Sign up United Kingdom
Proactive Investors - Run By Investors For Investors

Adamas Finance Asia looks further afield for SME winners

The opportunity across the whole continent of Asia is now much larger and, so, Pan-Asia is the new focus
Asia has an increasingly aspirational population

AIM is littered with husks of companies that tried and failed to make it big in China.

Non-existent corporate governance, disappearing executives, blue sky and nothing else have been all too prevalent.

While it’s fair to say things have improved, the scars remain and so it’s perhaps understandable the new manager of AIM-listed investment company Adamas Finance Asia Limited (LON:ADAM) wants to broaden its reach.

The original remit was predominantly to offer private credit (loans in essence) to small and medium-sized companies in China not able to get funds from traditional sources such as the banks.

Harmony Capital, which took over management of the US$78mln portfolio in May last year says while the private credit market in China is still a massive sector, things have changed.

Pan-Asia the opportunity

The opportunity across the whole continent of Asia is now much larger and, so, Pan-Asia is the new focus.

Obviously, that includes China, says Suresh Withana, Harmony Capital’s managing partner, but now not exclusively so.

Australia, Hong Kong, Singapore, Indonesia - companies based in any of these places are fair game, he says.

To free up capital, Harmony Capital has started to work through its existing portfolio, raising liquidity where possible.

WATCH: Adamas Finance Asia on the front foot and delivering on new investment strategy

Withana can see 40-50% of the US$78mln worth of assets at the last half-year end being changed once the process is substantially complete.

Money is due from a number of redeemed investments or in the case of dolomite/magnesium miner Hong Kong Mining, Adamas has taken a 79.3% stake following the failure of the business to complete a listing.

Adamas will invest more broadly and Withana has an open mind as to the types of companies Adamas now targets.

“We are sector agnostic” he told Proactive, though being Asia-focused will naturally pull it towards consumption plays, healthcare, fintech and energy/resources.

Typically for every US$100mln it has to invest, Adamas will look for 5-10 opportunities, he adds, that way its stakes are not too small nor do they dominate the portfolio.

Harmony has a network of contacts across Asia from which to source investment ideas, but Withana says for the management of a particular target company to have a large stake in their own business is probably one of its only hard and fast rules.

Adamas and Harmony have some owners in common, so it is not completely independent. However, Harmony Capital is run as its own independent unit focussed entirely on managing the listed vehicle.

Track record

Withana, though, points to a track record at Harmony that includes a fund not dissimilar to Adamas Finance Asia which deployed US$275mln at its peak before its dissolution.

Adamas Finance Asia market capitalisation is currently about US$53mln, which is a hefty discount to its stated asset value.

Withana recognises the legacy issues of being an AIM-listed investor specialising in China may be a reason for this, but says the fact that Adamas Finance Asia is a permanent capital vehicle means it can take a pan-Asian long-term view when it comes to allocating its cash.

The hubris that came with an AIM listing also belongs to a different generation, he says.

“We need to put our money where our mouth is, demonstrate what we are doing works and people will start to take us seriously.”

The first test will be the upcoming asset value update, which will show how much capital Withana has to play with, but he is upbeat.

“The demographics and predominantly aspirational Asian population mean the fundamentals have a long way to go.

“I’m a big believer in Asia.”

View full ADAM profile View Profile

Adamas Finance Asia Timeline

Related Articles

Enertopia Corp's partner GWT upbeat on potential of lithium recovery tests
October 25 2017
The feedstock used in the tests comes from the group's Clayton valley project in Nevada
chrome pipes
June 20 2018
Another change recently was for Tharisa to take over the running of the mine, which involved it buying the fleet from its contractor
Picture of Malaysian city
May 09 2018
The group’s ability to provide benefits to the retail sector was demonstrated in 2017.

No investment advice

The Company is a publisher. You understand and agree that no content published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable or advisable for any specific person. You further understand that none of the information providers or their affiliates will advise you personally concerning the nature, potential, advisability, value or suitability of any particular security, portfolio of securities, transaction, investment strategy, or other matter.

You understand that the Site may contain opinions from time to time with regard to securities mentioned in other products, including company related products, and that those opinions may be different from those obtained by using another product related to the Company. You understand and agree that contributors may write about securities in which they or their firms have a position, and that they may trade such securities for their own account. In cases where the position is held at the time of publication and such position is known to the Company, appropriate disclosure is made. However, you understand and agree that at the time of any transaction that you make, one or more contributors may have a position in the securities written about. You understand that price and other data is supplied by sources believed to be reliable, that the calculations herein are made using such data, and that neither such data nor such calculations are guaranteed by these sources, the Company, the information providers or any other person or entity, and may not be complete or accurate.

From time to time, reference may be made in our marketing materials to prior articles and opinions we have published. These references may be selective, may reference only a portion of an article or recommendation, and are likely not to be current. As markets change continuously, previously published information and data may not be current and should not be relied upon.

© Proactive Investors 2018

Proactive Investors Limited, trading as “Proactiveinvestors United Kingdom”, is Authorised and regulated by the Financial Conduct Authority.
Registered in England with Company Registration number 05639690. Group VAT registration number 872070825 FCA Registration number 559082. You can contact us here.

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use