The Top 4th-Quarter Trades of the Matthews Pacific Tiger Fund

Earlier this week, the


Matthews Pacific Tiger Fund
(Trades, Portfolio) disclosed its 13F portfolio updates for the fourth quarter of 2021, which ended on Dec. 31.

The


Matthews Pacific Tiger Fund
(Trades, Portfolio) seeks sustainable long-term capital appreciation by investing mostly in Asian companies, excluding Japan, with a focus on emerging economies. It evaluates stocks using a bottom-up, fundamental-based approach with a focus on long-term results. The fund is managed by Sharat Shroff, Inbok Song and Winnie Chwang.

The fund went on a selling spree in the latest quarter, reducing more than half of the stocks in its equity portfolio. Its biggest sells were for Tata Power Co. Ltd. (

BOM:500400, Financial), AIA Group Ltd. (HKSE:01299, Financial), LG Chem Ltd. (XKRX:051910, Financial) and WuXi Biologics (Cayman) Inc. (HKSE:02269, Financial). It made only one new buy during the quarter, which was Kakaopay Corp. (XKRX:377300, Financial).

Tata Power

The fund reduced its stake in Tata Power (

BOM:500400, Financial) by 64.1%, leaving a remaining holding of 38,191,262 shares and reducing the equity portfolio by 1.72%. During the quarter, shares traded for an average price of 222.05 Indian rupees ($2.97).

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Headquartered in Mumbai, Tata Power is India’s largest electric utility company. It generates, transmits and distributes electricity throughout India, 32% of which is generated from renewable sources. The company also operates electric vehicle charging stations.

On Feb. 9, shares of Tata Power traded around 234.75 rupees for a market cap of 750.11 billion rupees. According to the GF Value Line, the stock is significantly overvalued.

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The company has a financial strength rating of 3 out of 10 and a profitability rating of 6 out of 10. Warning signs include declining operating margins and a poor Altman Z-Score of 0.97, while positive signs include a Piotroski F-Score of 6 out of 9 and a return on capital of 11.24%, which is higher than 68% of industry peers.

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AIA Group

The fund also reduced its AIA Group (

HKSE:01299, Financial) investment by 39.02% for a remaining position of 12,344,400 shares. The trade shaved 1.08% off the equity portfolio. Shares changed hands for an average price of 84.70 Hong Kong dollars ($10.87) during the quarter.

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AIA Group is the largest life insurance and securities group in the Asia-Pacific region. The Hong Kong-based company was originally founded by an American businessman, and it was bought by a U.K.-based financial institution before eventually going public in 2010.

On Feb. 9, shares of AIA Group traded around HK$86.95 for a market cap of HK$1.04 trillion. According to the Peter Lynch chart, the stock is trading above its intrinsic value but below its median historical valuation.

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The company has a financial strength rating of 5 out of 10 and a profitability rating of 3 out of 10. Warning signs include a Piotroski F-Score of only 3 out of 9 and increasing long-term debt, while positive signs include price-earnings and price-book ratios being near their 52-week lows.

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LG Chem

The fund sold out of its 132,390-share holding in LG Chem (

XKRX:051910, Financial). Before the sale, the position took up 1.02% of the equity portfolio. During the quarter, shares traded around 748,452 South Korean won ($626.76) apiece.

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LG Chem is the largest chemical company in South Korea. It started out as a cosmetics manufacturer, but has since increased its chemicals portfolio into a wide range of products grouped under four segments: Petrochemicals, Energy Solutions, Advanced Materials and Life Sciences.

On Feb. 9, shares of LG Chem traded around 639,000 won for a market cap of 47.24 trillion won. According to the GF Value Line, the stock is fairly valued.

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The company has a financial strength rating of 5 out of 10 and a profitability rating of 8 out of 10. Warning signs include declining operating margins and assets growing faster than revenue, while positive signs include a Piotroski F-Score of 9 out of 9 and a return on invested capital that surpasses the weighted average cost of capital.

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WuXi Biologics (Cayman)

The fund reduced its WuXi Biologics (

HKSE:02269, Financial) investment by 40.79%, leaving a remaining stake of 6,622,500 shares. The trade took 0.88% off the equity portfolio. Shares traded for around HK$104.42 in the three months through the end of December.

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WuXi Biologics is an open-access platform for biologics drug development. Headquartered in WuXi, China, the company is the first Chinese biologics company to be approved by both the U.S. Food and Drug Administration and the European Medicines Agency. Its platforms include custom protein generation, microbial-derived products and antibody drug conjugates.

On Feb. 9, shares of WuXi Biologics traded around HK$61.60 for a market cap of HK$259.59 billion. According to the GF Value Line, the stock is significantly undervalued.

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The company has a financial strength rating of 7 out of 10 and a profitability rating of 8 out of 10. Warning signs include assets growing faster than revenue and days inventory building up, while positive signs include an interest coverage ratio of 75.52 and growing operating and net margins that outperform 93% of industry peers.

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Kakaopay

The fund’s single new position was Kakaopay (

XKRX:377300, Financial). It bought 59,089 shares, giving the stock a 0.12% weight in the equity portfolio. During the quarter, shares traded for an average price of 182,047.62 won.

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Operating under the Kakao Pay label, kakaopay is a South Korean IT services company that offers personal financial management, document management and bill payment features through its simple, easy-to-use app.

On Feb. 9, shares of Kakaopay traded around 126,500 won for a market cap of 16.88 trillion won. Since the stock went public in November 2020, shares are down 52%.

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The company has a financial strength rating of 3 out of 10 and a profitability rating of 1 out of 10. It is a young company that has not been public for long, so data on it is limited. From the operating margin of -43.34%, it’s clear the company has not yet become profitable. The cash-debt ratio has dropped to 0.89 as the company has taken on more debt to pursue growth.

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Portfolio overview

As of the quarter’s end, the fund held shares in 65 common stocks valued at a total of $7.24 billion. The turnover rate for the quarter was 2%.

The top holdings were Taiwan Semiconductor Manufacturing Co. Ltd. (

TPE:2330, Financial) with 8.16% of the equity portfolio, Samsung Electronics Co. Ltd. (XKRX:005930, Financial) with 5.07% and Tencent Holdings Ltd. (HKSE:00700, Financial) with 4.96%.

In terms of sector weighting, the fund was most invested in the technology, consumer cyclical and financial services industries.

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