Not only chips
South Korea ain’t only about chips.
When looking at this Far East market, global investors tend to focus on the Samsungs and similar high-tech exporters. Which is clearly not a bad problem to have as an economy. Yet, South Korea is much more than that, with plenty of other sectors which are equally attractive. Or one could say, equally spicy – like noodles and ramen.
Unlike equity investors, the West’s media & entertainment industry has already noticed the potential and the quality of South Korean assets and products ex-tech, and so have consumers across the world. South Korean companies are already benefitting.
For example, Nongshim, South Korea’s leading instant noodle maker, which has announced this week that it is accelerating overseas expansion as its ramen products benefit from the growing popularity of K-pop, South Korean movies (such as Oscar-winning Parasite) and South Korean culture in general, in countries such as the US, Germany and UK. See here.
As niche investors, we scout the whole globe to try and find attractive assets which are unfairly neglected by the market and which offer huge upside potential, both in terms of cash returns and/or multiple re-rating.
South Korea’s domestic-exposed companies are among the most attractive worldwide from both a valuation and business standpoint, and our NJ South Korean fund is the only vehicle which is available to investors for buying their stock. No other funds invest in these companies, many of which are likely to rally strongly once the effects from the real estate crisis wane.
Our fund includes about 125 stock holdings; trades at around 6x earnings (yes, 6x…this is not a typo) and at circa 40% discount to TBV; and it is highly diversified in terms of sectors, with Tech representing only 4% of the portfolio while the 2 biggest sectors in terms of portfolio weight (Consumer Discretionary and Industrials) weigh just 16% each.
The possible (likely?) inclusion of South Korea in the MSCI Developed Markets index could be a catalyst for a significative revaluation of the whole South Korean market.
Some kind of change in North Korea (even minor – along the lines of past reforms in China or Vietnam) provides instead a powerful free option to which today Mr Market is assigning zero probability. Such an event should disproportionally and massively benefit our portfolio, which is mostly composed of firms exposed to the domestic economy.
Spicy broth with a meaty taste and chewy noodles may not be to everyone’s taste, but South Korea should arguably be in all global investors’ menus.
See here for details on our NJ South Korean fund.
This is a marketing communication intended exclusively for institutional investors. Refer to the Fund Prospectus & KID before making any investment decision.
For any questions email us on: info@nicheam.com
Follow us on LinkedIn: www.linkedin.com/company/niche-am
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