STOCK GUIDE 2017

TOP 10 ASIAN STOCKS

IN OUR CURRENT WATCH LIST
 ABOUT VALUE INVEST ASIA

Vision
To become a key reference website for value investors interested about the Asian
Stock Markets.

Mission
To spread the concept of value investing across Asia.

Why are we doing this? And How do we plan to do it?

We realized that many blogs and website dedicated to value investing are based on the
US market. So, we set out to create a site that produces value investing education
information, specifically designed for investors in Asia.

Value Invest Asia creates high-quality and unique contents for investors in Asia. We do
that by creating educational content and information about companies listed in Asia,
updated every week. If you sign up for our mailing list, you would even be able to
receive a FREE monthly Asia-In-Focus Report, where we analyse the major financial
news in Asia for you.

Value Invest Asia is a site for you to learn, share and network on how to practice value
investing in Asia.

We want to develop a tribe of passionate value investors in Asia. Thus, VIA also provides
a blogging platform for Asian investors who want to share their ideas and knowledge
with others. We are able to create a writer account for you to post your thoughts while
we assist you in editing your posts and maintaining the website for you.

Together, we aspire to be your go-to website in your process of learning value investing
and finding potential companies to invest in.

Now, let us begin our journey.

ValueInvestAsia.com Stock Guide 2017 | 01

 HELPING YOU KICKSTART YOUR 2017
INVESTING JOURNEY

Starting out in investing can be a complicated task. You might have to scrabble through
the internet for information on what value investing is really about (and not even sure
if the information you obtain is correct). Then you might struggle with finding
information about the basics of accounting and financial analysis, just to understand
how to start analysing a stock.

Even after all that, you are still struck with tens of thousands of stocks to choose from,
where should you start?

We realized that challenge. It is the very same challenge that we face when we started
out learning about investing a decade ago. However, over the past decade, we have
designed a system to help us generate a smooth investment process, helping us
generate strong return on our investments. Part of the process is building up a good
number of companies that we monitor constantly on our Stock Watch List.

Starting this year, we decided to create a yearly guide for investors. This is meant to
highlight some of the stocks that our team is currently watching. We break it down the
facts about their businesses. We will also do a SWOT analysis on each of the company.
Hopefully, it would help you kick-start your investment journey as well. Let’s not waste
any time.

Here are the top ten Asian companies we are keeping in our Stock Watch List.

ValueInvestAsia.com Stock Guide 2017 | 02

 FEATURED COMPANY NO. 1

WANT WANT CHINA HOLDINGS LTD

• Ticker : HKG:0151
• Exchange : Hong Kong Stock Exchange
• Market Capitalisation : About HK$ 68.0 Billion (April 2017)
• 2016 Revenue : RMB19.7 billion
• 2016 Profit : RMB 3.5 billion

The Business
Want Want China Holdings is a manufacturer and distributor of kids snack food, dairy
products and other beverages in China. It produces popular products mainly under its
Want Want Brand. Its products could easily be spotted in most retail outlets across
China.

SWOT Analysis

Strength
The company has a wide distribution network in China, with more than 9000
distributors nationwide in China. This gives the company the ability to push its
products throughout the whole country. The company also manufactures its products
from 91 factories, meaning that it has a diversified manufacturing and distribution
capability.

Additionally, Want Want China has a long history in China and has built a strong
reputation as a snacks manufacturer for kids.

ValueInvestAsia.com Stock Guide 2017 | 03

Weakness
The company does have some weakness. For example, it is still a China-focused
company. Although it exports its products oversea, the domestic market is still the
largest market for the company.

Secondly, much of its sales and profits are coming from its key segment; the hot-kid
milk segment. That could be a weakness as too much of its business is relying on one
segment and one market.

More recently, there have been criticisms of its products recently, as they are deemed
as unhealthy snacks. As the parents around the world move toward being more health
conscience, demand for such unhealthy snacks and drinks might be on the decline.

Opportunities
Firstly, consumer spending in China is still on an upward trend. Given that Want Want
China is in the consumer space, it could grow together with the growing spending
pattern of consumers in China.

Moreover, there seem to be still many areas of opportunities for Want Want China. For
one, it could expand overseas. With its strong balance sheet and customer base in
China, it could support the company as it increases its investment to boost up its
market overseas.

Alternatively, it can utilise its existing distribution network in China and add on more
products to the pipeline. That could potentially increase its revenue in the future as
well.

Threat
E-commerce around the world is getting more and more mainstream. However,
e-commerce is already a mainstream channel for shoppers in China. Therefore, if the
company does not have a clear e-commerce strategy, it might be threatened
significantly in the future.

On the other hand, China is slowly opening up to the world. Chinese consumers are
demanding more and more of quality foreign goods as well. This could lead to more
international brands coming into China and creating more competition for a company
like Want Want China.

ValueInvestAsia.com Stock Guide 2017 | 04

 FEATURED COMPANY NO. 2

TENCENT HOLDINGS LTD

• Ticker : HKG:0700
• Exchange : Hong Kong Stock Exchange
• Market Capitalisation : About HK$ 2.2 Trillion (April 2017)
• 2016 Revenue : RMB 151.9 billion
• 2016 Profit : RMB 41.1 billion

The Business
Tencent Holdings (HKG:0700) is one of the largest technology companies in China. It is
the dominant social network in the country with close to a billion users each in its QQ
and WeChat platforms. Through its social platform, together with its other portal, the
company generates revenue from three mainstream.
• By providing services to its users.
• Distribute products and services of other companies to its users
• Advertising

ValueInvestAsia.com Stock Guide 2017 | 05

SWOT Analysis

Strength
The key strength of Tencent Holdings is its strong user base. Moreover, its platforms
are extremely “sticky” for existing users. Its users can perform a wide range of tasks
directly within its platform; from hailing a cab, to watching a movie, shopping and
transferring funds.

This creates a business model that generates very strong cash flow. In turn, it allows
Tencent Holdings to maintain a stellar balance sheet. This reduced the risk of the
company facing liquidity issues during a market downturn.

Weakness
However, Tencent Holdings is operating in a very fast-moving industry. The company
needs to constantly renew itself or might risk facing obsolesce. Yet, the issue is that it is
already one of the largest technology companies in the world. Its size might prevent it
from shifting fast enough to market trends.

In addition, it might have already reached a size where it is too big to grow significantly
to produce market-beating returns for investors. After all, its platforms have close to a
billion users each, which is already close to the entire population of China.

Lastly, Tencent Holdings is still predominately a China-based company. Therefore, it is

not certain if the company can replicate its success in overseas markets.

Opportunities
The most direct opportunity for Tencent Holdings now is to simply add on new
offerings on its platforms for users. The user base is already very engaged within its
platforms, the company can distribute additional services and products to them.

Secondly, it is already working in expanding its platform overseas. Its WeChat platform
is growing rapidly in markets like Southeast Asia. Once its user bases in these oversea
markets reached critical mass as well, it might be able to start replicating its services
and offerings to these new users.

One interesting aspect of its business is its venture capital arm. The company has
grown to such a large size that it is a key investor in new technology and start-ups all
over the world. It is a key investor in business such as JD.com, SuperCell, and Didi
Chuxing. Therefore, its future investments might also grow into huge businesses in
their own rights.

ValueInvestAsia.com Stock Guide 2017 | 06

Threat
Being a technology company, security threats are always very real. We have seen
multiple damaging incidents involving hackers, even with large companies such as
Yahoo Inc or Sony Inc. If Tencent Holdings is not able to manage the security and
privacy of its users & the company well, it might see its reputation being destroyed.

Furthermore, as China opens, the government might start allowing more foreign
companies to compete directly in China. It might lead to stronger competition for
Tencent Holdings, with companies that are experienced and well-funded. For example,
Facebook Inc has been very eager in promoting itself in China, hoping to be able to
enter the market one day.

Similarly, as Tencent Holdings grow, many parts of its business are starting to merge
with what its main competitors such as Weibo, Baidu and Alibaba are doing. This might
lead to a very nasty battle of the giants.

ValueInvestAsia.com Stock Guide 2017 | 07

 FEATURED COMPANY NO. 3

HSBC HOLDINGS PLC

• Ticker : HKG:0005; LON:HSBA; NYSE:HSBC; EPA:HSB

• Exchange : Hong Kong Stock Exchange; London Stock
Exchange, NYSE; Paris Stock Exchange
• Market Capitalisation : About HK$ 1.2 Trillion (April 2017)
• 2016 Revenue : USD 48.0 billion
• 2016 Profit : USD 7.1 billion

The Business
Hong Kong Shanghai Banking Corporation, or HSBC, is one of the few truly globalised
banks. It has a presence in every continent in the world except Antarctica. It provides a
wide range of financial services to individual and corporations worldwide, from retail
banking, corporate banking, investment banking to wealth management.

SWOT Analysis

Strength
HSBC has a long history and a strong brand in the financial sector. With its global reach
and a full range of services, the company is a “one-stop shop” for many companies
doing international businesses. It is also one of the few foreign banks that has a strong
presence in China. This might give it a good position to help Chinese companies expand
overseas.

More importantly, its strong branding creates trust in customers, the most critical
aspect of any financial firm.

ValueInvestAsia.com Stock Guide 2017 | 08

Weakness
However, being big might not always be an advantage. HSBC has been targeted by
many governments for its role in the global financial crisis or other money laundering
charges. Given its size, it becomes an easy target for governments to pursue, in order
to put a point across to the whole industry. The firm has been charged multiple times
over the last few years and has racked up fines running into the billions. Unfortunately
for HSBC, being big can be a weakness too.

Similarly, it is being monitored and regulated by many agencies and government. This
might prevent it from moving quickly to address new market trends or to compete with
smaller, more flexible competitors.

Lastly, given its huge global footprint and size, it is now part of the “too-big-to-fail”
banks. Yet, that might also cause it to be a “too-big-to-grow” bank. The bank might face
difficulties in growing significant for its investors.

Opportunities
Given its global network, HSBC is very well positioned to help companies, especially
China-based companies currently, in expanding overseas. Additionally, due to the
current weak interest rates environment and after a long series of facing regulatory
fines, HSBC could see a recovery in its business as interest rates rise in the future. This
is because, a bank typically earns a spread, called net interest margin between the cost
of their funds and the interest rate it charges to customers. With a rising interest rate
environment, there is a good chance that the bank would be able to increase that
spread as well. Thus, boosting its profit margin.

Threat
As mentioned above, the regulatory risk would be a key threat for the company. HSBC
is being watched closely by authorities around the world. Therefore, it would need to
be very careful in running its business.

Additionally, the finance industry is starting to face disruption from technology as well.
The recent rise in Fintech, technology companies focusing on the finance industry,
might become a threat to the traditional business of banking. This have been witnessed
in other industries; similar to how Airbnb and Uber have disrupted the hotel and taxi
businesses.

ValueInvestAsia.com Stock Guide 2017 | 09

 FEATURED COMPANY NO. 4

CAPITALAND MALL TRUST

• Ticker : SGX:C38U
• Exchange : Singapore Exchange
• Market Capitalisation : About S$ 7.1 Billion (April 2017)
• 2016 Revenue : S$ 689.7 million
• 2016 Profit : S$479.7 million

The Business
CapitaLand Mall Trust is a real estate investment trust, or a REIT in short. A REIT is
basically an asset owner which manage the properties for its unitholders. In return for
a beneficial tax treatment, it must pay out 90% of all its distributable income for the
year to its investors.

CapitaLand Mall Trust is the largest mall asset owner in Singapore. It owns 16
properties in Singapore. Most of its malls have premium tenants such as Temasek
Holdings, Cold Storage Singapore, Robinson & Co. and NTUC Enterprise.

ValueInvestAsia.com Stock Guide 2017 |10

SWOT Analysis

Strength
The REIT owns prime assets in Singapore that have large foot traffic. This means that its
malls are popular with both tenants and consumers. This allows it to generate very
strong cash flow from its properties. Given that most of its income must be distributed
out to investors, it has proven to be a popular investment among income investors.

Furthermore, it is sponsored by one of the largest property companies in Southeast

Asia, CapitaLand Ltd. The relationship with its sponsor might gives it access to acquire
future properties from the sponsor’s development. Thus, this relationship could help
enhance its asset base for its investors in the long run.

Weakness
CapitaLand Mall Trust is a REIT. Investor need to understand that a REIT structure is
more rigid than a company structure. The trust would need to pay out most of its
earnings to enjoy its tax benefits. This leaves only a little cash buffer to help protect the
REIT through a downturn or for expansion.

In addition, CapitaLand Mall Trust is part of the CapitaLand Group and therefore it is
segmented out as just the group’s mall owner and operator. This might restrict the REIT
in term of the opportunities to expand and how it can plan its long-term future.

Another point to note is that most of its earnings are coming from its Singapore assets.
That might cause it to be too exposed to the Singapore retail economy.

Lastly, even as it is the largest mall operator in Singapore, it does not have full pricing
power over its tenants. The rental rate it charges is still subjected to the market
condition, including supply and demand for retail space in Singapore.

Opportunities
Singapore has been voted for many years as one of the best places to live and work
globally. This has led to a growth in the population and tourism in Singapore.
Ultimately, these two trends are in favour of CapitaLand Mall Trust.

The REIT could expand overseas. In fact, it owns a 14.11% stake in its sister-REIT,
CapitaLand Retail China Trust, which focuses on retail properties in China. Likewise, as
its sponsor, CapitaLand Ltd expands to other markets, CapitaLand Mall Trust could end
up becoming the mall operator for other assets overseas. These could become a
growth catalyst for the trust in future.

ValueInvestAsia.com Stock Guide 2017 | 11

Threat
The entire retail sector is under threat from E-Commerce. Not surprisingly, it might
affect the mall operators as well. CapitaLand Mall Trust has already started changing its
tenant mix to match the emerging trends. It recently closed one of its most valuable
properties, Funan IT Mall. It wanted to transform Funan Mall into a lifestyle mall that
emphasizes more on the experiences of shoppers, rather than just being a shopping
destination.

Lastly, Singapore is a global city, therefore the health of the global economy would have
a direct impact on its economy. If the global economy is to slow down or faces another
recession, its operation might be impacted.

ValueInvestAsia.com Stock Guide 2017 | 12

 FEATURED COMPANY NO. 5

CAPITALAND COMMERCIAL TRUST

• Ticker : SGX:C61U
• Exchange : Singapore Stock Exchange
• Market Capitalisation : About S$4.8 billion (April 2017)
• 2016 Revenue : S$ 298.6 million
• 2016 Profit : S$ 260.6 million

The Business
CapitaLand Commercial Trust is another REIT sponsored by CapitaLand Ltd. It is one of
the largest commercial property owners in Singapore, owning prime grade An office
buildings like the Capital Tower and Raffles City Singapore. The REIT currently owns 10
commercial properties in Singapore and hold a 17.7% stake in MRCB-Quill REIT, another
commercial REIT listed on Bursa Malaysia.

ValueInvestAsia.com Stock Guide 2017 | 13

SWOT Analysis

Strength
The REIT owns many prime commercial buildings in Singapore which demand premium
rental rates. Singapore, being a key regional hub, continue to show strong demand for
commercial space. Its grade A assets allow the trust to have strong cash flow and a high
yield for its investors.

Again, due to its close relationship with CapitaLand Ltd, the company has a strong
backing from its sponsor in term of financing and future pipeline.

Weakness
Similar to CapitaLand Mall Trust, CapitaLand Commercial Trust is a REIT. As discussed
previously the rigid structure of a REIT means that the trust might have little buffer
cash to help protect itself from a downturn.

CapitaLand Commercial Trust is focused mainly on commercial properties such as

office buildings. This restriction might be a weakness for the trust. This is because the
trust would be subjected to the supply and demand of commercial properties in the
Singapore market and has little control over its pricing power.

Opportunities
The trust could tap on Singapore’s reputation as a regional hub. As businesses expand
in Singapore, so would the demand for commercial space. This would, in turn, benefit
the trust.

Its sponsor, CapitaLand Ltd has expanded overseas, CapitaLand Commercial Trust
could be the REIT to take control the group’s commercial properties. This would give the
REIT a good pipeline of growth opportunities in the future.

Another area of opportunity is that CapitaLand Commercial Trust could improve on

existing properties, boosting their value and yield. This is commonly known as Asset
Enhancement Initiatives, or AEI. AEI could potentially raise the value and rental of its
properties for CapitaLand Commercial Trust.

ValueInvestAsia.com Stock Guide 2017 | 14

Threat
One key threat to CapitaLand Commercial Trust is the rise of business parks.
Companies are turning to cheaper space for some of their back-office functions. In
recent years, many multi-national companies in Singapore started placing some of
their back-office employees in business parks outside of the cities. These business
parks give these companies the ability to save on significant rental compared to having
all their workforce in the central business district.

Furthermore, companies are opening up to the idea of having remote employees in

their organisation. If the trend of having remote employees continues, the demand (per
company) for prime office space might diminish in the future. This is also a possible
threat for the REIT.

ValueInvestAsia.com Stock Guide 2017 | 15

 FEATURED COMPANY NO. 6

FRASERS CENTREPOINT LIMITED

• Ticker : SGX:TQ5
• Exchange : Singapore Stock Exchange
• Market Capitalisation : About S$5.4 billion (April 2017)
• 2016 Revenue : S$ 3.4 billion
• 2016 Profit : S$ 597 million

The Business
Fraser Centrepoint Limited is one of the few fully integrated property companies in
Singapore. The company gained its listing status after a successful spinoff from Fraser
and Neave Ltd in 2014. The company currently has a presence in Singapore, Malaysia,
Thailand, Vietnam, the United Kingdom and Australia.

It has businesses from property development, ownership and property management.

It is the sponsor of 4 REITs in Singapore, namely Frasers Centrepoint Trust, Frasers
Commercial Trust, Fraser Hospitality Trust and Frasers Logistic and Industrial Trust.

SWOT Analysis

Strength
Frasers Centrepoint has the ability to offer the complete range of services in the
property sector. It can develop properties across different types; from residential,
retail, commercial, hospitality to industrial. This allows the company to not just be a
developer, it can be a town planner as well. It is highly advantageous compared to a
competitor who can only focus on one type of property.

ValueInvestAsia.com Stock Guide 2017 | 16

Apart from that, it also has a very strong branding and a long history, especially in
Singapore. Moreover, it has a strong backing from its main shareholder, the TCC Group
from Thailand, managed by the Sirivadhanabhakdi family.

Weakness
The company has expanded very aggressively over the past few years. Its largest
acquisition was made in 2014, when it bought out Australand Property Group, a large
property company in Australia, for USD2.46 billion.

Thus, all that expansion has led to a highly geared balance sheet. According to
Morningstar, the company has a debt to equity ratio of 125% at the end of its financial
year 2016. Its weak balance sheet is a worry as the company face a higher liquidity risk.

Lastly, the property markets in its key markets such as Singapore and Australia have
not been very bright in recent years. The property market in Singapore is dampened by
government cooling measures. Unfortunately, there is still no sign of recovery in the
Singapore property market till now.

Major cities in Australia have also seen property prices shooting up to record levels due
to huge foreign purchases. The prices are now at such high levels that many experts are
seeing a possible bursting of the housing bubble. If that is the case, it might affect the
company directly.

Opportunities
There are still opportunities for the company. There is still a long pipeline for the
company to recycle some of its existing assets into its REITs. This will free up some
capital for the company and gives the opportunity for its REITs to increase its earnings
and asset base.

Moreover, the group can still expand more into its overseas market, especially in
Thailand, given the strong network of its main shareholder.

Threat
The government cooling measures in Singapore has largely work to decrease the
possibility of a housing bubble in Singapore. Therefore, many other countries, like
Australia, facing such an issue might copy the strategy taken by the Singapore
government. Any government intervention in the property markets might threaten the
business of Frasers Centrepoint directly.

On top of that, the landscape for retail, commercial and hospitality is changing, with
more and more disruption to the industry coming from technology companies. How
that might shift the entire industries are yet to be seen. Nonetheless, it means that
Frasers Centrepoint would need to change with the time or risk having its business
model taken obsolete in the near future.

ValueInvestAsia.com Stock Guide 2017 | 17

 FEATURED COMPANY NO. 7

CARLSBERG BREWERY MALAYSIA BHD

• Ticker : KLSE:CARLSBG
• Exchange : Bursa Malaysia
• Market Capitalisation : About MYR 4.6 billion (April 2017)
• 2016 Revenue : MYR 1.7 billion
• 2016 Profit : MYR 205.0 million

The Business
Carlsberg Brewery Malaysia is one of the two main breweries licensed to operate in
Malaysia. It was founded in 1969 and started producing alcoholic beverages in the
country since 1972. Currently, the company manufactures and distributes alcoholic
beverages in Malaysia and exports to markets like Singapore and Brunei. The company
distributes popular brands like Carlsberg, Corona, Jolly Shandy and seven other brands.

Given its unique position, it has been able to enjoy a duopolistic-like environment with
its main competitor, Heineken Malaysia Bhd, for the past 45 years. It also has a 25%
stake in Lion Brewery, the largest brewery in Sri Lanka.

ValueInvestAsia.com Stock Guide 2017 | 18

SWOT Analysis

Strength
Carlsberg Brewery Malaysia has a strong branding in the country. It also has a long
proven track record of growth. Today, the business is relatively stable and very
defensive in nature for investors.

Moreover, the company is 51%-owned subsidiary of Carlsberg A/S, a mega player in the
brewery business globally. This means that the company has a very strong support
coming from its parent company. This reduced the liquidity risk for the company as the
parent company would most likely support the company if it falls into hard times.

Lastly, the company operates in a duopoly-like environment with its competitor,

Heineken Malaysia Bhd in Malaysia. This gives the company a huge advantage as it
raised the barrier of entry in the Malaysia market.

Weakness
Some of the weakness for the company includes slowing economy in Malaysia, its
restriction on geographic reach and the volatile Malaysia Ringgit.

Carlsberg Brewery might also be restricted in selling outside its key market of Malaysia,
Singapore and Brunei. This is because it is part of Carlsberg A/S and the parent
company might prefer its 51% subsidiary to remain as a three countries distributor.

If that is the case, the company has to face the slowing economy in Malaysia and its
currently weak & volatile currency. As it would still need to import most of its raw
material, currency risk is very real for the company.

Opportunities
The brewery has some clear opportunities at hand now. As it already has a very strong
distribution network in its key markets, it can add new brands to its portfolio quite
easily. It only distributes about 10 brands currently while its parent company has a
portfolio of more than 400 products.

In addition, the company can tag on to the growth of its business in Sri Lanka. Its 25%
stake in Lion Brewery is quite significant given that Sri Lanka has a population more
than 20 million people, which is more than its current addressable market.

ValueInvestAsia.com Stock Guide 2017 | 19

Threat
There are still threats lying ahead for the company. As it operates in a highly regulated
industry, it is at the mercy the regulators. If and when regulators decide to tighten the
rules surrounding its operations, Carlsberg Brewery Malaysia would still be deeply
affected.

The recent rise in duties and excise in Malaysia is one clear example of how the
regulators can affect its business. The hike has led to increase in contraband products
in Malaysia and thus impacting its sales volume slightly.

Apart from control from the regulators, the company is also in the control of its main
shareholders. Carlsberg A/S might at times have a different agenda globally compared
to its Carlsberg Malaysia’s local plans. Therefore, there is a chance that the company
might make a decision that is damaging for its minority shareholders.

ValueInvestAsia.com Stock Guide 2017 | 20

 FEATURED COMPANY NO. 8

VITROX CORPORATION BHD

• Ticker : KLSE:VITROX
• Exchange : Bursa Malaysia
• Market Capitalisation : About MYR 1.2 billion (April 2017)
• 2016 Revenue : MYR 234 million
• 2016 Profit : MYR 65 million

The Business
ViTrox Corporation is a Malaysia-based company that designs and manufactures
products for the semiconductor and electronics packaging industries. ViTrox
Corporation has a global client base.

It focuses on automated vision inspection equipment and system-on-chip embedded

electronics devices. Some of its products include Machine Vision System (MVS),
Automated Board Inspection (ABI) and Electronics Communication System (ECS).

SWOT Analysis

Strength
ViTrox Corporation has a very strong company culture, formed by its founders. In
addition, its founders are all still managing the company and have a long track record
of growing the company over the past decade.

ValueInvestAsia.com Stock Guide 2017 | 21

The company also has a very strong commitment to research and development.
Management has stated as a policy to spend about 15% of yearly revenue on research
and development purposes. This is an extremely high figure and has led to the
company creating very competitive products in the market. It is also reflected by the
ViTrox Corporation’s high net margin of more than 25% in the last few years.

Weakness
ViTrox Corporation produces very niche products for a specific type of customers.
Therefore, its fate would be highly dependent on how well the industry is doing. If the
semiconductor industry falls into a recession and cut back on capital expenditure, it
would affect the company directly.

Opportunities
Management is very farsighted in spotting opportunities for the company. The
management is already looking at how its vision technology can be utilised in other
industry. It is building an incubator lab to attract other entrepreneurs in finding more
applications for its technology.

Thus, the company is looking at becoming more than just a supplier to the
semiconductor industry. It is looking at becoming a vision technology powerhouse
globally.

Threat
ViTrox Corporation is still a very small company by the world’s standard. Therefore,
there is more risk for a small company to compete successfully in the global market.
Moreover, the company has a high revenue risk as a handful of customers contribute to
a large portion of its revenue. This is because its products are high-value equipment
which is typically purchased by large multinationals corporations. Therefore, there is a
risk of sharp loss of revenue if and when one customer decides to switch supplier.

ValueInvestAsia.com Stock Guide 2017 | 22

 FEATURED COMPANY NO. 9

TUNE PROTECT GROUP BHD

• Ticker : KLSE:TUNEPRO
• Exchange : Bursa Malaysia
• Market Capitalisation : About MYR 1.0 billion (April 2017)
• 2016 Revenue : MYR 364 million
• 2016 Profit : MYR 65 million

ValueInvestAsia.com Stock Guide 2017 | 23

The Business
Tune Protect Group Berhad runs a travel reinsurance and general insurance business.
Its travel reinsurance business is distributed with partners such as airlines and travel
agencies. Its largest partner in this segment is the AirAsia Group, as they have common
main shareholders.

The company also sell general insurance in its key market of Malaysia and Thailand.

SWOT Analysis

Strength
Its strong link with AirAsia provides Tune Protect Group with a stable source of travel
insurance business. The link allows the company to tag on to the growth of AirAsia's
business.

It also shares the low-cost business philosophy of the AirAsia Group and has a unique
business model of focusing on digital distribution. It has an integrated digital insurance
service for its customer from pricing, buying, processing and claiming.

Weakness
However, its relationship with AirAsia might also be a weakness for the company. It
might defer other airlines which are competing with AirAsia to work with Tune Protect
in the future. Currently, its travel insurance is still largely dependent on AirAsia, which
contributes about 86% of its travel insurance business.

On its general insurance front, the business has long been a highly regulated industry.
This means that it requires a general insurer license to operate in a certain market. Till
now, the company is only able to obtain licenses (through acquisitions) in Malaysia and
Thailand. It has attempted a few times to acquire an Indonesia-based general insurer
but has yet to succeed.

Opportunities
Opportunities for Tune Protect Group is bountiful. The company can form a new
partnership with other airlines to grow its travel reinsurance business. It has since then
formed partnerships with airlines like Air Arabia and Cebu Pacific.

The company can expand together with AirAsia. As AirAsia expands and grows its
routes, Tune Protect could tag on that growth.

Moreover, it can also grow its general insurance business through improving its digital
distribution and adding new products into its platform.

ValueInvestAsia.com Stock Guide 2017 | 24

Threat
Although Tune Protect Group is very innovative in its marketing and distribution
approach, it is still considered a small insurer in the entire insurance industry. There are
many larger and better-funded insurers that are also pursuing a digital strategy. The
competition might heat up for Tune Protect going forward.

Another threat is government intervention. As previously mentioned, it requires a

general license before it can operate in a certain country. And if it is unable to obtain
the license (as in the case in Indonesia), it might see itself being lockout for their market
and unable to expand overseas.

ValueInvestAsia.com Stock Guide 2017 | 25

 - NEW YORK STOCK EXCHANGE -

FEATURED COMPANY NO. 10

ALIBABA GROUP

• Ticker : NYSE:BABA
• Exchange : New York Stock Exchange
• Market Capitalisation : About USD 285 billion (April 2017)
• 2016 Revenue : RMB 101.1 billion
• 2016 Profit : RMB 71.5 billion

The Business
When we talked about Asian companies, we are not limiting ourselves to just
companies listed on the Asian stock exchanges. Many Asia-based companies do and
would continue to list on major exchanges such as the New York Stock Exchanges and
NASDAQ. These companies offer great value to investors interested in the Asian market
and we would not be disregarding them. Our last featured company is one such
example.

Alibaba Group is one of the largest technology companies in the world. It is most
well-known for its E-commerce platforms in the China. The company started out with
creating a successful B2B (Business-to-Business) platform, Alibaba.com. It went on to
create other successful platforms such as taobao.com and Tmall.

However, the Alibaba Group today can be considered as a technology conglomerate,

with businesses in E-commerce, cloud computing, digital media & entertainment and
other strategic investments.

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SWOT Analysis

Strength
Alibaba has a very strong user base, especially in
China. It is also the most popular e-commerce
platform in the country. The company has a long and
successful track record of creating popular digital
platforms. It has enabled Chinese businesses to sell
to the world through Alibaba.com. And it has helped
many small businesses in China to sell countrywide with Taobao. It has also helped
brands reached the whole of China through Tmall.

Today, Alibaba is still the largest e-commerce site in China and command a strong
market share. This gives it strong bargaining power over both its suppliers and
customers.

Weakness
There are still doubt about the level of corporate
governance within the Alibaba Group. The
company is operating in a complex structure with
its associates and investments. Moreover, foreign
investors questioned the legality of its VIE
structure, (read more about it here), and whether
it is sufficient to protect their rights. Most
importantly, the sudden transfer of Alipay from the Alibaba Group during the IPO
process caught many people by surprised, and casted a bad reputation on the
company.

Another weakness for the company is that it is still predominately in China. Although it
is a massive company which most people know globally, its business is generated
mainly in China. It is aggressively expanding in its oversea markets, such as Southeast
Asia with its acquisition of the Lazada Group and many more acquisitions related to the
logistic industry. Nonetheless, it is still too early to know how well it will perform in its
oversea markets.

Lastly, Alibaba group is a USD280 billion company, making it one of the largest
companies in the world. There is a risk that it might have reached a size that is “too big
to grow”.

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Opportunities
As mentioned, it is expanding very aggressively in the overseas markets. There is a
huge opportunity for Alibaba if it can duplicate what it has achieved in China to the
world. Moreover, it is looking at connecting small businesses around the world and
bring them through a platform to sell to the Chinese population. That could be a huge
potential for it as well.

Apart from its e-commerce business, its cloud computing and media & entertainment
segment are growing extremely fast as well. In the last quarter ending December 2016,
its cloud computing revenue more than doubled. Its digital media segment saw its
revenue boosted 273% over the same period. This shows that it might still be early days
for these two segments for Alibaba Group.

Threat
Threats are lying all over the place for Alibaba Group. As its business grew big, they are
overlapping with the businesses of many other technology giants. Alibaba now has to
compete with the likes of Amazon Inc, Tencent Holdings, even Alphabet Inc (Google)
and Microsoft Corporation on certain segments of its business. This means
competition would not be easy.

ValueInvestAsia.com Stock Guide 2017 | 28

 WHAT IS A STOCK WATCH LIST?

It is important to note that NONE of our featured companies here are stock
recommendations for you. Instead, we want to highlight to you ten companies that we
find interesting in the current market and want to share with you why we are following
them.

We hope it would give you an idea of how to go about looking at possible investment
and how to build up your own personal Stock Watch List. This is important as building
up your Stock Watch List is a key part of our investment process.

Notice that in all our discussion on the ten companies, we did not touch on the
valuation of the companies. This is by design. We hope you will look at companies and
investment in the same way too. Benjamin Graham once said “Investing is most
intelligent when it is most business-like”. And that is what we are doing here when
building up our first Watch List. We should always focus on the BUSINESS of the
company first. We want to find companies with good business models and strong
managements that we want to invest in.

Once we find these companies, we should keep monitoring their progress and see how
they developed over time. Only when we are comfortable with them, will we consider
their valuation and find a suitable price point to start investing in them.

We must be clear in our mind whether we want to be an investor or a speculator in the

stock market. If we are committed to being a value investor in the stock market, we
should create a logical and smooth investment process flow in which we discover,
evaluate, monitor and value companies for our portfolio.

Do keep a lookout on your email every month for our Asia-In-Focus report where we
share with you more insights on what is happening in the Asia markets and how to be
a better investor. We hope you find this E-Book valuable in your investing journey.

Check out our website to follow our latest updates.

@valueinvestasia

@valueinvestasia

Remember
You are your best fund manager.

ValueInvestAsia.com Stock Guide 2017 | 29



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