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Reasonably priced growth companies in Emerging markets


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I am looking for reasonably priced growth companies in Emerging markets like India, Brazil etc. Wondering if anyone has a good screen they could suggest or an interesting ideas? I was thinking things like consumer brand companies or something like Thomas Cook in India. I know nothing so any suggestions are welcome.

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Texhong Textiles


Why do you say so?


How do they compare with Shenzhou/Eclat/Hansae/Youngone in terms of valuation and growth?


I think the historical results tell the story here, once you account for the noise created by fluctuations in cotton prices.


The Red Corner blog has a series of posts (and comments thereto) about Texhong, its business model and management.  If I had to sum up the many thousands of words in those materials, it would be the following quote, which I've lifted from a comment to one of the posts on that blog:


I am suggesting that Texhong has important unit cost advantages in yarns and that it therefore enjoys important competitive advantages notwithstanding the fact that he product that it sells is a commodity.


You can look at Texhong's annual reports for 2006 and 2014 and contrast the following:


General & Administrative costs per metric tonne of yarn

Selling expense per MT of yarn (Selling expense = Selling & Distribution minus Transport)


The unit cost DECLINE in these two line items between these two years should sum to approximately 1450 yuan per MT. 1450/MT is 6% of the LT average selling price of yarn (24,000 RMB/MT). So a 4.5% operating margin in 2006 becomes, because of scale/scope economies, a 10.5% margin.


At constant asset turnover of 1.8x, Texhong's ROIC morphs from (1.8 x 4.5%) = 8% to (1.8 x 10.5%) = 19%

At debt/equity of 50%, ROE improves from 16% to 38%


Is it sustainable? Well the source is unit cost advantage. Yarn producers and yarn buyers are all price takers so global yarn prices -- and the therefore the prices at which Texhong sells its yarn -- do not go down just because Texhong improved its cost structure.


What will happen when it is selling a million MT of yarn? How wide will the gap be then between Texhong and the 98,000 other yarn manufacturers in the PRC?




Regarding the other companies you mentioned, are they actually comparable?  Texhong makes yarn.  Is Shenzou, for example, a yarn manufacturer, or is it further downstream (fabrics and garments)?



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Beijing Enterprise Holdings...  8x forward earnings, 80% book, 4.5x cash flow. Water infrastructure, Natural gas distribution, largest beer producer/market share in Beijing. mid teens 1,3,5,10 year earnings growth. Pays 2.5%+ dividend.


Any insight on why it is so cheap? Is it because its an SOE. I find it weird they combined such desperate businesses together.

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It's essentially a collection of assets that were under the control of the Beijing Municipal Government. The mishmash of businesses is not that unusual in China (ex Cheung Kong, Cofco, Chinese Resources Holdings before some of its spinoffs,Jardine  group, Shanghai Industrial, etc) . As to the cheapness, who knows for sure? I think it mostly got caught in the downturn of Chinese stocks. Some people probably didn't like that they invested ~US one billion in Russian natural gas fields.


They have monopoly like status for most of their businesses in Beijing with growth opportunities outside the area in water, natural gas distribution, and beer. It's about a 4% position for me.


Their website is user friendly and has quite a bit of info about the company, structure, future plans, etc http://www.behl.com.hk/en/global/home.php

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