Discover the Asian behemoths of the future while they are still startups

The portfolio manager of the Fidelity Asian Values trust, Nitin Bajaj, selects three Asian businesses for investment

My investment approach is based on patience, discipline, and diligence. We seek out reputable companies with capable management teams that offer a sufficient margin of safety at a reasonable investment. I concentrate on controlling absolute risk and minimizing losses during market downturns, which should eventually contribute to higher compound returns.

As a result, we typically steer clear of stocks with high multiples to earnings, start-ups, highly geared companies, cyclical businesses with peak margins, and thematic investments. This strategy has given the trust a high-quality, contrarian value tilt and a propensity to invest mainly in undervalued small and medium-sized businesses that are the "winners of tomorrow" before they achieve widespread recognition. Here are three instances.

Strong foundations for homes in India.

Housing loans for the building and acquisition of reasonably priced homes, with an average value of 12.5 million rupees (13,300), are offered by Repco Home Finance (Mumbai: REPCO). Its clients are mostly self-employed or salaried workers in low-wage industries with little job security, and they are typically found in smaller southern Indian cities and towns.

Even though over 50% of Repco's customers file taxes and 80% of its customers have credit bureau scores, banks and large mortgage lenders pay less attention to this market, which makes it obvious that Repco and other lenders have an opportunity to take advantage of it.

The management of Repco is also concerned with preserving the caliber of its assets, and credit scores are a significant factor in deciding the loan's cost. The price-to-book value (p/b) ratio of the stock is 0:6 and it offers a return on assets of nearly 3%. It's a high-quality company run by a competent staff.

With more than 3,000 dealers in its network, Surya Pertiwi (Jakarta: SPTO) is Indonesia's top distributor and manufacturer of sanitary ware. It is the sole distributor of the Japanese company TOTO in Indonesia. The business holds a 4050% domestic market share in sanitary fittings and a 6570% domestic market share in sanitary ware.

Sanitary ware is a fragile product with a high volume but low value, making long-distance transportation challenging. Therefore, there is little competition from Chinese peers in this sector. Our analysis projects that, with increased affordability, the Indonesian sanitary ware market may grow by 7% to 8% annually in volume terms over the coming years.

Demand is boosted by the relatively low market penetration of sanitary ware in the nation, which stands at 50% at the moment. The stock has a p/b ratio below one and a return on equity in the mid-teens. There is no debt on the balance sheet.

Chinese auto parts retailer Tuhu (Hong Kong: 9690) refers customers to its network of franchised auto repair shops via its app. Although it's a challenging industry, businesses that figure out the formula have good long-term growth prospects and high returns on investment because it's scalable and requires little capital. The market leader in China, where organized car parts retailing is still relatively new, is Tuhu.

In the next ten years, the company should be able to expand considerably, and the management team is strong. Although the company is in its early stages and has a net-cash balance sheet, and the stock is trading at a forward price/earnings ratio of 15, it is not a traditional value investment, but we are content with our position.