Leading  Fully  Integrated  In-­‐land  Logis1cs  Service  Provider   1.  What  makes  it  a  wide-­‐moat  business?     –  Hidden  Champion  owns  and  operates  40  different  warehouses  with  total  space  of  210,000  m2   and  an  area  of  around  557,000m2  for  automakers  to  rent  for  parking  their  cars  before  expor>ng.   –  Opera>ons  located  at  the  busiest  port  in  the  country  having  30  years  of  exclusive  rights  to   manage  chemical  &  dangerous  goods     –  Has  the  ability  and  know-­‐how  in  develop  and  employ  warehouse  management  sovware  to   ensure  maximum  efficiency.     2.  Why  it  has  the  poten>al  to  double  in  3-­‐5  years?     –  Venture  into  neighboring  country  to  capture  exploding  demand  for  logis>cs  services.   –  Looking  to  form  a  logis>cs  REITs  to  expand  business  through  M&A  to  gain  more  market  share   –  Aim  to  be  ASEAN  leader  by  2019   3.  Management/Corporate  Culture   –  Entrepreneur  run  business   –  Emphasizes  a  lot  on  innova>on.  Developed  strong  know-­‐how  and  gained  prac>cal  experiences   for  more  than  35  years  in  warehouse  management  efficiency   –  Founder’s  family  holds  50%  of  the  company   Forpersonaluseonly
  75. 75. All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   75   Financial  Summary   2012 2013 2014 TTM Gross Profit Margin 37.8% 41.0% 36.0% 36.6% EBIT Margin 17.4% 25.2% 11.6% 18.0% ROE 16.7% 25.3% 9.5% 10.6% Gross Profit/Total Assets 19.4% 20.9% 18.0% 18.0% Cash Conversion Cycle 7 -13 19 6 EBIT/CAPEX (x) - - - 1.3 Net Debt % of NTA 120.0% 144.2% 274.4% 64.1% EV/EBIT (x) - - - 20.7 EV/EBITDA (x) - - - 13.4 Sales 36.4% EBIT -8.6% EBITDA N/A Profitability Operating Efficiency Valuation 3 Year Growth Forpersonaluseonly
  76. 76. All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   76   No.1  Domes1c  Air-­‐con  &  Refrigerator  Maker   1.  What  makes  it  a  wide-­‐moat  business?     –  It  Innovated  an  air-­‐con  solu>on  that  addresses  local  needs  and  thus  garnered   a  loyal  following  over  the  past  50  years.     –  It  has  a  35%  domes>c  air-­‐con  market  share,  and  a  25%  domes>c  refrigerator   market  share.   –  It  has  an  unparalleled  extensive  aver-­‐sales  service  network.   2.  Why  it  has  the  poten>al  to  double  in  3-­‐5  years?     –  Domes>c   market   has   low   air-­‐con   and   refrigerator   densi>es   compared   to   other   Asian   countries.   Thus,   there   is   a   long   runway   to   grow   as   disposable   income  grows.   –  Great  focus  to  grow  its  building  management  solu>on  business  which  require   much   higher   barrier   to   entry   and   increases   its   s>ckiness   as   customers   are   >ed  to  their  solu>on  through  the  lives  of  the  buildings.   3.  Management/Corporate  Culture   –  Family  owned  business  with  more  than  50  years  of  reputa>on  to  uphold.   –  Current   management   built   the   current   deep   reach   of   aver-­‐sales   servicing,   and  the  new  building  management  solu>on  business.   Forpersonaluseonly
  77. 77. All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   77   Financial  Summary   2012 2013 2014 TTM Gross,Profit,Margin 25.8% 32.3% 33.1% 31.0% EBIT,Margin 10.4% 11.8% 12.9% 15.9% ROE 33.3% 22.1% 23.5% 20.5% Gross,Profit/Total,Assets 35.1% 50.9% 40.1% 39.5% Cash,Conversion,Cycle 123 121 136 133 EBIT/CAPEX,(x) 10.8 15.0 22.5 16.3 Net,Cash,%,of,NTA 107.2% 59.2% 26.4% 34.3% EV/EBIT,(x) O 3.4 11.7 9.2 EV/EBITDA,(x) O 3.2 11.1 8.7 Sales 32.2% EBIT 71.6% EBITDA 68.4% Profitability Operating,Efficiency Valuation 3,Year,Growth Forpersonaluseonly
  78. 78. All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   78   Top  Educa1on  Solu1on  Provider   1.  What  makes  it  a  wide-­‐moat  business?     –  Hidden  Champion    with  strong,  leading  posi>on  and  the  only  player  with  ICT  know-­‐how  in   educa>on  solu>on  provider  industry  to  win  government  tenders  and  penetrate  into  new   business  segment  and  market.   –  Operates  in  a  boring  industry  which  Industry  peers  become  complacent  and  lack  of   commitment  and  innova>ve  ideas  to  grow  their  business  forward.   2.  Why  it  has  the  poten>al  to  double  in  3-­‐5  years?     –  Quietly  consolida>ng  this  fragmented  industry,  taking  over  its  peers  that  has  valuable   Intellectual  Proper>es.   –  The  only  player  in  the  industry  that  meets  Government’s  latest  educa>on  material   requirements  making  them  able  to  win  more  tenders.     –  Growing  into  ASEAN  market  providing  publishing,  content  crea>on  and  digitaliza>on  services.   3.  Management/Corporate  Culture   –  Entrepreneur  run  business     –  Managing  Director  with  30  years  experience,  while  core  team  members  work  in  the  company   for  more  than  20  years.  Management  hold  >50%  of  the  company.   –  Managing  Director:  “This  business  is  not  a  typical  family  business  where  it  will  be  handover  to   my  2nd  genera>on.  I  constantly  tell  my  team  that  anyone  with  extensive  experience  in  this   industry  and  have  the  capabili>es  to  bring  the  company  forward  will  become  the  next  CEO.   This  company  is  aiming  to  become  a  regional  player,  not  just  locally.”   Forpersonaluseonly
  79. 79. All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   79   2013 2014 2015 TTM Gross-Profit-Margin 41.2% 46.3% 47.5% 47.5% EBIT-Margin 22.7% 21.8% 24.8% 24.8% ROE 20.0% 13.1% 14.9% 14.9% Gross-Profit/Total-Assets 42.2% 32.1% 28.8% 28.8% Cash-Conversion-Cycle 193 297 361 361 EBIT/CAPEX-(x) 13.2 14.4 1.0 1.0 Net-Cash/(Debt)-%-of-NTA 18.1% 22.9% P2.2% P2.2% EV/EBIT-(x) P 8.8 13.3 15.3 EV/EBITDA-(x) P 7.9 11.9 13.8 Sales 11.5% EBIT 22.2% EBITDA 20.0% Profitability Operating-Efficiency Valuation 3-Year-Growth Financial  Summary   Forpersonaluseonly
  80. 80. All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   80   1.  What  makes  it  a  wide-­‐moat  business?     –  Focus  on  tailor-­‐made  elevator  to  differen>ate  itself  with  other  players.   –  Synergy   across   3   business   segment   (Manufacturing,   Distribu>on   of   E&E   components,  Maintenances).  By  serving  1  customer,  all  3  segments  has  sales.   –  The  maintenances  base  will  con>nue  to  enlarge  because  more  than  90%  of  its   new  manufactured  elevators  are  serviced  by  them  every  year.   –  It   is   a   rule   by   government   that   ALL   elevators   must   be   serviced   on   monthly   basis.   2.  Why  it  has  the  poten>al  to  double  in  3-­‐5  years?     –  Increasing  EBIT  contribu>on  from  Services  and  Maintenances  segment  -­‐  from   3.2%  in  FY2010  to  22%  in  FY2015   –  Aggressive   growing   its   business   in   oversea   market   by   con>nue   M&A.   Their   profit  contribu>on  from  domes>c  and  interna>onally  will  be  50:50  by  FY2020.   3.  Management/Corporate  Culture   –  3  Execu>ve  Directors  has  more  than  20  years  experience  in  elevator  business   –  Founders  holding  ~36%  stake   Leading  Elevator  Manufacturer   Forpersonaluseonly
  81. 81. 2013 2014 2015 TTM Gross-Profit-Margin 27.5% 27.5% 28.0% 28.0% EBIT-Margin 11.5% 9.2% 13.1% 13.2% ROE 14.5% 10.9% 15.7% 15.7% Gross-Profit/Total-Assets 23.2% 32.5% 33.4% 33.4% Cash-Conversion-Cycle 294 194 214 214 EBIT/CAPEX-(x) 41 1 16 16 Net-Cash-%-of-NTA 10.2% 5.8% 12.4% 12.4% EV/EBIT-(x) 4.1 9.9 4.5 4.6 EV/EBITDA-(x) 3.9 9.0 4.2 14.3 Sales 13.8% EBIT 33.3% EBITDA 36.4% Profitability Operating-Efficiency Valuation 3-Year-Growth All  Rights  Reserved  by  8  Investment  Pte  Ltd.   No  Copy  and  Reproduc>on  Allowed.   81   Financial  Summary   Forpersonaluseonly

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