All abord the London-Asia express

IC Tip Update
21 Dec 06

Still, in the financial sector, the share price performance of Aim-traded investment company London Asia Capital (TIDM: LDC) continues to disappoint despite the stellar progress the business has made in the past year. Most notably, the company successfully raised £50m for its London Asia Chinese Private Equity Fund and is now receiving management fees of 2 per cent of the net assets of the fund plus 20 per cent of any increase in the value of the funds assets. London Asia has also floated two of its investee companies since the start of the year, and importantly the value of its investments are significantly above book cost. What's more London Asia is corporate advisor to five Chinese companies that have floated on Aim, plus another eight that trade on Plus Markets and on China's largest private equity exchange. And the company is profitable, too, turning in pre-tax profits of £713,000 in the first six months of 2006 - five times the profits made in the same period in 2005. However, London Asia shares continue to languish a 17.5p, only marginally up on the 16.5p recommended buy-in price. That looks unwarranted as it is not only 17 per cent below the company's last reported fully diluted net asset value, but completely ignores the value of its asset management arm. Buy.