Questing: Our Investment Process

Capture Long-Term Investment Returns of Listed Asian SMID-Cap H.E.R.O. Innovators

Inside the H.E.R.O. Leader's Mind Series

Hosokawa Micron (TSE: 6277)

Hosokawa Micron: World’s #1 Powder & Particle Processing Equipment Manufacturer At Tipping Point Growth & Expanding Into Nano-Level Advanced Grinding Technology for Lithium Battery in Electric Vehicles (EV), Cosmetics, Haircare & Pharmaceuticals
ROE 14.9%, EV/EBIT 8.7x, EV/EBITDA 7.2x, EV/CFO 6.1x, P/Sales 1.2x, Net Cash 26.1% of MV

TOCALO Co (TSE: 3433)

TOCALO: Japan’s #1 Leader In Indispensable Surface Modification Technology Centering on Thermal Spraying for Multiple Industries & Advanced Fields, Commands Over 90% Domestic Market Share In Semiconductor Equipment With Structural Growth in 3D NAND Memory
ROE 20%, EV/EBIT 10x, EV/EBITDA 8x, Net Cash 10% of MV

CUB Elecparts (TSEC: 2231)

CUB Elecparts: World’s Aftermarket Leader in Automotive Tire Pressure Monitoring System (TPMS) Expanding into ADAS Market
ROE 49.4% and trading at EV/EBIT 16.9x, EV/EBITDA 15.6x

Watch KB’s Presentation at the Asian Investing Summit 2018 on Hosokawa Micron (TSE: 6277) & TOCALO (TSE: 3433)

H.E.R.O. Innovators = Origin of the FAANNMGs (Facebook, Apple, Amazon, Netflix, Nvidia, Microsoft, Google) and BATs (Baidu, Alibaba, Tencent)

Tencent

And few believe in Tencent when they were an emerging SMID-cap H.E.R.O. Innovator:

Tencent’s Pony Ma ripped off Instant Messaging (IM) service, QQ, off Israel’s ICQ in 2000 as a free online download. After burning US$1.1m, the two investors that Ma found were anxious to sell their shares. The company was shopped around for nearly any price to China’s largest portals, but no one wanted to waste money on a company doing IM. If the mighty AOL couldn’t make money off IM, who could? Tencent had a ‘lucky break’ when China Mobile decided to share a portion of revenue to third-party companies who could boost the number of people buying data plans. Pony Ma offered IM chat messaging at RMB 6c per month per user. Viola! Tencent started to push anything that a mobile user would pay: ringtones, wall paper, horoscopes. Pennies over mobile phones earned Tencent US$6m sales and US$1.2m profits in 2001. Tipping point came when Tencent offered virtual goods – avatars, outfits, pets, and emperor-kids spend pennies and hours collecting. Naspers paid US$30m to buyout 50% of Tencent in 2005 before its listing and now its 35% stake in Tencent is worth >US$194bn! SMID-cap emerging innovators at an earlier stage like Tencent are always misunderstood, neglected, ignored and overlooked.