Liontrust Asia Income Fund

July 2019 portfolio changes

  • Bought – Merry Electronics. The Taiwanese headphones and speakers specialist has recently seen booming sales in true wireless stereo headset (TWS) sales. We believe this sales momentum is likely to continue, driven by technological improvements that allow signals to be sent simultaneously to both sides of the Bluetooth buds for stereo sound. This should enable widespread use; conventional Bluetooth wireless stereo earphones still need at cable to connect between the right and left bud, much like a stethoscope, barring users from the true wireless experience.
  • Bought – Downer. A specialist in the maintenance of infrastructure, Downer is the most diverse service contractor in Asia Pacific with over A$12bn in revenues and a contract backlog of over A$42bn. It is focused is on long term service contracts, especially with the government, where outsourcing provides a high level of opportunity. Downer is reducing its exposure to riskier construction and mining businesses in favour of business from more defensive industries. The company’s share valuation of 12.5x forward earnings looks reasonable given expectations of 10% earnings growth and a dividend yield of around 4%.
  • Sold - Indiabulls Housing Finance Limited (IHFL). The share price has been under pressure since September 2018 when a liquidity squeeze hit India’s shadow banking after a default by infrastructure lender IL&FS. Operationally, IHFL has managed the situation well, by reducing loan disbursements, securitizing assets, lowering riskier loan exposure and maintaining a healthy cash balance. While IHFL has continued to pay quarterly dividends (50% payout ratio) as well as bought back debt to demonstrate a strong capital position, persistent rumours of funding issues as well as unsubstantiated allegations of fraud have created an overhang for the stock. From a risk perspective, we decided to exit our position as we believe that these rumours are unlikely to abate in the near term and will continue to put downward pressure on relative stock performance.
  • Sold – Texwinca. First quarter results showed a continuation of losses from its Baleno-branded casual clothing and accessories operations. This segment has generated negative returns for three of the last four years for Texwinca. It looked as if Baleno’s move to a hypermarket format and rebalancing of store mix in 2018 had improved gross margins, but the recent results suggest this was a temporary effect. Texwinca is also likely to suffer from increasing competition from international retailers which may further pressure margins, as the likes of Uniqlo expand. These factors, and the decreasing liquidity of the company’s shares, led us to sell out of our holding.

For a comprehensive list of common financial words and terms, see our glossary here. 

Key Risks

Past performance is not a guide to future performance. Do remember that the value of an investment and the income generated from them can fall as well as rise and is not guaranteed, therefore, you may not get back the amount originally invested and potentially risk total loss of capital. Investment in Funds managed by the Asia team involves foreign currencies and may be subject to fluctuations in value due to movements in exchange rates. The Fund’s expenses are charged to capital. This has the effect of increasing dividends while constraining capital appreciation. 


The information and opinions provided should not be construed as advice for investment in any product or security mentioned, an offer to buy or sell units/shares of Funds mentioned, or a solicitation to purchase securities in any company or investment product. Always research your own investments and (if you are not a professional or a financial adviser) consult suitability with a regulated financial adviser before investing.

Monday, August 12, 2019, 4:37 PM