viewAdamas Finance Asia Limited

Adamas Finance Asia Ltd flies under the radar; but for how long?


  • Adamas Finance Asia transformation aims to unlock value
  • Harmony Capital sees a significant pipeline of opportunities
  • US$500,000 share buyback programme launched 

Quick facts: Adamas Finance Asia Limited

Price: 24 GBX

Market: AIM
Market Cap: £21.1 m

What does the company do?


Contrary to popular belief, markets aren’t necessarily the most efficient arbiters of value. Even our blue-chips have the potential to surprise – usually on the downside.

Market efficiency requires two elements: perfect information and liquidity.

WATCH: Adamas Finance Asia at 'inflection point' with significant pipeline opportunities

On London’s alternative bourse, both are in short supply, which throws up anomalies.

A possible case in point is Adamas Finance Asia Ltd (LON:ADAM), or ADAM for short.



The investment company has undergone and is still undergoing something of a transformation – one designed to help unlock significant latent value.

Under Harmony Capital, which has been managing ADAM’s portfolio since May 2017, historic investments in China have been restructured and are being monetised.

This will enable Suresh Withana, managing partner of Harmony Capital, and his team to focus on their real goal of unearthing investable gems from among Asia’s small- and medium-sized companies (SMEs).

ADAM under Harmony Capital’s management is probably the only listed investment company of its type in London focusing on Asia’s SME sector.

Withana and his team have considerable experience in this regard, having managed the successful US$270mln Harmony Investment Fund I, which had a similar mandate to that of ADAM today.

You can see why Harmony has focused on the region. There are 270mln SMEs and an estimated US$2.7trn funding gap present in Asia.


Investments in the portfolio

So far, ADAM has invested in a virtual doctors’ network, a luxury ski resort in Japan and a high-end food and beverage business. There’s also a proposed investment in a maker of needle-free injections.

The deals have been financed via traditional debt and convertible loans. Its proposed PharmaJet needle-free investment allows it to convert debt into equity on favourable terms at a “liquidity event” such as an initial public offering.

The returns are high (coupons on the debt can be double-digit), but then ADAM is operating at the riskier end of the investment market. That being said, Harmony Capital ensures that transactions are structured with strong downside protection in place to protect ADAM’s interests.

It should also be stressed, these are not throw-of-the-dice opportunities. Harmony’s team can spend as long as six months on due diligence. “Independent valuations are carried out at arms’ length,” Withana adds.

At the March 2019 year-end, there was cash of US$8.8mln on the balance sheet and the unaudited estimated net asset value per share was US$1.10 or 86p per share.


Pan-Asian contacts

Harmony’s contacts around Asia mean there are plenty of deals to be done.

“We have a very significant pipeline of opportunities; a number at the term sheet stage,” Withana explains.

So with a unique approach – and the intention of paying a dividend along with capital growth – why is the company’s share price (36p) trading at a 58% discount to its last available NAV?

Well, ADAM has a number of Chinese legacy assets that are perhaps viewed (possibly wrongly) as a drag on performance.

Harmony Capital inherited these investments, which includes a majority-ownership and control of Hong Kong Mining Holdings (HKMH), the largest magnesium dolomite mine in Shanxi Province, China. This is also ADAM’s largest single holding.

Withana has said the aim is to exit from them all, which would free up cash that could then be ploughed into pan-Asian opportunities, rather than solely in China.

One example was the US$3mln received from the disposal of Global Pharm assets was exchanged for a convertible bond in the Fook Lam Moon chain of restaurants in Hong Kong.


Share buyback to address discount

ADAM launched a US$500,000 share buyback earlier in the year February 2019 that is due to be completed by the end of the year.

The company has appointed VSA Capital to manage the share buy-back programme on its behalf, subject to pre-agreed parameters including a maximum price of US$0.79 per ordinary share - being a 25% discount to the group’s proforma net asset value per share of US$1.06.

In July, 80,000 shares were purchased for an aggregate purchase price of £30,400 at a price of 38p per share.


Inflexion points

  • Chairman John Croft said in June that increasing the liquidity of Adamas stock was “a key priority, one we will continue to take further actions to improve during the coming year”.
  • Croft said the board was “extremely encouraged by the considerable progress” made by the Harmony in seeking out new income generating investment opportunities.
  • The board expects NAV to benefit from mining operations at HKMH restarting in the second half of 2019.
  • ADAM struck a deal with a Hong Kong-based family office to go halves on its US$4mln investment in Infinity Capital Group, which is develooing the Japanese ski resort accommodation project.
  • The family office will pay ADAM an initial US$1mln
  • ADAM believes the deal with a “highly attractive co-investment partner” enables the company “to re-allocate capital within the company's strong pipeline of high-growth Asian small and medium-sized enterprises across the region”.

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Full interview: Restructuring beginning to have 'considerable effect' on...

Suresh Withana from Harmony Capital, the investment manager of Adamas Finance Asia Limited (LON:ADAM), caught up with Proactive London to discuss its results for the six months to June 2019. Total income increased to US$1.25mln from interest payments and fair value adjustments (H1...

on 10/9/19

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