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1
| May 2012www.towsongroup.com
May 2012
"Mimicking the herd invitesregression to the mean." – CharlieMunger"Wealth does not pass threegenerations." - Chinese Proverb
Global Value Investing Interviews and Insights
Value investors target Indianmortgages
An interview with Hemant Amin of Asiamin in Singapore
Applying "private market value" in a global age
Interview with Markus Matzsuk, former Partner at Gabelli & Company.
W
hat most of the world callsglobal investing, investorsin Singapore simply callinvesting. With a limited home market,they have always been forced to operateglobally. And as necessity is the mother
of invention, they were among the rst
investors to develop successful cross-border value strategies.This month we spoke withSingapore-based Hemant Amin about hisglobal approach. Hemant is ManagingDirector of Asiamin, a Singapore family
ofce focused primarily on real estate and
equities. We spoke with Hemant abouthow he deals with investing in emergingmarkets from a distance – and where hethinks the most attractive opportunitiesare today.(Continued on page 2)
M
ario Gabelli’s well-knownprivate market valueapproach makes a lot of intuitive sense when in places like Chinaand Saudi Arabia. In many ways thisapproach is more applicable to theserapidly developing environments thantraditional buy-and-hold value investingtechniques. Developing economies are by
denition developing. They are rapidly
advancing. And this advancement occursmostly through mergers, acquisitions,inbound development deals and soon. These are all situations in whichundervalued companies can move totheir private market values in the nearterm. A private market value approachis particularly useful in these situations.This month, we spoke with MarkusMatuszek (CFA, MBA), a former partnerat Gabelli & Company. About the privatemarket value approach. However, unlike
other interviews, we did not discuss specic
company names – only general approaches.
Jeff:How would you describeyour approach? Your geographies, industries, value, mis-pricing, growth, event driven? How would youcharacterize yourself?Markus Matzsuk:
Well, we’re basicallyvalue investors. We take the fundamentalapproach that is a value approach. So weunderstand management, balance sheets,
earnings power and cash ows.
(Continued on page 9)
 
Buffett in Beijing RepoRt
INVESTOR INSIGHTS
www.towsongroup.com
2
| May 2012
(Continued from page 1)
Interviewer:How would youdescribe your overall approach bygeography, industry, mispricing, greatcompanies… how would you identifyyour primary strategy?Hemant Amin:
We run a family
ofce out of Singapore. Apart from two
operational businesses, one in Singaporeand one in India, we manage a portfolio,which is invested roughly 30% inproperties and 70% in equities.Equities are what we research on adaily basis in terms of trying to get newideas. What we look at is something thatwe understand and opportunities whichcompound over a few years out - ratherthan doing a classic value play, which is tobuy really cheap stuff and then hopefullysell it at full value.We haven’t had much success in that,because over the years, we’ve found thatthose types of companies have extremelylow chances of moving up from a smallcap to a mid cap - or a mid cap movingup to a large cap. They usually stay withinnarrow bands of valuation, irrespectiveof the business per se because thebusiness environment adversely affectstheir earnings quality and they don’treally have a moat to increase earningsquality. Generally, we have moved away,
over the last 5 years or so, specically,
to focus on quality, quality, quality. Wewant to be part owners of a high qualitybusiness, which is able to compound itshigh quality earnings, and run by a highclass management - but we want it at areasonable price, with the key factor beinghigh quality recurring earnings.In India, we are looking primarily atFMCG, the fast moving consumer goodsmarkets. We are looking at small andmedium sized mid caps in India belowa billion dollars in market cap. We arelooking at half a billion and a billion US$range market cap companies. We also likemortgage companies. Those two sectorsseem to have the biggest investment fromour end. These are companies whichtypically you would have a reasonablechance of seeing earnings compound, ina risk free manner probably over the next5, 10, 15 years.Management quality is key ineverything we do also. A doggymanagement can screw up the greatest of companies. We want to align ourselveswith good quality companies run by greatrational thinking management who areshareholder-focused and understand thevalue of increasing earnings per shareyear on year without taking on risk thatis not proportionate to what they get interms of earnings per share increases.We look at their history of allocating thecapital of the company.The management mind-set, especiallyin mortgage lenders as we’ve seen in2008, if you don’t have the discipline inlending and you just want to increaseyour EPS at any cost, you can do it ona short-term basis, but you will go brokelong term. The 3 or 4 companies we haveinvested into in India, we equally focuson the risk the management takes on andthe mind-set of the management. Are theygrowing at any cost? Are they pricingtheir services and products properly? Arethey getting a decent spread? Obviously,we also look at things like loan to valuethat they carry on in their books. As longas we feel comfortable with management,
the growth prospects, the risk prole and
earnings compounding year after year, aswell as the loan to value remaining in the50% to 70% range, we have no problemsin continuing to keep money invested inthose companies.That’s broadly how we look at it,whether it be in India, whether it be in Asia.In short, it is our objective, as businessanalysts, to research, understand, investin and to partner with, for the longer term,select listed companies, with superiorbusiness models and durable competitive
Management quality is key in everything we do also. A doggy management can screw up the greatest of companies.
Value investors target Indian mortgages
An interview with Hemant Amin of Asiamin in Singapore
 
Buffett in Beijing RepoRt
INVESTOR INSIGHTS
www.towsongroup.com
3
| May 2012
advantages. Having predictable and
growing corporate cash ows, which
are run by shareholder focused andcompetent management of high integrity.Resulting in superior returns on equityand compounded returns for investors.
Interviewer:How about geographicalfocus? India versus Asia versus China?Hemant Amin:
Presently, we areinvested about 50% in India and 50%ex-India. Of the ex-India portion, 80%would be in Hong Kong & Singaporeand the rest in the U. S. So India is abig focus, as is Asia. The focus is reallyon understanding business models thathave really worked well in developedcountries like the U. S. and hopefully weget to invest in companies in India whichfollow similar models and strategies and
benet over decades with the benet of a
vast population needing similar productsand services as the West. Hopefully theycan ride on the same wave of growthpotentiality, as what their counterparts inthe U. S. have done over 2 or 3 decades.
Interviewer:What would get youmoving quickly into an opportunity?Hemant Amin:
We usually don’t rushinto stuff. We take our time to studyWe need to have comfort that the datawe have at hand really is genuine. Thatit has a track record of quality earnings,rather than someone giving us futurepredictions. On the contrary, we havestayed away from deals and / or delayedour entry into deals that have come to usin a hurry.HDFC Bank Limited provides
banking and nancial services to
individuals and businesses in India.HDFC operates a network of 1,986branches and 5,471 automated tellermachines in 779 cities. The companywas founded in 1994 and is based inMumbai, India.
HDFC Bank Ltd.
(HDB) - NYSE
Prev Close: 28.57Open:
 
29.01Bid: 29.00 x 200Ask: 29.00 x 1001y Target Est: 36.50Beta: 1.23Next Earnings Date: N/ADay's Range: 28.90 - 29.3852wk Range: 24.47 - 36.80Volume: 88,490Avg Vol (3m): 729,465Market Cap: 22.62BDiv & Yield: 0.22 (0.80%)
(Source: Yahoo Finance)
HDFC Bank Ltd.
On one occasion, we declined aprivate equity deal in India and we wentback a year later and paid twice the pricethat we were offered previously, simplybecause we found more comfort in thenumbers than we did 2 years ago. It’sa multi branded, consumer franchisefood business in India. We are morecomfortable on missing out on the earlyrise. We would rather be sure of earningsquality and sustainability than jump intoinvestments. Being very active in theinvestment world is counter productiveI believe.
Interviewer:Do macro themes driveyour ideas?Hemant Amin:
Not really. I personallydon’t seem to have any edge. The questionI ask myself is what do I bring to thetable when I am considering investmentopportunities? What do I know that theworld doesn’t know, for example? Atany point in time, several things in theworld may seem to be going wrong.Most people including very highly paidEconomists get predictions wrong evenwhen armed with sophisticated data andpredicting models.To evaluate an investment idea fromwhat is happening on a macro and thenlooking at opportunities, I have found it
personally very difcult to get right.
Rather, what we focus on, is to keep atab on 50 to 70 businesses we really like.We think we love the businesses. We lovethe type of numbers that they are turningout, but maybe the valuations are notright to really press the buy button.Yes, from a macro perspective thingsmay affect valuations which in a senseprovides us investment opportunities,but we wouldn’t necessarily look at themacro and then try to paint a picture of where things are going.Because our investment decisionsaren’t for a year or 6 months, potentially,
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