The £121m trust, which is headed up by FE Alpha Manager Hugh Young’s Asia Pacific team, has returned 795.47 per cent over the last decade – a figure only beaten by the Aberdeen Asian Smaller Companies IT. The average trust has delivered 215.83 per cent over the same period.
Performance of trust vs average trust over 10yrs
Source: FE Analytics
Over five years, Young and his team have managed 212.01 per cent, even though this timeframe includes the global financial crisis and a tough time for emerging markets in general.
In spite of its stellar medium- and long-term record, the £121m trust is on a discount of 14.5 per cent, according to the AIC, making it one of the cheapest options in the entire IT Asia Pacific ex Japan Equities sector.
Few high-growth trusts with a performance record to match are on such steep discounts, with both the Aberdeen Asian Smaller Companies IT and Scottish Oriental Smaller Companies IT currently trading on discounts of 3.6 and 4.8 per cent, respectively.
Aberdeen New Thai’s discount was as tight as 0.89 per cent a matter of months ago, but the recent sell-off – which has seen the Thai market fall by around 10 per cent in the last month – has resulted in a possible buying opportunity for the bargain hunters among you.
The figure of 14.5 per cent is wider than the trust’s one- and three-year average.
Aberdeen’s Adithep Vanabriksha and Orsen Karnburisudthi take on the day-to-day running of the trust. Speaking exclusively to FE Trustnet, Vanabriksha (pictured) said the recent sell-off was widely expected, and has done little to dampen his optimism.
However, he says investors looking to buy the trust now should not expect the next 10 years to be as spectacular as the last.
"Since I joined the trust in 2002, it’s up around 1,200 per cent," he explained.
"It was a good time to buy back then. Some very good companies were on 6x or 7x earnings as they were still recovering from the [Asian] crisis, and a lot of small and mid caps were pretty much undiscovered."
"Can we expect 50 to 60 per cent annual returns over the next 10 years? Possibly not, but we have recently been successful at returning 10 to 20 per cent, which I think isn’t unrealistic."
"This won’t only come from organic growth, as M&A is becoming an increasingly important theme."
On the recent sell-off, he said: "The market was up around 40 per cent over one year, so it’s hardly a surprise that we saw a pull-back. People will always take their profits from areas that have made them a lot of money."
"Some analysts said the economic numbers in Thailand for the first quarter were disappointing, but I think this was a bit of an excuse. The country is still growing 5 per cent year-on-year."
The manager says he sees the recent dip in markets as a buying opportunity, and has added to some of the trust's more economically sensitive names, including banks.
"Market falls are a good way to pick up quality names at a cheaper price. The fundamentals of these stocks don’t change just because Ben Bernanke says something to the Fed."
Vanabriksha says that the trust concentrates on the same stockpicking process used by the likes of the Edinburgh Dragon and Aberdeen New Dawn trusts.
"It draws on the same process that Hugh Young uses across the range, but only for Thai companies," he explained.
"We’ve done so well because we did our homework when we started back in 2002. We take a bottom-up approach, looking for good-quality companies that at the time are low in price."
"We create a portfolio and we sit on it. We’ve gone through various crises in the last 10 years, but because of the quality, they’ve been able to generate very good earnings and done very well as a result."
The manager points to corporate governance as one of the most important issues facing investors in Thailand, which he says is why the trust has weathered volatility so well.
"We like companies with the very best corporate governance and balance sheets," he explained. "They’re the two priorities."
"Over the last six years, there have been some major political problems in Thailand, and a lot of flooding, but our companies have done well."
He says political corruption is still a major problem in Thailand, but says there have been big improvements in recent years, which should support markets.
"The key question we ask is: 'will the politicians go for their own glory rather than the country’s?' It’s possible, but we have seen things become a lot more stable since 2011."
"Four of five years ago we had the coup, but since then things have moved on very quickly. We have the first ever female prime minister in power, and though corruption is still a problem, it’s getting better."
Vanabriksha says the experience throughout Aberdeen’s team is the trust’s biggest asset.
"Along with myself, there are two other portfolio managers and a junior manager. We’re also very well supported by the team of 15 to 20 in Singapore."
"Hugh Young is also on the committee, who has been involved with the trust since 1989."
As well as boasting very strong absolute returns, the trust has performed well relative to its benchmark. Our data shows it has beaten the Thailand Bangkok SET index over one, three and 10 years, and only fallen marginally short over five.
Performance of trust vs index over 10yrs
| Name | 1yr (%) | 3yr (%) | 5yr (%) | 10yr (%) |
|---|---|---|---|---|
| Aberdeen New Thai IT | 55.13 | 161.83 | 212.01 | 795.47 |
| Thailand Bangkok SET | 43.1 | 120.98 | 212.63 | 687.15 |
Source: FE Analytics
Like many Aberdeen portfolios, the New Thai IT tends to outperform its benchmark in falling markets, but lags in sharply rising ones. It lost less than the index in 2008, and managed to make money in the down years of 2006 and 2011.
The trust underperformed in 2009 and 2010, however, even though it managed more than 40 per cent in both cases.
Year-on-year performance of trust vs sector 2006-2012
| Name | 2012 (%) | 2011 (%) | 2010 (%) | 2009 (%) | 2008 (%) | 2007 (%) | 2006 (%) |
|---|---|---|---|---|---|---|---|
| Aberdeen New Thai IT | 55.95 | 1.36 | 59.39 | 47.77 | -25.54 | 8.27 | 18.62 |
| Thailand Bangkok SET | 39.32 | -0.19 | 68.61 | 59.14 | -26.38 | 38.62 | -0.77 |
Source: FE Analytics
It did outperform in the sharply rising market of 2012, but much of the trust’s growth came from a significant closing of the discount over the 12-month period.
Vanabriksha says the retail sector is currently expensive as a result of its recent stellar run, with some companies going from 10x to 20x earnings in recent years.
He still sees a lot of value in telecoms and financials, where he says he is finding good yield opportunities.
The manager says he is looking to take advantage of the government’s attempts to boost the domestic economy, through infrastructure and property companies.
He commented: "During the recovery of the Asian crisis between 2000 and 2008, exports drove the economy, making up around 50 per cent of GDP."
"However, the government is now looking to boost the domestic side, with an increase in the minimum wage, tax rebates for first-time buyers, and huge infrastructure programmes."
"The next five years could be very exciting in this area," he added.
The Aberdeen New Thai IT has an ongoing charges figure (OCF) of 1.55 per cent and does not charge a performance fee. It is currently yielding 1.5 per cent, but is not geared.
Vanabriksha and Karnburisudthi also run an offshore open-ended Thai fund domiciled in Singapore. However, this is not available to UK investors.
