Asia Dragon (DGN), formerly known as Edinburgh Dragon, aims to identify well-managed, world-class businesses in Asia and buy them when they are on attractive valuations. The management team at Aberdeen Standard Investments, headed by Adrian Lim and Pruksa Iamthongthong, take a long-term approach to investing. They aim to be an active, engaged shareholder, encouraging good corporate governance and alignment with other ESG goals.
The trust has performed strongly since implementing a number of changes to the process in 2017 and 2018, bringing to an end a period of underperformance. The essentials of the process remain the same: identifying companies with low leverage, sustainable earnings and strong competitive positions. Following a period of poor performance in 2015, the analyst team has been reorganised, a greater emphasis placed on examining the downside risks for stocks and the weighting to technology stocks and to China has been steadily increased.
The process is bottom-up, and so companies are picked on their own merits rather than to gain access to a theme, country or industry. Nevertheless, consumption growth, urban development and technology are areas the team find particularly exciting.
DGN is one of the largest Asia-focussed trusts with total assets of £627m. The management team is locally based, with the two managers based in Singapore, and contains over 50 investment professionals, some with extensive experience.
The trust has consistently traded on a double-digit discount in recent years, despite the recent recovery in performance. High-growth strategies have tended to be favoured by the market, while DGN has quality and value exposures which have been less in favour.
The trust has a total return objective, and so the board does not commit to maintain or grow the dividend. Although the payout has grown steadily in recent years thanks to growth in earnings, the board does not explicitly target a growing dividend and the yield is just 1.2%.