Tundra adds ACL Cables to portfolio
Tundra Sustainable Frontier Fund, based in Sweden, last month added to its portfolio ACL Cables PLC, a leading manufacturer of electrical products ranging from cables to power industry to switches and sockets for hotels and housing.
“We always reserve a small portion of the portfolio for what we view as long- term strategic positions. Although leaders in their specific areas these companies are often small, where liquidity can vary, consequently we accept a longer investment horizon – which is more than three years,” a statement by the fund has said.
“As Sri Lanka’s largest company, John Keells Holdings fell sharply in conjunction with their exclusion from the Frontier100 Index (an index that is primarily tracked by ETFs), we took the opportunity to increase our position in the company to approximately 2.5 per cent (previously 1per cent) at attractive levels.”
ACL Cables is a well-managed company with a very strong brand, market leader position and has demonstrated good historical growth, the statement said noting that ACL’s margins has suffered somewhat due to fast-rising prices for copper and aluminum. “It always takes a certain amount of time before higher input costs can be fully passed on in the pricing of the company’s products. However, we believe that this will happen from here on and over the next few years, which will lead to margin improvements in addition to volume growth.”
Tundra Sustainable Frontier Fund had bought the stock at a valuation of just over eight times current profits, while they expect a profit growth of more than 20 per cent on average over the next three years. “We added just under 1 per cent of the portfolio to the company to benefit from growing construction activity in Sri Lanka as a result of infrastructure initiatives and increasing tourism.”
Investments from Scandinavian countries such as Sweden have grown by 54 per cent per annum compound annual growth rate (CAGR) since 2013, Colombo Stock Exchange (CSE) data shows. These are funds which believe that deliberately investing in companies with good behaviour or agitating to improve the behaviour of offenders — can deliver results. Scandinavian ESG funds and their business communities and government policies are often held up as an example to other countries.
The CSE in a recent statement said that inward investment from this region have grown by 39 per cent per annum ( CAGR) since 2013. It said that Rs. 2.4 billion in foreign purchases recorded from Sweden so far in 2018 marks a new high for investment flows into the stock market from the country, where the inflows recorded within the first five months of the year have bettered the previous high of Rs. 1.6 billion recorded in 2014.
Scandinavian countries collectively have invested Rs. 8.2 billion in local equities in 2018 year to date, 23 per cent of the total foreign purchases during the period. Foreign purchases originating from Norway also most recently recorded an all- time high, with Rs. 7.6 billion worth purchases establishing a new record in 2017, during a year that established new all-time yearly foreign purchase records for 11 countries.