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Adamas Finance Asia: THE INVESTMENT CASE

Adamas Finance Asia ready to expand again as portfolio restructuring draws to close

More than three-quarters of the portfolio that Harmony Capital inherited has now been either restructured or sold.
Hong Kong
Fook Lam Moon has been operating in Hong Kong for 70 years

Adamas Finance Asia Limited (LON:ADAM) has seen a substantial overhaul since investment manager Harmony Capital took over in May last year.

More than three-quarters of the portfolio that Harmony Capital inherited has now been either restructured or sold.

The latest deal saw ADAM’s stake in four Chinese businesses swapped for a US$26.5mln convertible bond issued by Hong Kong-based food and restaurant group Fook Lam Moon.

FLM, as it is known, is a 70 year-old private company, which is well known in Hong Kong among foodie circles with one of its restaurants having achieved Michelin star status.

The consideration matched book value and Suresh Withana, Harmony Capital’s managing partner, was delighted with the price.

The bond, which pays a coupon of 5% and matures in five years time, also meets Harmony’s new remit of income producing, Pan Asian investments with capital gain potential, he added.

Core investments

FLM is one of three core investments alongside dolomite mine Hong Kong Mining and the most recent acquisition, Singapore-based healthcare group DocDoc.

This business uses data and clinical information processing to help patients find high-quality medical care.  

DocDoc currently has a network of over 23,000 physicians, 700 clinics and 100 hospitals and is tapping into a growing patient empowerment movement in Asia.

Hong Kong Mining, meanwhile, is in the process of re-starting operations at its mine in Shanxi Province, China.

Withana, however, says he and his team are very busy looking for other opportunities at present.

Very few other companies are doing what it does, he says, with a dearth of capital for small Asia-based companies.

That may seem strange, but after the 2008 global credit crunch the emphasis switched to state-backed or blue-chip companies with some countries even banning banks lending money to companies below a certain size or certain sectors.

Capital-starved SMEs

“The private sector is starved of capital from markets and banks across the region even in places such as China, Hong Kong, Singapore and Australia.”

“There are lots of opportunities for income-producing assets, fundamentally small and medium-sized companies that cannot raise capital as they are not big enough.”

That has created a very nice space for ADAM, adds Withana and now that the major work on the legacy portfolio is complete, the emphasis again is on expansion.

“For a year we have been very focused on getting the house in order, now we are in a position to actively start to do that.

“It’s like starting again.”

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More than three-quarters of the portfolio that Harmony Capital inherited has now been either restructured or sold.

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