Durante años, uno de los principales problemas del mercado coreano ha sido precisamente ese. Muchas compañías generaban dinero, pero existían pocos incentivos para pagar dividendos, recomprar acciones o mejorar la eficiencia del capital. En algunos casos, el propio sistema fiscal y corporativo incluso favorecía que las compañías mantuvieran valoraciones bajas.

Creo que esto está empezando a cambiar. Corea ha introducido varias reformas fiscales, legales y regulatorias, entre ellas el programa Corporate Value Up, con el objetivo de mejorar la asignación de capital y reducir el conocido Korea Discount.

Antes de empezar a hablar de las empresas que he encontrado, quiero explicar cuáles eran los problemas del mercado coreano, qué reformas se están introduciendo y por qué creo que algunas de estas compañías podrían experimentar un rerating durante los próximos años.

¿Por qué el mercado coreano ha cotizado históricamente tan barato?

El primer punto importante es la fiscalidad de los dividendos para un residente fiscal coreano. En Corea, cuando los ingresos financieros de una persona —intereses y dividendos— superan los 20M Won (alrededor de 13500$) se agregan a la base general del impuesto sobre la renta y tributan a los tipos marginales progresivos, que llegan hasta casi el 50%.

Esto es importante porque ayuda a entender por qué muchas empresas coreanas han tenido históricamente payouts bajos. Si el accionista controlador va a pagar un impuesto elevado cada vez que la compañía reparte dividendos, puede tener más incentivos a dejar el dinero dentro de la empresa, acumular caja, invertir en activos poco rentables o simplemente mantener una estructura de capital ineficiente.

El segundo gran problema es el impuesto de sucesiones. Corea tiene uno de los impuestos de herencia más altos del mundo desarrollado. El tipo máximo general llega al 50%, y en el caso de participaciones de control puede aplicarse una prima adicional que eleva la carga efectiva hasta aproximadamente el 60%. Esto es especialmente relevante en un mercado dominado por conglomerados familiares y compañías donde el control corporativo importa muchísimo.

En Corea, para acciones cotizadas heredadas o donadas, la base de valoración se calcula a partir del precio de mercado, no del valor contable o NAV de la empresa.

Más concretamente: para empresas cotizadas, el impuesto de sucesiones/donaciones se calcula usando el precio medio de mercado durante un periodo de cuatro meses: dos meses antes y dos meses después de la fecha de transmisión.

Por tanto, realmente había un incentivo a mantener la valoración de una empresa baja si sabías que ibas a heredar en un futuro próximo.

Entonces, como digo, creo que la infravaloración del mercado coreano estaba causada por el mismo sistema: no había incentivos a pagar dividendos ni a que la empresa tuviera una valoración alta que afectaría al impuesto de sucesiones.

No parece además haber una forma fácil de evitar este impuesto. Incluso los herederos de Samsung pagaron alrededor de 12 trillion Won (8bn $) por una herencia de 26 trillion.

Cambios regulatorios y fiscales en Corea

Desde el 1 de enero de 2026, los dividendos pagados por las denominadas high dividend companies quedan excluidos de la tributación global sobre rentas financieras y pasan a tributar de forma separada, a tipos progresivos de entre el 14% y el 30%, dependiendo de la base imponible.

• Los dividendos no deben haber disminuido respecto al año 2024.

• Tener un payout de un 25% y haber aumentado el dividendo un 10% respecto al año anterior o tener un payout de más del 40% de los beneficios.

• Hacer un disclosure de “Corporate Value Up” en el exchange coreano. Básicamente es un documento que tiene que hacer la empresa en donde, de forma resumida, tienen que explicar cuáles son sus planes para crear valor para el accionista. Suelen mencionar diferentes métricas como PER, P/Book, ROE.

  De momento el disclosure del Corporate Value Up es muy laxo, hay compañías que se lo toman en serio y otras simplemente hacen el documento un poco por ‘obligación’ para obtener el régimen fiscal preferencial. Aun así, el KRX suele mandar avisos si el documento no tiene medidas concretas. Veo posible que en el futuro les obliguen a dar más información y objetivos concretos a cumplir.

Por el momento ha funcionado muy bien. Por un lado, obligas a que las empresas paguen un mínimo de un 40% de payout o, en el caso de que la empresa tenga un payout del 25%, sabes que al año siguiente van a tener que subir el dividendo un 10% de forma obligatoria si quieren mantener el régimen.

Cambios legales

• Reforma del Commercial Act: deber fiduciario hacia accionistas

  El Parlamento aprobó en julio de 2025 una revisión del Commercial Act para expandir el deber fiduciario de los consejeros y proteger mejor a los minoritarios. Antes del cambio, los directivos tenían que velar por el bien de la “compañía” lo cual hacía que ciertas transacciones perjudiciales para el accionista minoritario se pudieran encubrir bajo el pretexto de buscar el “bien de la compañía”, pero ahora tienen la obligación legal de velar por el bien de los accionistas también.

• Fairness en fusiones, spin-offs y operaciones corporativas

  En noviembre de 2024 también se modificó el Enforcement Decree del Financial Investment Services and Capital Markets Act. Desde entonces, cuando una cotizada realiza una fusión, el board tiene que justificar si la oferta es adecuada.

  Este punto es muy importante en Corea porque muchas quejas históricas venían de fusiones, carve-outs, spin-offs y reestructuraciones injustas para el accionista minoritario.

  ---

Mejora del acceso a inversores extranjeros:

En general, Corea también ha facilitado el acceso de los inversores extranjeros a su mercado. Gracias a estos cambios, actualmente ya se pueden comprar acciones coreanas a través de brókers internacionales como Interactive Brokers.

• Eliminación del registro previo de inversor extranjero: Se elimina el antiguo sistema IRC, que era una fricción histórica para extranjeros.

• Omnibus accounts para extranjeros: Permiten operar a través de brokers/custodios extranjeros sin abrir cuentas separadas en Corea para cada fondo.

• Disclosure obligatorio en inglés: Uno de los problemas que me he encontrado al invertir en Corea es que muchas empresas solo publican sus informes en coreano, lo que complica bastante la posibilidad de hacer un análisis cualitativo de la compañía.

  El KRX está trabajando para obligar progresivamente a las empresas a publicar información en inglés. El plan se divide en varias fases y obligará a todas las compañías del KOSPI a reportar en inglés a partir de marzo de 2027.

  • Fase 1 — Desde enero de 2024: empresas del KOSPI con activos superiores a KRW 10T y una participación extranjera de al menos el 5%. Estas compañías debían publicar determinados disclosures materiales en inglés dentro de un plazo de tres días hábiles.

  • Fase 2 — Desde mayo de 2026: todas las compañías del KOSPI con activos superiores a KRW 2T. Esto amplía considerablemente el número de empresas obligadas.

  • Fase 3 acelerada — Desde marzo de 2027: todas las compañías del KOSPI.

  Por tanto, a partir de marzo de 2027, todas las empresas del KOSPI —unas 848 compañías— tendrán que publicar la mayoría de sus documentos en inglés.

Con todos estos cambios, y teniendo en cuenta las valoraciones tan bajas de muchas empresas pequeñas coreanas, veo posible que durante los próximos años se produzca un rerating en parte de este mercado por varios motivos.

Más allá de cotizar baratas en términos de beneficios, muchas de estas empresas también cotizan a múltiplos de P/B muy bajos y, en muchos casos, cuentan con una cantidad significativa de caja neta en el balance.

Uno de los objetivos del programa Corporate Value Up es precisamente incentivar a las compañías a mejorar sus retornos sobre el capital. En una empresa con exceso de caja, la forma más sencilla de elevar el ROE es repartir el capital sobrante mediante dividendos o recompras, o invertirlo en proyectos que generen una rentabilidad adecuada.

Además, los cambios legales hacen más probable que aparezcan fondos activistas que intenten presionar a estas compañías para mejorar la asignación de capital o realizar cambios corporativos.

Sin ir más lejos, dos de las empresas de las que voy a hablar a continuación recibieron una propuesta de un fondo activista para fusionarse, aunque finalmente la operación no salió adelante.

Mi estrategia de inversión en Corea

Una de las dificultades que me he encontrado a la hora de invertir en small caps coreanas es que la información que proporcionan suele ser bastante pobre. Por tanto, es realmente complicado hacer una valoración cualitativa profunda de la empresa.

Los documentos que publican están completamente en coreano, tienen un formato poco atractivo y serían más o menos el equivalente a los 10-Q de la SEC. Además, estas compañías no suelen proporcionar presentaciones que ayuden a entender mejor el negocio.

Más allá de la dificultad de acceso a la información, hay que tener en cuenta que estas empresas son bastante ilíquidas, así que prefiero diversificar entre muchas acciones antes que concentrarme en unas pocas.

En este contexto, incluso con el uso de inteligencia artificial, se me hace complicado realizar valoraciones cualitativas profundas de las empresas. Por eso, he optado por diversificar entre muchas compañías y crear una especie de “índice” propio de small caps value coreanas, compuesto actualmente por 17 empresas.

Por lo general, me he centrado en empresas baratas —con PER y P/B bajos— y que tengan un buen plan de Corporate Value Up; es decir, compañías que se hayan comprometido a pagar dividendos, recomprar acciones o mejorar la remuneración al accionista.

Empezaré escribiendo ahora sobre empresas financieras coreanas, ya que hay varios bancos cotizando a múltiplos interesantes y con buenos planes de Corporate Value Up.

De estas compañías he mirado más en profundidad JB Financial, Woori Financial, iM Financial y BNK Financial.

JB Financial

Valoración:

• Market cap: $3.41B

• PER TTM: 7.15x

• P/B: 0.92x

• ROE FY25: 12.4%

JB Financial es un holding financiero regional coreano que controla dos bancos —Jeonbuk Bank y Kwangju Bank—, además de una compañía de financiación al consumo y automóviles, JB Woori Capital; una gestora de activos, JB Asset Management; una división de venture capital y varias entidades financieras pequeñas en el extranjero, principalmente PPCBank en Camboya, JBSV en Vietnam y JBCM en Myanmar.

Crecimiento de beneficios

Si miramos la evolución de su beneficio neto durante los últimos ocho años, la compañía ha pasado de ganar alrededor de 290.000 millones de won anuales —tomando como referencia la media de 2018 y 2019— a generar aproximadamente 700.000 millones de won durante los dos últimos ejercicios.

Corporate Value Up

Payout del 50%, combinando dividendos y recompras.

Para 2026 planean un 32,5% de payout en dividendos y un 17,5% en recompras, aunque el objetivo a largo plazo es un mix de 40/10 entre dividendos y buybacks.

Además, se plantean subir la remuneración al accionista por encima del 50% si consiguen un ratio CET1 superior al 13% (actualmente está en 12,58%).

Entre los bancos coreanos con más de 1.000M$ de capitalización, JB Financial destaca como el que tiene mayor ROE, con un 11,9% según el screener (12,4% según los datos de la propia compañía), pero aun así cotiza a una valoración similar a sus peers en P/E y P/B. En mi opinión, dada la mayor calidad de las métricas de JB Financial en cuanto a ROE, su crecimiento sostenido en la última década y su enfoque shareholder-friendly con un payout del 50%, debería cotizar a una valoración más alta.

Resumen: grupo financiero barato (PE ~7x). Buen payout, del 50%, repartido entre dividendos y recompras. Buen crecimiento del beneficio neto en los últimos 5-10 años. ROE por encima de la media de los bancos coreanos.

Creo que JB Financial es el mejor en términos de riesgo/recompensa.

La oportunidad en los bancos coreanos menos eficientes

De forma general, creo que el principal atractivo de invertir en otros holdings bancarios coreanos es que históricamente no se han preocupado demasiado por mejorar sus métricas de eficiencia —como el ROE— ni por optimizar su valoración bursátil, medida mediante ratios como el PER o el P/B.

Sin embargo, la reciente introducción del programa Corporate Value Up está empujando a estas entidades a utilizar el capital de una forma más eficiente, aumentar el retorno para los accionistas y mejorar sus métricas de valoración.

Precisamente porque muchos de estos bancos parten de niveles de eficiencia y valoración muy bajos, es posible que tengan bastante margen para mejorar durante los próximos años. Si consiguen hacerlo, podría producirse un rerating significativo de sus acciones.

Por ejemplo, BNK Financial cotiza actualmente a solo 0.42 veces su valor contable, y su ROE es de apenas el 7.9%.

BNK Financial

Valoración:

• Market cap: $3.16B

• PER TTM: 6.2x

• P/B: 0.42x

• ROE FY25: 7.64%

BNK Financial es un grupo bancario regional formado principalmente por BNK Busan Bank, BNK Kyongnam Bank y BNK Savings Bank.

Muy barato en términos de P/B (0.42x) y con un ROE relativamente bajo (7.64%). El equipo directivo quiere subir el ROE por encima del 10%. De momento no parece haber progreso, pero será interesante ver si consiguen mejorarlo en los próximos años.

Lo positivo es que parecen tener un plan bastante sólido para conseguirlo. Por ejemplo, han vinculado parte de la compensación de los ejecutivos a KPIs de eficiencia, así que el management está realmente incentivado a lograrlo.

Corporate Value Up: Payout del 40-50% actualmente, con un posible incremento en función del ratio CET1.

Durante el primer semestre de 2026, BNK Financial ha recomprado aproximadamente 60 000 millones de won en acciones. Teniendo en cuenta que su capitalización bursátil actual ronda los 4.5 trillones de won, esto equivale aproximadamente a un 1.5% de su capitalización.

Además, la compañía ha pagado 300 won por acción en dividendos durante el primer semestre. Con una cotización actual cercana a los 15.000 won, esto representa una rentabilidad por dividendo del 2% durante la primera mitad del año, o aproximadamente un 4% anualizado.

Si anualizamos las recompras y los dividendos, obtenemos aproximadamente:

• Buyback yield: 3%.

• Dividend yield: 4%.

• Shareholder yield total: alrededor del 7%.

No está nada mal.

Me gusta que además tengan una política de remuneración al accionista bastante predecible, basada en su ratio CET1. Son conscientes de su P/B tan bajo y parecen centrados en usar recompras para mejorar su valoración. A un P/B de 0.42x, yo también prefiero claramente las recompras frente a los dividendos, tanto por su efecto sobre el valor contable por acción como por su posible mayor eficiencia fiscal.

Crecimiento de beneficios

En cuanto al crecimiento del beneficio, la compañía ha pasado de ganar aproximadamente 530.000 millones de won de media durante 2018 y 2019 a generar alrededor de 775.000 millones de won anuales durante los dos últimos ejercicios.

Resumen: banco extremadamente barato (PE 6.2x, P/B 0.42x) pero con ratios de eficiencia bajos (ROE por debajo del 8%). Tienen un plan sólido de remuneración al accionista y de mejora del ROE, con compensación ligada a KPIs de eficiencia.

Woori Financial

Valoración:

• Market cap: aproximadamente $16.5B

• PER TTM: 9.6x

• P/B: 0.64x

• ROE FY25: 9.1%

Woori es el cuarto mayor grupo financiero de Corea del Sur, por detrás de KB Financial, Shinhan Financial y Hana Financial.

Históricamente, ha sido el más puro de los cuatro en términos bancarios. Durante años careció de una división de seguros potente y de una securities arm relevante, lo que lo situaba en desventaja frente a sus peers más diversificados.

Entre 2024 y 2025, Woori adquirió Tongyang Life —la sexta mayor aseguradora de vida de Corea— y ABL Life. Además, relanzó Woori Investment & Securities.

De esta forma, Woori ha conseguido crear por primera vez una estructura formada por banca, seguros e inversión bajo un mismo grupo financiero.

Esto podría generar oportunidades de cross-selling entre sus aproximadamente 20 millones de clientes retail y su millón de clientes corporativos.

Corporate Value Up: Woori tiene actualmente un shareholder return del 40%, con un objetivo de elevarlo al 50% a largo plazo.

También quiere aumentar su ROE por encima del 10%.

Crecimiento de beneficios: La compañía ha pasado de generar aproximadamente 2 billones de won durante 2018 y 2019 a ganar alrededor de 3 billones de won durante los últimos años.

Por tanto, el crecimiento ha sido razonablemente bueno, aunque no tan destacable como el de JB Financial.

Resumen: Banco considerablemente más grande que los demás. Tiene potencial para crecer si consigue monetizar su base de clientes mediante sus servicios de inversión y seguros.

iM Financial

Valoración:

• Market cap: aproximadamente $1.8B

• PER TTM: 6.6x

• P/B: 0.42x

• ROE FY25: 7.3%

iM Financial es un holding financiero regional coreano cuya principal filial es iM Bank, anteriormente conocida como DGB Daegu Bank. El grupo también cuenta con negocios de seguros, gestión de activos, securities y financiación especializada, aunque su actividad continúa estando bastante concentrada en la banca comercial.

Corporate Value Up: La compañía tiene actualmente un shareholder return del 40%, con un objetivo de alcanzar un TSR del 50% a largo plazo.

Además, pretende mejorar su ROE desde el 7,3% actual hasta:

• Un 9% para diciembre de 2027.

• Un 10% a largo plazo.

  

  Crecimiento de beneficios

  Si miramos la evolución de su beneficio neto, iM Financial está ganando prácticamente lo mismo que en 2018. Es decir, durante los últimos ocho años apenas ha habido crecimiento.

  

  Resumen: De los bancos analizados, es el que me parece menos interesante. Apenas ha crecido durante la última década, su programa Corporate Value Up proporciona menos información que el de otros bancos y sus métricas de valoración son muy similares a las de BNK Financial.

  ---

Conclusión sobre los bancos coreanos

De las cuatro compañías analizadas, considero que JB Financial es la más interesante.

Cotiza a múltiplos baratos, sus métricas de eficiencia son superiores a la media de los bancos coreanos, ha tenido el mayor crecimiento de beneficios de las compañías analizadas y tiene una buena política de remuneración al accionista, con un payout total del 50%.

BNK Financial también me parece una inversión interesante, especialmente por su baja valoración en términos de P/B.

Me gusta que la compañía mencione de forma explícita que parte de la compensación de los directivos está vinculada a KPIs de eficiencia. También considero que su programa Corporate Value Up es el más claro de los cuatro.

Su ROE es mucho más bajo que el de JB Financial, pero precisamente por ello existe la posibilidad de que consiga mejorar significativamente su rentabilidad sobre el capital durante los próximos años.

En cuanto a iM Financial, es la compañía que menos me interesa de las cuatro. Cotiza a una valoración muy similar a la de BNK Financial, pero tiene un ROE ligeramente inferior, prácticamente no ha crecido durante los últimos ocho años y su programa Corporate Value Up es menos concreto. Por tanto, personalmente prefiero BNK Financial.

Finalmente, Woori Financial ha tenido una evolución razonablemente buena durante los últimos años, con un crecimiento decente del beneficio y un Corporate Value Up también aceptable. Sin embargo, cotiza a un múltiplo de beneficios superior al de las otras compañías.

Woori tiene la ventaja de ser la empresa más grande de las cuatro, pero creo que tanto JB Financial como BNK Financial ya son suficientemente grandes —ambas superan los 3.000 millones de dólares de capitalización— como para que la liquidez no represente un problema importante a la hora de invertir.

Por tanto, mi ranking personal sería:

1. JB Financial, por su combinación de crecimiento, ROE, valoración y remuneración al accionista.

2. BNK Financial, por su valoración extremadamente baja y el potencial de mejorar su eficiencia.

3. Woori Financial, por su mayor tamaño y diversificación, aunque cotiza a múltiplos más elevados.

4. iM Financial, por su falta de crecimiento y un Corporate Value Up menos convincente.

Esto es todo por el momento. Durante las próximas semanas publicaré más artículos sobre las otras compañías coreanas en las que he invertido, así que podéis suscribiros gratuitamente para recibir las próximas actualizaciones.

También podéis seguirme en Twitter/X: https://x.com/NateValuetw

For years, one of the main problems with the Korean market has been exactly that. Many companies were generating money, but there were few incentives to pay dividends, buy back shares, or improve capital efficiency. In some cases, the tax and corporate system itself even created incentives for companies and controlling shareholders to keep valuations low.

I think this is starting to change. Korea has introduced several tax, legal, and regulatory reforms, including the Corporate Value Up program, aimed at improving capital allocation and reducing the well-known Korea Discount.

Before getting into the companies I’ve found, I want to explain what the problems with the Korean market were, what reforms are being introduced, and why I think some of these companies could see a rerating over the coming years.

Why has the Korean market historically been so cheap?

The first important issue is the taxation of dividends for Korean tax residents. In Korea, when an individual’s financial income —interest and dividends— exceeds KRW 20M, or approximately $13,500, it is added to their general taxable income and taxed at progressive marginal rates that can reach almost 50%.

This is important because it helps explain why many Korean companies have historically maintained low payout ratios. If a controlling shareholder has to pay a high tax rate every time the company distributes a dividend, they may have a greater incentive to leave the money inside the business, accumulate cash, invest in low-return assets or simply maintain an inefficient capital structure.

The second major problem is inheritance tax. Korea has one of the highest inheritance tax rates in the developed world. The general maximum rate reaches 50%, and an additional premium may be applied to controlling stakes, increasing the effective tax burden to approximately 60%.

This is particularly relevant in a market dominated by family-controlled conglomerates and companies where corporate control matters enormously.

In Korea, the valuation basis for inherited or gifted listed shares is calculated using their market price, rather than the company’s book value or NAV.

More specifically, for listed companies, inheritance and gift tax is calculated using the average market price over a four-month period: two months before and two months after the date of transfer.

Therefore, there was a genuine incentive to keep a company’s valuation low if you knew that you were likely to inherit a stake in the near future.

As I mentioned, I believe the undervaluation of the Korean market was partly caused by the system itself: there were few incentives to pay dividends or to achieve a higher valuation, as this would increase the inheritance tax burden.

There also does not appear to be an easy way to avoid this tax. Even Samsung’s heirs paid approximately KRW 12T —around $8B— in taxes on an inheritance valued at KRW 26T.

Regulatory and tax changes in Korea

Since January 1, 2026, dividends paid by so-called high-dividend companies have been excluded from the comprehensive taxation of financial income. Instead, they are taxed separately at progressive rates ranging from 14% to 30%, depending on the taxable amount.

To qualify as a high-dividend company, a company must meet the following conditions:

• Dividends must not have decreased compared with 2024.

• The company must either have a payout ratio of at least 25% and increase its dividend by 10% compared with the previous year, or have a payout ratio of more than 40% of earnings.

• The company must publish a Corporate Value Up disclosure on the Korean exchange.

Basically, this is a document in which the company has to explain, in broad terms, how it plans to create value for shareholders. Companies usually mention different metrics such as P/E, P/B and ROE.

For the time being, the requirements for the Corporate Value Up disclosure are fairly loose. Some companies take the process seriously, while others seem to prepare the document mainly because they are “required” to do so in order to benefit from the preferential tax regime.

Even so, the KRX usually sends notices when a disclosure does not include concrete measures. I think it is possible that, in the future, companies will be required to provide more information and set specific targets that they will actually have to meet.

So far, I think the new regime has worked quite well. On the one hand, it encourages companies to maintain a minimum payout ratio of 40%. Alternatively, if a company has a payout ratio of 25%, it will have to increase its dividend by 10% the following year if it wants to remain eligible for the preferential tax treatment.

Legal changes

Recent reforms have significantly strengthened the legal position of minority shareholders in Korea.

· Reform of the Commercial Act: fiduciary duty towards shareholders: In July 2025, the Korean Parliament approved a revision of the Commercial Act to expand the fiduciary duties of directors and provide greater protection to minority shareholders.

Following the reform, directors now also have a legal obligation to consider the interests of shareholders.

· Fairness in mergers, spin-offs and corporate transactions: In November 2024, Korea also amended the Enforcement Decree of the Financial Investment Services and Capital Markets Act.

Since then, when a listed company carries out a merger, the board must explain whether the consideration offered is fair and appropriate.

This is particularly important in Korea because many of the historical complaints from investors involved mergers, carve-outs, spin-offs and corporate restructurings that disadvantaged minority shareholders.

Improved access for foreign investors

In general, Korea has also made it easier for foreign investors to access its market. Thanks to these changes, Korean stocks can now be bought through international brokers such as Interactive Brokers.

• Removal of the prior foreign investor registration: the old IRC system, a historical source of friction for foreigners, has been eliminated.

• Omnibus accounts for foreigners: allow trading through foreign brokers/custodians without opening separate accounts in Korea for each fund.

• Mandatory English disclosure: one of the problems I’ve run into investing in Korea is that many companies only publish their reports in Korean, which makes it quite hard to do qualitative analysis. The KRX is working to gradually require companies to publish information in English, through a phased plan that will require all KOSPI companies to report in English starting March 2027:

  • Phase 1 — from January 2024: KOSPI companies with assets above KRW 10T and at least 5% foreign ownership. These companies had to publish certain material disclosures in English within three business days.

  • Phase 2 — from May 2026: all KOSPI companies with assets above KRW 2T. This significantly widens the number of companies required to comply.

  • Phase 3 (accelerated) — from March 2027: all KOSPI companies.

So, from March 2027 onward, all KOSPI companies —around 848 of them— will have to publish most of their documents in English.

With all these changes, and considering the extremely low valuations of many Korean small-cap companies, I believe part of this market could experience a rerating over the coming years for several reasons.

Beyond trading at low earnings multiples, many of these companies also trade at very low P/B ratios and, in many cases, hold significant amounts of net cash on their balance sheets.

One of the objectives of the Corporate Value Up program is precisely to encourage companies to improve their returns on capital. For a company holding excess cash, the easiest way to raise its ROE is to distribute that surplus capital through dividends or share buybacks, or invest it in projects capable of generating an adequate return.

In addition, the recent legal reforms make it more likely that activist funds will pressure these companies to improve capital allocation or implement corporate changes.

In fact, two of the companies I will discuss later received a proposal from an activist fund to merge, although the transaction ultimately did not go ahead.

My approach to investing in Korea

One of the difficulties I have encountered when investing in Korean small caps is that the quality of the information they provide is generally quite poor. As a result, it is genuinely difficult to carry out an in-depth qualitative assessment of these companies.

The documents they publish are entirely in Korean, usually have an unattractive format and are more or less equivalent to the 10-Q filings submitted to the SEC. In addition, these companies rarely provide investor presentations that make it easier to understand the business.

Beyond the difficulty of accessing information, it is also important to bear in mind that many of these companies are relatively illiquid. For this reason, I prefer to diversify across a large number of stocks rather than concentrate my portfolio in just a few of them.

In this context, even with the use of artificial intelligence, I still find it difficult to conduct truly in-depth qualitative analysis of these companies. I have therefore decided to diversify across a larger number of businesses and create a kind of personal Korean small-cap value index, currently consisting of 17 companies.

In general, I have focused on cheap companies —with low P/E and P/B multiples— that also have a solid Corporate Value Up plan. In other words, companies that have committed to paying dividends, repurchasing shares or otherwise improving shareholder returns.

I will start by discussing Korean financial companies, as there are several banks trading at attractive multiples and with relatively strong Corporate Value Up plans.

Of these companies, I have looked more closely at JB Financial, Woori Financial, iM Financial and BNK Financial.

JB Financial

Valuation

• Market cap: $3.41B

• PE TTM: 7.15x

• P/B: 0.92x

• ROE FY25: 12.4%

JB Financial is a Korean regional financial holding company that owns two banks —Jeonbuk Bank and Kwangju Bank— as well as a consumer and auto finance company, JB Woori Capital; an asset manager, JB Asset Management; a venture capital division; and several small overseas financial institutions, mainly PPCBank in Cambodia, JBSV in Vietnam and JBCM in Myanmar.

Earnings growth

Net income has grown from approximately KRW 290B per year —using the average of 2018 and 2019— to around KRW 700B over the past two years.

Corporate Value Up

JB Financial has a 50% payout target, combining dividends and share buybacks.

For 2026, the company plans to distribute 32.5% of earnings through dividends and 17.5% through buybacks, although its long-term target is a 40/10 mix between dividends and share repurchases.

The company is also considering raising shareholder returns above 50% if it achieves a CET1 ratio above 13%, compared with 12.58% currently.

Among Korean banks with over $1B in market cap, JB Financial stands out as having the highest ROE, at 11.9% according to the screener (12.4% per the company’s own figures), but it still trades at a similar valuation to its peers on P/E and P/B. In my opinion, given the higher quality of JB Financial’s ROE metrics, its sustained growth over the past decade, and its shareholder-friendly approach with a 50% payout, it should trade at a higher valuation.

Summary: cheap financial group (P/E ~7x). A solid 50% payout ratio, split between dividends and share buybacks. Solid net income growth over the past 5-10 years. Above-average ROE for Korean banks.

I believe JB Financial offers the best risk-reward profile of the banks analyzed.

The opportunity in Korea's less efficient banks

Generally speaking, I believe the main attraction of investing in other Korean bank holding companies is that, historically, they have not focused too much on improving efficiency metrics such as ROE or optimizing their market valuations through measures such as P/E and P/B.

However, the recent introduction of the Corporate Value Up program is pushing these institutions to use capital more efficiently, increase shareholder returns and improve their valuation metrics.

Because many of these banks are starting from very low levels of efficiency and valuation, they may have significant room for improvement over the coming years.

If they manage to improve these metrics, their shares could experience a meaningful rerating.

For example, BNK Financial currently trades at only 0.42x book value, while generating an ROE of just 7.9%.

BNK Financial

Valuation

• Market cap: $3.16B

• PE TTM: 6.2x

• P/B: 0.42x

• ROE FY25: 7.64%

BNK Financial is a regional banking group made up mainly of BNK Busan Bank, BNK Kyongnam Bank, and BNK Savings Bank.

Very cheap on a P/B basis (0.42x) and with a relatively low ROE (7.64%). Management wants to push ROE above 10%. So far, progress appears to have been limited, but it will be interesting to see whether management can improve this metric over the coming years.

On the positive side, the company appears to have a fairly solid plan to achieve this. For example, it has linked part of executive compensation to efficiency-based KPIs, meaning that management is genuinely incentivized to deliver.

Corporate Value Up: Payout of 40-50% currently, with a possible increase depending on the CET1 ratio.

During the first half of 2026, BNK Financial repurchased approximately KRW 60B of shares. Considering that its current market capitalization is around KRW 4.5T, this represents approximately 1.5% of its market cap.

In addition, the company paid KRW 300 per share in dividends during the first half of the year. With the shares trading at around KRW 15,000, this represents a dividend yield of 2% during the first half, or approximately 4% annualized.

If we annualize both the buybacks and dividends, we get approximately:

• Buyback yield: 3%

• Dividend yield: 4%

• Total shareholder yield: around 7%

Not bad at all.

I also like the fact that BNK has a fairly predictable shareholder return policy, based on the evolution of its CET1 ratio.

Management is aware that the company trades at a very low P/B and appears to be focused on using buybacks to improve value per share.

At a 0.42x P/B, I also clearly prefer buybacks (they're also more tax-efficient).

Earnings growth

Net income has grown from approximately KRW 530B on average during 2018 and 2019 to around KRW 775B annually over the past two fiscal years.

Summary: extremely cheap bank (P/E ~6x, P/B 0.42x) but with low efficiency ratios (ROE below 8%). The company has a solid plan for shareholder returns and ROE improvement, with compensation tied to efficiency KPIs.

Woori Financial

Valuation:

• Market cap: approximately $16.5B

• PE TTM: 9.6x

• P/B: 0.64x

• ROE FY25: 9.1%

Woori is the fourth-largest financial group in South Korea, behind KB Financial, Shinhan Financial and Hana Financial.

Historically, it has been the most banking-focused of the four. For years, it lacked a strong insurance business and a relevant securities arm, which put it at a disadvantage compared with its more diversified peers.

Between 2024 and 2025, Woori acquired Tongyang Life —the sixth-largest life insurer in Korea— and ABL Life. It also relaunched Woori Investment & Securities.

As a result, Woori has created, for the first time, a structure combining banking, insurance and investment services under the same financial group.

This could create cross-selling opportunities across its approximately 20 million retail customers and one million corporate clients.

Corporate Value Up: Woori currently has a 40% shareholder return ratio, with a long-term target of increasing it to 50%.

The company also wants to raise its ROE above 10%.

Earnings growth: In terms of earnings growth, net income has grown from approximately KRW 2T during 2018 and 2019 to around KRW 3T in recent years.

Therefore, growth has been reasonably good, although not as impressive as that of JB Financial.

Summary: Woori is a considerably larger bank than the others and has the potential to grow if it can successfully cross-sell its new investment and insurance services to its existing customer base.

However, it also trades at higher valuation multiples than JB Financial and BNK Financial.

iM Financial

Valuation

• Market cap: approximately $1.8B

• PE TTM: 6.6x

• P/B: 0.42x

• ROE FY25: 7.3%

iM Financial is a Korean regional financial holding company whose main subsidiary is iM Bank, formerly known as DGB Daegu Bank.

The group also has businesses in insurance, asset management, securities and specialized finance, although its operations remain relatively concentrated in commercial banking.

Corporate Value Up: The company currently has a 40% shareholder return ratio, with a long-term target of reaching a 50% TSR.

It also aims to increase its ROE from the current 7.3% to:

• 9% by December 2027

• 10% over the long term

Earnings growth: If we look at the evolution of its net income, iM Financial is earning almost the same amount as it did in 2018.

In other words, there has been almost no earnings growth over the past eight years.

Summary: Of the banks analyzed, iM Financial is the one I find least interesting. It has barely grown over the past decade, its Corporate Value Up program provides less information and includes fewer concrete measures than those of other banks, and its valuation metrics are very similar to BNK Financial’s.

Conclusion on Korean banks

Of the four companies analyzed, I think JB Financial is the most interesting. It trades at cheap multiples, its efficiency metrics beat the Korean bank average, it’s had the strongest earnings growth of the group, and it has a good shareholder return policy, with a 50% total payout.

BNK Financial also strikes me as an interesting investment, especially given its low P/B valuation. I like that the company explicitly ties part of executive compensation to efficiency KPIs, and I think its Corporate Value Up program is the clearest of the four. Its ROE is much lower than JB Financial’s, but this lower starting point also means that there is significant room for improvement over the coming years.

As for iM Financial, I don’t see it as especially attractive: it’s barely grown over the past eight years. Its valuation metrics are similar to BNK’s, but its ROE is slightly lower. I also think its Corporate Value Up program is less well defined than BNK’s — BNK’s plan is clearer, includes more concrete measures, and seems better aligned with improving operating efficiency. Personally, I prefer BNK Financial over iM Financial, especially given how similar their valuations are.

Finally, Woori Financial has performed reasonably well over the past few years, with decent earnings growth and a reasonably solid Corporate Value Up plan. That said, it trades at a higher earnings multiple than the other companies. Woori has the advantage of being the largest of the four, but I think both JB Financial and BNK Financial are already large enough —both above $3B in market cap— that liquidity shouldn’t be a real issue for investing in them.

So my personal ranking would be:

1. JB Financial, for its combination of growth, ROE, valuation, and shareholder returns.

2. BNK Financial, for its extremely low valuation and the potential to improve efficiency.

3. Woori Financial, for its larger size and diversification, though it trades at higher multiples.

4. iM Financial, for its lack of growth and a less convincing Corporate Value Up story.

   ---

   That’s all for now. I will be publishing more articles over the coming weeks covering the other Korean companies I have invested in, so feel free to subscribe for future updates. You can also follow me on X: - https://x.com/NateValuetw

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This week, several Chinese online lenders reported their results, so I wanted to summarize how I view the numbers and where I now stand on the sector.

Let’s start with the year-to-date stock performance.

Broadly speaking, most of these stocks have performed poorly, with the exception of FinVolution, which is down only around 11%. And, honestly, given the regulatory changes that have taken place, I think some of these companies have not fallen as much as one might have expected.

Before discussing the individual company results, I will first summarize the main regulatory changes introduced since October 2025.

24% Cap on the Total Annualized Cost of Loans

The most important regulatory change introduced from 2025 onwards was the 24% annualized cap on the total cost of consumer loans.

The key point is that this cap does not apply only to the nominal interest rate. It applies to the all-in cost borne by the borrower. In other words, the 24% limit must include interest, service fees, guarantee fees, credit enhancement fees, and any other charges associated with the loan.

This directly affects the business model of fintech lending platforms, because many of them monetized part of the loan through fees or separate structures that were not always presented as explicit interest.

Greater Transparency and Mandatory Disclosure of Total Financing Costs

In March 2026, the NFRA and the PBOC issued a new policy requiring lenders and platforms to clearly disclose the comprehensive financing cost to borrowers.

For online personal loans, the disclosure form must be shown prominently to users, including mechanisms such as a non-dismissible pop-up window with a timer. The key compliance deadline is August 1, 2026.

The goal is for borrowers to clearly understand the total annualized cost of the loan before accepting it. This affects marketing, conversion rates, and the ability to sell high-cost loans in a less visible way.

For fintech platforms, this means less commercial flexibility and greater pressure on products that relied on opaque or poorly disclosed fees.

Tougher Rules for Small Loan Companies

The authorities have also tightened the rules for small loan companies, which matters because many Chinese fintech platforms use, or have historically used, micro-lending or small-loan licenses to originate or facilitate credit.

The new guidelines not only reinforce the 24% cap, but also push these entities towards a lower maximum cost linked to the LPR — specifically, four times the Loan Prime Rate, which would imply a cap of roughly 12%.

Greater Control Over Banks and Funding Partners

Another important change is that banks and financial institutions working with online platforms are now expected to take greater responsibility for risk management, underwriting, and the customer relationship.

The regulator wants to avoid a situation where banks act merely as balance-sheet providers while fintech platforms control the entire origination, pricing, and risk management process.

This trend already existed under previous regulations, but it has been reinforced in 2025–2026 as part of the broader campaign to tighten oversight of online lending.

The practical result is that banks are becoming more selective when choosing fintech partners. They are demanding stronger compliance, better risk controls, and are reducing exposure to weaker platforms.

For companies such as QFIN or FinVolution, this may be negative in the short term because it can reduce volumes and take rates. However, it could be positive over the long term if the market consolidates around the leading platforms.

For weaker companies such as X Financial, the impact could be much more severe.

Authorized Platforms and Whitelisted Partners

The new framework also pushes banks and financial institutions to work only with platforms that meet certain regulatory and operational standards. In practice, this functions almost like a whitelist of approved partners.

This accelerates sector consolidation. Platforms with scale, strong risk controls, technological capabilities, and good regulatory compliance are more likely to maintain relationships with banks and funding partners.

Smaller, more aggressive platforms, or those with weaker credit performance, may lose access to funding.

This is one of the reasons why the regulatory impact is not the same across the sector. QFIN and FinVolution appear better positioned to survive the new environment, while X Financial has suffered a much sharper contraction in originations and profitability.

Greater Oversight of Online Marketing for Financial Products

In 2026, the regulator also tightened the rules around the online marketing of financial products. Internet platforms and financial institutions are expected to promote products only within the scope of their authorized activities and to provide clear information to consumers.

This particularly affects user acquisition. Fintech platforms can no longer grow as aggressively through online traffic, promotions, or less transparent acquisition channels.

This helps explain why several companies have reduced marketing spending, prioritized higher-quality borrowers, and accepted significant declines in originations.

As we will see below, the earnings of all these companies have fallen significantly as a result of these regulatory changes.

Q1 2026 Results

Let’s go company by company. I will first present the Q1 numbers and then briefly explain how I interpret the results of each company.

Originations, Q1 2025 to Q1 2026 (RMB billions).

Earnings, Q1 2025 to Q1 2026 ($ millions).

Delinquency, Q1 2025 to Q1 2026.

QFIN

QFIN

The positive: QFIN’s results came in at the high end of its guidance range. The company had guided for Q1 net income of RMB 830–880 million and reported RMB 879.8 million, effectively at the very top of the range.

Originations were slightly lower than in Q4, and earnings also declined modestly. The main negative point was that delinquency increased from 2.71% to 3.50% during the quarter. This is something that needs to be monitored.

Guidance: Q2 guidance is for net income of RMB 830–910 million, which implies that Q2 should be broadly similar to Q1, or slightly better.

Shareholder returns: QFIN did not repurchase shares during Q1, although it did repurchase around $100 million of convertible notes. In Q4, the company repurchased around $170 million of ordinary shares and also increased its semi-annual dividend to $0.78 per ADS.

If maintained, that implies an annual dividend of $1.56 per ADS, or almost a 10% dividend yield at the current share price.

The stock rose 25% on the day of the results, which surprised me. That said, I do think the stock had fallen significantly despite QFIN being a higher-quality business than some other companies in the sector, such as XYF or JFIN, where the decline in the share price seems easier to justify.

FINV

The positive: FinVolution’s earnings increased compared to Q4 2025, from $59.4 million to $61 million. Its delinquency ratio rose from 2.85% to 3.11%, but the increase was smaller than for several other companies in the sector.

The international segment continues to grow at a very strong pace, around 40% year-over-year. It now represents almost one-third of FinVolution’s revenue.

However, only around 7% of operating profit comes from the international business, which means the company’s earnings remain heavily dependent on China.

Guidance: FinVolution maintained its 2026 revenue outlook of RMB 11.5–12.9 billion. For comparison, 2025 revenue was RMB 13.6 billion.

That said, these revenue figures are not especially informative on their own. Margins could be significantly lower, and if a larger share of revenue comes from the international segment, similar revenue could still translate into much lower net profit.

Based on annualized Q1 earnings, the company trades at roughly 5x earnings.

Shareholder returns: FinVolution repurchased around $40 million of shares during Q1. The company also increased its annual dividend to $0.306 per ADS, equivalent to a 5.8% dividend yield, and announced a new $150 million buyback program.

XYF

The positive: if I had to highlight something positive, I would say I am surprised that X Financial managed to avoid an accounting loss this quarter. That said, given that this is a financial company, I would be cautious about relying too heavily on reported earnings.

Beyond that, both Q1 and Q4 results were frankly weak.

Delinquency has surged to 9.95% for loans 91–180 days past due. The one positive point is that delinquency for loans 31–60 days past due declined from 2.9% in Q4 2025 to 2.61% this quarter.

This suggests that, although delinquency has worsened for older loans, the company is now focusing on higher-quality borrowers.

However, achieving this has required a major sacrifice: the company has lost a large part of its business. Originations in Q1 2026 were less than half the level of Q3 2025.

Guidance: guidance is also poor. The company expects to originate RMB 11.5–12.5 billion in Q2 2026, compared with RMB 14.6 billion this quarter, which was already a very sharp decline.

Shareholder returns: XYF repurchased $8.2 million of shares in Q1. Given the decline in the share price, this is not insignificant — it represents almost 5% of the market cap in a single quarter.

The company had previously increased its semi-annual dividend to $0.28 per ADS, which would imply an approximate 11% yield if maintained.

My main criticism of XYF is that the company repurchased a large number of shares near the stock’s peak, while buybacks have been much smaller now that the share price has collapsed.

To put numbers on it, from Q1 to Q3 2025, XYF paid $67.9 million to repurchase 4.26 million ADS, at an average price of almost $16 per share. Now that the stock trades at less than one-third of that price, the company is repurchasing far less.

Overall, although XYF was previously my main position among the Chinese lenders, I no longer find it attractive.

The regulatory changes have affected XYF particularly severely, and for now, the company does not seem to be recovering.

XYF historically lent to lower-quality borrowers, which explains why its delinquency ratios have consistently been higher than those of higher-quality platforms such as QFIN or FinVolution.

To serve those lower-quality borrowers, XYF had to charge interest rates above the current 24% regulatory cap. What we are seeing now is that a large part of XYF’s previous customer base is no longer economically viable under the new regulatory framework.

On top of that, implementing multiple regulatory changes in a short period is more burdensome for smaller companies such as XYF, which do not have the same customer base or scale to absorb compliance costs.

Finally, stricter oversight of the institutions that banks are allowed to work with also hurts XYF more. As a smaller platform that served riskier borrowers, it may find it harder to maintain access to funding partners that do not want to take on that kind of risk.

Technically, given how cheap XYF is on a price-to-book basis — around 0.17x book value — the company could repurchase a very large portion of its shares and return significant capital to shareholders.

But that requires confidence that management is willing to act aggressively in shareholders’ interests. Given the recent, relatively modest buybacks, I am not sure that confidence is justified.

I also have doubts about how much XYF’s operating business is worth in the current environment, where the Chinese regulator has become increasingly hostile and appears intent on structurally reducing the cost of consumer credit.

JFIN

Overall, JFIN’s results were genuinely poor. The company reported an accounting loss in Q1, although at first glance the results may not look quite as disastrous. Originations declined sharply, from RMB 35.6 billion in Q1 2025 to RMB 19.3 billion, representing a loss of almost 50% of its volume. On the other hand, delinquency levels remained relatively well controlled compared with other companies, with the 90-day-plus delinquency ratio standing at 2.25%.

The company’s outlook, however, is horrible. For Q2 2026, transaction volume is expected to be between RMB 9.5 billion and RMB 10.5 billion. This would represent a decline of around 50% quarter over quarter and almost 75% year over year. Considering that Jiayin already reported an operating loss in Q1, Q2 is likely to be a real disaster. It also raises the question of whether Jiayin’s business is viable with such a significantly reduced loan base.

The share price fell 28% on the day of the results. Even so, given how poor the Q2 outlook is, I still consider the stock too risky to buy.
For comparison, here is a table with the current valuations of the companies (as of 21st of July).

Potential Future Regulatory Changes

Beyond the changes introduced in October 2025, it appears that further regulatory tightening may already be underway this year.

For example, on March 15, the NFRA and the People’s Bank of China issued a new policy requiring lenders to disclose all financing costs before August 1.

In addition, the October 2025 measures introduced a 24% financing cap, but according to this article, that cap may already be moving towards 20%. Some regional firms have reportedly even been told that they need to reduce financing costs to 18%.

Therefore, even if there is not yet a formal law replacing the 24% cap, the regulator already appears to be pushing rates significantly lower.

According to the article, some industry participants believe the long-term objective is to cap interest rates on these types of loans at four times the Loan Prime Rate.

The LPR is currently around 3%, which would imply a cap close to 12%. The objective would be to gradually bring rates down to that level by the end of 2027, while substantially reducing the share of loans above 12% by the end of 2026.

The article explicitly mentions QFIN, Lexin, Jiayin, and Yiren. Therefore, these appear to be very specific regulatory changes that could directly affect these companies as soon as this year.

Final Conclusion

All of this makes me think about the terminal value of these companies if regulatory pressure remains this intense.

If the cap moves from 24% towards 12%, margins will compress dramatically. Many of the loans originated by QFIN, FinVolution, and other platforms would simply no longer be profitable.

In that scenario, a meaningful part of the market would not just become less attractive — it could disappear altogether.

Although these companies may look optically cheap, I no longer think they are necessarily cheap if the regulator is going to be this aggressive.

This is the main change in my thinking compared with a few months ago, when I wrote my article at the beginning of the year.

Back then, I thought the regulator would take a more pragmatic approach. Since China wanted to support consumption, I expected the regulatory changes to be relatively mild, or at least milder than what the market seemed to be pricing in.

But if the current direction continues — with a 24% cap on the total annualized cost of credit and the possibility of eventually moving closer to 12% — the profitability of these companies will fall sharply.

This is not simply a case of earnings being somewhat lower. A significant part of the market these companies serve could become structurally unprofitable, because many borrowers would no longer generate acceptable returns under the new framework.

In that context, I no longer think these companies are as attractive as they once appeared.

Even if they trade at 3–5x current earnings, it is quite possible that in five or ten years these businesses will be far less profitable, or that a significant part of their business model will have been impaired by regulation.

For that reason, I prefer to be more cautious. Personally, I only hold a small position in QFIN, and for now I intend to keep it that way.

I want to wait and see whether these regulatory changes are truly implemented as aggressively as they currently appear, or whether the regulator eventually adopts a more pragmatic approach and allows for a more gradual transition.

My thesis has changed.

Previously, I thought the market was overestimating regulatory risk and that these companies could remain very profitable businesses, albeit at lower valuation multiples.

Now, I think the risk is more serious. If the regulator wants to structurally reduce the cost of consumer credit, these companies will not only face lower growth, but also lower margins, lower volumes, and probably lower structural profitability.

In short, these companies may still look cheap based on current earnings, but I am no longer convinced that they are cheap once earnings are normalized under a much tougher regulatory environment.

On a personal note, and despite having been very bullish on XYF in the past, I have sold my entire position. At this point, I believe that smaller lenders are simply too risky, and that, in a more hostile regulatory environment, their operating businesses could be worth close to zero.

Reflection on Buying Cheap Companies

Even so, despite all of this, and despite the fact that the investment may not have played out as well as I expected, there is one positive lesson I take from the situation: the value of buying cheap companies.

In the case of X Financial, for example, almost everything has gone worse than I expected.

Earnings have deteriorated significantly, the business has contracted, originations have fallen sharply, and the regulatory outlook is much worse than it appeared at the beginning of the year.

And yet, the stock is only down around 17% year-to-date.

If a company with a more demanding valuation had suffered a similar deterioration in earnings, business performance, and regulatory outlook, the share price decline would probably have been much larger.

Instead, because XYF started from such a depressed valuation, part of the damage was already priced in.

Therefore, even though the investment has not gone as I expected, I do think this case illustrates one of the advantages of buying cheap companies: even when the thesis deteriorates materially, valuation can provide some downside protection.

That obviously does not prevent you from losing money. But it can significantly limit the downside if the stock was already trading at extremely depressed multiples.

Buying cheap does not protect you from being wrong, but it can make the cost of being wrong much lower.

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Esta semana han presentado resultados muchas de las empresas prestamistas chinas y quería hacer un resumen de qué me parecen los resultados y qué opino del sector ahora mismo.

Vamos a empezar viendo la rentabilidad de las acciones en lo que va de año.

Por lo general, la mayoría de acciones han ido mal, a excepción de Finvolution, que solo ha caído un 11%. Y, sinceramente, creo que incluso con los cambios regulatorios que ha habido algunas empresas ni siquiera han caído tanto como uno se esperaría.

Antes de empezar a ver los resultados de las compañías voy a resumir los cambios regulatorios de octubre de 2025, para dar un poco de contexto de por qué los resultados están siendo malos por lo general.

• Tope del 24% al coste total anualizado del préstamo

  El cambio más importante introducido a partir de 2025 fue la imposición de un límite del 24% anualizado al coste total del préstamo para el consumidor. La clave es que este límite no se aplica solo al tipo de interés nominal, sino al coste total integrado que soporta el borrower. Es decir, dentro de ese 24% deben incluirse intereses, comisiones de servicio, fees de garantía, credit enhancement fees y otros cargos asociados al préstamo.

  Este cambio afectó directamente al modelo de negocio de las plataformas fintech, porque muchas de ellas monetizaban parte del préstamo mediante comisiones o estructuras separadas que no siempre aparecían como interés explícito.

• Mayor transparencia y disclosure obligatorio del coste total

  En marzo de 2026, la NFRA y el PBOC publicaron una política que obliga a los lenders y plataformas a revelar de forma clara el comprehensive financing cost al borrower. Para préstamos personales online, el formulario de disclosure debe mostrarse al usuario de forma destacada, incluyendo mecanismos como una ventana emergente no descartable con temporizador. La fecha clave para cumplir esta obligación es el 1 de agosto de 2026.

  La intención es que el cliente vea claramente cuál es el coste anualizado total del préstamo antes de aceptarlo. Esto afecta al marketing, a la conversión de usuarios y a la capacidad de vender préstamos caros de forma menos visible. Para las fintechs, implica menos flexibilidad comercial y más presión sobre productos que dependían de fees poco transparentes.

• Endurecimiento sobre las small loan companies

  Las autoridades también han endurecido las reglas para las small loan companies, que son relevantes porque muchas fintechs chinas usan o han usado licencias de micro-lending/small-loan para originar o facilitar crédito.

  Las nuevas directrices no solo aplican el límite del 24%, sino que también empujan a estas entidades hacia un coste máximo más bajo ligado a la LPR (4 veces el Loan Prime Rate, que sería de un 12% aproximadamente).

• Más control sobre bancos y entidades financiadoras

  Otro cambio relevante es que los bancos y financial institutions que trabajan con plataformas online tienen que asumir más responsabilidad sobre el riesgo, el underwriting y la relación con el cliente. El regulador quiere evitar que los bancos actúen como simples proveedores de balance mientras la fintech controla todo el proceso de originación, pricing y risk management.

  Esto ya venía de regulaciones anteriores, pero desde 2025–2026 se ha reforzado dentro de la campaña de control del lending online. El resultado práctico es que los bancos se vuelven más selectivos a la hora de trabajar con plataformas, exigen más compliance y reducen exposición a players más débiles.

  Para empresas como QFIN o FinVolution, esto puede ser negativo a corto plazo porque reduce volumen y take-rate, pero positivo a largo plazo si el mercado se concentra en plataformas líderes. Para compañías más débiles como X Financial, el impacto puede ser mucho más duro.

• Sistema de plataformas autorizadas o whitelisted partners

  El nuevo marco también empuja a los bancos y entidades financieras a trabajar con plataformas que cumplan ciertos criterios regulatorios y operativos. En la práctica, esto funciona como una especie de whitelist de partners autorizados o aceptables.

  Esto acelera la consolidación del sector. Las plataformas con escala, buen control de riesgo, capacidad tecnológica y cumplimiento regulatorio tienen más probabilidades de mantener relaciones con bancos y funders. Las plataformas pequeñas, agresivas o con peor comportamiento de crédito pueden perder acceso a funding.

  Esta es una de las razones por las que el impacto no es igual para todas las compañías. QFIN y FinVolution parecen mejor posicionadas para sobrevivir al nuevo entorno, mientras que X Financial ha sufrido una contracción mucho más fuerte de originations y rentabilidad.

• Mayor supervisión del marketing online de productos financieros:

  En 2026 también se reforzaron las normas sobre marketing online de productos financieros. El regulador quiere que las plataformas de internet y entidades financieras promocionen productos únicamente dentro del ámbito de actividades autorizadas y con información clara para el consumidor.

  Esto afecta especialmente a la adquisición de usuarios. Las fintechs ya no pueden crecer de forma tan agresiva mediante tráfico online, promociones o canales de captación poco transparentes. Esto ayuda a explicar por qué varias compañías han reducido marketing, han priorizado borrowers de mayor calidad y han aceptado caídas significativas de originations.

  A raíz de todos estos cambios, como veremos a continuación, el beneficio de todas estas empresas ha bajado significativamente.

Resultados Q1 26

Vayamos por partes: voy a dar primero los números de Q1 y después comentaré brevemente qué opino de los resultados de cada empresa.

Originations desde Q1 2025 a Q1 2026 (en billions de RMB).

Earnings desde Q1 2025 a Q1 2026 (en millones de dólares).

Delinquency desde Q1 2025 a Q1 2026.

• QFIN: Lo bueno: Sus resultados han estado en la parte alta del guidance que dieron. Su guidance para Q1 era de ganar entre 830 y 880M de RMB y han ganado 879,8 millones, literalmente en el rango alto.

  Han originado algo menos que en Q4, el beneficio también ha bajado ligeramente, y como punto negativo, la delinquency ha subido de un 2,71% a un 3,50% este quarter; habrá que monitorizar la evolución.

  Guidance: El guidance para Q2 es de ganar entre 830 y 910M RMB, así que Q2 será igual o ligeramente mejor que Q1.

  Retornos a accionista: No han recomprado acciones durante Q1, aunque han recomprado unos 100M$ de unas notas convertibles. En Q4 recompraron unos 170M$ en acciones ordinarias, y también subieron el dividendo a 0,78$ por ADS semianual —1,56$ anuales si lo mantienen, o casi un 10% de yield al precio actual.

El día de los resultados subió un 25%, cosa que me sorprendió, aunque todo sea dicho, creo que la acción había bajado mucho a pesar de que QFIN tiene más calidad que otras empresas del sector que sí podrían merecer esas bajadas (como XYF o JFIN).

• FINV: Lo bueno: El beneficio ha subido respecto a Q4 de 2025, de 59,4M$ a 61M$. El delinquency ratio ha subido de un 2,85% a un 3,11%, menos que para las otras empresas del sector.

  

  El segmento internacional está creciendo a ritmos muy elevados, de alrededor del 40% anual. Ahora mismo representa casi un tercio del revenue de Finvolution, aunque solo un 7% del operating profit viene del segmento internacional; por tanto, su beneficio sigue estando muy ligado al mercado chino.

  Guidance: Mantienen su outlook de revenue para 2026 de entre 11,5 y 12,9B de RMB. Por comparar, en 2025 la revenue fue de 13,6B RMB. Aun así, estos números no me dicen mucho, porque los márgenes pueden ser muy inferiores; o si un porcentaje superior viene del segmento internacional, aun con una revenue similar el net profit podría ser muy inferior. De igual manera, con el beneficio anualizado de Q1 cotiza a 5 veces beneficios.

  Retornos al accionista: Recompraron unos 40M$ de acciones durante Q1. Han subido el dividendo anual a 0,306$ por ADS (5,8% de yield) y han anunciado un nuevo programa de recompras de 150M$.

• XYF Lo bueno: Por decir algo bueno de sus resultados, diría que me sorprende que hayan conseguido no tener pérdidas contables este quarter, aunque siendo una empresa financiera tampoco me fiaría mucho de los números.

  Más allá de eso, los resultados tanto de Q1 como de Q4 son francamente malos. La delinquency se les ha disparado a un 9,95% para los préstamos entre 91 y 180 días. Como punto positivo, la delinquency para préstamos entre 31 y 60 días ha bajado de un 2,9% en Q4 25 a un 2,61% este quarter, lo que sugiere que, a pesar de que la delinquency haya subido para los préstamos antiguos, están optando por clientes de mayor calidad en Q1.

  

  Aún así, para conseguir esto han tenido que sacrificar gran parte de su negocio. Han originado menos de la mitad de prestamos en Q1 26 que en Q3 de 2026

  Guidance: el guidance es también malo. Esperan originar de 11,5 a 12,5B RMB en Q2 2026, frente a 14,6B este quarter, que ya era una bajada muy grande.

  Retornos al accionista: Han recomprado 8.2M$ en Q1, lo cual no está mal dado la bajada que ha tenido la acción, es casi un 5% del market cap en un quarter. Anteriormente subieron el dividendo semi anual a 0.28$ por ADS, aproximadamente un 11% de yield si lo mantienen.

  Mi queja respecto a XYF es que recompraron muchísimas acciones en su precio máximo y ahora que la acción ha bajado mucho, las recompras son muy inferiores.

  Por poner números, de Q1 a Q3 de 2025 pagaron 67,9M$ por 4,26M de ADS, casi 16$ por acción, y ahora, estando la acción a menos de un tercio de ese precio, están recomprando muchísimo menos.

  Por lo general, aunque en el pasado XYF ha sido mi posición principal dentro de las prestamistas chinas, ahora mismo no la veo atractiva. Los cambios regulatorios han afectado especialmente a XYF y, por el momento, no parecen levantar cabeza.

  XYF prestaba dinero a clientes con peor calidad crediticia, y por eso sus delinquencies han sido históricamente superiores a las de otras empresas de mayor calidad como QFIN o FinVolution.

  Para poder prestar a clientes con peor perfil, cobraban intereses superiores al 24% actual. Por tanto, lo que estamos viendo es que simplemente una gran parte de los clientes a los que servía XYF ya no son rentables con el nuevo límite regulatorio.

  Por otro lado, el tener que implementar tantas regulaciones en un período breve también afecta más a empresas pequeñas como XYF, que no tienen una base de clientes tan grande como otras para diluir los costes.

  Por último, el mayor control sobre las entidades con las que trabajan los bancos también afecta más a XYF. Al ser una plataforma más pequeña y que además aceptaba clientes con mayor riesgo, seguramente le complique el acceso a ciertos bancos que no quieran asumir el riesgo de trabajar con una plataforma así.

  Técnicamente, con lo barata que está XYF por price to book —0,17x—, podrían recomprar toda la empresa, o una gran parte, y devolver el dinero a los accionistas. Pero tienes que confiar en que el management esté dispuesto a hacer eso, cosa que, viendo las recompras tímidas recientes, me genera dudas.

  También tengo mis dudas de que el negocio operativo de XYF valga mucho en el entorno actual, con un regulador chino cada vez más hostil y que parece querer reducir estructuralmente el coste del crédito al consumo.

• JFIN: De forma general, los resultados de JFIN son realmente malos. Han perdido dinero a nivel contable en este Q1, aunque a simple vista los resultados no parecen tan terribles. Si, han tenido una bajada de originations, pasando de originar 35.6B RMB en Q1 de 2025 a 19.3B, una pérdida de casi el 50% de volumen. Pero por otro lado han mantenido las delinquencies bastante bien en comparación con otras empresas, teniendo un ratio de 90 day+ delinquencies de un 2.25%.

  Por otro lado, el outlook de la compañía es horrible. Para Q2 de 2026 el volumen de transacciones será de 9.5 a 10.5B RMB. Estamos hablando de una caída del 50% QoQ, y de casi un 75% año sobre año. Teniendo en cuenta que ya tuvieron una pérdida operativa en Q1, Q2 será un verdadero desastre y me hace pensar en si el negocio de Jiayin es viable con una base tan reducida de préstamos.

  

  El precio de la acción reaccionó bajando un 28% el día de los resultados, pero aún así, con un outlook de resultados de Q2 tan horrible, considero que es demasiado arriesgado comprar sus acciones.

Por comparar, aquí tenéis una tabla con las valoraciones actuales de las empresas (a fecha 21 de julio).

Posibles cambios futuros

Más allá de los cambios que hicieron en octubre de 2025, parece que ya está habiendo nuevos cambios regulatorios para este mismo año. Por ejemplo, el 15 de marzo, la NFRA y el People's Bank of China publicaron una nueva política que requiere a todos los prestamistas hacer disclosure de todos los costes de financiación antes del 1 de agosto.

Además de eso, el cambio de octubre de 2025 puso un límite de financiación del 24% y, por lo que dice este artículo, ese tope ya se estaría bajando al 20%. Algunas firmas regionales dicen incluso que les han comunicado que tienen que bajar los costes al 18%. Por tanto, aunque quizá todavía no haya una ley concreta que sustituya el límite del 24%, parece que el regulador ya está presionando para que los tipos bajen bastante más.

Según el artículo, también hay gente en la industria que dice que el objetivo a largo plazo es capar los tipos de interés de este tipo de préstamos a cuatro veces el Loan Prime Rate (LPR). Ahora mismo el LPR está alrededor del 3%, por tanto estaríamos hablando de un límite cercano al 12%. El objetivo sería ir reduciendo los tipos hasta ese nivel para finales de 2027, y que para finales de 2026 el porcentaje de préstamos por encima del 12% baje sustancialmente.

El artículo menciona explícitamente a QFIN, Lexin, Jiayin y Yiren. Por tanto, parece que hay cambios regulatorios muy concretos que podrían afectar directamente a estas empresas tan pronto como este año.

Conclusión Final

Esto me hace pensar en cuál es el valor terminal de estas compañías si hay tantos cambios regulatorios y, además, si estos cambios van a ser tan fuertes. Si pasan de un límite del 24% a uno del 12%, los márgenes se van a comprimir muchísimo. Muchos de los préstamos que originan QFIN, FinVolution y otras empresas simplemente dejarían de ser rentables. En ese escenario, una parte importante de ese mercado se destruiría, simple y llanamente.

Aunque estas empresas puedan parecer ópticamente baratas, creo que en realidad no lo están tanto si el regulador va a ser tan agresivo. Este es el cambio principal en mi forma de pensar respecto a hace unos meses, cuando escribí el artículo de principios de año. En ese momento pensaba que el regulador iba a ser más pragmático y que, como China quería potenciar el consumo, los cambios iban a ser bastante laxos o, al menos, más laxos de lo que esperaba el mercado.

Pero si finalmente los cambios van en la dirección actual, con un límite del 24% al coste total anualizado y con la posibilidad de que a largo plazo quieran reducir ese coste hacia algo más cercano al 12%, la rentabilidad de estas empresas va a bajar drásticamente. No es solo que vayan a ganar algo menos; es que una parte importante del mercado al que acceden estas compañías podría directamente desaparecer, porque muchos borrowers dejarían de ser rentables bajo ese nuevo marco.

En ese contexto, ya no creo que estas empresas sean tan atractivas como parecían. Aunque coticen a PER 3-5 es probable que dentro de cinco o diez años estas compañías sean mucho menos rentables, o incluso que una parte relevante del modelo de negocio quede destruido por la regulación.

Por eso ahora mismo prefiero ser más prudente, y a nivel personal, solo mantengo una posición pequeña en QFIN y, por el momento, así se va a quedar. Quiero esperar a ver si estos cambios regulatorios realmente se implementan de forma tan agresiva o si, por el contrario, el regulador termina siendo más pragmático y permite una transición más gradual.

Personalmente, ahora mismo evitaría las empresas más pequeñas como XYF, JFIN o YRD y me centraría en las que tienen mayor calidad y pueden soportar los cambios regulatorios como QFIN o FINV.

Mi tesis ha cambiado. Antes pensaba que el mercado estaba exagerando el riesgo regulatorio y que estas compañías podían seguir siendo negocios muy rentables, aunque con menores múltiplos. Ahora creo que el riesgo es más serio: si el regulador quiere reducir estructuralmente el coste del crédito al consumo, estas empresas no solo van a tener menos crecimiento, sino también menos margen, menos volumen y probablemente menos rentabilidad estructural.

En resumen, siguen pudiendo parecer baratas en términos de beneficios actuales, pero ya no estoy tan seguro de que sean baratas si normalizamos los beneficios bajo un escenario regulatorio mucho más duro.

A título personal, y a pesar de que en el pasado era muy bullish con XYF, he vendido toda mi posición, y considero que ahora mismo las prestamistas más pequeñás son demasiado arriesgadas, y en un entorno regulatorio más hostil su negocio operativo podría valer prácticamente 0.

Reflexión sobre comprar empresas baratas

Aun así, a pesar de todo esto y de que la inversión quizás no haya salido tan bien como pensaba, hay un punto positivo que saco de todo esto: el comprar empresas baratas.

Por ejemplo, en el caso de X Financial, prácticamente todo ha salido peor de lo que esperaba: los beneficios se han deteriorado muchísimo, el negocio se ha contraído, las originations han caído con fuerza y el panorama regulatorio es bastante peor de lo que parecía a principios de año. Y, aun así, la acción solo ha bajado alrededor de un 17% en lo que va de año.

Si una empresa con una valoración más exigente hubiera sufrido un deterioro similar en beneficios, negocio y outlook regulatorio, probablemente la caída hubiera sido muchísimo mayor. En cambio, al partir de una valoración tan baja, parte del daño ya estaba descontado.

Por tanto, aunque la inversión no haya salido como esperaba, sí creo que este caso demuestra una de las ventajas de comprar empresas baratas: incluso cuando la tesis se deteriora mucho, puedes tener cierta protección por valoración. No evita que pierdas dinero, obviamente, pero sí puede limitar bastante el downside si la acción ya cotizaba a múltiplos muy deprimidos. Comprar barato no te protege de equivocarte, pero sí puede hacer que el coste del error sea mucho menor.

Y esto es todo por el momento. Recordad que, si queréis recibir los artículos de forma gratuita, podéis suscribiros y agradezco que compartáis el artículo. También podéis seguirme en Twitter. - https://x.com/NateValuetw

My first impression is that Malaysia offers plenty of companies with very low valuations, although in many cases shareholder returns are poor: low payouts, few buybacks, and scarce clear catalysts. That said, there’s a new element worth paying attention to: a few weeks ago Bursa Malaysia launched a programme aimed at improving the valuations of listed companies, along similar lines to the reforms Japan pushed through, which helped reduce the discount of many Japanese companies.

For now there are no concrete details on the measures, but the mere fact that the regulator and the exchange are pushing in that direction strikes me as positive. If the programme ultimately leads to better capital allocation policies, higher dividends, buybacks, or more pressure on undervalued companies, it could become a relevant catalyst.

This phenomenon isn’t unique to Malaysia. In Korea, another geography I’m currently analysing as part of this screener, corporate reforms are also being pushed to reduce valuation discounts. Overall, I see this type of initiative as an interesting tailwind for Asian markets where many cheap companies already exist, but where there has historically been little pressure to unlock value.

For now, my plan is to keep a close eye on a few Malaysian companies and revisit the market once the concrete details of the “value-up” programme are known. At that point it might make sense to run a new screener to identify which companies could benefit the most from these measures.

Macro snapshot: Malaysia

Demographics and general context

Malaysia is an emerging Southeast Asian economy with a population of roughly 34 million people. It’s a multi-ethnic country —predominantly Malay, with significant Chinese and Indian minorities— and one of the most prosperous in the region. Nominal GDP per capita stood at around USD 11,650 in 2023, and the country is classified as a newly industrialised economy.

Economic growth

The recent trajectory is solid. GDP growth in 2025 came in at 5.2%, slightly above the 5.1% recorded in 2024. Q4 2025 was the strongest quarter since the end of 2022, with year-on-year expansion of 6.3%, driven by agriculture, manufacturing, and services. More recently, Q1 2026 moderated to 5.3% year-on-year, with private consumption acting as the anchor of growth thanks to a stable labour market and higher incomes.

GDP structure by sector

The economy has successfully transitioned from being a commodity exporter to a diversified economy:

• Services: 54% of GDP

• Manufacturing: 25% of GDP and over 60% of total exports

• Mining and quarrying: 9%

• Agriculture: 9%

Key industries include:

• Electronics and semiconductors: the export backbone; Malaysia is a critical node in the global E&E supply chain.

• Oil and gas: Petronas is the major domestic player; the sector is an important source of fiscal revenue, although exposed to price volatility.

• Palm oil: along with oil, LNG, and tin, dominates natural resource exports, contributing significant foreign currency inflows.

• Islamic finance: Kuala Lumpur is a leading hub for Islamic finance, banking, and insurance, with well-developed capital markets.

• Data centres / tech: companies like Google, Microsoft, and ByteDance have each invested over USD 2 billion to take advantage of Malaysia’s competitive edge in data infrastructure, thanks to its skilled workforce, low land costs, cheap energy and water, and absence of natural disasters.

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Interesting ideas

Here are the ideas I’ve found. For those who haven’t read my previous articles: I focus mainly on finding companies that are cheap on a multiples basis, and I place a strong emphasis on shareholder returns. I consider this very important when investing in companies trading at extremely low multiples, because it’s the best way to “force” a rerating by the market — or otherwise, you’ll collect high dividends and buybacks while you wait.

Allianz Malaysia

Although I generally focus on more obscure companies in emerging countries, Allianz Malaysia strikes me as a very good opportunity. You can buy a subsidiary of a global company —which gives you some assurance that the parent’s standards will be maintained— at a much lower price and with significantly higher growth potential.

In short: Allianz Malaysia is the country’s largest non-life insurer by market share (15.2% measured by GWP in FY2025), and at the aggregate group level —combining life and non-life— it accounts for around 14%.

Within the group there are two distinct businesses:

Allianz General (non-life) is the more mature business and, above all, the most competitively solid. In FY2025 it surpassed 15% market share, consolidating its position as the leader of the Malaysian general insurance market. GWP grew 7.6% to RM 3.68 billion and PBT rose 16.1% to RM 624.7 million. The growth engine has been motor insurance, where it ranks number one, alongside commercial lines.

Allianz Life (life) is a business with completely different dynamics. Market share of 11.8% (ranked #4 in the sector), but with stronger structural growth because life insurance penetration in Malaysia remains very low. The relevant metrics here are not GWP but Annualised New Premiums (ANP) and Value of New Business (VNB): FY2025 ANP of RM 923.9M (+6.0%), VNB of RM 395.8M (+8.3%), and operating profit of RM 544.8M (+13.0%).

Allianz Malaysia has multiplied its premiums by 4x over the last 20 years, going from USD 374M in 2008 to USD 1,536M in 2025, and net income has multiplied by roughly 12x, going from ~USD 20.5M to USD 236M. In other words, earnings have grown 3x faster than premiums, which reflects a structural improvement in margins and mix —especially the growing weight of the life business, which carries higher profitability and operates in a market with much less saturation than non-life.

Comparing Allianz Malaysia with other Malaysian insurers, it trades somewhat cheaper than the average, although Takaful Malaysia trades at a similar PE and has greater market share in takaful (Islamic insurance), which is growing faster than conventional insurance.

As for the general insurance market in Malaysia, it’s expected to grow at a CAGR of over 6% through 2030, and the insurance penetration rate as a percentage of GDP remains relatively low, pointing to considerable structural room for expansion.

Valuation

One detail worth clarifying is that Allianz Malaysia also has Irredeemable Convertible Preferred Shares (ICPS), so when calculating ratios you have to take into account not only the ordinary shares but also the preferred shares in the diluted share count. These preferred shares pay a dividend equivalent to 1.2x that of the ordinaries and rank ahead of them. The parent, Allianz SE, controls 85% of these ICPS. When calculating per-share ratios you need to factor in these shares, and depending on the data provider they may or may not be included. On an adjusted basis, Allianz Malaysia trades at roughly 7.5x earnings, but the P/BV is not adjusted in TIKR — on an adjusted basis it would trade at ~1.18x.

Therefore, if you have the option to buy the preferred shares, they may be more attractive than the ordinaries because of the extra yield. In my case, from what I’ve seen, they’re not available on Interactive Brokers, so I bought the ordinaries. But it’s something to mention and to keep in mind when calculating valuations.

In summary, it strikes me as a good investment: a cheap company (PE ~7.5x), growing at a healthy pace in an economy expanding at a sustained 5% annually with similar forecasts for 2026, within an insurance sector projected to grow more than 6% per year.

If Allianz Malaysia simply captures the sector’s growth (6%) and pays a dividend of 4–5% per year, I believe double-digit annualised returns can be achieved without any need for rerating.

Beyond Allianz Malaysia, I haven’t found other companies that fully convince me. There are very cheap names, but they have extremely low dividends, and until they change their dividend policy I don’t think we’ll see a significant rally in their share prices.

Even so, I’ll comment on a few that strike me as interesting, especially if they raise their payout going forward.

Jewellers in Malaysia: Poh Kong and Tomei

I’ve found two Malaysian jewellers that are genuinely cheap. Their current earnings are inflated by the rise in the gold price, but even so —even adjusting for that effect— they’re cheaper than comparable companies I’ve analysed in Hong Kong, such as Emperor Watch & Jewellery and King Fook Holdings, which trade at around 5x earnings. Poh Kong and Tomei, by contrast, trade at less than 3x current earnings and around 4x on normalised earnings, as we’ll see below. The problem, of course, is the dividend.

Part of their current earnings is abnormally high due to the rise in the gold price: these companies had gold in inventory bought at lower prices and are now selling it at higher prices. But the reality is that, even if we use reference years in which the gold price was more stable —such as 2022 or 2023— they still trade at really low multiples.

For example, Poh Kong earned around 80 million on average in 2022 and 2023, which would imply a PE of approximately 5x on its current market cap. Tomei averaged around 55 million in those same years, which would also give us a PE of around 5x.

That said, since 2022, the equity of these companies has grown considerably, largely because they pay a very low dividend and retain almost all of their profits. Tomei had 360 million of equity in 2022 and by the end of 2025 was already around 560 million. Poh Kong, meanwhile, went from 680 to 980 million. In other words, equity has risen by roughly 40% in both cases.

It’s therefore reasonable to think that normalised earnings —even in a scenario where the gold price were to stay stable— would be similar to or higher than those of 2022, simply because these companies now have considerably more equity and part of it has been reinvested, especially Tomei. Poh Kong hasn’t invested as much, but even so, by the mere fact that the gold price is now higher, even if margins were to hold steady, net income should be higher.

And in fact, if we look at operating margins, they haven’t risen as much as one might expect. Poh Kong had operating margins of 8–9% in 2022 and 2023, and right now they’re around 10%. Tomei has gone from roughly 9–10% to 13%. Even in a margin-normalisation scenario, recurring profit should be higher than in 2022 and 2023.

We’re therefore looking at companies trading at a normalised PER of approximately 4x and, in both cases, below their book value: Tomei at 0.5x price-to-book and Poh Kong at 0.43x. The only problem —and not a minor one— is that they barely return any of that money to shareholders.

Poh Kong

The largest gold jewellery chain in Malaysia. It operates primarily as a gold retailer (bars, coins, jewellery) and has its own manufacturing plant. Although I don’t think it’s a great business, it’s genuinely very cheap: less than 3x earnings and less than 0.5x P/Book.

It has some debt, although it’s more than covered by its gold inventories. The problem is the dividend: they paid 3 cents per share on a price of MYR 1.11 (~2.7% yield). It’s true that they’ve raised it from 1.2 cents in 2021 to 3 cents in 2025, but the payout is still around 10%, which is laughable.

What’s more, unlike Tomei, Poh Kong isn’t using that cash to expand either. In the annual report they mention plans to expand to secondary cities, more investment products, and digitalisation, but for the time being they’re not executing on them: CAPEX in 2025 was MYR 4M on a profit of 121M. That’s the point that bothers me the most — they don’t pay a dividend, but they aren’t reinvesting either. Without a clear catalyst, I don’t see how a rerating could be forced.

Tomei

Unlike Poh Kong, it has a more diversified model: retail, manufacturing and wholesale, pawnbroking, safe deposit boxes, gemological laboratory, education, and digital gold.

Tomei is even cheaper than Poh Kong on a PE basis, though it pays a smaller dividend and has more debt. As for the business itself, I find its proposition more interesting: it’s diversifying into adjacent businesses that can add value to its stores, and it is indeed investing — MYR 18.7M in CAPEX in 2025.

Even so, the dividend is truly laughable: 1.6% yield with a payout of 3.3%. They could easily pay more without it affecting operations — net income was 104.3M and total dividend payments amounted to only 3.5M.

The low payout is probably explained by a combination of three factors: they’re financing the expansion CAPEX, they have some debt that’s worth paying down, and the volatility of the gold price encourages keeping a cash cushion. Even so, the three reasons combined don’t justify a 3% payout — they could easily raise it to 15–20% without compromising either the investment plan or the balance sheet. Perhaps if gold stabilises this year they’ll feel more comfortable being more generous with shareholders. We’ll see.

With such low valuations, I think it’s worth following these two stocks and seeing if they decide to raise the payout. With a 20% payout, Tomei would be paying a dividend of more than 7% — that I would find very interesting.

PBA Holdings Berhad — Water utility in Penang

It has net cash and trades at 5.3x earnings and 0.5x book. For a utility, it strikes me as incredibly cheap. On top of that, in August 2025 they raised water tariffs, so earnings should increase from this year onwards.

That said, it has a dividend of only 2.7% with a payout of 13%, and it plans to invest MYR 2 billion through 2030 to ensure water sufficiency in Penang — a huge investment relative to a market cap of 600M. With the state of Penang as the largest shareholder, the priority is clearly operational rather than shareholder returns.

It’s very cheap, and once the investment plan is completed by 2030, its capex requirements should drop significantly and the dividend could rise considerably. But for now it’s too long-term a play — I’ll keep it on the radar, but I don’t find it interesting at the moment.

Teo Seng — Malaysia’s largest egg producer

Also very cheap, although it’s a clearly cyclical company — it depends on egg prices and on its inputs (maize and soy account for 60–75% of group costs).

One thing to keep in mind: until July 2025 there was a government subsidy programme for egg prices. In H2 2025, subsidies received amounted to MYR 11M on a profit of 58.9M — stripping them out, we’d get to ~48M in the second half of the year (adjusted PE of ~5.3x).

Unlike the jewellers, Teo Seng is investing aggressively in expansion:

• FY2025 CAPEX: MYR 95.2M (vs. 104M in FY2024)

• New farm completed — additional capacity of 270,000 birds, reaching a total of 25 farms

• Spent-hen processing plant — new downstream revenue source, in final commissioning phase

• Boiled-egg division — already exporting to Singapore; starting egg mayo production for convenience chains

• Liquid egg line — in design phase, aimed at bakeries and confectioners (B2B)

• Compost towers — organic fertiliser from manure, circular economy

The strategic target is to reach 5 million eggs/day (I estimate they’re currently in the 3.5–4M/day range with 25 farms).

Even so, I’m not fully convinced. Dependence on commodities like maize and soy makes it difficult to track margins reliably. It may be worth revisiting if they manage to maintain a similar profit in 2026 — for now, I’ll keep it under observation.

On a personal note, I’ve bought a small position in Allianz Malaysia and will follow the two jewellers closely. They trade at very attractive valuations and, if they raise their payout in the future, I would seriously consider taking a position.

This is not an investment recommendation. Always do your own research.

That’s all for now. Overall, Malaysia offers interesting companies at very low valuations, but with a fairly poor shareholder return policy. I think it’s worth following this market, especially once the concrete measures of the MY Value Up programme are published. In other countries like Japan and Korea, this type of programme has helped lift overall market valuations.

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¿Por qué Malasia?

Durante las últimas semanas he estado haciendo un screener global y, como suele ocurrir, muchas de las empresas más baratas que aparecen están en Asia. Hasta hace poco no había analizado Malasia porque no tenía acceso operativo a ese mercado, pero ahora que Interactive Brokers permite comprar acciones malayas, me parece una geografía interesante para seguir.

Mi primera impresión es que Malasia ofrece muchas compañías con valoraciones muy bajas, aunque en muchos casos el retorno al accionista es pobre: payouts reducidos, pocos buybacks y escasos catalizadores claros. Aun así, hay un elemento nuevo que merece atención: hace unas semanas Bursa Malaysia lanzó un programa para intentar mejorar las valoraciones de las compañías cotizadas, en una línea similar a las reformas que impulsó Japón y que ayudaron a reducir el descuento de muchas empresas japonesas.

Por ahora no hay detalles concretos sobre las medidas, pero el simple hecho de que el regulador y la bolsa estén empujando en esa dirección me parece positivo. Si finalmente el programa deriva en mejores políticas de capital allocation, mayores dividendos, recompras o más presión sobre compañías infravaloradas, podría convertirse en un catalizador relevante.

Este fenómeno no se limita a Malasia. En Corea, otra de las geografías que estoy analizando en este screener, también se están impulsando reformas corporativas para reducir los descuentos de valoración. En conjunto, veo este tipo de iniciativas como un viento de cola interesante para mercados asiáticos donde ya existen muchas empresas baratas, pero donde históricamente ha faltado presión para desbloquear valor.

Por ahora, mi idea es seguir de cerca algunas compañías malayas y volver a revisar el mercado cuando se conozcan los detalles concretos del programa de “value-up”. En ese momento podría tener sentido hacer un nuevo screener para identificar qué empresas podrían beneficiarse más de estas medidas.

Resumen Macro Malasia

Demografía y contexto general

Malasia es una economía emergente del sudeste asiático con una población de aproximadamente 34 millones de personas. Es un país multiétnico —mayoritariamente malayo, con minorías china e india significativas— y uno de los más prósperos de la región. El PIB per cápita nominal rondó los 11.650 USD en 2023, y el país está clasificado como economía recientemente industrializada.

Crecimiento económico

La trayectoria reciente es sólida. El crecimiento del PIB en 2025 fue del 5,2%, ligeramente por encima del 5,1% de 2024. El Q4 2025 fue el trimestre más fuerte desde finales de 2022, con una expansión del 6,3% interanual, impulsada por agricultura, manufactura y servicios. En lo más reciente, el Q1 2026 moderó hasta el 5,3% interanual, con el consumo privado como ancla del crecimiento gracias a un mercado laboral estable y mayores ingresos.

Estructura del PIB por sectores

La economía se ha transformado con éxito de exportadora de materias primas a economía diversificada:

• Servicios: 54% del PIB

• Manufactura: 25% del PIB y más del 60% de las exportaciones totales

• Minería y canteras: 9%

• Agricultura: 9%

Las industrias clave son:

• Electrónica y semiconductores: columna vertebral exportadora; Malasia es un nodo crítico en la cadena global de suministro de E&E.

• Petróleo y gas: Petronas es el gran actor nacional; el sector es una fuente importante de ingresos fiscales, aunque con exposición a precios volátiles.

• Aceite de palma: junto al petróleo, GNL y el estaño, domina las exportaciones de recursos naturales, aportando ingresos significativos en divisas.

• Finanzas islámicas: Kuala Lumpur es un hub líder de finanzas islámicas, banca y seguros, con mercados de capitales bien desarrollados.

• Data centers / tecnología: compañías como Google, Microsoft y ByteDance han invertido más de 2.000 millones USD cada una para aprovechar la ventaja competitiva de Malasia en infraestructura de datos, gracias a su mano de obra cualificada, bajo coste de la tierra, energía y agua barata, y ausencia de desastres naturales.

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Ideas Interesantes

He aquí las ideas que he encontrado. Para los que no hayan leído mis artículos previamente: me centro principalmente en encontrar empresas baratas por múltiplos y hago un gran hincapié en que los retornos al accionista sean buenos. Considero que esto es muy importante al invertir en empresas con múltiplos extremadamente bajos, ya que es la mejor manera de “forzar” al mercado a que se produzca un rerating — o de lo contrario, cobrarás dividendos y buybacks elevados mientras esperas.

Allianz Malaysia

Aunque generalmente me centro en empresas más desconocidas en países emergentes, Allianz Malaysia me parece una muy buena oportunidad. Puedes comprar la subsidiaria de una empresa global —lo que te asegura hasta cierto punto que los estándares de la matriz se van a mantener— pero a un precio muy inferior y con un potencial de crecimiento muy superior.

De forma resumida: Allianz Malaysia es el mayor asegurador por cuota de mercado del país (~14% medido por GWP).

Dentro del grupo hay dos negocios distintos:

Allianz General (no-vida) es el negocio más maduro y, sobre todo, el más sólido competitivamente. En FY2025 superó el 15% de cuota de mercado (15,2%), consolidándose como líder del mercado general malayo. GWP creció un 7,6% hasta RM3,68 mil millones y el PBT subió un 16,1% hasta RM624,7 millones. El motor de crecimiento ha sido motor insurance, donde son número uno, junto a commercial.

Allianz Life (vida) es un negocio con dinámicas completamente distintas. Cuota de mercado del 11,8% (ranking #4 del sector), pero con mejor crecimiento estructural porque la penetración del seguro de vida en Malasia sigue siendo muy baja. Las métricas relevantes aquí no son GWP sino Annualised New Premiums (ANP) y Value of New Business (VNB): ANP FY2025 de RM923,9M (+6,0%), VNB de RM395,8M (+8,3%) y operating profit de RM544,8M (+13,0%).

Allianz Malaysia ha multiplicado sus premiums por 4 en los últimos 20 años, pasando de 374M$ en 2008 a 1.536M$ en 2025, y el net income se ha multiplicado por ~12 veces, pasando de ~20,5M$ a 236M$. Es decir, los beneficios han crecido 3 veces más rápido que los premiums, lo que refleja una mejora estructural de márgenes y mix —especialmente el peso creciente del negocio de vida, que tiene una rentabilidad superior y opera en un mercado con mucha menos saturación que el de no-vida.

Comparando Allianz Malaysia con otras aseguradoras del país, cotiza algo más barata que la media, aunque Takaful Malaysia cotiza a un PER similar y tiene mayor cuota de mercado en takaful (seguros islámicos), que están creciendo más rápido que los seguros tradicionales.

En cuanto al mercado general de seguros en Malasia, se espera que crezca a un CAGR de más del 6% hasta 2030, y la tasa de penetración del seguro como porcentaje del PIB sigue siendo relativamente baja, lo que apunta a un margen de expansión estructural considerable.

Valoración:

Un detalle a aclarar es que Allianz Malaysia tiene también unas acciones preferentes convertibles (ICPS — Irredeemable Convertible Preference Shares), así que a la hora de calcular ratios hay que tener en cuenta no solo las ordinarias sino también las preferentes en el share count diluido. Dichas preferentes pagan un dividendo equivalente a 1,2 veces el de las ordinarias y con prioridad sobre estas. La matriz, Allianz SE, controla el 85% de estas ICPS. A la hora de calcular ratios por acción hay que tener en cuenta dichas acciones, y en función del proveedor de datos puede ser que las tengan en cuenta o no. De forma ajustada, Allianz Malaysia cotiza a unas ~7.5 veces beneficio, pero el P/BV no está ajustado en TIKR, y de forma ajustada cotizaría a ~1.18 veces.

Por tanto, si tienes la opción de comprar las preferentes pueden ser más interesantes que las ordinarias por el extra de yield. En mi caso, por lo que he visto, en Interactive Brokers no están disponibles, así que he comprado las ordinarias. Pero es algo a mencionar y a tener en cuenta a la hora de calcular las valoraciones.

En resumen, me parece una buena inversión: una empresa barata (PER ~7,5x), que crece a buen ritmo en una economía con expansión sostenida del 5% anual y previsiones similares para 2026, dentro de un sector asegurador con perspectivas de crecer más del 6% anual.

Con que Allianz Malaysia simplemente capture el crecimiento del sector (6%) más un dividendo del 4–5% anual, creo que se pueden conseguir retornos de doble dígito anualizados sin necesidad de ningún rerating.

Más allá de Allianz Malaysia, no he encontrado otras empresas que me convenzan mucho. Hay empresas muy baratas, pero tienen dividendos extremadamente bajos, y mientras no cambien su política de dividendo no creo que vaya a producirse una subida significativa de las acciones.

Aún así, voy a comentar algunas que me parecen interesantes, especialmente si en el futuro aumentan el payout.

Joyerías en Malasia: Poh Kong y Tomei.

He encontrado dos joyerías en Malasia que están realmente baratas. Sus beneficios han subido principalmente por la subida del precio del oro, pero aún así están más baratas que empresas equivalentes que he analizado en Hong Kong, como Emperor Watch & Jewelry y King Fook Holdings, que cotizan a ~5 veces beneficios. Poh Kong y Tomei, en cambio, cotizan a menos de 3 veces beneficios. El problema, como veremos, es el dividendo.

Parte de sus beneficios actuales son anormalmente altos debido a la subida del precio del oro: estas empresas tenían oro en inventario comprado a precios inferiores y ahora lo están vendiendo más caro. Pero la realidad es que, incluso si tomamos como referencia años en los que el precio del oro estuvo más estable —como 2022 o 2023—, aún así cotizan a múltiplos realmente bajos.

Por ejemplo, Poh Kong ganó alrededor de 80 millones de media en 2022 y 2023, lo cual implicaría un PER de aproximadamente 5x sobre su market cap actual. Tomei ganó de media unos 55 millones en esos mismos años, lo cual también nos daría un PER en torno a 5x.

Ahora bien, desde 2022 el equity de estas empresas ha crecido considerablemente, en gran parte porque pagan un dividendo muy bajo y retienen casi todo el beneficio. Tomei tenía 360 millones de equity en 2022 y a finales de 2025 ya rondaba los 560 millones. Poh Kong, por su parte, pasó de 680 a 980 millones. Es decir, el equity ha subido aproximadamente un 40% en ambos casos.

Por tanto, es razonable pensar que los beneficios normalizados —incluso en un escenario en el que el precio del oro se mantuviera estable— serían parecidos o superiores a los de 2022, simplemente porque estas empresas tienen ahora bastante más equity y parte de él lo han reinvertido, especialmente Tomei. Poh Kong no ha invertido tanto, pero aún así, por el simple hecho de que el precio del oro sea hoy superior, aunque se mantengan los márgenes, el net income debería ser mayor.

Y de hecho, si miramos los márgenes operativos, tampoco han subido tanto como cabría esperar. Poh Kong tenía márgenes operativos del 8-9% en 2022 y 2023, y ahora mismo están en torno al 10%. Tomei ha pasado de un 9-10% aproximadamente a un 13%. Incluso en un escenario de normalización de márgenes, el beneficio recurrente debería ser superior al de 2022 y 2023.

Por lo tanto, estaríamos ante unas compañías que cotizan a un PER normalizado de aproximadamente 4x y, en ambos casos, por debajo de su valor contable: Tomei a 0,5x price-to-book y Poh Kong a 0,43x. El único problema —y no menor— es que apenas devuelven parte de ese dinero a los accionistas.

·Poh Kong: La cadena de joyerías de oro más grande de Malasia. Opera principalmente como retailer de oro (barras, monedas, joyería) y tiene planta de manufactura propia. Aunque no me parece un grandísimo negocio, está realmente muy barata: menos de 3 veces beneficios y menos de 0,5 veces el P/Book.

Tiene algo de deuda, aunque está cubierta sobradamente por sus inventarios de oro. El problema es el dividendo: pagaron 3 céntimos por acción sobre un precio de 1,11 MYR (~2,7% de yield). Es cierto que lo han subido desde 1,2 céntimos en 2021 hasta 3 céntimos en 2025, pero el payout sigue estando en torno al 10%, lo cual es irrisorio.

Además, a diferencia de Tomei, Poh Kong tampoco está usando ese dinero para expandirse. En el annual report mencionan planes de expansión a ciudades secundarias, más productos de inversión y digitalización, pero por el momento no lo están ejecutando: el CAPEX en 2025 fue de 4M de Ringgit sobre un beneficio de 121M. Ese es el punto que más me chirría — no pagan dividendo, pero tampoco lo están reinvirtiendo. Sin un catalizador claro, no veo forma de forzar un rerating.

· Tomei: A diferencia de Poh Kong, tiene un modelo más diversificado: retail, manufactura y wholesale, empeño (pawnbroking), caja de seguridad, laboratorio gemológico, educación y oro digital.

Tomei está más barata en cuanto a PER que Poh Kong, pero paga menos dividendo y tiene más deuda.

Tomei está aún más barata en PER que Poh Kong, aunque paga menos dividendo y tiene más deuda. En cuanto al negocio en sí, me parece más interesante su propuesta: están diversificando hacia negocios adyacentes que pueden dar valor añadido a sus tiendas, y sí están invirtiendo — 18,7M de Ringgit en CAPEX en 2025.

Aún así, el dividendo es realmente irrisorio: 1,6% de yield con un payout del 3,3%. Podrían perfectamente pagar más sin que afectara a sus operaciones — el net income fue de 104,3M y el pago total de dividendo supuso únicamente 3,5M.

El payout tan bajo se explica probablemente por una combinación de tres factores: están financiando el CAPEX de expansión, tienen algo de deuda que conviene ir reduciendo, y la volatilidad del precio del oro empuja a mantener cierto colchón de caja. Aun así, los tres motivos juntos no justifican un payout del 3% — podrían perfectamente subirlo al 15–20% sin comprometer ni el plan de inversión ni el balance. Quizás si el oro se estabiliza este año se sientan más cómodos siendo más generosos con el accionista. Veremos.

Con unas valoraciones tan bajas, me parece interesante seguir estas dos acciones y ver si deciden aumentar el payout. Con un payout del 20% de los beneficios, Tomei estaría pagando un dividendo superior al 7% — eso sí me parecería muy interesante.

PBA Holdings Berhad — Utility de agua en Penang

Tiene caja neta y cotiza a 5,3 veces beneficios y 0,5 veces book. Para ser una utility, me parece increíblemente barata. Además, en agosto de 2025 subieron las tarifas del agua, por lo que el beneficio a partir de este año debería aumentar.

Sin embargo, tiene un dividendo de solo el 2,7% con un payout del 13%, y tiene previsto invertir 2.000M de Ringgit hasta 2030 para asegurar la suficiencia hídrica en Penang — una inversión enorme respecto a un market cap de 600M. Siendo el estado de Penang el mayor accionista, la prioridad es claramente operativa, no la retribución al accionista.

Es muy barata, y una vez finalizado el plan de inversión de aquí a 2030, sus necesidades de inversión deberían bajar mucho y el dividendo podría aumentar considerablemente. Pero es una jugada demasiado a largo plazo — la dejo en el radar, pero no la veo interesante por el momento.

Teo Seng — Mayor productor de huevos de Malasia

También muy barata, aunque es una empresa claramente cíclica — depende del precio de los huevos y de sus inputs (maíz y soja suponen el 60–75% de los costes del grupo).

Un aspecto a tener en cuenta: hasta julio de 2025 existía un programa de subsidio gubernamental para el precio de los huevos. En el 2H 2025, los subsidios recibidos fueron de 11M de Ringgit sobre un beneficio de 58,9M — eliminándolos, llegaríamos a ~48M en la segunda mitad del año (PER ~5,3x ajustado).

A diferencia de las joyerías, Teo Seng sí está invirtiendo agresivamente en expansión:

• CAPEX FY2025: 95,2M de Ringgit (vs. 104M en FY2024)

• Nueva granja terminada — capacidad adicional de 270.000 aves, alcanzando un total de 25 granjas

• Planta de procesamiento de gallinas viejas — nueva fuente de ingresos downstream, en fase final de commissioning

• División de huevos cocidos — ya exportando a Singapur; inicio de producción de egg mayo para cadenas de conveniencia

• Línea de huevo líquido — en fase de diseño, orientada a panaderías y confiterías (B2B)

• Torres de compost — fertilizante orgánico de estiércol, economía circular

El objetivo estratégico es alcanzar 5 millones de huevos/día (estimamos que actualmente están en el rango de 3,5–4M/día con 25 granjas).

Aún así, no me convence del todo. La dependencia de commodities como el maíz y la soja hace que sea difícil hacer un seguimiento fiable de los márgenes. Puede ser interesante revisarla si consiguen mantener un beneficio similar en 2026 — de momento, la dejo en observación.

De forma personal, he comprado una posición pequeña en Allianz Malaysia y seguiré de cerca las dos joyerías. Cotizan a valoraciones muy interesantes y, si en el futuro suben el payout, me plantearía seriamente tomar una posición.

Esto no es una recomendación de inversión. Haz siempre tu propio análisis.

Eso es todo por el momento. En general, Malasia ofrece empresas interesantes a valoraciones muy bajas, pero con una política de retribución al accionista bastante pobre. Creo que es interesante seguir este mercado, especialmente cuando publiquen cuales son las medidas concretas del programa MY Value Up. En otros países como Japón y Corea este tipo de programas han servido para aumentar las valoraciones del mercado general.

Si os ha gustado el artículo, recordad que podéis suscribiros gratuitamente para no perderos los próximos. Actualmente estoy haciendo un screener de acciones coreanas, así que no tardará en llegar el siguiente.

In this article I’m going to review my 2025 results and share my main investment ideas for 2026.

My return in 2025 was +84.01%.

Returns over the last few years

2020: +56.54%
2021: +260.94%
2022: +41.53%
2023: +5.78%
2024: +26.62% - Article: Annual Review - 2024
2025: +84.01%

A large part of this performance came from my long–short strategy in gold miners, followed by my beloved Halyk Bank and Chinese fintechs.

Overall, this year I invested mainly through long–short strategies within the same sector, i.e. going long one company and short another comparable company in the same sector (for example, gold miners or Chinese fintechs).

The long Google / short Apple, as I mentioned in this thread, also worked well.

Investment ideas for 2026

Below are my main investment ideas for 2026.
Beyond gold miners, many of these ideas are similar to those from 2024, although with some important nuances.

Gold miners

Around April–May, I started to take a serious interest in gold miners, not only because of the rise in the gold price, but also because early in the year I ran a screener using the parameters I usually apply (basically low P/E ratios / cheap companies), and several gold miners came up as extremely cheap.

Unfortunately, I didn’t pay enough attention and missed the initial rally from January to May.

My idea remains the same as the one I explained in this thread: go long a diversified basket of small gold miners and short large gold miners and gold itself.

I simply believe that small gold miners are quite cheap relative to the gold price and also relative to large gold miners. It’s normal for large companies to trade at a premium versus smaller ones, but in the case of gold, this valuation gap seems excessive to me.

The small miners I’m long are trading, on average, 4–5 times cheaper than the large miners I’m short (Lundin Gold, Agnico Eagle, Alamos Gold), adjusting for current production and costs.

Although the valuation gap has partially closed, I still believe this strategy will work very well over the coming years. Many small miners have production growth projects that are now viable thanks to current gold prices, while large miners do not have clear plans to materially increase production.

The performance of the stocks I follow since I published the tweet has been as follows:

Shorts

• LUG: +63.94%

• AGI: +46.32%

• AEM: +42.71%

• Gold: +30.32%

Average shorts: +45.82%

Longs

• ORV: +307.69%

• MMY: +215.00%

• CERT: +158.46%

• ALTN: +144.02%

• MSA: +133.98%

• GAU: +100.00%

• SBI: +95.70%

• THX: +77.97%

• ORE: +55.65%

• STGO: +55.20%

• SOMA: +22.69%

Average longs: +124.21%

If there’s interest, I’ll write a longer article explaining the reasons why I believe small gold miners will outperform large miners and gold itself.

Chinese fintechs

How could I not mention Chinese fintechs once again. Share price performance has been somewhat turbulent, to put it mildly.

They surged in the first half of the year and then collapsed in recent months due to a regulation that came into force in October, limiting the maximum interest rate they can charge, as well as the threat of even more regulation in 2026.

Companies such as XYF or JFIN were up more than 100% at one point and ended the year with negative returns.

Is it worth investing in these stocks right now?

Despite the negative short-term outlook and regulatory uncertainty, I believe that at these prices it’s worth taking the risk.

For example, XYF is currently trading below what it earned over the last 12 months (0.91x earnings) and at 0.2x price-to-book. These are ridiculous valuations.

A common criticism of such cheap stocks, especially from countries like China, is that the profits must be fake. However, by now both XYF and other Chinese fintechs have clearly demonstrated that these profits are real, as they have returned a large portion of them through dividends and buybacks.

In the case of X Financial ($XYF): They paid two dividends of $0.25 and $0.28 this year (~9.4% dividend yield) and repurchased $67.9 million worth of shares between January 1st and November 20th.

At current prices, this would represent roughly ~28% of the current market cap in buybacks, which together with dividends amounts to more than 37% of market cap returned to shareholders in a single year.

Realistically, returns haven’t been that extreme because the average repurchase price was around $16 per share, while the stock now trades below $6. I sincerely hope they accelerate buybacks at these levels, as they still had $48M available under their buyback program at the last earnings release.

Looking at shares outstanding, they have declined by ~13% from late 2024 to the most recent results.

They earned ~$196M in the first three quarters of the year.
They paid approximately $22M in dividends and repurchased $68M in shares, for a total of $90M, implying a ~45% payout ratio.

One year ago, the ratios were like this:

On the other hand, I don’t believe China wants to completely destroy this sector, especially when it is trying to boost domestic consumption, and access to financing is a key pillar for higher consumption.

https://chinaglobalsouth.com/2025/12/16/china-orders-banks-and-commerce-to-boost-consumption/

https://www.chinadaily.com.cn/a/202512/30/WS69530ef3a310d6866eb3113e.html

Finally, even in a worst-case scenario where China aggressively regulates the sector and effectively wipes it out, XYF is still trading at 0.2x book value and has net cash. So technically, beyond being extremely cheap on earnings and cash flow, it is also very cheap on an asset basis.

Clearly, forward earnings will be lower than those earned in 2025. For example, the company’s outlook for Q4 2025 is to generate between 21 and 23B in loans, compared to 33.6B in Q3. This is a significant decline, which will likely be compounded by margin compression due to interest rate caps.

So profits could fall by half or even more. But trading at less than 1x last year’s earnings, even a 50% earnings drop would imply 2x earnings. A 66% drop would imply 3x earnings. These are still very cheap multiples.

I also find it interesting to go long XYF and short a more expensive peer such as Finvolution to mitigate regulatory risk.

In short, there is clearly regulatory risk, but at this price, I believe it’s worth the risk.

Halyk & Kaspi:

A large part of Halyk’s performance this year came in the last month. I don’t really know why; there hasn’t been any significant news, and while Halyk surged, Kaspi and FRHC remained flat or declined.

This may partly be due to Alejandro Estebaranz (a spanish fund manager with a big Youtube channel) publishing a YouTube video a few weeks ago speaking very positively about Halyk. After all, his investment channel has more than 1 million subscribers, and many people may have bought the stock.

I even think it’s possible that Estebaranz bought Halyk for his funds, as he spoke extremely well of the company.

What surprises me is that I’ve followed and invested in Halyk for over two years and barely saw interest from large investors, despite the fact that, in my view, it was so cheap it was a no-brainer. I’m not a big fan of victory laps, but in this case… I told you.

As an anecdote, I visited Kazakhstan in June and was pleasantly surprised. The two main cities, Astana and Almaty, have nothing to envy well-known European cities.

The question is: after this year’s rally, is Halyk still worth it? And what about Kaspi?

The reality is that despite the rally, Halyk trades at 4x earnings, which is still very cheap, and it maintains a minimum 50% payout policy. If earnings are maintained, this implies a minimum 12.5% yield in 2025. Not bad at all.

On the other hand, Kazakhstan has introduced new banking regulations effective in 2026, including raising the corporate tax rate for banks from 20% to 25%.

As a positive, Kazakhstan has managed to stabilize the tenge, which depreciated by more than 15% against the dollar in 2024.

In 2025, depreciation has been controlled and the currency has remained relatively stable year-on-year. That said, this is versus the dollar, which itself has weakened against many other currencies such as the euro.

In summary, I believe Halyk is still a good opportunity, although due to multiple expansion (3x earnings a year ago vs 4x now) and the higher tax rate, it is no longer as attractive as before.

Meanwhile, Kaspi’s share price fell by ~22% in 2025, and although it is still more expensive than Halyk (4x vs 7.3x earnings), the valuation gap between the two is the smallest I’ve seen since I started following them

Personally, I have positions exceeding 5% in both companies. I believe they are attractive at current valuations and both have growth projects in different countries: Halyk in Uzbekistan and Kaspi in Turkey. While these projects won’t materially impact group earnings in the short term, they offer solid long-term potential.

Hong Kong stocks

To begin with, here are the returns of the three companies I discussed in last year’s article: Dream International, Justin Allen and Nameson Holdings.

Overall, strong performance. Personally, I was only invested in Nameson and Justin Allen, with small positions. The most striking case was Dream International, which rose by 300%, driven by rumors that it would manufacture Pop Mart figures, which have become extremely popular in recent years.

I still believe there are very good opportunities in Hong Kong. The main issue is that investing there is more inconvenient than in markets like the US.

For example, over the past year Interactive Brokers has restricted the ability to buy certain Hong Kong stocks, citing concerns about price manipulation. As far as I understand, this limitation only applies to European residents.

For instance, it is currently not possible to buy Justin Allen via IBKR, and many small Hong Kong stocks are unavailable. As an alternative, they can be purchased through other brokers such as DeGiro.

Additionally, many stocks lack sufficient liquidity to build large positions. There is limited interest in small Hong Kong stocks, and many companies have controlling shareholders owning 60–70% of shares, resulting in a very limited float.

Despite this, I still see very good opportunities for 2026.

Ten Pao

A Hong Kong company that designs, manufactures and sells power supplies, smart chargers and power-related products for multiple industrial and consumer sectors.

It trades at 5x earnings, ROE above 20%, and offers an 8% dividend yield at current prices.

Ten Pao has built a new industrial park in Huizhou, fully operational since August 2025. The new facility covers 200,000 m², double the size of the previous one. This should allow for higher production and, being more modern, improved margins.

Over the medium term, Ten Pao has significantly increased both revenue and earnings, and with the new facilities, I believe it can grow further in 2026 and expand margins..

In short, I see it as a bargain: a growing company at 5x earnings, with an 8% dividend, good return on equity, and operating in a sector with a solid future.

It is my main position in Hong Kong, we’ll see how it performs in 2026.

Beyond Ten Pao, I hold some residual positions in Hong Kong. A few interesting names:

Lion Rock

A publishing group focused on printing and publishing educational and commercial books, with a strong presence in China and international markets.

5x earnings, 8% dividend, ~14% ROE.

Nameson Holdings

A manufacturer and exporter of garments (OEM/ODM) for international brands, with production mainly in Asia.

No longer as cheap as in the past (6.4x earnings), ~14% ROE, ~12% dividend yield.

Nameson’s strongest point is its consistently high dividends. In 2025, it paid HK$0.125 per share, which at current prices implies a ~12% yield, but during most of last year it traded between HK$0.8–0.9, implying a yield close to 15%.

Although the dividend is sustainable, its payout ratio is above 70%. If earnings decline, the dividend will almost certainly be reduced.

Prinx Chengshan Holdings

A Chinese manufacturer of tires for passenger vehicles, trucks and special vehicles, with proprietary brands and growing international exposure.

4.6x earnings, ~8% dividend, ~14% ROE.

On the downside, it operates in a fairly commodity-like and capital-intensive sector. It has significant CAPEX ahead as it is building new factories.

Overall, as mentioned, Ten Pao is my main position. I’m currently running an exhaustive screener, so I may share other interest Hong Kong ideas in the coming weeks.

Shipping

I currently hold three small shipping positions: Tsakos Navigation, Navios Maritime Partners and Danaos Corp.

I believe they are cheap, with all three of them trading below 0.4x NAV, and shareholder treatment has improved in recent years, with higher dividends at Tsakos and buybacks at NMM.

As I mentioned, these are small positions, but I believe they should perform well over the medium term given their valuations and favorable supply-demand dynamics in tankers and dry bulk (less so in containerships).

That’s all for now.
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Thank you very much for reading!

Mi rentabilidad del año 2025 ha sido del +84.01%.

Rentabilidad de los últimos años

• 2020: +56,54%

• 2021: +260,94%

• 2022: +41,53%

• 2023: +5,78%

• 2024: +26,62% - Artículo Review Anual 2024

• 2025: +84,01%

Una gran parte de esta rentabilidad ha venido de mi estrategia long–short en mineras de oro, seguida de mi querida Halyk Bank y de las fintech chinas.

De forma general, este año he invertido principalmente mediante estrategias long–short dentro del mismo sector, es decir, ir long de una empresa y short de otra comparable del mismo sector (por ejemplo, en mineras de oro o fintech chinas).

El long Google / short Apple, como comenté en este hilo, también salió bien.

Ideas de inversión para 2026.

A continuación, mis principales ideas de inversión para 2026.
Más allá de las mineras de oro, muchas de estas ideas son similares a las de 2024, aunque con algunos matices importantes.

Mineras de oro

Sobre abril–mayo empecé a interesarme seriamente por las mineras de oro, no solo por la subida del precio del oro, sino porque a principios de año hice un screener con los parámetros que suelo utilizar (básicamente PERs bajos / empresas baratas) y aparecieron varias mineras de oro extremadamente baratas.

Por desgracia, no les presté suficiente atención y me perdí el rally inicial de enero a mayo.

Mi idea sigue siendo la misma que expliqué en este hilo: ir long de un basket diversificado de mineras pequeñas y short de mineras grandes y oro.

Simplemente considero que las mineras pequeñas están bastante baratas respecto al precio del oro, y también respecto a las mineras grandes. Es normal que las compañías grandes coticen con prima frente a las pequeñas, pero en el caso del oro este gap de valoración me parece excesivo.

Las mineras pequeñas en las que estoy long cotizan, de media, 4–5 veces más baratas que las mineras grandes en las que estoy short (Lundin Gold, Agnico Eagle, Alamos Gold), ajustando por producción y costes actuales.

Aunque el gap se ha cerrado parcialmente, sigo creyendo que esta estrategia funcionará muy bien en los próximos años. Muchas mineras pequeñas tienen proyectos de crecimiento de producción, ahora viables gracias a los precios actuales del oro, mientras que las grandes no tienen planes claros de aumentar producción de forma sustancial.

La rentabilidad de las acciones que sigo desde que publiqué el twit ha sido la siguiente:

Shorts

• LUG: +63,94%

• AGI: +46,32%

• AEM: +42,71%

• Oro: +30,32%

Media shorts: +45,82%

Longs

• ORV: +307,69%

• MMY: +215,00%

• CERT: +158,46%

• ALTN: +144,02%

• MSA: +133,98%

• GAU: +100,00%

• SBI: +95,70%

• THX: +77,97%

• ORE: +55,65%

• STGO: +55,20%

• SOMA: +22,69%

Media longs: +124,21%

Si veo que hay interés escribiré un artículo más largo hablando de los motivos por los que creo que las mineras pequeñas batirán la rentabilidad de las grandes y del oro.

Fintech chinas

Como no mencionar de nuevo las fintech chinas. La cotización de las acciones ha sido algo turbulenta, por decirlo de alguna manera. Subieron mucho en la primera mitad del año y en los últimos meses se han desplomado debido a una regulación que entró en vigor en octubre limitando el tipo de interés máximo que pueden cobrar, y también por la amenaza de incluso más regulaciones en 2026.

Empresas como XYF o JFIN llegaron a subir más del 100% y han acabado el año con rentabilidad negativa.

¿Vale la pena invertir en estas acciones ahora mismo?

A pesar del outlook negativo a corto plazo y de la incertidumbre regulatoria, creo que a estos precios vale la pena asumir el riesgo.

Por ejemplo, XYF cotiza ahora mismo por debajo de lo que ha ganado en los últimos 12 meses (0.91x beneficios), a 0.2x veces price to book. Son valoraciones ridículas.

Una de las críticas que es común en acciones tan baratas y de países como China es que los beneficios tienen que ser falsos, que realmente no han ganado ese dinero. Pero a estas alturas tanto XYF como las otras fintech chinas han demostrado que ese dinero es real, ya que han repartido una gran parte de esos beneficios, tanto en dividendos como en recompras.

En el caso de XYF: Han pagado dos dividendos de 0.25$ y de 0.28$ este año (~9.4% de dividend yield) y han recomprado acciones por un valor de 67.9 millones de dólares del 1 de enero al 20 de noviembre. A precios actuales esto representaría un ~28% del market cap actual en recompras que junto con el dividendo sería un total de más del 37% del market cap devuelto a accionistas en un año.

Siendo realistas los retornos no han sido tan extremos debido a que el precio medio de las recompras es de aproximadamente 16$ por acción, mientras que ahora cotiza por debajo de 6$. Espero francamente que aceleren las recompras a estos precios, ya que aún tenían 48M$ disponibles en su programa de recompras en su última presentación de resultados.

Si miramos las acciones en circulación se han reducido un ~13% desde finales de 2024 a los resultados más recientes.

Han ganado ~196M$ en los tres primeros quarters del año.
En dividendos han pagado aproximadamente 22M$ y han recomprado 68M$, dando un total de 90M$. Por tanto, el payout ha sido de ~45%.

En comparación hace un año los ratios estaban así.

Por otro lado, no creo que China quiera simplemente cargarse este sector, más aún cuando están intentando potenciar la economía de consumo dentro de China, y el acceso a financiación es un pilar para que haya más consumo.

https://chinaglobalsouth.com/2025/12/16/china-orders-banks-and-commerce-to-boost-consumption/

https://www.chinadaily.com.cn/a/202512/30/WS69530ef3a310d6866eb3113e.html

Para acabar, incluso si nos ponemos en el peor de los casos en el que China regula este sector de forma muy agresiva y se carga el sector entero, XYF por ejemplo sigue cotizando a 0.2 veces su valor en libros y tiene caja neta. Así que técnicamente la empresa, más allá de que también esté muy barata en cuanto a beneficios/cash flow, está muy barata en cuanto al valor de sus activos.

Claramente sus beneficios forward serán inferiores que los que han ganado en 2025. Por ejemplo, su outlook para Q4 2025 es de generar entre 21 y 23B en préstamos, mientras que en Q3 2025 hicieron 33,6B. Hablamos de una bajada importante y esto seguramente se sumará a que el margen muy posiblemente se comprima debido a las nuevas regulaciones que limitan el tipo de interés máximo.

Así que es posible que quizás los beneficios les bajen a la mitad o incluso más. Pero cotizando ahora mismo a menos de 1 vez beneficios del último año, aunque le bajaran los beneficios a la mitad estamos hablando de que cotizaría a 2 veces beneficios. Si los beneficios bajan un 66%, 3 veces beneficios. Seguimos hablando de múltiplos muy baratos.

Por otro lado, también considero interesante ir long XYF y short de alguna otra más cara como Finvolution para mitigar el riesgo de que China regule muy fuertemente este sector.

De forma resumida, aquí hay riesgo regulatorio claramente, pero creo que a este precio merece la pena.

Halyk & Kaspi:

Una gran parte de la rentabilidad de Halyk este año se ha dado en el último mes. No sé realmente el motivo, no ha habido ninguna noticia significativa y, mientras que Halyk ha subido mucho, Kaspi y FRHC se han mantenido estables o han bajado.

Quizás en parte es debido a que Alejandro Estebaranz hizo un vídeo en su canal de YouTube hace unas semanas hablando muy bien de Halyk. Al fin y al cabo es un canal de inversión con más de 1 millón de seguidores y mucha gente puede haber comprado.

Creo que incluso es posible que Estebaranz haya comprado Halyk en sus fondos, ya que, como digo, me pareció que hablaba muy bien de la empresa.

Algo que me sorprende es que he seguido e invertido en Halyk desde hace más de dos años y no he visto apenas interés por parte de inversores grandes a pesar de que, en mi opinión, estaba tan y tan barata que era un no-brainer. No soy mucho de hacer victory laps, pero en este caso, I told you.

Como anécdota, visité Kazajistán en junio y me sorprendió para bien. Pensaba que sería un país un poco tercermundista y, por lo menos las dos ciudades principales, Astana y Almaty, son ciudades que no tienen nada que envidiar a ciudades europeas más conocidas.

La pregunta es: ¿a pesar de la subida de este año sigue valiendo la pena Halyk? ¿Vale la pena Kaspi ahora?

Y la realidad es que, a pesar de la subida, Halyk cotiza a 4 veces beneficios, lo cual sigue siendo muy barato, y siguen teniendo su política de un payout mínimo del 50%. Si mantienen los beneficios esto significa que en 2025 el yield mínimo sería de un 12,5%. Nada mal.

Por otro lado, Kazajistán ha introducido nuevas regulaciones para el sector bancario que entran en efecto este año 2026, y una de ellas es que subirán el tipo impositivo a los bancos de un 20% a un 25%.

Como punto positivo, Kazajistán ha conseguido estabilizar el tenge, ya que en 2024 se depreció más de un 15% respecto al dólar.

En 2025 han conseguido controlar la depreciación y se ha mantenido bastante estable respecto a hace un año. Todo sea dicho, esto es respecto al dólar, que de por sí se ha depreciado respecto a muchas otras monedas como el euro.

De forma resumida, creo que Halyk sigue siendo una buena oportunidad, aunque dada la expansión de múltiplos (hace un año estaba a 3 veces beneficios vs 4 ahora) y el aumento del tipo impositivo ya es no tan buena.

Por otro lado, la cotización de Kaspi ha bajado un ~22% en 2025, y aunque sigue estando más cara que Halyk (4x vs 7,3x beneficios) es el gap de valoración más pequeño que ha habido entre las dos en todo el tiempo que las llevo siguiendo.

Personalmente, tengo posiciones de más del 5% en ambas compañías. Creo que son buenas oportunidades a las valoraciones actuales y que ambas tienen proyectos de crecimiento en diferentes países: Halyk en Uzbekistán y Kaspi en Turquía. Aunque a corto plazo dichos proyectos no van a aportar de forma significativa a los beneficios del grupo, son proyectos con buenas perspectivas a largo plazo.

Acciones de Hong Kong

Para empezar, esta es la rentabilidad de las tres empresas sobre las que hablé en el artículo del año pasado: Dream International, Justin Allen y Nameson Holdings.

Por lo general, buena rentabilidad. De forma personal solo estuve invertido en Nameson y en Justin Allen con una posición pequeña. El caso más llamativo, el de Dream International, que llegó a subir un 300%, fue debido a rumores de que iban a fabricar los muñecos de Pop Mart, que son unos muñecos chinos que se han hecho muy populares estos últimos años.

Sigo pensando que hay muy buenas oportunidades en Hong Kong. El único problema es que es cierto que invertir en Hong Kong es más inconveniente que en otros mercados como el americano.

Por ejemplo, este último año Interactive Brokers ha limitado la posibilidad de comprar ciertas acciones de Hong Kong debido a que consideran que hay riesgo de que la gente manipule el precio de dichas acciones. Por lo que tengo entendido esta limitación solo aplica a clientes con residencia en Europa.

Por ejemplo, no es posible comprar Justin Allen hoy día en IBKR y muchas acciones pequeñas en Hong Kong no se pueden comprar. Como alternativa se pueden comprar en otros brókers como DeGiro.

Por otro lado, muchas acciones no tienen suficiente liquidez para poder hacer posiciones grandes, ya que, por un lado, no hay mucho interés por comprar acciones pequeñas en Hong Kong y, por otro lado, muchas de estas acciones tienen un accionista de referencia grande, que en muchos casos tiene un 60-70% de las acciones, así que el float es reducido.

A pesar de ello, sigo viendo muy buenas oportunidades para 2026.

Ten Pao

Empresa de Hong Kong que diseña, fabrica y vende fuentes de alimentación, cargadores inteligentes y productos de suministro eléctrico para múltiples sectores industriales y de consumo.

Está a 5 veces beneficios. ROE por encima del 20%. Dividendo del 8% a precios actuales.

Por otro lado, Ten Pao ha construido un nuevo parque industrial en Huizhou y está totalmente operativo desde agosto de 2025. El nuevo parque tiene 200.000 m² de extensión, mientras que su parque antiguo en Huizhou tenía la mitad, así que definitivamente tendrán la oportunidad de aumentar la producción y, al ser instalaciones más modernas, deberían poder aumentar sus márgenes.

A medio plazo podemos ver que Ten Pao ha aumentado significativamente tanto su revenue como sus beneficios y, como digo, creo que con las nuevas instalaciones es posible que crezcan en 2026 y que también aumenten sus márgenes.

De forma resumida, me parece un chollo que puedas comprar empresas así a PER 5, que crecen, con dividendos del 8%, con buenos ROE, y en un sector con buen futuro.

Personalmente es mi posición principal en Hong Kong, a ver qué tal va en 2026.

Más allá de Ten Pao tengo alguna posición residual en Hong Kong. Por poner algunos nombres de empresas interesantes:

Lion Rock

Grupo editorial centrado en impresión y publicación de libros educativos y comerciales, con fuerte presencia en China y mercados internacionales.

PER 5, dividendo del 8%, ROE ~14%. No le veo tan buen futuro al negocio como a Ten Pao.

Nameson Holdings

Fabricante y exportador de prendas de vestir (OEM/ODM) para marcas internacionales, con producción principalmente en Asia.

Ya no está tan barata como en el pasado (PER 6,4x), ROE ~14%, dividendo ~12%.

El punto más fuerte de Nameson es que llevan unos años pagando dividendos muy altos. Por ejemplo, en 2025 han pagado 0,125 HK$ por acción, a precios actuales es un yield del ~12%, pero Nameson cotizó entre 0,8 y 0,9 HK$ la mayor parte del año pasado, por tanto su yield era de casi un 15%.

Como digo, este es el punto fuerte en mi opinión de Nameson, aunque su payout es bastante alto, por encima del 70%. Sigue siendo un dividendo sostenible, pero si les bajan los beneficios bajarán el dividendo casi seguro.

Prinx Chengshan Holdings

Fabricante chino de neumáticos para turismos, camiones y vehículos especiales, con marcas propias y creciente exposición internacional.

PER 4,6x, dividendo ~8%, ROE ~14%.

Como punto negativo, me parece que opera en un sector bastante commodity e intensivo en capital. Tienen mucho CAPEX por delante ya que están construyendo nuevas fábricas.

De forma general, como digo, mi principal posición es Ten Pao. Ahora mismo estoy haciendo un screener exhaustivo, así que quizás comparta alguna otra empresa interesante en Hong Kong en las próximas semanas.

Shipping

Ahora mismo tengo tres posiciones pequeñas en shipping: Tsakos Navigation, Navios Maritime Partners y Danaos Corp.

Simplemente me parece que están baratas, cotizando las tres acciones por debajo de 0,4x NAV, y que en estos últimos años han mejorado el trato a los accionistas, subiendo el dividendo por parte de Tsakos y haciendo recompras en NMM.

Como digo, son posiciones pequeñas, pero creo que a medio plazo deberían ir bien dadas sus valoraciones y que las perspectivas de oferta-demanda son positivas tanto en tankers como en dry bulk (no tanto en containerships).

Y esto es todo por el momento. Recordad que, si queréis recibir los artículos de forma gratuita, podéis suscribiros y agradezco que compartáis el artículo. También podéis seguirme en Twitter. - https://x.com/NateValuetw

¡Muchas gracias por leer!

Para empezar, mi rentabilidad del año 2024 ha sido del +26,62%.

Rentabilidad de los últimos años

• 2020: +56,54%.

• 2021: +260,94%.

• 2022: +41,53%.

• 2023: +5,78%.

• 2024: +26,62%.

La rentabilidad en 2024 ha sido del 26,62%. De forma resumida, Halyk Bank y las Fintech chinas han sido las que más han contribuido al resultado positivo, mientras que el shipping es lo que más ha lastrado la rentabilidad.

Por lo general, he tradeado mucho menos mi portfolio que otros años. He variado el porcentaje que ocupan diferentes acciones en mi cartera, pero ha habido pocas ventas e incorporaciones de empresas nuevas.

Ventas de acciones

En cuanto a las acciones vendidas, me deshice de toda mi posición en Enquest PLC, una productora de petróleo del Reino Unido. Los cambios fiscales del nuevo gobierno británico en el sector del Oil & Gas fueron más severos de lo que esperaba, y finalmente decidí liquidar toda la posición. La empresa sigue estando muy barata, pero me cansé de seguir invertido en un país que claramente está haciendo todo lo posible por cargarse su sector petrolero.

También tenía una posición en carbón metalúrgico (Stanmore Resources), pero decidí deshacer la mayor parte de dicha posición debido a la bajada de precios del carbón.

Nuevas incorporaciones

Para terminar, incorporé a lo largo del año la empresa australiana Mitchell Services. Considero que es una oportunidad interesante, cotizando a múltiplos bajos y con buenos retornos al accionista.

Aquí tenéis varios artículos gratuitos donde se habla de ella:

• Mitchell Services is a potential 4-bagger...

• Groundbreaking research

• Mitchell Services (MSV)

En cuanto a mi cartera actual y oportunidades buenas para 2025:

Fintech chinas (ej.: $XYF, $JFIN, $YRD...)

El negocio principal de estas compañías es facilitar préstamos para otras entidades (principalmente bancos). No es un sector especialmente atractivo, sobre todo por ser muy susceptible a regulación en un país como China. Sin embargo, cotizan a múltiplos ridículamente bajos, a pesar de que sus cotizaciones han subido mucho en el último año.

No es solo que estén muy baratas, sino que, por lo general, tienen buenas políticas de retorno al accionista. Por poner algunos ejemplos:

• JFIN cotiza a 6,53 USD y ha pagado 0,9 USD en dividendos en 2024 (13,7% de rendimiento a precios actuales).

• QFIN cotiza a 38,7 USD actualmente y ha pagado 1,2 USD en dividendos en 2024 (3,1% de rendimiento). Además, ha recomprado más del 14% de las acciones en circulación desde junio de 2023. Tienen otro programa de recompras en marcha por 450 millones de dólares para 2025, que equivaldría a recomprar alrededor de un 7,5% de las acciones en circulación.

• XYF cotiza a 8,41 USD y pagó 0,34 USD en dividendos en 2024 (4,04% de rendimiento). Realizaron una tender offer, recomprando 2 millones de acciones de un total de 50 millones en circulación (4% de recompras). Recientemente han recomprado 6,35 millones de acciones a un accionista mayoritario (13% de las acciones), por lo que en conjunto han devuelto más de un 20% de la capitalización a los accionistas entre dividendos y recompras en solo un año.

Podría dar más ejemplos, pero os hacéis una idea. A pesar de las subidas, muchas de estas empresas cotizan a unas dos veces beneficios. De las compañías que sigo, estas son las que más baratas están de todo el mercado, y que además tienen buenos retornos al accionista.

Hay riesgo regulatorio, sí, como en cualquier otra empresa en China, pero a estos precios y con estos retornos al accionista, creo que dichos riesgos están sobrevalorados.

· Halyk Bank: Un banco kazajo que cotiza en la Bolsa de Valores de Londres (aunque se negocia en USD). La acción está muy barata, cotiza a 3 veces beneficios a pesar de que han estado creciendo sustancialmente sus beneficios en dólares durante los últimos años. Tienen una política de dividendos de pagar al menos el 50% de las ganancias en dividendos. La acción actualmente cotiza a 20 dólares y pagaron 3 dólares en dividendos en 2024.

Su payout para 2024 fue de alrededor del 55%, por lo que su balance sigue creciendo a pesar de pagar dividendos masivos. Pagan dividendos con las ganancias del año pasado, por lo que el dividendo de lo que ya han ganado en 2024 aún no ha sido pagado. Considerando que actualmente la acción cotiza a unas 3 veces beneficios, deberían pagar al menos alrededor de 3.3 dólares en dividendos para 2024 (16% de yield) asumiendo el pago mínimo del 50%.

Acciones de Hong Kong

La eterna promesa de las empresas chinas: siempre baratas, pero casi siempre underperforming frente al S&P 500. Más que englobar a todas las compañías “chinas” en un mismo saco, quiero centrarme en cierto nicho de empresas en Hong Kong que, en mi opinión, no deberían cotizar a múltiplos tan bajos.

Mucha gente no quiere invertir en China debido al riesgo regulatorio. Es cierto que es posible que mercado sobrerreacione a dicho riesgo, pero existe. Sin embargo, en Hong Kong hay muchas acciones en las que realmente no creo que se justifique ese mismo nivel de “riesgo China”. Algunas de estas empresas apenas venden en China; en ciertos casos ni siquiera producen allí, o al menos tienen la producción diversificada en países como Vietnam o Malasia, entre otros.

Esto último es muy importante porque, dada la victoria de Trump en las elecciones de EE. UU., es posible que se impongan aranceles más duros contra China. Al tener parte de su producción fuera del territorio chino, estas compañías podrían esquivar en gran medida dichos aranceles.

Algunos ejemplos:

• Nameson Holdings (PER 5, dividendo del 16%).

• Dream International (PER 4,3, dividendo del 11%).

• Justin Allen (PER 4,8, dividendo del 7%.

Estas empresas son solo simple ejemplos, hay muchas más compañías de un perfil similar.

Shipping

Dado que el shipping es el segmento donde he obtenido mayor rentabilidad a lo largo de estos años, haré un breve comentario. En general, no soy optimista con la mayoría de segmentos de shipping. A pesar de la situación geopolítica (guerra de Ucrania, crisis del mar Rojo), muchos sectores están experimentando rates bastante débiles. Considerando que en varios de estos segmentos el orderbook (nuevos pedidos) se ha incrementado (tankers, dry bulk, containerships), sumado al posible fin de algunos conflictos geopolíticos y a una potencial guerra comercial bajo Trump, creo que hay un riesgo significativo de que los rates, y consecuentemente, los beneficios de las navieras, se desplomen.

Es cierto que la cotización en muchos segmentos ha bajado en los últimos meses, como en tankers y dry bulk, pero aun así considero que hay que ser precavido dadas las circunstancias. En mi caso, he reducido la posición en shipping, aunque aún mantengo una posición relevante en Tsakos Navigation.

Este artículo es muy interesante para saber más sobre el estado actual del shipping:

• Shipping equities valuation update

Y esto es todo por el momento. Tengo pensado escribir con más frecuencia en 2025, así que, si queréis recibir los artículos de forma gratuita, recordad suscribiros. ¡Muchas gracias por leer!

My returns for the year 2024 have been +26.62%.

Returns in Recent Years

• 2020: +56.54%

• 2021: +260.94%

• 2022: +41.53%

• 2023: +5.78%

• 2024: +26.62%

In summary, Halyk Bank and Chinese Fintech companies have been the biggest contributors to the positive returns, while shipping has been the biggest drag on returns.

I’ve traded much less compared to previous years. I have adjusted the weighting of the different companies in my portfolio, but there have been few sales or additions of new companies.

Stock Sales

I sold my entire position in Enquest PLC, a UK-based oil producer. The UK government’s changes to the tax regime in the Oil & Gas sector were more severe than I anticipated, and I ultimately decided to liquidate the position. The company remains very cheap, but I grew tired of staying invested in a country that is clearly doing everything they can to dismantle its oil sector.

I also held a position in metallurgical coal (Stanmore Resources), but I decided to divest most of it due to falling coal prices.

New Additions

Over the year, I added the Australian company Mitchell Services to my portfolio. I believe it’s an interesting opportunity, trading at low multiples with strong shareholder returns.

Here are some free articles discussing the idea:

• Mitchell Services is a potential 4-bagger...

• Groundbreaking research

• Mitchell Services (MSV)

Current Portfolio and Opportunities for 2025

Chinese Fintech (e.g., $XYF, $JFIN, $YRD...)

These companies primarily facilitate loans for other entities (mainly banks). While the sector isn’t particularly attractive due to its susceptibility to regulation in a country like China, they trade at ridiculously low multiples.

Not only are they extremely cheap, but they also generally offer strong shareholder returns. For example:

• JFIN: Currently trading at $6.53, it paid $0.90 in dividends in 2024 (a 13.7% yield at current prices).

• QFIN: Trading at $38.7, it paid $1.20 in dividends in 2024 (a 3.1% yield). Additionally, it has repurchased over 14% of its outstanding shares since June 2023 and has a $450M buyback program for 2025, equivalent to 7.5% of outstanding shares.

• XYF: Trading at $8.41, it paid $0.34 in dividends in 2024 (a 4.04% yield). It also conducted a tender offer, repurchasing 2 million shares (4% of outstanding shares), and recently repurchased 6.35 million shares from a major shareholder (13% of shares). Overall, they’ve returned over 20% of their market cap to shareholders through dividends and buybacks in a single year.

Despite most of these stocks rising sharply over the past year, many of these companies still trade at just 2 times earnings. Among the companies I follow, these are likely the cheapest in the entire market and also offer excellent shareholder returns.

Yes, there’s regulatory risk—just as with any other company in China—but at these prices and with these shareholder returns, I believe those risks are overestimated.

Halyk Bank

A Kazakh bank listed on the London Stock Exchange (traded in USD). The stock is incredibly cheap, trading at 3 times earnings, while its profits have grown substantially in recent years (in USD terms). Its dividend policy mandates paying at least 50% of profits as dividends.

Currently, the stock trades at $20 and paid $3 in dividends in 2024. Its 2024 payout was about 55%, allowing its balance sheet to grow despite significant dividend payments. Dividends are paid from the prior year’s earnings, so the dividend from 2024’s net profit has not yet been distributed. Assuming the minimum 50% payout, the dividend for 2024 should be at least $3.30 (a 16% yield).

Hong Kong Stocks

The “eternal promise” of Chinese companies: always cheap, but almost always underperforming the S&P 500. Rather than lumping all “Chinese” companies into one category, I want to focus on certain Hong Kong-based companies that, in my opinion, shouldn’t be trading at such low multiples.

Many people don’t want to invest in China due to regulatory risk. It’s true that the market can overreact to that risk, but it does exist. However, in Hong Kong, there are many stocks where I don’t believe that the same level of “China risk” is justified. Some of these companies barely sell in China; in certain cases, they don’t even produce there, or at least have diversified production across countries like Vietnam or Malaysia, among others.

This last point is very important because, given Trump’s victory in the U.S. elections, it is possible that tougher tariffs against China will be imposed. By having some of their production outside of China, these companies could largely avoid those tariffs.

Examples:

• Nameson Holdings: P/E 5, 16% dividend.

• Dream International: P/E 4.3, 11% dividend.

• Justin Allen: P/E 4.8, 7% dividend.

These are just a few examples—there are many other companies with a similar profile.

Shipping

Since shipping is where I’ve had the highest returns over the years, I’ll make a brief comment. Overall, I’m not optimistic about most shipping segments. Despite the geopolitical situation (the war in Ukraine, the Red Sea crisis), many sectors are experiencing fairly weak rates. Given that in several of these segments the orderbook has increased (tankers, dry bulk, containerships), combined with the potential end of some geopolitical conflicts and a possible trade war under Trump, I believe there is a significant risk that shipping rates—and consequently shipping companies’ profits—could plummet.

It’s true that share prices in many segments have fallen in recent months, such as tankers and dry bulk, but I still believe one must be cautious under these circumstances. In my case, I have reduced my position in shipping, although I still hold a significant position in Tsakos Navigation.

This article is very interesting for more information on the current shipping climate:

• Shipping equities valuation update

That’s all for now. I plan to write more frequently in 2025, so if you’d like to receive these articles for free, don’t forget to subscribe. Thank you for reading!

Geo Energy Resources offered me to visit both their offices in Singapore and their mines in Indonesia a few months ago. Since I was traveling around Asia I thought, why not?

It's easy to forget that behind a company's stock there are people working to make everything run smoothly. This article is mainly about that: my visit to the mines did not change my opinion on the stock, but meeting all the people behind the project and being able to ask them firsthand about what it's like to work for Geo Energy has been a really enriching experience.

If you want to stay up to date with previous articles about the company, here they are:

Remember that you can subscribe for free if you want to receive all the updates from my blog:

My adventure started with a visit to Geo Energy's offices in Singapore, where I met with the company's CFO, Mr. Adam Tan. We talked for a while about the challenges the company is facing for this year and I also asked him about the CEO change that occurred at the end of last year. Finally, we talked about personal aspects.

I like to talk to local people to get to know the reality of a country, and Singapore was a country that I really enjoyed, so we talked about what it's like to live there.

Interestingly, the offices are literally next door to the Spanish embassy, although I asked them about it and they told me that it was an embassy for commercial purposes, so to speak, and that the real embassy was not that one.

The next day, I had a long journey ahead of me: a flight from Singapore to Jakarta and from Jakarta to Banjarmasin. Upon arriving in Jakarta, the immigration officer looked at me strangely when I told him I was going to Banjarmasin. I was the only foreigner on the flight.

Upon arriving in Banjarmasin, I was greeted by Mr. Ferry, the chief security officer of the TBR mine. Ferry is a mining engineer with extensive experience in the sector: he worked for Freeport for 10 years and has been working for Geo Energy for about 6 years. According to him no investor had visited the mines for about three years.

I spent the night in Banjarmasin, and the next day we left early for the mines, which are about 3 and a half hours from the city. Here's a video of the road.

Once we arrived at the mines, Ferry introduced me to the entire team and they gave me a brief presentation for visitors. As a curiosity, there is no foreigner working in the mines. Geo Energy mainly hires engineers and geologists to plan the mining process, while the rest of the work is subcontracted to BUMA.

Here we have Mr. Ferry showing us the offices.

It should be noted that although all the workers are from Indonesia, the vast majority are from other areas of the country, and they usually work for six weeks straight and then go back home for two weeks to rest. I noticed that there was a very good atmosphere among all the workers, and in the end, it's normal since they are sharing so much time together away from their family, so it seemed like the office people were like a second family to them.

After finishing the presentation, we headed to the mines. For safety reasons, all cars had to carry the stick that you can see in the following video. When driving on the mine's terrain, there is low visibility due to the dust, as you will see later.

Before going I thought that the two Geo Energy mines (TBR and SDJ) were close, but in reality, the 'two' mines are together, literally adjacent, so more than two mines, I would say they are two licenses.

Here they showed me the main seam of the TBR mine, with a height of 18 meters.

The employees had an hour of rest around noon, so all the machines literally stopped and they went to sleep during that time. Another curious aspect is that I visited the mines during Ramadan, so the workers neither ate nor drank anything during the day. It must be tough given the heat working in those mines under the sun.

After seeing the mine up close, we went to the viewpoint, where you can appreciate how big the mine is.

Lastly we went to the port, which is about 10 or 15 minutes from the mine, where they load the coal into barges and then they transfer it to larger ships. In the video, you can also see the way from the mines to the port.

This was everything I visited in the mines. Overall, a very good experience since I had never visited a coal mine. Finally, here are my personal reflections on the visit and my opinion of Geo Energy as a stock.

Personal reflections on the visit

When it comes to investing in a coal company in Indonesia, there are various factors that make people hesitant. Some may be concerned about potential labor exploitation, environmental pollution, or other questionable practices that may be associated with such an investment.

However, the reality I saw was completely different: the workers seemed genuinely happy to work there, proof of that is that most of them had already been working for Geo for a few years. Safety measures appeared to be followed, breaks were given to workers, and on the way to the mines we saw that Geo had built infrastructure like a bridge that was also useful to the local population.

In a way, it's comforting to see that not only shareholders can benefit, but that they were also creating value for the local population and workers. I won't be hypocritical and say that if I had seen otherwise I wouldn't invest in Geo, but after spending two months in Southeast Asia, I have also seen other listed companies that simply contribute the bare minimum and the local population barely benefits from their operations.

On a personal level it was an enriching experience and in a way, I'm proud to have visited them, as I was one of the first investors who wrote about them. It was an original idea that I discovered about two years ago, and since then, it has gained a lot of followers in the Spanish community, with some national investment funds also investing in it.

So I left with the good experience of having visited a coal mine for the first time, of having learned firsthand what it's like to work and live there, and they even allowed me to take a piece of the company, a piece of Indonesian coal that is now with me in the mountains of Andorra.

Geo Energy as a company and as a stock.

At this point, I wanted to make a small reflection: you have to distinguish between liking a company and wanting to invest in it. I think many people are not able to discern between these two concepts and end up 'falling in love' with companies, which I think is a fatal investment mistake.

For me, the stock price is the most important thing when it comes to investing, especially if we are talking about cyclical companies.

That being said, I currently do not have any position in Geo Energy as I said in the last article in March. What's new since then?

• On the one hand, ICI4 has remained relatively stable, currently in the $70-73 range.

• On the other hand, in the last article, I modeled a production of 10 million tons for 2023. However, I think it is quite unlikely that this figure will be reached, as Geo Energy only has a quota of 8 million tons for this year. Given that there has been no news in this regard, it would be more prudent to think that they will only produce 8 to 9 million tons. This is quite negative because producing fewer tons could make the production cost increase, or at least I don't think they will decrease compared to last year's high costs.

• Something else to keep in mind is that Geo Energy has held up very well this year despite the weakness in most coal companies. While Geo has a 4.6% YTD return, other companies such as BTU (-16.4%), Yancoal (-10.5%), Whitehaven Coal (-25.58%), or Thungela Resources (-47.33%) have much lower returns, so on a relative level, I think these other companies may be more attractive.

Similarly, Geo Energy should complete an acquisition this year, possibly in the coming months. I really think that the stock will move based on how accretive the transaction is to stockholders. I personally prefer to stay away for the time being and once the acquisition is made, I will reconsider my position.

That's all for now. If you liked the article, you can subscribe to the blog for free, follow me on Twitter or YouTube, and if you have any questions or doubts, you can leave a comment right here.

Regarding the future of the blog, I will write the articles in both Spanish and English, even though I think I will end up making the videos in English eventually. I plan to publish more articles in the coming months, although I would like to write about original ideas and not rehashes like most of the content I see lately.

In the coming weeks, I will write about Valeura Energy (this is a rehash, but I consider that the analyses I have seen are not complete) and possibly about PBF Energy, a less well-known idea, especially among the Spanish community.

Geo Energy Resources me ofreció visitar tanto sus oficinas como sus minas en Indonesia hace unos meses. Dado que estaba de viaje por Asia, ¿por qué no aceptar la invitación?

Es fácil olvidar que detrás de las acciones de una empresa hay personas trabajando para que todo funcione correctamente. Este artículo trata principalmente sobre eso: mi visita a las minas no ha cambiado mi opinión sobre la acción, pero conocer a toda la gente detrás del proyecto y poder preguntarles de primera mano cómo es trabajar para Geo Energy ha sido una experiencia realmente enriquecedora.

Si queréis estar al día con los artículos anteriores de la empresa, aquí los tenéis:

Recordad que os podéis suscribir gratuitamente si queréis recibir todas las actualizaciones de mi blog:

Aquí tenéis el vídeo de YouTube comentando el artículo:

Mi aventura empezó con una visita a las oficinas de Geo Energy en Singapur, donde me reuní con el CFO de la empresa, el señor Adam Tan. Estuvimos hablando un rato sobre la empresa: cómo iba a nivel operativo, también le pregunté por el cambio de CEO que se produjo a finales del año pasado y finalmente también estuvimos hablando sobre aspectos personales.

Me gusta hablar con gente local para conocer la realidad de un país, y Singapur fue un país que realmente me gustó, así que estuvimos hablando sobre cómo es vivir allí.

Curiosamente las oficinas están literalmente puerta con puerta con la embajada de España, aunque les pregunté al respecto y me dijeron que era una embajada para aspectos comerciales por decirlo de alguna manera, y que la embajada real no era esa.

Al día siguiente, me esperaba un largo viaje: un vuelo de Singapur a Jakarta y de Jakarta a Banjarmasin. Al llegar a Jakarta, el funcionario de migración me miró de forma extraña cuando le dije que iba a Banjarmasin. Era el único extranjero en el vuelo.

Al llegar a Banjarmasin, me recibió el señor Ferry, el principal responsable de seguridad de la mina TBR. Ferry es un ingeniero de minas con amplia experiencia en el sector: trabajó durante 10 años para Freeport y lleva unos 6 años trabajando para Geo Energy. Según me comentó, hacía unos tres años que no había visitado las minas ningún inversor, por lo que en general sentí que los trabajadores tenían curiosidad por ver a un extranjero.

Pasé la noche en Banjarmasin y al día siguiente salimos temprano hacia las minas, que están a unas 3 horas y media de la ciudad. Aquí tenéis un vídeo del camino.

Una vez llegamos a la zona de las minas, Ferry me presentó a todo el equipo de trabajo y me hicieron una breve presentación para visitantes. Como curiosidad, no hay ningún extranjero trabajando en las minas. Geo Energy contrata principalmente a ingenieros y geólogos para planificar el proceso minero, mientras que el resto del trabajo está subcontratado a BUMA.

Aquí tenemos al señor Ferry enseñándonos las oficinas.

Hay que tener en cuenta que aunque todos los trabajadores son de Indonesia, la gran mayoría son de otras zonas del país, y suelen trabajar durante seis semanas seguidas y después se vuelven a su casa dos semanas a descansar. Noté que había muy buen ambiente entre todos los trabajadores, y al final es normal compartiendo tanto tiempo juntos alejados de su familia, daba la sensación que la gente de la oficina era una segunda familia para ellos.

Al acabar la presentación fuimos de camino a las minas. Todos los coches tienen que llevar el palo que podéis ver en el siguiente vídeo por temas de seguridad. Al conducir por el terreno de las minas hay poca visibilidad debido al polvo como veréis más adelante.

Antes de ir pensaba que las dos minas de Geo Energy (TBR y SDJ) estaban cerca, pero en la realidad son ‘dos’ minas que están juntas, son literalmente contiguas, así que más que dos minas diría que son dos licencias. Realmente tienen responsables separados para cada mina, presupongo porque a nivel legal al ser dos licencias tendrán esos requisitos, pero en la práctica están juntas.

Aquí me enseñaron el filón principal (main seam) de la mina de TBR, con una altura de 18 metros.

Como curiosidad los empleados tenían una hora de descanso sobre las 12, por tanto todas las máquinas literalmente se paraban y los empleados se iban a dormir durante ese tiempo. Otro aspecto curioso es que visité las minas durante el Ramadán, por lo que los trabajadores ni comían ni bebían nada durante el día. Debe ser duro dado el calor que hace trabajando en esas minas al sol.

Después de ver la mina de cerca, fuimos al mirador donde se puede apreciar lo grande que es la mina.

Y para acabar fuimos al puerto, que está a unos 10 o 15 minutos de la mina, y donde cargan el carbón en barcazas que después lo transfieren a barcos más grandes. En el vídeo también podéis ver el camino de las minas al puerto.

Esto fue todo lo que visité de las minas. En general una muy buena experiencia ya que nunca había visitado unas minas de carbón. Para acabar aquí tenéis mis reflexiones personales sobre la visita y mi opinión de Geo Energy como acción.

Reflexiones personales sobre la visita

Cuando se trata de invertir en una compañía de carbón en Indonesia, hay varios factores que hacen que la gente tenga dudas. Algunos pueden estar preocupados por la posible explotación laboral, la contaminación ambiental u otras prácticas cuestionables que podrían estar asociadas con dicha inversión.

Pero la realidad que he visto ha sido completamente distinta: los trabajadores parecían genuinamente contentos de trabajar con ellos y prueba de ello es que la mayoría llevaban ya unos cuantos años trabajando allí. Todos los trabajadores a los que pregunté me dieron buenas referencias y noté un buen ambiente de trabajo.

Las medidas de seguridad parecían cumplirse, se daba descanso a los trabajadores y por el camino a las minas también vimos que Geo había construido infraestructura como algún puente que también era de gran utilidad a la población local.

De cierta manera es reconfortante ver que no solo los accionistas se pueden beneficiar, sino que también estaban creando valor para la población local y los trabajadores. No voy a ser tan hipócrita como para decir que si hubiera visto lo contrario no invertiría en Geo, pero tras estar dos meses por el Sudeste Asiático también he visto otras empresas cotizadas que simplemente aportaban lo mínimo y la población local realmente apenas se beneficiaba de las operaciones.

A nivel personal ha sido una experiencia enriquecedora y de cierta manera me enorgullece haber podido visitarles, ya que fui de los primeros inversores en Twitter que escribió sobre ellos. Era una idea original que descubrí alrededor de hace dos años y a partir de ahí ha tenido bastante seguimiento entre la comunidad española, llegando algunos fondos de inversión nacionales a invertir en ella.

Así que me quedo con la buena experiencia de haber visitado por primera vez unas minas de carbón, de haber conocido de primera mano como es trabajar y vivir allí y también me permitieron llevarme un trocito de la empresa, un trozo de carbón indonesio que ahora mismo está conmigo en las montañas de Andorra.

Geo Energy como empresa y como acción.

Llegados a este punto, quería hacer una pequeña reflexión: hay que distinguir entre que te guste una empresa y que quieras invertir en ella. Creo que mucha gente no es capaz de discernir entre estos dos conceptos y al final se acaban ‘enamorando’ de las empresas, cosa que me parece un error fatal de inversión.

Para mi el precio de la acción es lo más importante que hay a la hora de invertir, especialmente si hablamos de empresas cíclicas.

Dicho esto, ahora mismo no tengo ninguna posición en Geo Energy tal y como dije en el último artículo en Marzo. ¿Qué novedades hay desde entonces?

• Por un lado, el ICI4 se ha mantenido relativamente estable, ahora mismo está en la zona de los 70-73$.

• Por otro lado, en el último artículo modelé una producción de 10 millones de toneladas para 2023. Sin embargo, creo que es bastante improbable que se alcance esta cifra, ya que Geo Energy solo tiene una cuota de 8 millones de toneladas para este año. Dado que no ha habido ninguna noticia al respecto, lo más conservador sería pensar que producirán de 8 a 9 millones de toneladas. Esto es bastante negativo, ya que producir menos toneladas puede hacer que el costo de producción aumente, o al menos no creo que se reduzca respecto a los costos elevados del año pasado.

• Algo a tener en cuenta también es que Geo Energy ha aguantado el año muy bien a pesar de la debilidad en la mayoría de empresas de carbón. Mientras que Geo lleva un 4.6% de rentabilidad YTD, otras empresas como BTU (-16.4%), Yancoal (-10.5%), Whitehaven Coal (-25.58%) o Thungela Resources (-47.33%) llevan rentabilidades muy inferiores, por tanto a nivel relativo creo que pueden ser más atractivas estas otras empresas.

De igual manera, Geo Energy debería completar una adquisición este año, posiblemente en los próximos meses. Realmente considero que en ese momento es cuando la acción se moverá en función de si la adquisición genera valor para los accionistas. Personalmente, prefiero mantenerme apartado y, una vez que se haga la adquisición, reconsideraré mi posición.

Eso es todo por ahora, si os ha gustado el artículo podéis suscribiros gratuitamente al blog, seguirme en Twitter o YouTube, y si tenéis cualquier pregunta o duda podéis dejar un comentario aquí mismo.

Respecto al futuro del blog, escribiré los artículos tanto en español como en inglés, aunque los vídeos posiblemente los acabaré haciendo en inglés eventualmente. Tengo pensado publicar más artículos los próximos meses, aunque me gustaría escribir sobre ideas originales y no refritos como es la mayoría de contenido que veo últimamente.

En las próximas semanas escribiré sobre Valeura Energy (esto es un refrito pero considero que los análisis que he visto no son completos) y posiblemente sobre PBF Energy, una idea menos conocida especialmente entre la comunidad española.

Geo Energy Resources recently released their FY2022 results. While the company's dividend for the fourth quarter was higher than expected, I am concerned about the overall increase in costs.

You can read my previous post regarding Geo Energy here:

Geo Energy Resources ($RE4) - Cheaper than ever? - 23rd Jan 2023.

Geo Energy Resources (RE4: SGX) - 29rd of September 2021.

On the positive side, the dividend was higher than expected at 0.04 SG$ for Q4, with a payout ratio of 57%. I expected a lower dividend since Geo Energy is looking for an acquisition, so it seems to suggest that they are comfortable with their current cash position, and maybe we could expect similar payout ratios in the future.

However, there were several negative aspects on the report. Costs have increased all across the board. Not only cash costs but G&A, ‘Other Expenses’ and the overall tax rate was higher than I expected. Additionally, an allowance loss of 15M$ was reported for Q4.

Regarding the production cash costs they have risen by around 5$/ton over Q3. This is a huge increase and only half of it (2.5$) is due to the increase in royalties. My expectation was that since production would rise in Q4, overall cash costs would remain flat and that they would only increase by the amount of the extra royalties.

At the same time G&A expenses have increased by around 2.5M$ over 2021, ‘Other Expenses’ have also increased and the tax rate was surprisingly higher than what I expected (34% for FY22). This suggests that they have moved a significant part of their cash from the Indonesian subsidiary to the Singapore entity.

The company's production has also been a significant disappointment. They missed their guidance of 11 Mt for FY22, producing only 10.2 Mt. I am surprised by such a big miss in the production, since their latest guidance was in the second week of november. While their guidance implied a production of 3.7 Mt for Q4, they have only produced 2.9 Mt.

The guidance for 2023 is also dissapointing at 8 to 10 Mt.

FY23 Model

Let’s revisit the FY23 model I did on the last article and the updated inputs for the model.

The old model used the following assumptions:

·Pricing: 75$/t on export sales, 38$/t for their DMO.

·Million tonnes produced: 10Mt, 7.5 Mt export sales, 2.5 Mt DMO. I’m not accounting for the possible increase in DMO obligations, but I’m using a low-guidance of 10 Mt. For instance FY22 production should be around 10.6 Mt – 11 Mt.

·Cash costs: 42$ + 3% of ICI4 pricing (44.25$). I reduced the cash costs a bit since their costs are linked with the coal price aswell. Even though there is no precise numbers I estimate it to be a 30% of the coal price, so for a 10$ decrease the cash costs should decrease around 3$ all else being equal.

· Average G&A, other expenses and CAPEX of other quarters. In the past quarter “Other Expenses” went up due to a tax they have to pay to move money from their Indonesian subsidiary to the Singapore company, therefore I’m using an additional 5% expense on their pre-tax income.

· Tax rate: 23%

The updated model uses the following assumptions:

·Pricing: 75$/t on export sales, 38$/t for their DMO.

·Million tonnes produced: 10Mt, 7.5 Mt export sales, 2.5 Mt DMO.

·Cash costs: 46$ + 3% of ICI4 pricing (48.25$).

· Average G&A, other expenses and CAPEX of other quarters. I’ve increased it in line with the costs they’ve had over the past year.

· G&A: 18M$ | Other Expenses: 10M$ | Depreciation & Amortization: 25M$

· Tax rate: 30%. I’ve increased it since their average tax rate has increased to around 34%, which suggests they are moving money from their indonesian subsidiary to the Singapore entity.

With these new assumptions the difference in Net Income and Free Cash Flow is quite significant. While for the old assumptions they’d generate around 140M in Net Income and 150M in FCF for the new ones it would be around 90M in Net Income and 110M in FCF.

My biggest concern regarding the results is the limited information provided regarding all these issues, including the factors contributing to the lower than expected production, the reasons for the consistent increase in costs, the large allowance loss for Q4 (amounting to 15M$, or 4.5% of the market cap), and any potential plans to address these concerns.

The other difference is that while I previously assumed 10 Mt of production for FY23 I believed their guidance would be around 10.5 to 11 Mt, and it seems that 10 Mt is the high end of the guidance for the current year.

For full disclosure I have significantly reduced my position in Geo Energy Resources after these results. The difference in costs and tax rate would result in a 35% decrease in Net Income assuming the same ICI4 pricing and the same production, which I am not even sure they will reach.

Despite my concerns, I still believe that Geo Energy has potential. They still have a massive cash position and their dividend payout has been higher than expected. However, the company needs to address the issues with their costs and production if they want to maintain investor confidence.

Today's article will review the dry bulk market and my thoughts on the equity valuations of different dry companies.

What is dry bulk shipping?

Dry bulk shipping refers to the transportation of dry unpackaged goods such as coal, iron ore, grains, and building materials by sea in large vessels. These carriers are specifically designed to carry large quantities of dry bulk cargo and are equipped with cranes and conveyors for loading and unloading the cargo. The demand for dry bulk shipping services is largely driven by the global trade in raw materials, as well as the growth of the construction, agriculture, and energy industries.

How has the industry done historically?

Like pretty much every shipping segment, there was a big spike in rates during the mid-2000s due to China's rise. That led to an order book of over 100% of the fleet for some segments. When the Great Financial Crisis hit and the new ships started hitting the water, well, you can see what happened to rates.

During 2021 and 2022, rates rebounded and dry bulk companies enjoyed a mini bull cycle, which has started losing strength over the past two quarters.

The Baltic Dry Index is currently trading at a 3-year low, close to the level it was during the first COVID quarantines in 2020. In general, dry bulk stocks tend to exhibit a strong correlation with the BDI; however, over the past 6 months, many stocks have shown little correlation with the underlying freight rates.

Seasonality and FFAs

The Chinese New Year usually marks the low point for dry bulk rates, so there will likely be some rebound after CNY, but the FFAs are already pricing in a steep increase in rates for the second quarter. For those not familiar with shipping, FFAs are financial derivatives that allow parties to lock in a future price for a particular route.

The thing is, the rates FFAs are implying are close to breakeven levels for many segments. So even if this rebound happens, they're not going to generate meaningful cash flows.

As a matter of fact, since I started writing the article this weekend rates for March have gone down by a further 10%, so it seems FFAs are adjusting their expectations to reality.

Dry Bulk Near Term Outlook - China

Let's first look at the near-term outlook. For the past few months, there has been a narrative that since China has abandoned the Zero Covid Policy, rates will rebound again. However, I am a bit skeptical about this. During 2022, China still had its COVID policies and dry bulk rates were quite good, especially for smaller segments like Supramaxes and Panamaxes. Even Capesizes did very well compared to the pre-COVID years, but rates have been slowly sliding down across all segments since the second quarter of 2022 and have recently cratered.

In fact, for some companies, the second quarter of 2022 was stronger than any quarter in 2021.

Source: BANCOSTA Weekly Report 05/2023

In my opinion, the weakness in rates could have more to do with the weakness in the Chinese economy and the collapse in its real estate sector than with COVID policies. China’s real estate collapse was a big mess, and these structural issues are unlikely to be fixed in the short term, so I think it will take some years before real estate development goes back to 2021 levels.

While there has been some recent strength in commodities related to steel production such as metallurgical coal, the recent news headlines don't seem very positive. We'll have to wait and see how the situation develops.

ArcelorMittal Warns on Steel Demand as China Seen Flatlining

China's soft infrastructure growth seen jamming breaks on steel demand in 2023

The Boom, Bust and Future of China's Real Estate Sector

Dry Bulk Medium to Long Term Outlook

I believe the outlook for dry bulk looks promising a few years down the road. The current orderbook is significantly lower than historical levels, and I don't anticipate companies placing orders for new ships if rates remain at their current levels.

In fact, we should start seeing demolitions pick up over this year. Current rates are very unprofitable for most segments and keeping older vessels trading becomes quite expensive from the 20-year mark since they are required to undergo expensive special surveys more frequently.

At the same time, there is still uncertainty regarding future regulations in shipping propulsion, and dry bulk is probably the most affected segment by this. Dry bulk ships are the most simple and cheapest to build out of the major shipping segments, so the propulsion technology represents a higher percentage of the ship cost. If new regulations are introduced, compliance could be significantly more expensive for dry bulk ships compared to other segments where propulsion technology represents a smaller percentage of the cost.

Equity Valuations

Companies need to take different approaches to maximize profits depending on whether the market cycle is strong or weak. During a strong market cycle, a company with a leveraged balance sheet and an aging fleet trading mainly on the spot market is likely to generate the most profit. However, during a weak cycle a company with low leverage, a young fleet equipped with scrubbers, and a significant number of fixed-time charters would be more favorable.

I would personally avoid companies that have a high exposure to the Capesize segment, since it relies heavily on the Chinese economy and infrastructure spending.

Given these preferences and the current uncertainty in the freight market, Safe Bulkers appears to have one of the best risk-reward profiles, due to their mix of long-term time charters, decent scrubber coverage and a diversified fleet across different dry bulk segments. Additionally, their price to NAV valuation is one of the lowest in the sector. Their fourth quarter results were out a few days ago and they posted 0.29$ in earnings per share for a company that’s trading at around 3.25$. Although their earnings in the upcoming quarters are expected to decline they are well-positioned to weather a weak market cycle.

On the other hand, Golden Ocean has one of the least attractive risk-reward profiles in my opinion. Their fleet is heavily focused on the Capesize segment, it trades mostly on the spot market, they are trading at slightly above NAV values and their leverage is relatively high. At the same time it’s very likely they won’t pay any dividend for the fourth quarter since they recently acquired six secondhand ships plus they have six other newbuilds hitting the water on 2023, so they’ll have to post some equity and given the weak market for the first quarter it would be wise not to have any additional cash outflows.

Conclusion

In conclusion, there is a lot of uncertainty regarding dry bulk for this year. Despite the weakness in rates, most stocks have not followed the historical correlation with the Baltic Dry Index. In my opinion the risk reward for most dry bulk equities is not positive at the moment and given the current overall equity valuations, it would be wise to wait and see if rates actually rise before making any investment decision.

Thanks for reading the article, I hope you liked it and if you agree or disagree I’m happy to talk about it here or on Twitter, so feel free to comment.

If you enjoy my content make sure to subscribe and it would be really helpful if you can share the article.

Today’s article is about Golden Energy Resources (GEAR from now on), a Singapore-based company trading under the ticker AUE, with a 62.05% interest in Golden Energy Mines (GEMS), an indonesian coal company trading under the ticker GEMS in the Jakarta Stock Exchange and a 64.01% stake in the Australian-traded met coal company Stanmore Resoures (ASX: SMR). They also own a 50% stake in an australian gold mine.

A quick summary

GEAR’s major shareholder (the Widjaja family), which owns around 78% of the shares outstanding, made an offer to acquire the entire company back in November 9^th 2022. The circumstances of the offer were quite shady as I documented here while it was happening.

In essence, Golden Energy Resources dropped by a 27.22% in a single day, from 0.9 SG$ to 0.655 SG$, with no information at all that could warrant such drop and right the next day they announced the acquisition offer at 0.846 SG$, a price lower than the opening price of the previous day.

 Pure coincidence, right?

The current spread of the acquisition is around 2 to 6% and it should close before August 2023. But I also believe there is a good chance that the offer will be raised and I see the downside scenarios as unlikely given that the acquisition is extremely profitable for the Widjaja family.

The acquisition offer

The acquisition offer consists of the following:

Let’s separate the two different parts of the acquisition offer:

• They’re offering 1.3936 GEMS shares for every GEAR share or opt for a cash option of 7664.8 Indonesian Rupiah per GEAR share.

• Something to note is that since the offer was made the exchange rate of the Indonesian Rupiah to Singapore Dollar has weakened so if shareholders opt for the cash option they will receive ~0.8345 SG$ instead of 0.846 SG$.

For the second part, they are paying 0.16 SG$ for the holding company ex-GEMS shares, which consists of the following:

                · Golden Energy’s 50% stake in a JV gold mining business called Ravenswood Gold. They acquired it in 2020 for around 50M AUD (100M on a 100% basis). Ever since then they’ve been pouring around 50M$ in CAPEX for every semester. GEAR has invested a total of around 230M$ in the JV. Yet, the mine is still unprofitable so it’s a bit hard to really value it, but for a conservative valuation, I’ll just discount a 50% of the entire investment over the past three years, so I value their stake in the Ravenswood JV at 115M$.

                · Golden Energy’s associated net debt which I calculate it to be around 115M US$ right now. The net debt figure has improved substantially since their latest 1H 22’ results because of the dividends from GEMS.

                · Golden Energy’s 64.01% stake in Stanmore Resources, worth 1400M US$ at 3.53 AUD/sh.

The crown of the jewel of the acquisition for the Widjaja family really is the Stanmore Resources’ stake.

Economics of the acquisition: GEMS

According to the acquisition statement the rationale behind the offer is to exit the thermal coal business of GEMS and focus on Stanmore’s metallurgical coal segment. They clearly prefer SMR’s business, since GEAR already made an offer to acquire the company around 3 years ago.

But at the same time, the thermal business is still very attractive given Indonesian Coal prices and in my opinion they are banking on the fact that it’s likely that a lot of shareholders will opt for the cash option of the offer instead of taking GEMS shares. The company trades in Indonesia and it's not easy to get a local broker as a foreigner non-resident.

Either way, I think it’s quite fair they’re paying a ~25% discount to the traded share price, since the liquidity on those shares is low, so even if you decide to take the shares you might not be able to sell them at current market prices.

Economics of the acquisition: Exit Offer & SOTP

Before getting into the numbers let me say I find this part of the offer very unfair, the Widjaja family stands to make hundreds of millions of dollars from a simple financial transaction.

Given that they intend to pay 0.16 SG$ for this part and that there are 2638.1M shares outstanding it would be total cost of 422M SG$ or 321.2M US$. Since the Widjaja family already owns 77.5% of the shares outstanding the total acquisition cost will only be a 22.5% of that (95M SG$ or ~72.4M US$).

To calculate how much the stake could be worth I’ve done a sum of the parts valuation.

• Ravenswood gold: A 50% discount to their total investment over the past three years - 115M$.

• Stanmore Stake: 64.01% stake at traded market value.

• Net debt: Given that GEAR has received around ~165M$ in dividends from GEMS on the second half of 2022 I estime the net debt to be around 115M$.

So the net value of the company would be around 317M$. To give an easier comparison this would equate to 0.71 SGD per share and their intention is to pay only 0.16 SGD for it.

I want to insist that most of the value of the offer resides in Stanmore Resources, a liquid traded security. We can argue about the Ravenswood Gold value, but even if you write it off and consider its value as 0 the SOTP valuation would still be 0.646 SGD per share for an immediate 400% upside to the acquiror.

I also want to insist in the sheer amount of money they stand to make from a simple financial transaction: over 300M$. There is no execution risk: no mine or oil field to be developed, this is simply buying a traded asset way below its traded value.

Will the offer be raised?

The Widjaja family stands to make an obscene amount of money even if they raise the offer substantially. I also want to point out that this transaction should be closed by August, but in the meantime there is the possibility that GEAR will receive additional dividends from GEMS, making the offer even more attractive.

But, why would they raise the offer if they don’t need to? There are two scenarios in which they could be forced to do it.

• They could simply lose the vote to shareholders. They need a 75% of the independent votes in favour for the offer to go through. The reality is that so far there is not a big shareholder or an activist, so even though the offer is very unfair they could still get the votes. They are also threatening, in a way, that if the offer goes through and you vote against it, you’re going to be stuck with the shares in the private company.

  

• Being forced to raise it by the Singapore Stock Exchange. Before the offer goes through there needs to be an independent financial advisor reviewing the deal. Even if this “independent” advisor is not very independent (we know these things happen) I just don’t see how they are going to justify paying such a big discount to tradeable securities.

I honestly don’t know if the Singapore Stock Exchange is usually aggresive in these kind of takeovers, but in the time I’ve been investing I’ve found the SGX to be a lot more dedicated to the protection of shareholders than in other exchanges. The SGX usually asks open questions related to the financial results or trading activity of their companies. This is the questions they sent regarding GEAR’s weird trading activity the day before the offer.

Possible outcomes

These are the possible outcomes of the transaction:

When it comes to the spread it is a lot thinner now than just last week when I was writing the article. GEAR went up by 0.025 SGD today (6th Feb) so at 0.82 SGD the spread is around 1.7% which is obviously not very attractive.

• Case 1: The acquisition offer is accepted.

  You make the spread based on your purchase price and the price they’re paying. At 0.79 SGD that is over 5.5% or 11% annualized.

• Case 2: They raise the offer:

  They have an ample margin to raise the offer and still have an extremely profitable deal. We’re talking that at current prices they are making over 300M$ with little execution risk. Even if they doubled the offer to 0.32 SGD they would still make over 140M$. At 0.64 SGD, or four times the current offer, they would simply be paying the sum of the parts even if we consider Ravenswood value as 0.

  You could even argue that they should pay a premium to the value of traded securities, but I will be happy if they double the offer. If they double the offer the current spread would be around a 25%, or almost 50% annualized.

• Case 3: The offer is not accepted and they don’t raise the offer.

  In this scenario we would own the company which at the current price of Stanmore Resources it looks like a pretty good deal.

  For instance, at 0.79 SG$ the company’s market cap is 1.58B US$, they have around 115M$ in net debt and their stake in Stanmore is already worth 1.5B$. Apart from that they own a 60%+ of the indonesian miner which is still extremely profitable and has been paying consistent dividends over this past year.

In my opinion the biggest likelyhood would be for the offer to be accepted or for the offer to be raised. As I said they can make hundreds of millions of dollars despite paying more.  

Reflection: Is the voting process fair?

Edit 10th of February: I initially thought that shareholders that voted against the offer couldn’t tender the shares, but it seems that shareholders will be able to vote against the offer and still have 14 additional days to tender the shares.

Therefore I intend to vote against the offer and if it still goes through I will tender my shares.

Thanks to Jeremy Raper for the information- https://twitter.com/puppyeh1

thanks for the article but I need to make a very important correction. Even if you vote No, the Exit Offer will be open for a period of 14 days once all Exit Offer conditions have been fulfilled, for ALL shareholders (even those who vote no) to accept the terms. see pages 13-14 here: http://investor.gear.com.sg/newsroom/20221109_021819_AUE_B599T1IV2BCR696W.1.pdf

In other words, the barrier to voting no here is really much lower than you portray. this is quite a crucial point given the amount of value being extracted here. even if you vote No to try to block the deal - as I obviously am, on these heinous terms - you can still take the Exit Offer in the end if it ends up getting voted through.

Conclusion

I find GEAR to be an interesting situation: we can make a decent spread on the current offer but at the same time there is a good chance that the offer will be improved.

Whatever happens this should be finished by August 2023, so we have a fixed time frame and the annualized returns could be very high if they end up raising the offer.

Thank you for reading the article, I hope you liked it and if you did you can help me by retweeting this tweet:

If you have any questions or thoughts on the article leave a comment here or on Twitter.

To freely use it go to File → Make a copy so will you have an editable copy on your account.

A few notes on how the file works and the methodology:

• You can edit the TCE for the different type of ships and it will automatically calculate the overall TCE of every segment.

• The formulas for the profit sharing agreements are based on their own charter book.

• The model is based off the the average net income breakeven for the first three quarters of 2022.

• The model is also based off 58 ships as I have accounted for the sale of their six MR ships.

As I said, this model is simply an approximate one so take it with a grain of salt.

This is the third article I’ve written this year and so far I’ve enjoyed making the content. These are my plans for the blog:

• Planning to write around 3 articles/month.

• I had initially planned to post everything on Sundays but I will just publish the articles when I finish them. I’ll announce them one or two days earlier on my Twitter account.

• Focused on companies/topics I own/I am interested in, but I will let you guys vote what is your preference for the next article.

As for the upcoming articles I’ll be publishing the following:

• Golden Energy Resources - Acquisition spread turned into special situation. - By early/mid next week.

• Peabody Energy ($BTU): Coal company - I’ll publish the article once first quarter results are out.

As for other the next articles these are the choices you can vote on Twitter.

• Dry bulk shipping review & thoughts.

• A review of UK Oil & Gas companies - Focused on Harbour Energy and EnQuest Energy.

• Overall market review and why I believe shorting’s risk reward is becoming more and more compelling.

• Deep dive of a polish coal company.

And that’s it, if you have any question on the model feel free to reach out.

Tsakos Energy Navigation (NYSE: $TNP) is a diversified tanker company owning over 60 ships and transporting mainly crude oil and products (diesel, gasoline…) aswell as owning three LNG ships. Over this past year and specially since the start of the Ukraine war tanker rates have spiked to very high levels so Tsakos is one of the main beneficiaries of the lucrative tanker market.

Shipping is a very commoditized industry: pretty much every company will do well if the market rates are good. My philosophy when investing in the sector is to find the best companies based on valuation and shareholder returns. So, does Tsakos fit this criteria? Let’s find out.

Tanker Market Review

The dislocations caused by the Ukraine war resulted in higher shipping rates for both crude and product tankers. Basically, since Europe has sanctioned russian oil they have to transport it further to countries like China or India, and Europe has to import the fuel from somewhere else increasing the tonne-miles for the overall segment.

Rates have started easing up specially for product tankers and VLCCs but they are still very profitable. Despite that, the outlook for most tanker segments is pretty good. The orderbook is very low and there are some catalysts that could make rates go up like China’s demand picking up after the Chinese New Year and the EU ban on Russian oil products, which starts in February.

Tsakos Equity & Debt

First off let’s look at Tsakos’ debt and equity structure. Given that Tsakos has been paying dividends on the common shares for the past 20 years and that preferred shares’ dividends have priority over common shares I’ve considered the prefs as debt and I have included the payments on the EPS calculations.

• Tsakos Common Shares: 28 630 206 shares.

• Series D Preferred Shares (Par Value 25$ | Coupon: 8.75%): 3 517 061 shares | Total: 87.93 M$

• Series E Preferred Shares (Par Value 25$ | Coupon: 9.25%): 4 745 957 shares | Total: 118.65M$

• Series F Preferred Shares (Par Value 25$ | Coupon: 9.50%): 6 747 147 shares |

  Total: 168.68M$

• Series G Convertible Preferred Shares (Par Value 10$): 459 286 | Total: 4.6M$

• Net Debt (Excluding Preferred Shares): 1293.25M$.

• Net Debt + Preferred Shares: 1673.11M$

• Market Cap (At 17$/sh): 486.7M$

• Enterprise Value: 486.7+1673.11 = 2159.8M$

Tsakos Trailing Valuation

Now, let’s compare Tsakos’ earnings and ratios with other tanker stocks. I’ve taken the earnings from the last quarter and last half and annualized them to see their relative cheapness.

The cheapest companies are all product tankers ones. This is simply because product rates went higher much earlier in the year. Fourth quarter product rates were similar to 3rd quarter so the earnings should stay flat for Q4 and for Q1, I expect them to be weaker. We will have to see if rates start picking up from the EU Russian product ban.

At first glance, Tsakos’ doesn’t look very attractive based on trailing earnings multiples. They’re relatively cheap but you would expect a company that is hugely levered in a strong market to be the cheapest one by far. This is mainly because of Tsakos’ fixed time-charters which are not benefitting from the current market strenght.

At the same time, using NAV numbers they’re the cheapest one in this group. So even though for every dollar you are paying for Tsakos’ equity you are getting a lot more ships they really are not earning that much. Finally, if we use multiples that take into account the debt like EV it is more expensive.

Still, if those time charters expire soon and Tsakos is able to realize current market rates their EPS would significantly increase. Therefore, let’s have a look at Tsakos’ charter book and then we’ll talk about the forward valuation.

Tsakos’ Charter Book

Tsakos’ fleet consists of 58 vessels right now. I’ve adjusted the numbers for the following:

• Brokers have reported that Tsakos recently sold their 6 MRs although they haven’t confirmed it yet.

• Four of their ships are only 51% owned so I’ve adjusted it for their stake.

• Not accounting for upcomming newbuilds.

Of those 58 vessels:

• 25 are trading on fixed-rate contracts.

• 16 are trading on floating-rate contracts.

• 17 are trading in the spot market.

Let’s have a deeper look into their fixed-rate contracts. Out of the 25 fixed-rate vessels one of them is a VLCC, two of them are LNG ships, two are Handysizes, two are Suezmaxes, four are DP2-shuttle vessels and fifteen are Aframaxes.

One of the most important charters expiring for Tsakos in the near term is the one for the LNG ship ‘Neo Energy’, which currently earns only 37000$ a day. For instance, CoolCo was able to charter one of their ships at 140 000$ a day for 12 months back in September. I don’t expect Neo Energy to get such a high rate because it is a ship with older technology, but I can see them getting 80-100k$ for one year, which would mean an additional 0.50 to 0.80$ in annual earnings per share. Other than that the other ships are expiring further than 1 year out so there won’t be additional earnings from them in the near term.

I’ve added the options attached to the vessels (most of those options are in the money) to calculate the final expiration date. You can check Tsakos’ full charter book here, but they don’t list the options in that file, you have to go to the SEC 20F filing.

In the Suezmax and DP2 front there is also no near term charters expiring. There are two important things to note here: DP2 vessels are Suezmaxes that have dynamic positioning equipment and they work with offshore oil platforms, so their market dynamics might follow oil prices and oil offshore demand more than Suezmaxes’ rates. I find that the charters they were able to get for their DP2 vessels are pretty good, the ships are more expensive than a normal Suezmax but they are getting very lucrative long-term charters.

Finally, when it comes to Aframaxes they have three ships expiring this year at an average of 28k$. Current spot rates are around 40 to 50k$ a day, but it’s only three vessels out of 58 so the contribution won’t be that significant.

Then, when it comes to the bulk of their Aframax charters we would have to wait until 2028 for the expiration. They are commiting to very long-term charters on some of their ships at rates that are dangerously close to breakeven levels. For instance, according to their most recent presentation, the cost to operate an Aframax for Tsakos is 19 227$, including OPEX, G&A, interest expense and depreciation.

On average they are making less than 3 000$/day on these very long term charters. But, what if interest expenses go up? What if OPEX goes up? Or what if the vessel is simply worth a lot less than what you’ve depreciated it because of regulations 10 years from now? At the same time those charters usually expire a lot sooner but they have extremely long option periods at the choice of the charterer. So, if the tanker market is terrible the charterer could return those ships to Tsakos at the worst possible time. In general I find those charters to be quite poor, and obviously they are not gonna get market rates anytime soon.

My issue with NAV valuations is exactly this one: Tsakos’ ships that are on long term charters are definitely not worth their market value. Some NAV valuations discount below-market charters, but I’m not sure if it’s discounted enough.

Floating Rate Contracts

When it comes to their floating-rate contracts I find them to be much better than their fixed-rate ones. In general those contracts have a floor and then a profit sharing agreement until a certain point. These kind of contracts work best in a bearish or slightly bullish environment, since they won’t lose a lot of money even if rates are terrible, but if there is a very strong rise in rates, like what happened in 2022, they won’t benefit that much since they are capped at a certain rate.

Most of their ships expiring are Panamax Product tankers (LR1) so if rates rise with the EU ban on Russian diesel they could benefit significantly. In general their floating rate contracts are pretty good.

Spot rates

Finally, out of the 17 vessels trading in the spot market, one is a LR1, two are Aframaxes, four are Handysizes and ten are Suezmaxes. In this regard they are well positioned since Suezmaxes’ rates have held up very well despite the weakness in other classes.

In general they are not too badly positioned although I really don’t like their fixed-rate chartering policy. Their floating rate contracts are okay, they have an LNG ship expiring soon and they have a significant presence in the Suezmax spot market.

If you want to see the sensitivity of spot rates to the average TCE rates Tsakos will achieve I have created a Google Sheets file which I’ll send to all of my free subscribers this weekend. The file also has a very basic model of the additional revenue Tsakos would receive based on the input data.

Tsakos’ Forward Valuation

After looking at Tsakos’ trailing valuation let’s look at the forward one given the improved market rates. One thing I’ve noticed is that Tsakos’ breakeven levels are much higher than any other peer. The closest peers to Tsakos would be Teekay Tankers ($TNK) and International Seaways ($INSW) due to similar fleet age and profile. TNK’s average age is over 3 years older than TNP and as ships age they’re more expensive to run. On INSW side their breakeven is lower despite similar age since half of their operating days come from MR ships, one of the smallest of the tanker classes.

For Tsakos, they have 3 LNG ships and four DP2 shuttles with higher operating costs. Also they’re more expensive ships so depreciation and interest expense will be higher, but I’m not sure if enough so that seven ships out of 64 for Q3 would add over 5000$ in additional expenses per day per ship. Comparing them we can see that Tsakos’ net income breakeven is 4300$ higher than TNK and 5500$ higher than INSW.

High costs are the bad part, now the good part is that a 7000$ increase in net TCEs to Tsakos would double their margins. Can they achieve that for Q4 or 2023?

What I’ve seen for tanker companies is that the variability in between the average TCE for every company is huge when comparing the same classes even when the avg age of the fleet is similar. So at the end of the day it seems like it depends a lot on the prowess of the chartering department of every company.

Any additional increase in the average TCE for Tsakos will have to come mainly from their spot rate ships or the profit-share ones. The issue is that the age of those vessels is in general very high.

• Spot Rate Charters: 15.2 years.

• Profit Share Charters: 11.9 years

• Fixed Rate Charters: 8.4 years

None of their ships on spot rates contracts have scrubber and the youngest one is 10 years old. Market rates are still really good though but I would expect a discount given the aged fleet. For profit sharing charters the average age is also very high. If we only count the vessels whose charter is expiring in 2023 or 2024 they average over 13.2 years.

Management & Related Party Transactions

Any serious analysis of a Greek shipping company requires this type of research.

First off, let’s start with Tsakos’ family share ownership. They own around 26% of the shares outstanding in and additionally they own 310 000 Pref. D Shares, 130 000 Pref. E Shares and 150 000 Pref F shares.

The stake in the common shares is around 120M$ and their stake in the preferred shares is around 38M$, which nets them around 3.5M$ a year.

Additionally, the CEO of Costamare owned an almost 10% of the shares outstanding and has been disposing of them over the past year. Just yesterday (31st Jan) there was a SEC filing where it was disclosed he has almost liquidated his entire stake, and in his previous filing in September it was a 5%.

Following the ownership I had a look at their related party transactions and I have to say it wasn’t very pleasant seeing the amount of fees Tsakos’ related parties are making but to sum it up they make fees when:

• Selling a ship.

• Buying a ship.

• Chartering a ship.

• Fees for arranging the transport of the crew to the vessels.

• Fees for insuring the hull and machinery.

• Technical management fees.

  Many shipping companies do this, but at the same time Tsakos has been aggresively diluting shareholders until very recently.

Something I found quite funny is that since 2002 the CAGR in the DWT they manage has grown from 2.2M to 8M, by approximately 6.7%, whereas the shares outstanding has grown from 6.81M to 28.17M, for a 7.4%.

-The Tsakos family owns 26% of the shares outstanding, surely they’re aligned with shareholders.

Well, at 17$ a share that’s around 120M$, and if we look at the past three years they have made more or less that amount in fees. Sure, it’s not purely fees, they make real work aswell but the real cost is simply very opaque, we don’t know how much they are overcharging, but Tsakos’ expenses are definitely higher than industry average.

They even have listed as a liability their contractual obligations to their private company. That is only to ‘Tsakos Energy Management’ though, as you see they make fees from four other companies.

I might be skeptical, but I think you need to be when investing in these kind of companies. With the cash flows from this year and the ships sales they should have enough for the prepayments on the newbuilds, so I don’t think they’ll use the ATM anytime soon and given the good outlook for the tanker market using it would completely shatter any investor sentiment. But really their main goal for the past 20 years has been to grow the fleet, not to create shareholder value.

Final Remarks & Conclusion

Tsakos is trading at very cheap multiples and over time once their charters expire their earnings should rise. It is trading at a big discount to NAV but, will the gap close?

On the one hand management has said they are not going to do share buybacks which would be the best return of capital but during the latest Capital Link interview two weeks ago they said the following:

If they actually implement the policy and tanker rates remain healthy we could see a rerating in the stock. For instance, if they applied the policy during the Q3 the dividend would have been from 0.375$ to 0.75$, 9 to 18% annualized dividend yield which would make it one of the highest dividend yield tanker stocks.

After reviewing other companies I think is the most attractive one if you are looking for 'dirty' tanker exposure, but I find other product tanker companies with dividend policies like TORM or Hafnia very interesting aswell given the possible catalyst in the EU Russian diesel ban and similarly low valuations.

Finally, we can’t forget about the corporate governance discount. The amount of fees they’re getting is outrageous and their costs seem higher than what they should be. I don’t like that companies overcharge investors, specially in this sneaky way, but it is what it is.

In the end, it’s up to you to decide whether you find Tsakos as an attractive investment. What are your thoughts on ?

Thanks for reading the article, I hope you liked it and if you agree or disagree I’m happy to talk about it here or on Twitter, so feel free to comment.

If you enjoy my content make sure to subscribe and it would be really helpful if you can share the article.

More than one year has passed since I made the initial article on Geo Energy Resources and the stock has had its ups and downs, has paid a fair share of dividends, and it has risen from 0.265 SGD to its current share price of 0.32 SGD (+20%). Even though the share price is higher than back then I believe the stock is much cheaper today. If you don’t know much about Geo Energy Resources I would recommend reading the first article.

As for the performance of the stock we have to consider that since Sept 2021 they have paid 0.13 SGD in dividends so the total percentage gains would be close to 70%.

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Geo Energy over the past year

On the operational side cash costs have gone up and production has gone down Despite reduced production and higher costs Geo Energy has been extremely profitable during 2022, earning 141M$ over the first nine months of the year. They have also paid 0.09 SG$ in dividends during that time period and they have also built a massive net cash position of over 200M$, representing close to 60% of their market cap.

Before talking about 2023, I want to point out that the fourth quarter of 2022 is likely to be a very strong one for various reasons.

The first one is that Geo Energy had already sold most of the production that needed to be sold to the Domestic Market Obligation during other Q1 to Q3, precisely 2.5Mt. Therefore in Q4 they will only need to sell 0.5 million tonnes at the reduced DMO pricing (38$/t) and the rest of production will be sold at spot prices. Production in Q4 should pick up aswell given the guidance from management, and finally the average price of Indonesian Coal has been higher during Q4 than during the rest of the year, averaging more than 90$/t during the quarter.

I’ll give more details of the 4th quarter in the valuation section of the article.

Outlook for 2023

Thus far 2023 looks very nicely, with coal futures trading solidly above 75$/t for the entire year.

Even if we take the scenario where their cash costs stay at elevated levels and their production goes down to 10 Mt, I have Geo’s FCF for 2023 at around 150M$ (2.25x current market cap) at 75$/t ICI4.

There is some negative things to point out for 2023 though:

1.- Royalties for Geo Energy mines will increase from a flat 3% to a 5-8% based on coal pricing. At ICI4’s current price the royalty regime would be a 6%, therefore we should expect their net margins to shrink by the amount of the extra royalties.

2.- There have been rumours about an increase in the Domestic Market Obligation (DMO) rate from the current 25% of production to a 30%. There were also plans to change the way the DMO mechanism works but so far there is no confirmation any of these is going to happen.

3.- The effective tax rate should be expected to rise, since the cash is generated in Geo Energy’s Indonesian subsidiary and in order to pay dividends or buybacks it needs to be transferred to their Singapore entity, which implies a 10% withholding tax.

4.- Overall mining costs to rise further. The strip ratio in one of their mines has risen substantially over the past year, and after further talks with management, it seems like due to the geology of the mine costs are expected to stay elevated. Given that their costs have already risen by a lot any further increase in costs will make the company vulnerable in an environment of lower prices.

Even if the DMO changes were to happen I don’t think it would significantly hit Geo’s profitability for next year. In the case of the royalties I’m simply assuming that their cash costs will increase at least by a 3% of ICI4’s pricing.

As for the DMO mechanism it wouldn’t be a big difference from last year. Let me explain, the DMO means that indonesian coal companies need to sell a 25% of their production quota to a public utility (PLN) at a capped price of 38$/t. Geo Energy’s quota for 2022 was 12 Mt, so they needed to sell 3 Mt to the PLN. Even though their production will likely be below 11 Mt they still need to sell the amount based on the quota they had. If we assume they are actually able to produce 11 Mt their DMO obligations for last year will have been a 27.3% of production, so increasing it to 30% would just mean selling an additional 2.7% which wouldn’t be very impactful.

Indonesian Coal Outlook

Before talking about the valuation let’s focus on the coal Geo Energy sells. It is a coal with low calorific value (4200 kcal/kg) but with low sulfur and ash content aswell. According to Geo Energy’s management, despite its lower calorific value it is necessary for blending with other types of coals (Chinese, Australian…) in order to be used for power generation.

I haven’t found data related to the CO2 emissions of ICI4 coal per unit of energy generated, but since it’s calorific power is lower I assume the CO2 emissions are higher than for other more energy dense coals. But still, if we look at the following graph, we can see that the main countries buying indonesian coal don’t really care much about CO2 emissions.

The main two importers seem to want even more coal, since China very recently resumed the imports of Australian coal and India just asked their utilities to import more coal.

Comparing differents types of coal

I’ve made this chart to show how much have these different coal types and LNG risen from the previous peak in 2018, and how much have they gone down from their 2021-2022 peak, aswell as the relative pricing per unit of energy produced.

As we can see ICI4 is still very competitive with other types of energy when it comes to its pricing per unit of energy. I have researched the average price per MMBtu for different types of coals and JKM to see what’s the average historical discount for Indonesian Coal during the past few years.

I will base most of my conclusions based on 2018 and 2019 pricing, given that 2020 was an abnormal year due to COVID, and 2021 was abnormal aswell since China blocked the imports of Australian coal. I would have liked to use more data from previous years to 2018, but I couldn’t find some of it.

So, as we can see, API4 (South African coal) traded on average at around a 50% premium to ICI4 on an energy basis during 2018-19. This is pretty close to the current premium, which is around 40%. Newcastle traded at a 66% premium to ICI4 during those years while its current price is 3 times higher than ICI4. We can also see that Newcastle usually traded at a slight premium to API4, so given historical prices Newcastle should go down and settle at prices slightly above API4 (170$).  API5 has usually traded at a slight premium to ICI4 aswell which has widened over this past year.  At the same time JKM LNG’s premium has gone up from an average of 225% during 2018-19 to over 370% in 2021 and much higher in 2022.

My conclusion from this is that both Indonesian Coal and South African are fairly valued when it comes to their historical relative valuations. On an absolute basis ICI4 is still a very cheap energy source when compared to alternatives. LNG is still very expensive but I don’t expect it to go down in the near term. Newcastle coal seems to have held surprinsingly well, but I think it’s a matter of time until it settles at its slight historical premium to API4. When it comes to API5 I don’t have access to current spot prices but I believe it has gone down recently. Its premiums were just slightly higher than average so it seems like it’s relatively fairly valued aswell.

Finally these are the charts of the energy types analyzed. My final conclusion is that I feel much more comfortable with ICI4’s pricing than with other coals like Newcastle. For its part, ICI4 has been very stable for this past year, aside from a brief spike to 130$ during the Chinese energy crisis that crashed to 70$ when China ordered their miners to increase output as much as possible. Since that happened prices have hovered pretty stable around the 80 to 100$ mark.

Earnings Model for Q4 22’

Their current market cap is around 332M US$ (at 0.315 SG$/sh), and the net cash currently is around 200M US$ already accounting for the third quarter dividend paid. Considering that their fourth quarter should be a very good one their net cash will very likely be above 250M$ by Q4-end, giving an Enterprise Value of less than 100M$.

Geo had a quota of 12 Mt for 2022 but given production problems management guided for 11 Mt. They produced 1 Mt in October, therefore if they were to hit 11 Mt the production for November and December would have to be 1.2Mt per month, so I’m only considering 10.6 Mt of production for FY 22 (1Mt per month for Q4).

I have modelled their fourth quarter given these assumptions:

·Pricing: 85$/t on export sales, 38$/t for their DMO.

·Million tonnes produced/sold: 2.5 Mt export sales, 0.5 Mt DMO.

·Cash costs: 45$+3% of ICI4 (47.55$). I’ve increased their cash costs due to the royalty increase.

· Average G&A, other expenses and CAPEX of other quarters. In the past quarter “Other Expenses” went up due to a tax they have to pay to move money from their Indonesian subsidiary to the Singapore company, therefore I’m using an additional 5% expense on their pre-tax income.

· Tax rate: 23%

Given these numbers the post-tax FCF generation would be around 70M$ and net profit around 60M$, resulting in a net cash position of ~270M$. Based on the minimum payout the dividend for Q4 22’ should be at least 0.02 SG$ (6% yield from Q4 alone).

Therefore their FY22 multiples would be the following:

· Market Cap: 350M$ - Net Debt: -270M$ - Enterprise Value: 70M$

· 200M Net Income (1.7x PE).

· 225M FCF (1.5x MCAP/FCF – 0.33 EV/FCF) – Obviously this free cash flow has been adjusted for dividends and buybacks.

Earnings Model for FY23’

For FY23 I’ve used these assumptions:

·Pricing: 75$/t on export sales, 38$/t for their DMO.

·Million tonnes produced: 10Mt, 7.5 Mt export sales, 2.5 Mt DMO. I’m not accounting for the possible increase in DMO obligations, but I’m using a low-guidance of 10 Mt. For instance FY22 production should be around 10.6 Mt – 11 Mt.

·Cash costs: 42$ + 3% of ICI4 pricing (44.25$). I reduced the cash costs a bit since their costs are linked with the coal price aswell. Even though there is no precise numbers I estimate it to be a 30% of the coal price, so for a 10$ decrease the cash costs should decrease around 3$ all else being equal.

· Average G&A, other expenses and CAPEX of other quarters. In the past quarter “Other Expenses” went up due to a tax they have to pay to move money from their Indonesian subsidiary to the Singapore company, therefore I’m using an additional 5% expense on their pre-tax income.

· Tax rate: 23%

With these assumptions Geo would generate:

· ~140M Net Profit - 2.4x earnings.

· ~150M Free Cash Flow - 2.26x MCAP/FCF.

Given the 140M Net Profit, the dividend yield based on the minimum payout would be ~12% for FY23.

Valuation

Since the company is clearly trading at very cheap FCF multiples and has around 70% of their market cap in cash I think a big part of the valuation is qualitative, the market clearly thinks the cash won’t be used in accretive ways for shareholders. I will talk about this in detail in the next section, but for now here are different simple ways to value Geo Energy.

                · On the one hand I want to adress the net cash position. It is a key part of their current valuation and the question that we have to ask ourselves is: How do we value it? How do we value money the company has but that we cannot access?  For the time being I’m going to discount 50% of the net cash.

So, from the 270M expected cash at the end of 2022 it would add 135M$ to the valuation.

                · Secondly, how do we value the FCF? Which multiple do we use? In this case I’m not going to use a high one either, it wouldn’t be fair when we look at other coal companies, most of them are trading at 2 times FCF or so. I think the cash flow might be more valuable on companies that have higher fixed dividend policies, like Yancoal, but in the case of Geo Energy the dividend policy is a minimum of 30% of earnings, so we will surely benefit from the cash flows.

With that being said I came up with three conservative valuations in my opinion:

1.- Discounting the net cash by a 50% and adding 2x 2023 FCF:

Market Cap: 430M$ - Share Price: 0.41SG$ - % Change: +25%.

2.- Net cash + 1x FCF:

Market Cap: 405M$ - Share Price: 0.38SG$ - % Change: +17%.

3.- Discounting the net cash by a 50% and adding 1x 2023 FCF:

Market Cap: 285M$ - Share Price: 0.27SG$ - % Change: -15%.

Finally, in a less negative valuation I think it would be fair to value the cash without discount and valuing their FCF at 1.5x times given the lower than average reserves.

Market Cap: 485M$ - Share Price: 0.46SG$ - % Change: +45%

With this valuation we would come up with a 45% upside.

Reasons for Geo Energy’s cheapness

In general coal companies are trading at extremely low valuations, Yancoal ($YAL.AX) is also trading at around 1.5x their 2022 FCF to equity, Peabody Energy ($BTU) is trading at around two times their 2023 EV/FCF.

The capital allocation has not been perfect, in my opinion given the huge net cash reserves and the good outlook for 2023 there really isn’t any better investment than buying your own shares. Even though management is not too keen on big share buybacks, they have bought back around 0.5% of shares outstanding during this past month.

Low reserves in their mines. Geo Energy mainly owns two mines – SDJ and TBR. SDJ produced 4.5 Mt while TBR did 6.3 Mt in 2021. By year end 2022 I estimate SDJ will have about 3 years left of reserves while TBR around 8 years. We will see if they have added some new reserves once their Annual Report is out, but I wouldn’t expect much of it, for the past years they have barely added new reserves to their mines. There is therefore uncertainty about what will happen with Geo once the SDJ reserves run out, and the market usually doesn’t like uncertainty.

Another reason why it could be this cheap is the increase in mining costs over the past year. Their breakevens have risen by a lot, therefore if ICI4 prices were to go down to the 40$ mark they might not be profitable anymore, whereas around 2 years ago their mining costs were below 20$. To be fair, after writing this article and talking with management I am a bit concerned about it, we will see if they are able to stabilize them over this year.

Downside scenarios and adressing concerns:

I am going to adress now the negative scenarios, and also the concerns I’ve read from other shareholders on forums. I think most of them really are blown out of proportion or unrealistic.

I see a few negative scenarios/concerns, mainly the following:

               1.- Coal prices cratering: Any commodity company will suffer if their index goes down. I have covered this though, I don’t think the fundamentals really support this as long as other energy sources are trading at high prices aswell.

               2.- A ‘bad’ acquisition. It is true that the company is looking for an acquisition. Given their low reserves it is understandable that they would like to secure other assets to make sure the company is here to stay. I don’t see a reason why they would go for an acquisition that wasn’t accretive to shareholders to be honest, since the current CEO – Charles Antonny Melati – holds around 36% of the shares and in between different other executive directors they hold a 5% stake. Apart from the shareholding % I like to look at their holdings based on their salary. The biggest two inside owners apart from the CEO hold around 10 times their salary in shares, therefore I would assume it is an important part of their capital. Given that they have actual skin in the game I don’t see a reason why they would do a bad acquisition or rush it. I mean they still have 3 years left on one of their assets, and the other has 8 years left, so they still have plenty of time to wait for the right opportunity.

3.- Private takeover of the company: Another concern I’ve read from shareholders is that they are hoarding cash in order to take the company private at a low price. I think this one is completely unrealistic. The SGX has pretty strict rules for takeovers: a 75% of the independent voters need to vote in favour. Management has been treating shareholders in a fair way and they have always been open and transparent to questions from me and other shareholders, so I really don’t see this happening.

Most downside scenarios in my opinion are pretty unlikely and it would mean that the company would have to be managed in bad faith which hasn’t happened either.

Conclusion

The reason that I like Geo Energy at this price is that I can make negative assumptions in most parts of their business – production going down, costs going up and coal pricing going down – and despite all this I think the downside is quite limited given the cash reserves. For instance, if Geo Energy’s shares were to drop by a 20% the market cap would equal more or less their net cash. I also feel much more comfortable being exposed to spot pricing in ICI4 than in other coals like Newcastle given how cheap ICI4 is relative to other energy sources.

We’re not buying a company in a pretty sector, the coal they produce is not high quality one, the capital allocation might not be perfect, yet, at this price, I haven’t seen anything cheaper than this as a combination of FCF generation plus balance sheet strenght.

As Howard Marks says:

And in this case I think the price you pay is simply too cheap to ignore.

That’s it for now, I hope you liked the article, and if you did you can help me by promoting it and subscribing to the newsletter. If you have any questions or thoughts on the article leave a comment here or on Twitter.

Finally I have also made a spanish YouTube video talking about this article:

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When it comes to asset classes stocks represented 36.89% of net performance, options a 7.21% and cash a -2.79%. ETFs and warrants were negligible.

Top Performers:

1.- Peabody Energy (BTU): +8.47%.

2.- Thungela Resources (TGA): +5.6%.

3.- Zim Integrated (ZIM): +5.49%

4.- Coronado Global  (CRN): +4.62%

5.- PBF Energy (PBF): +3.84%

Bottom Performers

1.- Corsa Coal (CSO.to): -8.17%

2.- QFIN puts: -4.26%

3.- United Oil & Gas (UOG): -2.78%

4.- USD Currency: -2.27%

Reflections

1.- What I’ve learned from my biggest losses this year is not to trust shady management teams. For both Corsa Coal and United Oil & Gas there were clear signs the management was not being completely transparent with shareholders and thus, whatever information you believe you might have on the company is not worth much.

2.- The stock liquidity is another thing I’ll be focusing for this year. As I usually have relatively concentrated positions, is it not that easy to get in and out of illiquid positions anyone, and I think that is one of the advantages that I can have over the market. Many times the market is pretty slow to react, or doesn’t fully comprehend the impact of news in a short time frame.

A clear example of this happened just recently with United Maritime Corp ($USEA). They announced on the 3rd of January that they would be acquiring two capesizes from the parent company, Seanergy Maritime. The stock opened like a 4 or 5% up that day and I was able to sell my entire position, and it obviously dropped the following days given that the news were honestly quite bad.

Then, in other companies like CSO or UOG I wasn’t able to sell despite knowing there were some bad news because there was simply no liquidity at all, so that will be something to consider

3.- Another thing I’ll be looking to change for 2023 is the amount of positions I hold. I think at a certain point it makes no sense to have smaller positions for a retail investor. Even though I am currently full time investing it just gets harder to keep track of every single position at a deep level, so I’ll be looking to concentrate on the main ideas that I have.

4.- Despite having a good performance in options I think moving onto 2023 the profitability threshold I will look for will be higher than in 2022.

Regarding options’ strategies, my favourite one has been executing straddles on stocks with high IV like BTU, while owning the stock. So basically selling a short put, a short call and owning the stock. Specially in stocks where there is no clear catalyst and you are still bullish you can make very good returns month to month as long as the stock is relatively flat. If it goes up you are collecting both the short call and put premiums plus the difference in between the stock and the short call strike. In the case it goes down you are collecting both the put and call premiums, so the loss won’t be as big.

2023 Outlook and strategies:

This past year has proven that fossil fuels are necessary and they’re going to be for many years to come, but despite record high pricing in coal, pretty much every single coal company that I follow has had a lower output in 2022 than in 2021, and most of them are focusing in buybacks and dividends instead of CAPEX programs. I don’t think current spot prices will last forever, but once they go down I belive they will settle at significant higher prices than they were before COVID.

 Therefore, I believe there are lots of cyclical companies – specially in the coal sector but also in refineries, oil & gas and shipping that have a complete different balance sheet than at the start of 2022, still have a great outlook for 2023, yet they trade at a similar or lower valuation. In particular, I like investing in cyclical companies that do not necessarily live and die by the spot price of the commodities they sell.

For example, in the coal sector I still like Peabody Energy. A meaningful part of their cash flows are fixed (their entire PRB and US coal is already sold for 2023) and they had significant hedges in place for their seaborne thermal in 2022 at much lower prices than spot, which will fully expire in 1H 23’. Therefore, even if spot prices went down their cash flows woulnd’t be affected as much as other coal names.

For tankers I like Tsakos Navigation for the same reason, they are benefitting from higher spot rates but a significant part of their fleet is on fixed rates or profit-sharing agreements that are capped at much lower prices than spot. So even if spot prices went down from current extremely high levels but settled at higher prices than pre-Russian invasion they would still generate significant cash flows and actually they would go up over time as their fixed contracts expire.

On the other side, I also feel like there is a great risk/reward proposition in cyclical companies that, although they are exposed to spot prices, have a very significant part of their market cap in cash.

This would be the case for Yancoal and Geo Energy Resources. Based on conservative models I have made Yancoal should have around half of their market cap in cash with no debt on Q4 results, and Geo Energy has an enormous cash position, given that Q4 should be very good for them their net cash position will almost surely be more than 250M$, I would say closer to 300M$ probably, for a market cap of 325M$ as of now.

So far, given the coal futures strip, 2023 looks amazing aswell, but even if it dropped, as long as it settles at prices above pre-COVID levels, those companies would still be significantly profitable and their huge net cash positions should mitigate the downside even in a negative pricing scenario.

Comments on different industries

O&G: When it comes to oil & gas, I believe that high prices are here to stay. These are the main catalysts for my oil thesis:

                · On the one hand, russian production has held up surprinsingly well, but I still think that over time they’ll run into issues given the sanctions on buying equipment for example, and the loss of the know-how majors could provide to russian companies, I believe it is a matter of time until their production starts dropping.

                · Secondly, OPEC has proven they’re willing to cut production in order to keep higher prices. The US has been draining the SPR at a good pace, which should stop this year and actually they’ll start buying some barrels to refill it. Even if they kept draining the SPR, which would be negative for oil prices in the short term, it would just give more leverage to the OPEC in the longer term, so it wouldn’t be bad for oil prices either way.

                · Lastly, many western countries have introduced windfall taxes for O&G companies which I think will discourage investment over the medium term. Fortunately no major oil producer has introduced these laws, but the sentiment from political administrations in countries like the USA and Canada is not very favourable, so in a way, I feel like the capital cycle in many of these industries is manipulated for political reasons, so even if prices rise I don’t expect a big supply increase.

I don’t call for prices to go as high as some people say to 200$, I’m perfectly content if they stay at the current range of around ~80$ for Brent, as most companies I own already generate meaningful cash flows in that range.

Tankers:  The Ukrainian war has created dislocations in the oil market which will probably last for a long time. It seems that, unfortunately, the war is going to last for a long time given that no side is willing to make concessions, and even if it ended I doubt the West would lift those sanctions anytime soon. As I’ve briefly commented, rates have gone down slightly but they are still at very high levels historically. We will see where they settle, but I am pretty confident it will be at much higher levels than pre-invasion. The tanker orderbook looks amazing and despite having a few months of very solid rates there has barely been any newbuilding. Even if there was, new ships won’t hit the water for a few years.

This won’t be very popular among fintwit but I don’t think tanker equities in general are *that* cheap. Most of these companies are trading at more than 2 times cash flow to equity, but they are still heavily levered, so the EV/FCF multiples are not that cheap and this cash flow is annualizing the last quarter in which spot rates were very high.

For instance, during the dry bulk boom last year there were a few equities, like $GRIN, $EGLE and $EDRY trading at around or less than 1.5x FCF while having a lot less leverage, so in my opinion they looked a lot more interesting, given what they were earning at the time, than tankers are right now.

Therefore my main choice in tankers is Tsakos, which has its own issues, but it is not that exposed to spot rates and it’s still similarly cheap or even cheaper than other tanker equities based on FCF multiples.

Dry bulk: I am not too convinced on dry recovering fully on 2023. Despite China announcing they are reopening, rates have cratered and even the smaller classes have gone down despite holding up very well during 2022. It is true this is the seasonally weak part of the year, so after Chinese new year we will see what happens, but I’m not too optimistic.

Still, I believe dry bulk’s setup looks very nice a few years down the road. The orderbook is very low and there is still a pretty heavy backlog in most yards due to orders for LNG, LPG and containerships. I think the most attractive equity in this sector would be Safe Bulkers since it’s very cheap, and has a significant part of their fleet on fixed rates way above current spot prices.

Shorting: I have very recently started shorting companies with a small % of my portfolio, since I believe there are still very overvalued stocks out there.

Given that 1Y treasuries have gone up from virtually 0% to 4.7% as of now, how much sense does it make to invest in companies with high PE ratios, some of which aren’t even growing aggresively anymore, during a period of economic stagnation. In my opinion, it doesn’t make much sense to assume the risks and volatility of investing in those equities when you can make a 4.7% ‘risk-free’. There are also other factors which I believe make shorting equities much more compelling than a year ago which I’ll write about in the near future.

Finally, I wanted to point out a few books about investing that I’ve liked.

The first one is  Capital Returns: Investing Through the Capital Cycle from Edward Chancellor. I feel like this book is a must read if you are investing in commodities, it explains very well how capital cycles work, although it gets a bit repetitive towards the end, it’s still a great book. Then I also read a few books written by Jim Rogers, which are a nice mix in between adventures and investing, and I found them very enjoyable to read aswell.

That’s all for now, this will be my 4th year investing in individual equities and my 2nd year doing it full time, I’m genuinely curious and excited to see if I can keep outperforming the market.

 Finally, as I said I’m going to start writing articles consistently this year, so if you enjoyed reading this article make sure to subscribe to the newsletter and follow me on Twitter (https://twitter.com/NateValuetw).  The next article will be an update on Geo Energy Resources and should be published by the end of this week.

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For spanish speakers I’ve also made a YouTube video about this article:

Here’s the link to the article I wrote on the 10th of October on Grindrod:

Therefore let’s just start with dry bulk and Grindrod:

FFA’s have dropped sharply since I published the article on Oct 10 due to various reasons, but mainly due to China’s slowdown in the property sector which has made Chian’s steel output hit a 4-year low.

https://www.spglobal.com/platts/en/market-insights/latest-news/metals/110921-chinas-oct-steel-output-declines-for-sixth-straight-month-hits-44-month-low-cisa

China also ramped up their local coal production so that has probably affected aswell, since more local production = less coal imports. That coupled with Q1 being the seasonally weakest quarter and the Beijing winter olympics taking place in February has caused a sharp drop in rates. Despite the drop, Supramax rates have been holding up relativelly well compared to Capes and Panamaxes, and they are currently the most expensive dry bulk ships to charter despite being the smallest of the three (good for Grindrod).

The decline in FFAs is still very significant for supramaxes. Even though current rates (25k for Q4 - 20k for Q1) are still very profitable for supramaxes, they have gone from being literal money printers at 35k+ to being pretty good rates. At 20k Grindrod would currently trade at a PE of around ~3, which is still very low.

Supramax FFA’s in Oct 10

Finally, let’s compare Grindrod with the peers I used in the article (EGLE & SB). SB has seen the biggest drop, and to be honest, it’s completely justified. Safe Bulkers was very overvalued compared to peers as I suggested in the article. They also released some pretty mediocre results and haven’t still implemented a dividend policy. To be honest, I would not be surprised if SB drops even further, I think it’s completely justified that they should trade at a discount to other peers like Eagle and Grindrod.

Eagle has also dropped but they recently paid a 2$ dividend so the real drop including dividends would be slightly lower. Even though I am not a big fan of Eagle due to its convertible bond I think it might be worth making a position at current prices.

At the same time Grindrod is pretty much even, the share price is hovering around 14$, so 1 to 2% down. Grindrod has been one of the top dry bulk performers over the past month.

When I made the article I thought Grindrod was simply undervalued in general (due to how high FFAs were in Q4/Q1 back then) and also undervalued relative to peers. Conditions have changed and FFAs are a 30% lower now, Grindrod’s stock has outperformed peers and, even though I would still pick Grindrod out of these three companies, I think the undervaluation gap compared to peers is not nearly as big as it was. If I had to pick a dry bulk company to own long-term I’d definitely choose Grindrod but if you are looking to trade the stock I am not sure Grindrod has much room to go up in the short term unless rates go up. I am actually very surprised to see Grindrod trading so well relative to peers despite rates falling down.

Looking back at what I wrote in the article I think it was very accurate. Grindrod generated a little over a 15% of their market cap in this quarter, will likely generate around a 20% in Q4, and the market is starting to realize they definitely don’t deserve to trade at a discount to peers. Despite dry bulk rates crashing hard over the past month the stock is up over this time period.

Overall thoughts on 3Q results:

Good results, even though I really don’t think they are that surprising, as I modelled in the article the EPS are quite close, even though my model gave them a slightly higher EPS my numbers are usually +-10% around the actual EPS, and I did not take into account that most companies would have higher expenses due to higher bunker prices, so I missed the EPS by a bit more than 10% on Eagle, 5% on Grindrod and missed SB by quite a lot aswell.

Peer comparison and outlook from 10th of October

They have also paid a dividend of a 30% of their net income as their dividend policy states and purchased 91,871 shares during the third quarter (even though I already mentioned that in the article).

Overall good results, good outlook, not very surprising in my opinion given the outlook they gave.

Grindrod’s outlook: Based on 3rd quarter operating days they have fixed a 78% of their handysize days and a 70% of operating days for Ultramax.

As I mentioned in the article, Grindrod was very likely to outperform peers in the future due to their JV acquisition. Grindrod’s stock would have needed to rise a 50% (21.5$/sh) to trade at the same annualized PE (based on 3Q) as Eagle on the day I published the article (10th of Oct).

Something that has caught my attention is that they have released their purchase option prices and daily time charter rates. As I mentioned in Grindrod’s article I think their purchase options are one of their main appeal over other dry bulk companies, since they can easily reduce their breakeven on ships they have already been operating for a few years at prices below market rates.

From these prices I’d say the most attractive purchase right now would be the IVS Naruo, a 2014 Supramax for 16.1M $. Its daily charter-in rate is much higher than the IVS Pinehurst and the purchase price is 2M below Pinehurst, so I think that’d be the one that’s most attractive to buy at the moment. Pinehurst is also quite attractive to buy at 18M $. Then I’d say the most attractive buys would be the IVS Atsugi and IVS Pebble Beach, since they are ships from 2020 and its purchase option is almost the same as the IVS Hayakita (2016-built).

Even though ship prices have probably fallen a bit since rates have crashed these are the latest sales from Seasure 12th of Nov report:

A 2016-built Ultramax was recently sold for 28.5M$ and two 2012-built for 22M$, so their purchase options are definitely valuable.

As I’ve also highlighted in their charter-in costs, the average of their TC-in rate is around 12,500$ (excluding Pinehurst) whereas the IVS Pinehurst charter-in cost is ‘only’ 9,000$.

What about the cost to operate their owned fleet?

I’ve used numbers from this quarter to calculate their OPEX+Interest expense per day per ship, which amounts to ~6700$/day. I’ve excluded G&A per day costs since those are company-based expenses and I guess not included in the charter-in costs.

With this number I’ve calculated how much would Grindrod eventually save if they were able to execute all their purchase options. I’ve used 7500$ for their owned fleet costs (I like to run conservative numbers), and they’d save 2M$ per quarter, which is a decent amount.

Conclusion:

I think Grindrod is still attractive at current prices relative to peers, but dry bulk rates have crashed so I think Grindrod’s stock will probably trade close to the sentiment in dry bulk freight markets in the short term. What I mean by this is that I think Grindrod is still slightly undervalued compared to peers (despite the recent stock outperformance), but the dry bulk freight fundamentals look a bit uncertain for the next months. I would say after Q1 rates will probably go back to pretty high levels (25k$+ probably), but given the uncertainty around China’s property market I am not sure if they will get back to the levels we’ve seen this year (35k$) in 2022.

 Fourth quarter results should be better than this quarter (2.5$+ EPS probably), even though they still have around a 25% of open days for their fleet and charter rates are now lower than their outlook, so their 4th quarter TCE will probably be lower than their outlook.

Overall, Grindrod is still attractive but I think it was a much better buy back in October 10th based on peer valuation and dry bulk market fundamentals.

That’s it for now, I’ll post another article with my thoughts on the coal market and Geo Energy Resources by next week.

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