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Portfolio additions build income stream

Adamas Finance Asia aims to be the leading London-quoted pan-Asian focused diversified SME investment holding vehicle. It targets above average income and capital growth, with a stated objective to provide shareholders with unique access to a diversified portfolio with access to high-growth Asian economies.
The key message from the recent interim result was the material increase in total portfolio income, from US$0.05m (H1 2018) to US$1.25m in the first six months this year. We see that as the key metric to track continuing progress made by ADAM’s investment manager, Harmony Capital.
First half income was a combination of interest and fair value adjustments. The second half result will be driven by full contributions from transactions concluded in H1 and follow-on investment tranches. That should justify some reappraisal of ADAM’s prospects and valuation, but the other major component will be confirmation that China based Future Metal Holdings (FMH) has resumed operations this year.
As FMH contributed 46% of mid-year NAV, its prospects are closely aligned with ADAM’s. The latter has de facto control of FMH via an 84.8% stake and taken a hands-on role to steer it into a position where it can restart mining this year. Success in that respect should help validate the portfolio’s intrinsic value (NAV/share 88p at end June 2019 vs a 30p share price) and demonstrate the investment manager’s ability to work ADAM’s assets for shareholders’ benefit.
ADAM has built an investment pipeline which it will capitalise upon where it has rebuilt its valuation and gained access to new capital. It is rolling out initiatives to address the illiquidity of its equity and positively raise its profile.