Adamas Finance Asia

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Ticker: ADAM Exchange: AIM

Adamas Finance Asia aims to be the leading London-quoted pan-Asian focused diversified SME investment opportunity. It targets above average income and capital growth, with a stated objective to provide shareholders with unique access to a diversified portfolio with access to high-growth Asian economies.

Latest Reports

Interview with the Investment Manager on progress and outlook

Published: 31st May 2020

Suresh Withana, MD of Harmony Capital who manage Adamas' portfolio discusses:

- the progress evident in the FY 2019 results

- limited impact on activities from Covid-19, but a resulting surge in opportunities

- the recovery from pandemic lockdown in Asia is building

- strategic ambitions still on track, and portfolio news can help shrink large discount to NAV

 

Strong revenue growth emerging

Published: 28th May 2020

The highlight of FY19 results was an over six-fold increase in gross portfolio income to USD2.24m, as ongoing repositioning of the investment portfolio moved it closer to the point where it will support sustainable dividends. The period was, of course, pre COVID-19, but ADAM does not expect any material impact on portfolio valuations for FY20. Each investment has a strategy in place to actively manage operational exposure and mitigate the pandemic’s impact.

Asia’s SMEs, already lacking access to traditional financing pre-COVID-19, have an even more urgent need for new sources of cash. So one potentially positive consequence is apparent in ADAM’s pipeline of prospective new investments.

ADAM remains relatively well positioned. It has an existing portfolio of diversified pan-Asian investments, access to liquidity to continue to both provide support where required and finance new investment. Since the year end, it has raised another USD1.7m via further subscriptions to its corporate bond issue.

Although economic disruption has yet to play out, China, Hong Kong and other territories relevant to ADAM’s portfolio have reported initial recovery and are gradually lifting lock-down measures. ADAM sees Asian markets benefiting from their experience of previous pandemics (Bird Flu/SARS).

A key short-term catalyst to a higher equity rating is newsflow on progress to bring legacy holdings, such as Chinese dolomite quarry operation Future Metal Holdings (FMHL), back up to full speed.

In the interim, variables and risks appear offset by a sizeable (c.66% discount to underlying NAV/share of 99c), itself based upon a conservative assessment of fair value.




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ADAM reports highly significant Portfolio news

Published: 27th January 2020
Suresh Withana, Managing Partner of Investment Manager Harmony Capital details why the return to production of the large dolomite mine in China owned by FMH is so exciting and important for ADAM, which owns 85% of FMH. 

He also reviews progress from other portfolio members, assesses progress in growing ADAM and how that can be financed, and contrasts the low stock-market valuation of ADAM with reported NAV and analysts' calculations.


You can also access our full research report on the FMH mine by clicking here


Good progress at ADAM's largest investment

Published: 20th January 2020
Adamas Finance Asia (ADAM) is listed on AIM and intends to be the leading London-quoted investment vehicle focused on providing financing to a diversified portfolio of established and emerging SMEs across Asia.

ADAM holds an 85% controlling shareholding in Future Metal Holdings (FMH) As at 30 September 2019, that stake represents 45.2% of its portfolio. The business consists of the largest magnesium dolomite quarry in Linfen City, Shanxi Province, China and ADAM believes that FMH is in a strong position to capture the growth of the substantial magnesium market in China. 

Progress vs operational and strategic targets at the quarry is key to understanding FMH’s potential and any assessment of ADAM’s intrinsic value. That is particularly true short term, as ADAM continues to scale up its portfolio of income producing investments. 

Over the last 12 months, ADAM has directed its investment in FMH to support plans to restart quarrying production and progressively, create a self-sustaining, profitable and saleable business. According to the latest update, the key initiatives are on target. 

Independently analysed production and sales estimates show potential for FMH to generate c US$4.5m pa revenues and at c 50% gross/30% operating margins, post-tax annual earnings of c US$1.0m. Delivering on these estimates would underpin a significant valuation for FMH and, in turn, ADAM.

The next phases will be confirmation of (a) production scalability and (b) firm, large volume orders that provide revenue visibility at prices which underpin the financial model. Further updates should continue to narrow the substantial disparity between ADAM’s £36m market cap and our proforma NAV calculation of £76m.

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Just what the doctor ordered

Published: 19th December 2019
DocDoc is an innovative business with considerable growth potential plus early mover/competitive advantages. We believe it is disruptive in ways that benefit its key industry stakeholders: patients, medical practitioners and insurers. We recently met DocDoc’s CEO Cole Sirucek to discuss the company’s business model and growth strategy and regard Singapore-based DocDoc as a prime example of the potential of ADAM’s investment template.  Download Now

Capital raise & new income producing deal

Published: 23rd October 2019
Adamas Finance Asia has just made two significant announcements: a conditional share sale and purchase agreement with an existing portfolio investment, and a bond issue. 

The new capital supports ADAM’s capability to execute on its extensive pipeline, further diversify its portfolio and grow its income. These will help support ADAM’s underlying equity valuation and growth strategy, income for shareholders, and ensure that it will be able to commence dividend payments to its investors soon. It also confirms ADAM’s ability to access a broader range of financing options. 

It has raised c USD1.9m gross via a US Dollar-denominated corporate bond, issued to family offices in the Middle East. This bond matures in October 2022 and is secured via a fixed and floating charge on ADAM’s assets. It represents the first close of a corporate bond issuance programme of up to USD 10m. The first tranche carries a 12.5% pa cash coupon, payable semi-annually, and ADAM may change the terms of future corporate bond issuances under this programme.

ADAM has conditionally agreed to acquire 40% of a new SPV, Infinity TNP (ICG TNP), a wholly owned subsidiary of existing investment, Infinity Capital Group Limited (ICG). ICG develops premium residential projects in the Asia Pacific region, including Hirafu Village, a ski resort in Niseko, Japan. ADAM has agreed to pay ICG £5.63m for 40% of ICG TNP, settled via 16.18m ADAM shares at 34.8p/share. Post the transaction, ICG will hold 16% of ADAM’s issued share capital. 

The company plans to target an ungeared annualised total (income and capital growth) return of between 14% and 16% from its new investments. Based upon its existing pipeline, it expects to have fully invested the new capital by the end of the current year.  

Proforma NAV/share is 73p, versus a stock price of just 24p.

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Portfolio additions build income stream

Published: 26th September 2019

Adamas Finance Asia aims to be the leading London-quoted pan-Asian focused diversified SME investment holding vehicle. It targets above average income and capital growth, with a stated objective to provide shareholders with unique access to a diversified portfolio with access to high-growth Asian economies.

The key message from the recent interim result was the material increase in total portfolio income, from US$0.05m (H1 2018) to US$1.25m in the first six months this year. We see that as the key metric to track continuing progress made by ADAM’s investment manager, Harmony Capital.

First half income was a combination of interest and fair value adjustments. The second half result will be driven by full contributions from transactions concluded in H1 and follow-on investment tranches. That should justify some reappraisal of ADAM’s prospects and valuation, but the other major component will be confirmation that China based Future Metal Holdings (FMH) has resumed operations this year.

As FMH contributed 46% of mid-year NAV, its prospects are closely aligned with ADAM’s. The latter has de facto control of FMH via an 84.8% stake and taken a hands-on role to steer it into a position where it can restart mining this year. Success in that respect should help validate the portfolio’s intrinsic value (NAV/share 88p at end June 2019 vs a 30p share price) and demonstrate the investment manager’s ability to work ADAM’s assets for shareholders’ benefit.

ADAM has built an investment pipeline which it will capitalise upon where it has rebuilt its valuation and gained access to new capital. It is rolling out initiatives to address the illiquidity of its equity and positively raise its profile.

 

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Transition to new strategy on track

Published: 20th June 2019
ADAM’s FY18 figures do not fully convey the successful efforts of the investment manager in restructuring the inherited portfolio. The latter is now far more coherent than it was 18 months ago, divided between stable, non-strategic assets held for sale and recently made, income-generating investments.  Two attractive transactions were completed post the year-end and future reports should consequently reflect a more diversified income-focused investment strategy. 

Since its appointment as ADAM’s new Investment Manager just over two years ago, Harmony Capital Investors Limited (“Harmony Capital”) has restructured and stabilised the legacy portfolio, secured two new investments and built a pipeline of new potential investments across sectors that fit its revised investment policy. 

The latter’s focus is SME ‘special situations’ in Asia i.e. companies which seek growth capital but are unsuitable or too complex for traditional financing methods available in their local markets. ADAM’s competitive advantages and bargaining power are derived from local networks, an experienced investment manager with a successful track record of deploying capital across Asia and the acute shortage of traditional sources of finance to many borrowers in its target Asian markets.

A new investment completed in FY18 and two further deals announced post the year-end illustrate the template. ADAM has a healthy pipeline of similar opportunities, which will enable it to continue to grow its portfolio, subject to securing access to capital from asset sales and new equity. 

NAV/share at the year-end was 113c. That is significantly above the current share price, which reflects historic underperformance by the previous investment manager, uncertainty over the timing and financial scale of exits and the illiquidity of ADAM’s shares. Management expects newsflow to help deal with these issues over the next 18 months, while it plans other initiatives to help attract and build a wider shareholder base and ideally, build its equity base to finance portfolio growth.

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Adamas Finance Asia at the Equity Development Investor Forum, January 2019

Published: 1st February 2019
Suresh Withana, Managing Partner of Harmony Capital their investment manager, updated us on the unique offering that ADAM affords to AIM investors, progress of their investments and the ambitions of the company moving forward.

NB  for any investor who missed Suresh's presentation on ADAM's unique AIM proposition there is an invitation to cocktails with ADAM at the Sofitel SW1, next Thurs 7th of February at 18.45. 

Register here to gain admittance  : CLICK HERE

New investment in the medical device sector

Published: 25th January 2019
Adamas Finance Asia aims to be the leading London-quoted pan-Asian focused diversified SME investment holding vehicle. It targets above average income and capital growth, with a stated objective to provide shareholders with unique access to a diversified portfolio with access to high-growth Asian economies.

It has announced a proposed new US$5m investment in a medical devices company called PharmaJet Inc (PharmaJet). This follows a US$4m investment in a residential project in a popular Japanese ski resort in December 2018, which provided it with initial exposure to Asia’s winter tourism industry. 

PharmaJet has developed innovative, needle-free injectors, which have US Food and Drug Administration marketing clearance, European Union CE Mark and World Health Organisation Personal Quality and Safety certification for the suitability of delivering medication and vaccines. ADAM was attracted by the underlying growth potential for the medical devices sector within Asia and the significant demand for needle-free injectors. 

PharmaJet is seeking to raise between US$12M and US$20M for business expansion, particularly within Asia, and to move it towards a potential IPO. As the lead investor, ADAM intends to subscribe up to US$5M in a convertible bond and has agreed to a non-binding term sheet, subject to final legal documentation. The convertible bond has a four-year maturity and a 10% pa coupon (6% cash, 4% Payment-in-Kind). It will be drawn in tranches, with the first subject to satisfaction of certain conditions (eg completion of legal due diligence and execution of legally binding documentation). 

This investment reflects the investment mandate of ADAM to seek an immediate, attractive income stream to underpin future distributions, and medium term capital growth. It is an example of ADAM’s ability to access niche investment opportunities not normally available to European investors. Detailed due diligence was carried out by Harmony Capital.

We are encouraged by two recent investments in rapid succession and expect the significant (93%) gap from the share price to reported NAV to shrink on further activity. 



NB Suresh Withana, Managing Partner of Harmony Capital Investors, is presenting to investors at the ED Investor Forum next Wed, 30th Jan at 17.30pm. Registration is free but required, by signing up here: 

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announces two investment deals in quick succession

Published: 14th January 2019

Suresh Withana explains why investment manager Harmony Capital has selected PharmaJet and Infinity Capital Group to enter the portfolio of Adamas (LON:ADAMA) in recent weeks. 

NBSuresh will also be presenting at our Private Investor Forum at Buchanan Communications on the evening of Wednesday the 30th of January 2019

Register for the Event here - CLICK HERE 

Venue: 107 Cheapside, London EC2V6DN 

Time: 5pm for a prompt 5:30 start


Initial investment in Asian winter tourism

Published: 13th December 2018
Adamas Finance Asia (“ADAM”) aims to be the leading London-quoted pan-Asian focused diversified SME investment company. It targets above average income and capital growth, with a stated objective to provide shareholders with unique access to a diversified portfolio sourced from high-growth Asian economies.

Their latest investment fits its investment mandate by providing an immediate, attractive income stream, which reaffirms the potential for future dividends, and capital growth over the medium term. Furthermore, the attractive terms agreed confirm the management’s view regarding the acute shortage of traditional sources of finance to many borrowers in its target Asian markets. 

ADAM has agreed to finance the development of a premium residential project in Hirafu Village, located in the Niseko Ski Resort in Hokkaido, Japan, one of the world’s most popular winter travel destinations. It will provide the borrower, Infinity Capital Group Limited (ICG) with a US$4m senior secured loan note, fully secured by other ICG assets in Niseko. The coupon is 17.5% pa, payable in cash with the first tranche drawn imminently according to the Company, and ADAM receives warrants. 

This transaction is a timely reminder of the Investment Manager’s ability to source and execute attractive deals, and its plans to build cash flows to support future dividend payments. 

ADAM shares are currently 48% below end September 2018 (unaudited) NAV/share. We believe that gap discounts any perceived risks and offers attractive potential upside as Harmony Capital further builds ADAM’s portfolio with Asian SMEs.

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Interview with Investment Manager on unique Asian SME offering

Published: 24th October 2018
Founder of Investment Manager Harmony capital, Suresh Withana, explains the attractions of the Adamas Finance Asia mandate to gain exposure to Asian SME growth.

A full research note about ADAM has just been published by Equity Development here ... https://www.equitydevelopment.co.uk/edreader/?d=%3D%3DQN5QjM 


Unique access to Asian SME growth

Published: 24th October 2018
Adamas Finance Asia (ADAM) aims to be the leading London-quoted pan-Asian focused diversified SME investment holding vehicle. It targets above average income and capital growth, with a stated objective to provide shareholders with unique access to a diversified portfolio with access to high-growth Asian economies.

Over the last 16 months, its new Investment Manager, Harmony Capital Investors Limited (“Harmony Capital”), has begun to reposition ADAM to address its past underperformance. It has restructured and stabilised its legacy portfolio and built a pipeline of new potential investments which fit with ADAM’s revised investment policy. 

We set out the investment case in this note and how ADAM plans to leverage its competitive positioning to build a portfolio that supports progressive income distributions and capital gains. It has sourced predominantly private opportunities and, subject to securing access to the necessary capital, has a pipeline of income generating assets which fit its new investment strategy. 

Although ADAM is sector agnostic, that pipeline includes potential investments in Internet & Technology, Healthcare & Life Sciences, Property, Industrials, Energy and Resources and Education across Asia. A common theme is likely to be a focus on SME ‘special situations’ which seek growth capital but are unsuitable or too complex for most traditional financing methods available in their local markets.

The recent interims reflected the ongoing transition, disposals of non-core, legacy assets and reinvestment in new income generating assets. ADAM reported a 1.5% increase in consolidated NAV to US$95m (FY17: US$93.6m) and concluded its first new investment since Harmony Capital’s appointment, a US$2m stake in DocDoc Pte. via a convertible bond. 

ADAM’s legacy portfolio has been stabilised and is held at fair value. The shares are currently c.50% below 116c NAV/share at end Sept (unaudited). We believe that discounts any perceived risks and offers attractive potential upside as the investment manager builds growth momentum and credibility over the next 12-18 months.
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