Transition to new strategy on track
ADAM’s FY18 figures do not fully convey the successful efforts of the investment manager in restructuring the inherited portfolio. The latter is now far more coherent than it was 18 months ago, divided between stable, non-strategic assets held for sale and recently made, income-generating investments. Two attractive transactions were completed post the year-end and future reports should consequently reflect a more diversified income-focused investment strategy.Since its appointment as ADAM’s new Investment Manager just over two years ago, Harmony Capital Investors Limited (“Harmony Capitalâ€) has restructured and stabilised the legacy portfolio, secured two new investments and built a pipeline of new potential investments across sectors that fit its revised investment policy.
The latter’s focus is SME ‘special situations’ in Asia i.e. companies which seek growth capital but are unsuitable or too complex for traditional financing methods available in their local markets. ADAM’s competitive advantages and bargaining power are derived from local networks, an experienced investment manager with a successful track record of deploying capital across Asia and the acute shortage of traditional sources of finance to many borrowers in its target Asian markets.
A new investment completed in FY18 and two further deals announced post the year-end illustrate the template. ADAM has a healthy pipeline of similar opportunities, which will enable it to continue to grow its portfolio, subject to securing access to capital from asset sales and new equity.
NAV/share at the year-end was 113c. That is significantly above the current share price, which reflects historic underperformance by the previous investment manager, uncertainty over the timing and financial scale of exits and the illiquidity of ADAM’s shares. Management expects newsflow to help deal with these issues over the next 18 months, while it plans other initiatives to help attract and build a wider shareholder base and ideally, build its equity base to finance portfolio growth.
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