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Yeoman Capital Management Pte Ltd
“Performance backed by
Principles, Process and People”
Investment Team
• Mr David GOH Kay Yong, CFA as Chairman of Company
and Chairman of Investment Committee
• Mr YEO Seng Chong as Chief Investment Officer and
Portfolio Manager
• Mr WONG Seak Eng, FCCA, CA(M) as Assistant Portfolio
Manager
• Mr CHANG Yue Chang as Investment Analyst
• Mrs WONG Sok Cheng as Head, Governance and
Administration
• Support staff Ms Christina Lee and Ms Serena Kow
Investment Strategy
Regional Focus Asia ex-Japan
Industry Focus None
Investment Style Value methodology
Absolute return goal
Fully invested (subject to valuation criteria)
Long only, no leverage, no short selling, no use
of derivatives
Stock Selection Methodology Bottom-up, based on ‘3-Rights’ approach
No. of Securities 50 to 100
Investment Time Horizon Long term, 3-5 years or better
Benchmark MSCI AC Far East ex-Japan
Target Return 8%-10% p.a. CAGR nett of fees, div. re-invested
Investment Criteria
Bottom-up stock selection based on the “3-Rights” approach
Right Business • Listing history
• Stable operating history
• Conservatively financed
• Above average capital efficiency
• Free cash generation
• Dividend paying history
Right Price • Trading below fair value
• With “margin of safety”
Right People • Stable management who are competent in their field
• Transparent structure and financials
• Committed to corporate governance & mindful of shareholders’
interests
Portfolio Management
Portfolio Construction Sell Triggers
Max Single • When the shares reach or exceed fair value
Entity • When the company no longer passes the
Exposure 15% “3 Rights” test
• When there is something better to buy
Max Sector
Exposure 25%
Max
Country
Exposure 45%
Cash can be held until suitable
opportunities emerge
Single Product Offering
Yeoman 3-Rights Value Asia Fund,
Mauritius domiciled,
managed by Yeoman
(for full details, see PPM)
We are a focused single methodology, single fund, single team, single
track record manager. We do not offer a new product every time there
is a new fad popular in the market (e.g. BRIC, commodities, technology,
…etc). For us, investing is evergreen. There are always undervalued
stocks in the markets for us to consider. We believe that serious, long-
term investors should see beyond fleeting fads and flavours of the
month.
700%
Yeoman All Portfolios Performance vs. MSCI AC Far East ex-Japan Index Oct 1997 - Apr 2010
(12 Years 6 Months) in SGD terms,
dividends re-invested, nett of fees
600%
Alpha
500%
Yeoman All Portfolios Cumulative Performance
MSCI AC Far East ex-Japan (MSELCFFX)
Cumulative
400%
300%
200%
100%
0%
Oct-97
Feb-98
Jun-98
Oct-98
Feb-99
Jun-99
Oct-99
Feb-00
Jun-00
Oct-00
Feb-01
Jun-01
Oct-01
Feb-02
Jun-02
Oct-02
Feb-03
Jun-03
Oct-03
Feb-04
Jun-04
Oct-04
Feb-05
Jun-05
Oct-05
Feb-06
Jun-06
Oct-06
Feb-07
Jun-07
Oct-07
Feb-08
Jun-08
Oct-08
Feb-09
Jun-09
Oct-09
Feb-10
-100%
Yeoman All-Portfolios Performance: 12yr 6mo ending 30 Apr 2010
Period Yeoman-All Performance MSCI AC FE x Japan Performance
Oct 97 to Dec 97 6.60% -2.90%
Jan 98 to Dec 98 -2.50% -10.70%
Jan 99 to Dec 99 99.30% 61.40%
Jan 00 to Dec 00 -25.10% -35.20%
Jan 01 to Dec 01 We have applied 9.50% -1.60%
the same disciplined There
Jan 02 to Dec 02 -2.60% -14.50%
process for 12.5 have
Jan 03 to Dec 03 42.90% 39.20%
years. been
Jan 04 to Dec 04 17.50% 8.80%
good and
Jan 05 to Dec 05 13.60% 18.10%
bad years
Jan 06 to Dec 06 27.60% but ... 23.50%
Jan 07 to Dec 07 32.28% 32.48%
Jan 08 to Dec 08 -47.62% -48.16%
Jan 09 to Dec 09 61.31% 60.32%
YTD 2010 18.38% 0.25%
Cumulative Performance from
10/97 to 4/10 (12Yr 6mo) 428.68% 85.82%
CAGR 14.25% 5.08%
Note: In SGD terms, nett of all fees, dividends re-invested and calculated according to CFA(AIMR) PPS standards.
…Overall, we have generated
creditable returns on
compounded, net of fees basis,
with significant out-performance
against the market.
Portfolio Valuation Characteristics
Please have a look at the evolution of our portfolio
over the most recent 2 years:
Dec 2007 Dec 2008 Dec 2009
PE 12.23x 9.54x 17.64x
P/B 1.25x 0.45x 0.67x
Div Yield 3.17% 6.31% 3.13%
ROE 1yr trailing 11.20% 8.74% 5.56%
ROE 5yr trailing 13.27% 10.75% 9.78%
Wt. Marcap SGD297M SGD134M SGD216M
Asset allocations at end Apr 2010
Asset allocations:
Hong Kong 32.27%
Singapore 24.14%
Korea 20.04% Equities 98.00%
Malaysia 19.73%
Thailand 1.82%
Cash 2.00%
• We do not believe in market timing because it is not possible to know
what jiggles will take place in the market over the future.
• For us, when we see an undervalued stock in front of our eyes, the
future is now. Hence, if investment criteria are met, we are fully
invested.
• We believe that for long-term investors with understanding of the value
methodology, market timing adds no value (and may even destroy
value).
Our Investment Process
• We run highly efficient in-house screens to find stocks that
are undervalued.
• Our ideas are generated independently, not through broker
recommendations.
• Based on the results of our screen, we further examine each
stock according to the “3-Rights” criteria:
Right Business, Right Price, Right People.
• Investment ideas are ranked, and we invest in the best ideas
before us.
• Our screens can throw up numerous ideas in a very short time,
but studying annual reports and financial statements of each
company takes time and hard work.
• In Mar 2009, when nobody wanted to invest in stocks, our
screens showed up 1,000+ stocks. When others were
pessimistic, we were very optimistic.
Our Investment Process
• We invest only when there
is a Margin of Safety,
Intrinsic or fair i.e., when the current price
value of the stock is below its
intrinsic or fair value.
• We estimate the intrinsic
value of a stock by
Margin of studying its financial
Safety statements (balance sheet,
cash flow, income
statement, dividend
history, etc.)
Current • When we buy a stock in a
market price business, we think of
ourselves as part-
owners.
• We aim to buy stocks at
50-cents to the dollar or
Stock better.
Our Investment Process
• For us, more Margin of Safety = less Risk
• Risk ≠ Volatility
• Volatility is good for us. If we have a firm grasp of the
value of a stock, then we can buy when the price is low,
and sell when the price is high, relative to valuation
Benjamin Graham quotes:
“On any given day, the manic depressive Mr Market might quote a
high or low price for a stock…”
“In the short term, the market is a voting machine; in the longer
term, the market is a weighing machine.”
• An undervalued stock fulfilling the 3-Rights criteria will
eventually be re-rated by the market.
Our Investment Process
Return on
• If we buy a stock below book
Equity
value, and there is steady
ROE every year, then over
time, book value grows.
Book value
• The stock becomes more and
more undervalued, and will
eventually be re-rated.
• Competent and honest
management is essential
for this to happen.
• A strong balance sheet
Current gives us comfort that what
market price we buy will not blow up
Stock easily.
becomes • We believe that a stock
even cannot become more and
more more undervalued
Stock forever.
under-
valued
Our Investment Process
We are Evergreen
• Our approach works in both good times and bad.
• During good times, there are still undervalued companies
in a buoyant market. These undervalued stocks can re-
rate to being in-line with the market.
• During bad times, there are even more undervalued
companies. Chosen well and held for the long term, these
stocks will perform and out-perform in the recovery.
We are Patient
• Our stock picks on portfolio basis work over a longer time
horizon.
• Very often, nothing may happen for a time, but when the
re-rating occurs, stock price rises can be dramatic.
Our Portfolio is Diversified
At end Apr 2010, our portfolio weights were:
Stock Category Portfolio Wt Avg Wt in Category
Top 5 18.88% 18.88% / 5 = 3.78%
Top 10 32.27% 3.23%
Bottom 65 67.73% 1.04%
Total 75 100.00% 1.33%
Our best ideas
occupy a larger Our other ideas each occupy
part of our an average of 1.04% of
portfolio so that we portfolio weight. Over time,
can gain from their after further monitoring, we
re-rating. have the luxury of adding to
these positions.
Emotional Stability
• To be a value manager, emotional stability is required.
• In the bust of 2008/09, many market participants rushed
to get out of the market.
• We re-examined our stocks, and found that the real
businesses we had chosen continued to function,
management continued doing their jobs, and there was no
serious impairment of balance sheets.
• We decided that our companies would survive the
downturn, so…
• We did not sell into a falling market.
• In the FY ended 30 Jun 2009, our portfolio turnover was
only 9.58% p.a.
Emotional Stability
• In hindsight, the storm of 2008/09 subsided quickly.
• In Mar-Dec 2009, the economies turned the corner and
markets rebounded, leaving those fund managers who
were sitting on cash regretful.
• As other managers scrambled to put their cash back into
the market, we were already fully invested.
• During the bust of 2008/09, people were predicting a
10-yr recession. We ignored the bad news all around and
focused on picking stocks. These events show that market
timing is difficult if not impossible to do.
• Better to stick with process than to do guesswork,
we believe.
Our Clients
• Our clients are high-net worth individuals, family trusts,
foundations and endowments etc. who share our view
of what constitutes risk.
• During the bust of 2008/09, we did not have a single
redemption.
• Our clients sleep well knowing that their money is invested
in a portfolio of real businesses, undervalued and properly
governed.
• We are aware that the money invested with us is hard-
earned, retirement money. We take a serious, solemn view
of our responsibilities. We see ourselves as stewards.
• The principals of Yeoman Capital Management have a
significant portion of their personal wealth invested in the
Fund, alongside clients.
Our Clients
We take care of our clients’ interests
• Our expense ratio (FY 2008/09) is a mere 1.28%.
(Most bank unit trusts have expense ratios above 2%.)
• We do not take any form of rebates or soft commissions
from brokers or service providers (So no financial incentive to
trade frequently and rack up more expenses for clients. Not good
stewardship, in our solemn opinion).
• Our portfolio turnover ratios are low:
– FY 2007/08: 33.6% p.a.
– FY 2008/09: 9.58% p.a.
(The bank unit trusts that we have studied have turnover ratios ranging
from 85% p.a. to as high as 250% p.a.!)
Why Invest With Us?
We believe we might be of service to you:
•We have a proven long-term track record of 12 years 6 months.
•We invest in sound, operating companies at prices below fair value.
This is ideal for a risk-averse investor. We believe that in the
interests of safety, there is no other way to invest in equities.
•We do not chase the latest fads. After a market disruption, we do
not throw everything out of the window and adopt a new process.
We stick to a disciplined process.
•Our process is validated by academic research.
•We place clients’ interests above our own.
•We see ourselves as stewards of other people’s money (and so we
don’t “play” with it).
Why Invest With Us?
In terms of contribution to your overall portfolio:
• We are invested in Asia, where the economic future is believed
to be.
• We are in equities, which provides the highest returns over the
long-term and offers protection against inflation (provided the
fund manager knows what he is doing).
• We are in small caps, which research has shown to out-perform
big caps.
• We are diversified but concentrated meaningfully.
And most of all…
WE KNOW WHAT WE ARE DOING!
(We have Performance backed by Principles, Process & People!)
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