Integral Capital Pte Ltd is a Singapore-based independent boutique fund management company. It is founded and wholly owned by its principals, who have several decades of combined Asian investing experience. The firm operates as a Registered Fund Management Company ("RFMC") with the Monetary Authority of Singapore [MAS] under the Securities and Futures (Licensing and Conduct of Business) Regulations ["SFR"]. Integral Capital specialises in the equity markets in the Asia Pacific region, and currently is the manager of the Integral Asia Value Fund.
The investment objective of the Fund is to achieve superior investment returns over an investment cycle by investing in, mainly listed Asian equities or equity-related instruments. The Fund is benchmark agnostic and may increase its holding in cash when no suitable investment opportunity avails itself.
The Fund adopts a value approach in its investments. The Manager shares the philosophy that a portfolio of high quality businesses acquired at attractive valuations will generate good returns through an investment cycle. The quality of these businesses is reflected by their business franchise, management quality, corporate governance, balance sheet strength and growth potential. Besides identifying these businesses, the Fund will seek to acquire these stakes at a significant discount to intrinsic value and with a view to holding these positions for the long term.
The value approach is integral to the Fund's investment process. The Manager adopts a 'mosaic' approach by evaluating each investment from several different perspectives in order to determine its intrinsic value.
Some of the perspectives by which each investment is studied are:
- The quality of the company's business franchise as reflected by its market share, brand quality, gross and net operating margins, historical track record versus its peer group and its growth potential.
- Management quality, the level of corporate governance and their track record will also be key factors in ascertaining whether an investment in a company is appropriate.
- Other critical factors include the strength of the company's balance sheet, its debt level in relation to its business and its business relationship with its customers and suppliers.
- Some of the key valuation yardsticks which the Fund will use to evaluate fair value include using price-earnings ratios, price-to-book, price-sales, discount to net asset value, price-cash flow, Return on Equity, Return on Assets, Enterprise Value/EBITDA, discounted cash flow and dividend discount models.
The Fund's focus is on the Asia Pacific region which includes all Asian developed and emerging markets. The Manager firmly believes the economic resurgence of China, India and ASEAN, which are amongst the most populous regions in the world, will continue to create investment opportunities and will present long term growth opportunities for investors in the Fund.
The value approach requires the Fund to take a mid to long term investment horizon. The Manager agrees with Benjamin Graham's observation that markets operate as a voting machine in the short-term but work like a weighing machine in the long-term. Stocks are thus likely to be under-priced from time to time, either because of overall pessimism or negative corporate news which may be temporary in nature.
Investing is always about the future and the Manager is aware that all equity investments will carry a certain amount of risk. In addition, some Asian financial markets, which are still evolving in their disclosure and corporate governance requirements, may present other risks to investors. However, the Manager is of the view that assessing intrinsic value and requiring a significant discount before investing provides a 'margin of safety' which will minimize the risks involved and will manage the assets of the Fund in line with this philosophy. Investors however should still be mindful of the risks involved and be prepared to ride through swings in the market. The Manager will not be able to predict short term swings in the market but believes that patience in investing, more often than not, is rewarded.