The Straits Times / The Business Times News on AsiaPharm

Will Templeton investment spur AsiaPharm?

Shares have risen 11% since TSEMF II bought 4.11% stake of 20m shares

(SINGAPORE) Is AsiaPharm Group in for a dizzy ride following the entry of Templeton Strategic Emerging Market Fund II (TSEMF II) as an investor?

The China-based pharmaceutical group has already risen some 11 per cent from May 3 after TSEMF II, headed by renowned fund manager Mark Mobius, bought a 4.11 per cent stake of 20 million shares at 80.32 cents apiece.

Last Thursday, AsiaPharm, listed in May 2004, closed at a high of 96.5 cents.

Shareholders are likely to be hoping for the same magic as Celestial Nutrifoods, also a China stock, which has risen more than four times, or some 320 per cent, since late last year when TSEMF II paid 44.4 cents per share for just over 5 per cent of the company in a share placement exercise.

Last Thursday, Celestial closed at $1.95, up 25 cents.

'Our reputation precedes us. It's quite useful to have this name but the name has to have some substance,' said Mr Mobius in an interview last week.

Still, he cautioned that it 'doesn't mean we won't make any mistakes as there are so many variable factors'.

Mr Mobius believes in taking an active role and getting closely involved with the management of the companies he invests in.

'The structure of investing is quite good . . . watching the company very closely and getting intimately involved,' he said.

In December, Templeton won the right to sit in on board meetings of Celestial, which raised questions of unfair preferential treatment.

'That's just as an observer . . . It's a very good thing for one of their own to be there,' said Mr Mobius, referring to minority shareholders.

Citing an example of how taking an active role has helped all shareholders, he mentioned a Templeton investment in Brazil where the founding family decided to charge a fee for the use of its name.

After Templeton protested, the idea was dropped, said Mr Mobius.

In AsiaPharm's case, Templeton does not have observer status on the board but 'our surveillance, whether we sit in on the board or not - is no less', he said.

Templeton does not interfere in the day-to-day management of the companies it invests in.

Its role is to offer advice and let the companies share its resources in areas such as knowledge of capital markets, corporate governance and investor relations.

'Our involvement raises the profile of the companies in the international community . . . We try to introduce AsiaPharm to other investors,' he said, adding that these investors could be capital investors or other companies that can do business, either as suppliers or customers .

To date, TSEMF II, launched in early 2005, has invested in two listed Singapore companies, and is currently worth about US$132 million. It is available only to institutions and sophisticated investors and makes strategic investments in both listed and unlisted companies or small companies in emerging markets.

Its mandate is to go into companies which are too small, or too illiquid and enhance their capability by boosting capital. As for AsiaPharm, TSEMF II took up a quarter of 20 million shares of its share placement exercise of 80 million new shares.

Its predecessor TSEMF I, which was started in 2000, grew to US$110 million and has generated returns in the high teens on an annualised basis.

Both the strategic funds are part of Templeton Asset Management Ltd (TAML) which is run by Mr Mobius.

TAML manages assets over US$27 billion and is a unit of Franklin Resources, a global investment management entity operating as Franklin Templeton Investments, which has assets of some US$490 billion.