abrdn Asia Focus plc

Legal Entity Identifier (LEI): 5493000FBZP1J92OQY70

ANNOUNCEMENT OF UNAUDITED HALF YEARLY RESULTS

for the six months ended 31 January 2025

abrdn Asia Focus plc, a £522m company that offers investors a unique portfolio of high-quality, well-researched Asian fast-growing businesses, not represented in mainstream funds, today confirms its unaudited half yearly results for the six months ended 31 January 2025.

"Smaller companies are poorly researched and less correlated to global markets. Our strategy has delivered better returns and lower volatility than the Asia large and small cap indices." Gabriel Sacks, abrdn Asia Limited

Highlights during the reporting period for abrdn Asia Focus plc (the "Company") include:

·      Share price total return: +8.8%

·      Net Asset Value ("NAV") on a total return basis: +7.1%

·      MSCI AC Asia Ex Japan Small Cap Index (the "benchmark"): -1.9%

·      Outstanding long-term performance record: NAV total return since inception (19 October 1995): +2670.0%

·      AIC ISA millionaire: abrdn Asia Focus plc is the best performing Asia investment trust that would have made investors £1,000,000 if they had invested their full ISA allowance from 1999 to 2025

·      Two interim dividends paid in the first six months of the Company's financial year of 1.6p per Ordinary share. The Board has set a target dividend of at least 6.42p per Ordinary Share for the financial year ending 31 July 2025

Krishna Shanmuganathan, Chair of abrdn Asia Focus plc commenting on the review period, said:

"abrdn Asia Focus' portfolio is unique and it is not possible to replicate the exposure to these fast-growing, often unheard of smaller companies through passive investing. It is where active stock picking really delivers genuine alpha through unearthing these hidden gems. Indeed, it is testament to the Company's investment managers' stock picking approach of identifying high-quality companies with robust business models and sustainable growth prospects which has contributed the bulk of the underlying portfolio's outperformance against the benchmark. In addition, the investment team continues to leverage their deep local insights and rigorous research process to uncover opportunities to deliver attractive returns over the long term.

"More broadly, we maintain our view that many investors are still underestimating the benefits of allocating part of their capital to Asian small caps which have proven to be less correlated to mainstream equities and have offered superior returns to Asian large caps. Indeed, it is quite telling that abrdn Asia Focus was recently once again included among the top 6 investment trusts in the UK that would have returned more than £1 million for ISA savers who invested their entire allowance each year since 1999, as announced by the Association of Investment Companies."

Performance Highlights

Financial Highlights

Chair's Statement

I am very pleased to announce that your Company delivered strong performance against both the Asian small-cap and large-cap market benchmarks over the six-month period to 31 January 2025.

Your Company's share price delivered +8.8% while the net asset value ('NAV' diluted) grew by 7.1% in sterling terms, both on a total return basis including the reinvestment of dividends. This compared very favourably to the MSCI AC Asia ex Japan Small Cap Index's total return of -1.9% in sterling terms and the larger cap MSCI AC Asia ex Japan Index's total return of 6.4%.

The performance was even more welcome considering what a turbulent six months it was for global markets. Significant noise around geopolitics, tariffs and the interest rate outlook resulted in heightened volatility over this period.

Investment Performance

Your Company's portfolio is unique and it is not possible to replicate the exposure to these fast-growing, often unheard of, smaller companies through passive investing.  It's where active stock picking really delivers genuine alpha through unearthing these hidden gems.  Indeed, the Manager's stock selection contributed the bulk of the underlying portfolio's outperformance against the benchmark. Here, I would highlight India, where your Manager's stock choices performed well; especially Vijaya Diagnostics in the healthcare space and KFin Technologies, a capital markets infrastructure business, given their robust results, good margins and continued prospects for growth.

Korea also merits a mention, where your Manager navigated a challenging environment of extreme political turmoil, including a declaration of martial law followed by a swift impeachment of the President. Again, stock selection was strong, with notable contributions from Park Systems, which develops highly specialised microscopes primarily for advanced chip manufacturing, and Hyundai Marine Solutions, a business that provides maintenance services for the shipping industry.

In China your Company saw some strong stock performances, including positive contributions from Zhejiang Shuanghuan Driveline, an industrials business focused on gear manufacturing for electric vehicles and Tongcheng Travel, one of China's leading online travel platforms.

Your Investment Manager

All of the above is a testament to your Manager's stock-picking approach of identifying high-quality companies with robust business models and sustainable growth prospects. The investment team continues to leverage their deep local insights and rigorous research process to uncover opportunities to deliver attractive returns over the long term.

In line with this, your Manager continues to add depth to its small-cap capabilities in Asia, with the recent hires of two further research analysts with a primary focus on small and mid-cap companies in India as well as a senior technology analyst. These new additions provide further confidence in your Manager's commitment to Asia, where it is well known for its expertise.

More detail on the portfolio and the Manager's views on the markets and outlook for Asia are contained in the Investment Manager's Report on pages 6 to 8 of the published Half Yearly Report for the six months ended 31 January 2025.

Protecting Shareholders' Interests

The Board believes that your Company's discount to NAV is wider than merited by its future prospects. This is despite proactive steps taken as part of the strategic review in 2021, in particular the introduction of a five-year conditional tender opportunity, the linking of investment management fees to market cap rather than NAV and the move to progressive and more frequent dividends.

In order to show continued commitment to Shareholders' interests, the Board has now significantly stepped-up share buybacks over the past half-year to not only provide additional liquidity but seek to limit the share price volatility for shareholders. During the period the Ordinary shares have traded at an average discount of 16.4% and we have bought back 3,355,000 Ordinary shares (2.2% of the Company's outstanding shares) in the market at a discount to the prevailing NAV per share (six months to 31 January 2024: 2,022,500), ending the period on a discount of 13.1%.

We will continue to look for opportunities to improve the market perception of the Company, while believing that this will over time be primarily determined by the investment performance achieved.

We are pleased that performance remains well ahead of the benchmark since 1 August 2021, when the conditional tender offer was put in place covering the five years to August 2026, with the portfolio's NAV total return per share 7.2% ahead of the benchmark as at the end of January 2025.

Over the longer term, your Company's NAV total return per share has returned an outstanding 2,667% in absolute terms since inception, reflecting your Manager's excellent investment track record of delivering sustained returns to shareholders. This compares very favourably against returns of 632.6% for the large-cap benchmark (MSCI AC Asia Pacific ex Japan Index), and 573.4% for the blended small-cap benchmark index.

Meanwhile, for holders of the Company's convertible unsecured loan stock (CULS) that are soon to be maturing in May 2025, I would draw your attention to the fact that the CULs have been 'in the money' (ie the share price has traded at above the level of the conversion price) since the turn of the year, given the conversion price of £2.93 and with the share price at £2.98 as of 31 January 2025. Hence, I would welcome holders of the CULS who opt to convert their CULS to equity and urge them to consider the benefits of remaining longer term equity shareholders in the Company given its compelling track record and continued prospects for growth. The Board is also considering overall gearing levels in light of the CULS maturity on 31 May 2025 and is actively considering available options for replacing or retiring that debt. You should expect more information on this in due course.  As at 27 March 2025, the latest practicable date, the Company's net gearing stood at 10.5%.

More broadly, the Board maintains its view that many investors are still underestimating the benefits of allocating part of their capital to Asian small caps which have proven to be less correlated to mainstream equities and have offered superior returns to Asian large caps.  Indeed, it is quite telling that abrdn Asia Focus was recently once again included among the top 6 investment trusts in the UK that would have returned more than £1 million for ISA savers who invested their entire allowance each year since 1999, as announced by the Association of Investment Companies.

Revenue and Dividends

Your Board continues to be firmly committed to the enhanced and progressive dividend policy recognising the importance of the Company's dividend income for many shareholders in addition to its strong capital growth. Underlying earnings per share for the period amounted to 2.6p (2024: 3.4p), slightly down as the portfolio is further tilted towards growth stocks, but revenue from the portfolio continues to cover the Ordinary dividend, with the shares yielding 2.2%, as of 31 January 2025 (2.5% including special dividends). Two interim dividends have been paid in the first six months of the Company's financial year. These interim dividends of 1.6p per Ordinary share were paid on 20 December 2024 and 21 March 2025. The Board has set a target dividend of at least 6.42p per Ordinary Share for the financial year ending 31 July 2025. The Board plans to maintain the progressive policy of the last 29 years in order to provide shareholders with a regular dividend and dependable level of income alongside the Company's capital growth prospects.

Outlook

Investors may very well be feeling unsure about markets at the moment. However, the fundamentals of the portfolio remain solid, growth in Asia is still healthy and companies continue to offer exceptional potential for outsized returns.

The attractions of Asian small companies continue to be compelling. These companies often operate in niche markets with high growth potential and are less exposed to global tensions. The diverse economic landscape of Asia, coupled with the increasing consumer base, provides a fertile ground for smaller companies to thrive.  Furthermore, valuations are a supporting factor for continued investment, which appear reasonable relative to historical levels and when compared to other major markets elsewhere, particularly the US.

Your Manager continues to focus on the quality of the businesses in the portfolio and their earnings potential and in these two respects, your Manager and the Board continue to see great opportunities for growth and compounding wealth creation, just as we have in the past.

Krishna Shanmuganathan
Chair,
28 March 2025

Investment Manager's Review

Overview

After ending on a strong note in the previous financial year, Asian small caps retreated by 1.9% in sterling terms over a challenging six months to January 2025. A triumvirate of macroeconomic concerns, geopolitical uncertainty after Donald Trump's US presidential election win and tariff risks for China, as well as US monetary policy developments were brought to bear on investor sentiment. Some markets also faced the added complication of idiosyncratic or country-specific factors, such as Korea which was thrown into political turmoil.

Across the region, we would highlight a reversal in fortunes for two of the region's biggest markets - China and India. Small caps in China were by far the best performers, after a tough prior 12 months as hopes of a rapid post-pandemic rebound faded and domestic macroeconomic challenges came to the fore. The central government made a major policy pivot in September towards targeted stimulus measures to stabilise a still-weak property sector as well as support domestic consumption and the broader economy. This resulted in a sharp rally. Towards the end of the review period, news of a low-cost Chinese artificial intelligence (AI) model, DeepSeek, led to a rally in AI-related stocks and boosted sentiment in China, while triggering a sell-off in US tech and the associated supply chain in Taiwan as expectations for data centre capex and tech hardware demand came under scrutiny.

In contrast, after a stellar prior run on a buoyant economy, growth in the corporate sector, and substantial foreign capital inflows, Indian small caps were among the biggest losers during this period on the back of profit-taking and a continued sell-off in small- and mid-cap stocks. The main reasons for the pullback have been a weakness in consumer demand and a slowdown in capital expenditure, amid the shifting policy priorities for the government following elections in calendar 2024. Most importantly, earnings growth started to moderate in the last few quarters.

Elsewhere, in South Korea, political turmoil resulted in extreme market volatility, and the market was among the key laggards. The country saw then-president Yoon Suk Yeol declare martial law, the first ever imposition since Korea became a democracy in 1987. This sparked public anger and street protests but proved short-lived as the National Assembly vetoed Yoon's imposition. Yoon's impeachment and suspension from office followed soon after.

Portfolio Review

The portfolio significantly outperformed its closest reference benchmark by 8.8% over the review period. This was due to a few key areas of relative strength.

In India, our underweight to the market, a laggard, and our stock selection there contributed significantly to performance. Among our holdings, the share price of Vijaya Diagnostic Centre, a leading healthcare services company, hit an all-time high in August following robust quarterly results. Vijaya's good showing reflected its strong execution and differentiated integrated business model that led to the company maintaining its growth lead over its peers. Another solid performer was KFin Technologies, buoyed by continued momentum in investor flows and excitement about the potential for overseas expansion of its core registrar services. Its fundamentals remain sound, and its recent results exceeded expectations with continued prospects for growth.

Elsewhere in Korea, our underweight to the market relative to the benchmark benefited performance, given the above-mentioned political woes. Our holdings also contributed to returns. Specialised microscope maker Park Systems Corp's share price outperformed the local market despite lower-than-expected revenues for the third quarter, as sentiment remained positive on the company's ability to continue to grow equipment sales. Demand for industrial-use atomic force microscopy is accelerating from a low base, driven by the transitioning to more advanced and smaller semiconductor manufacturing technologies in the foundry and memory industry. Hyundai Marine Solution, an engineering services company that caters to the shipping industry, also did well, as its results tracked well ahead of previous estimates. Its aftermarket division drove robust growth with volume, pricing, and mix all trending positively. The retrofit business, although in transition mode, showed a building backlog with multiple projects in the pipeline.

Finally, China including Hong Kong was also a key performance driver. Strong stock selection drove returns. Gear and reducer manufacturer Zhejiang Shuanghuan Driveline rallied on anticipation that it will be a key beneficiary of demand from humanoid robotics. Dah Sing Financial also outperformed as it delivered a beat on its first-half earnings, with resilient net interest margins and an outsized contribution from its insurance partnership with Sun Life. It also announced a substantially higher interim dividend, reinforcing its robust financials despite the challenging economic environment in Hong Kong as well as management's commitment to improving shareholder returns. Another contributor was Precision Tsugami (China) Corp, which sells high-end computer numerical control (CNC) machine tools. The company is benefiting from higher CNC adoption, market share gains, and margin expansion, with recent revenue and operating profit exceeding consensus expectations while the order momentum remained very strong.

Meanwhile, we remain focused on our objective of investing in a diversified portfolio of around 50 well-run companies with industry-leading positions. Over the review period, we continue to refine and refresh our portfolio towards holdings with better growth prospects, steadier cash flow and clearer earnings visibility amid a still-uncertain backdrop.

In India, we continue to find smaller companies across various sectors that merit a place in the portfolio. India is home to many attractive companies with competitive business models, high returns and appealing long-term growth prospects. We initiated a position in Cholamandalam Financial Holdings, a diversified financial services group. The stock trades at a substantial discount to its subsidiary, Cholamandalam Investment and Finance, which is a high-quality lender in India that is rapidly broadening its product portfolio and loan exposures.

We also introduced Newgen Software Technologies, which helps companies organise their digital documents, streamline their workflows, and enhance how they communicate with customers. We view it as a niche software company backed by a solid product offering that is highly rated by industry consultants. Execution has been strong, evident from its successful track record in onboarding and retaining clients in its core markets, namely India and the Middle East.

Another new holding was Phoenix Mills, a leading retail-led developer and operator, following a correction in its share price that made its valuation more palatable. The company has quality malls in top-tier and state capital cities as well as a good pipeline of new assets to be launched over the next few years. This provides a healthy stream of current recurring income for the business that should steadily grow.

The last addition was Poly Medicure (PLMD), a founder-owned business that sells consumable medical devices. PLMD has a broad product portfolio, with infusion therapy being the largest segment, but it is also looking to expand further in cardiology and critical care. The company is on track for double-digit revenue growth in fiscal year 2025 and beyond with management expecting strong growth in India due to new launches and an expanded marketing team. It is also investing in several new facilities for export to Europe and the US. To fund these initiations, we sold out of a few companies in India including Map My India, Cyient and Medanta.

Elsewhere in China, we introduced Kingdee International, which is the leader in enterprise resource planning (ERP) software products for SMEs in China. The company has first mover advantage and is poised to benefit from the rapid adoption of ERP software and cloud solutions, as SMEs become increasingly open to utilising home-grown digital technology. We also like the company's move to a subscription-based revenue model which is relatively unique among leading Chinese ERP software players and provides greater earnings resilience.

In Southeast Asia, we added a new holding in Philippine Seven Corp as a proxy for consumer exposure in the Philippines. The company runs 7-Eleven's dominant convenience store chain network in the Philippines, with scale, strong execution over the years and healthy cash generation. Competition exists but the industry has a good runway for growth given low levels of penetration. The retail format of convenience store chains has also worked well across the country, driven by rising urbanisation and a growing middle class. Its management seems forward-looking and has the benefit of being able to leverage off innovations across the global 7-Eleven network.

In addition, we bought Vietnam-based Mobile World, a consumer electronics retailer which has branched out into grocery. It is the country's biggest retailer with a broad store network and a first mover advantage in a country where informal food markets are still prevalent. We view it as an attractively valued company that is well placed to capitalise on the underpenetrated modern retail and e-commerce sectors, given the exciting growth dynamics as well as rising wealth levels in Vietnam.

Against this, we exited Alchip Technologies, Bangkok Chain Hospital, Credit Bureau Asia and Millennium & Copthorne Hotels (New Zealand).

Outlook

As we look ahead, the consensus is that Asia and emerging markets may face challenges due to Donald Trump's policies, tariffs, and interest rates. US deregulation and tax cuts could bolster the US dollar, which is unfavourable for Asia.

On the flip side, Asia's attractive valuations offer potential for upside surprises, driven by structural tailwinds. It is also encouraging to see a greater appreciation for shareholders, with the value-up theme being promoted by shareholders and authorities in South Korea and China. This has positively impacted our engagement efforts with companies across the region.

We remain positive on Asia, expecting that China may adopt more aggressive stimulus policies to mitigate the tariff impact. At the Two Sessions parliamentary meeting held in early March 2025, the Chinese leadership reiterated their pro-growth policy agenda with a particular focus on stimulating household consumption which should help unlock excess savings accumulated during the pandemic.

Elsewhere, Asian corporates are in good shape with low debt levels, strong competitive positions and a broadly favourable macroeconomic backdrop with little inflationary pressure. Challenges remain but the companies held in the portfolio have dynamic management teams, robust financials and high barriers to entry with globally competitive business models. They have fared well against several shocks in the past and we are very excited about their growth prospects looking ahead.

Gabriel Sacks, Flavia Cheong &
Xin Yao Ng

abrdn Asia Limited
28 March 2025

Disclosures

Investment Objective and Policy

Investment Objective

The Company aims to maximise total return to shareholders over the long term from a portfolio made up predominantly of quoted smaller companies in the economies of Asia excluding Japan.

Investment Policy

The Company may invest in a diversified portfolio of securities (including equity shares, preference shares, convertible securities, warrants and other equity-related securities) predominantly issued by quoted smaller companies spread across a range of industries and economies in the Investment Region. The Investment Region includes Bangladesh, Cambodia, China, Hong Kong, India, Indonesia, South Korea, Laos, Malaysia, Myanmar, Pakistan, The Philippines, Singapore, Sri Lanka, Taiwan, Thailand and Vietnam, together with such other economies in Asia as approved by the Board.

The Company may invest up to 10% of its net assets in collective investment schemes, and up to 10% of its net assets in unquoted companies, calculated at the time of investment.

The Company may also invest in companies traded on stock markets outside the Investment Region provided over 75% of each company's consolidated revenue, operating income or pre-tax profit is earned from trading in the Investment Region or the company holds more than 75% of their consolidated net assets in the Investment Region.

When the Board considers it in shareholders' interests, the Company reserves the right to participate in rights issues by an investee company.

Risk Diversification

The Company will invest no more than 15% of its gross assets in any single holding including listed investment companies at the time of investment.

Gearing

The Board is responsible for determining the gearing strategy for the Company. Gearing is used selectively to leverage the Company's portfolio in order to enhance returns where and to the extent this is considered appropriate to do so. Gearing is subject to a maximum gearing level of 25% of NAV at the time of draw down.

Principal Risks and Uncertainties

The principal risks and uncertainties affecting the Company are set out in detail on pages 20 and 21 of the Annual Report and Financial Statements for the year ended 31 July 2024 and these have not changed.

They can be summarised under the following headings:

·               Shareholder and Stakeholder Risk;

·               Investment Risk;

·               Operational Risk

·               Governance & Regulatory risk; and

·               Major Events and Geo Political risk.

Macroeconomic risks arising from geopolitical uncertainty such as the ongoing conflict in Ukraine and tensions in the Middle East and Taiwan continue to present a significant risk to world markets. In addition to the risks listed below, the Board is also very conscious of the risks emanating from increased environmental, social and governance challenges. As climate change pressures mount, the Board continues to monitor, through its Manager, the potential risk that investee companies may fail to keep pace with the appropriate rates of change and adaption. In all other respects, the Company's principal risks and uncertainties have not changed materially since the date of the 2024 Annual Report.

Going Concern

The Directors have conducted a thorough review of the Company's ability to continue as a going concern and have also considered the revenue and ongoing expenses forecasts for the current year. 

The Board monitors the Company's covenant compliance and gearing levels regularly and is satisfied that there is sufficient headroom in place and flexibility if required.  The Board is mindful that the Convertible Unsecured Loan Stock 2025 ("CULS") is due to mature on 31 May 2025. The Board expects to be able to refinance the CULS if desired, by arranging a new bank facility, drawing down under the Loan Note Shelf Facility (which is uncommitted and subject to lender credit committee approval) or by arranging alternative finance. In the event that the Board chooses not to refinance the maturing CULS the Company will repay the CULS from portfolio sales.

The Company's assets consist of a diverse portfolio of listed equities which in most circumstances are realisable within a short timescale. The Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the next 12 months. Accordingly, the Board continues to adopt the going concern basis in preparing the financial statements. 

Directors' Responsibility Statement

The Directors are responsible for preparing this half-yearly financial report in accordance with applicable law and regulations. The Directors confirm that to the best of their knowledge:

·      the condensed set of financial statements contained within the half-yearly financial report has been prepared in accordance with Financial Reporting Standard 104 (Interim Financial Reporting);

·      the Interim Board Report (constituting the interim management report) includes a fair review of the information required by rule 4.2.7R of the UK Listing Authority Disclosure Guidance and Transparency Rules (being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements and a description of the principal risks and uncertainties for the remaining six months of the financial year) and 4.2.8R (being related-party transactions that have taken place during the first six months of the financial year and that have materially affected the financial position of the Company during that period; and any changes in the related party transactions described in the last Annual Report that could so do).

Krishna Shanmuganathan

Chair

28 March 2025

Ten Largest Investments

As at 31 January 2025

Portfolio

Investment Case Studies

Proya

In which year did we first invest?

April 2024

% Holding:

1.9%

Where is their head office?

Hangzhou, China

What does the company do?

It is a domestic player in the Chinese cosmetics market, known for its innovative products and strong market presence.

Why do we like the company?

Proya has established itself as one of the leading brand platforms in the Chinese cosmetics industry with a well-diversified product portfolio that includes skincare, make-up, and body and hair care products. We like it for its ability to adapt to market trends and consumer preferences with a strong commitment to Research & Development (R&D). The company has successfully developed a range of innovative products that specifically cater to the dynamic and evolving needs of mainland consumers. This has been a key driver of its success.

In addition, the company has a very strong online presence across various distribution channels, which gives it a significant advantage over peers and has helped to entrench its brand perception among younger consumers, particularly during Covid. Proya's core brand, which makes up the bulk of overall sales, is often ranked as the best-selling cosmetics brand across a number of e-commerce websites, which is testament to its strong market position. Management's strategy involves breaking down the core brand into niche skincare segments and focusing on "hero products" or bestsellers in each category. 

The company's focus on innovation also sets it apart from its domestic peers. It operates a shared R&D platform with key R&D centres locally in Shanghai and Hangzhou and an overseas centre in Paris. This one platform allows Proya to maintain its agility in product innovation and to use resources efficiently.

Regarding growth, China's cosmetics market has become the world's largest and Proya is well-positioned to continue gaining market share. Localisation trends have meant that their brands have gained traction at the expense of luxury Western brands such as L'Oreal or Estee Lauder which are more expensive and might not be suited to local tastes. Greater cost awareness and down-trading among mainland consumers have added to Proya's appeal.

Longer term, we believe that there is room for Proya to benefit from premiumisation in China as their product portfolio evolves and their price gap versus Western brands narrows. This would be positive for the company's profitability.

When did we engage Proya on ESG?

We last met Proya in June 2024.

What were the key areas of engagement?

Our engagement has been focused on enhancing disclosure practices and addressing issues such as the use of chemicals, packaging recycling, and testing practices.

What is the result of our engagement?

Proya achieved a triple ESG rating upgrade from MSCI from CCC to BBB in October 2022, reflecting its engagement with stakeholders as well as its commitment to sustainability and responsible business practices.  On the carbon front, Proya has worked with its supply chain partners to promote the green transition by improving environmental assessment standards and exploring low-carbon technologies. In 2023, the company agreed with its 10 key suppliers on carbon emissions management and released the "Together for a Zero Carbon Future" manifesto, committing to reduce carbon emissions by 2025.

Elsewhere, in procurement, Proya has also prioritised environmentally friendly materials, such as sustainably sourced paper, palm oil, eco-friendly inks, and coatings, to reduce the environmental burden during production. Notably, one of its branches (in Huzhou) obtained the Roundtable on Sustainable Palm Oil (RSPO) Supply Chain Certification (Mass Balance model) in August 2024, initiating the replacement of certified palm oil.

The company has also set up R&D centres in Longwu and Shanghai to focus on developing new, green, safe, and efficient cosmetic ingredients, thus enhancing its capabilities in fundamental research and independent development.

How has the company performed since we invested in it?

Since we invested in it in April 2024, the share price of Proya Cosmetics has fallen close to 9% in GBP terms (total returns), compared to the MSCI AC Asia ex Japan Small Cap Index's gain of about 3%. This reflects a more challenging period for Chinese equities although we expect consumer confidence to meaningfully pick-up in 2025 as the Chinese authorities accelerate policies to support economic growth and stabilise the property market which should help unlock the excess savings accumulated by Chinese households since the onset of the covid-19 pandemic

Phoenix Mills (India)

In which year did we first invest?

November 2024

How has the company performed since we invested in it?

Since we first invested in it in November 2024, the share price of Phoenix Mills has marginally fallen by 0.1% in GBP terms (total returns), proving more resilient than the MSCI AC Asia ex Japan Small Cap Index, which returned -7.6%.

% Holding:

1.4%

Where is their head office?

Mumbai, India

What does the company do?

Phoenix Mills is a leading retail-led developer and operator, with high quality malls in strategic locations across India's top-tier cities as well as a good pipeline of new assets to be launched over the next few years.

Why do we like the company?

The company is a prominent player in the Indian real estate market, known for its ownership, management, and development of large mixed-use properties typically anchored by a premium shopping mall. We like the structural growth drivers for the business given the lack of supply of quality malls in India alongside the country's rapidly growing wealth which should continue to support demand for malls that are in good locations and have an attractive tenant mix. We see Phoenix Mills as a good way to access consumption growth across India's largest cities, supported by management's strong execution over the years and the healthy cash-flow from its existing mall portfolio which can comfortably cover their investment plans for the next 3 years.

In terms of earnings prospects, the company's ability to buy prime land and develop high-quality retail and mixed-use properties has created a steady stream of rental income. This is supported by the management's focus on doubling the operational annuity portfolio area in the next five years. Annuity-type revenues are typically inflation-linked and means the financials for the business are much less lumpy than for ordinary developers which look to sell rather than own their completed developments. Additionally, the company's robust balance sheet, with a low net debt to equity ratio, supports its expansion plans without compromising financial stability. The company's strategic partnerships with the Canada Pension Plan Investment Board and the Government of Singapore Investment Corporation have further strengthened this position, reducing funding risks and preserving the balance sheet.

The company's 3QFY25 results showed a decent recovery in like-for-like consumption and rental growth. Management remains confident of the positive momentum, with new mall developments on track and continuous consumption growth expected to drive mid-teen earnings growth annually.

When did we engage Phoenix Mills on ESG?

We last met Phoenix Mills in February 2025.

What were the key areas of engagement?

We have been engaging Phoenix Mills on green buildings, energy management and water efficiency.

What is the result of our engagement?

Through our continuing engagement with Phoenix Mills, we are pleased with the company's progress in its ESG journey. On the green building front, one of its retail malls in India, Phoenix Citadel Indore, has clinched two prestigious certifications: the USGBC LEED Gold and the IFC EDGE Advanced Green Building Certification. This makes it the first retail asset in India to receive the IFC EDGE Advanced Certification, which recognises energy and water efficiency.

Phoenix Mills is also committed to increasing renewable energy through its operations. Two examples stand out. Green energy now accounts for about 30% of the energy requirement of its retail portfolio. The company has also installed EV charging stations in its malls located in Mumbai, Pune, Chennai, and Bangalore.

Finally, water conservation also matters, with the company implementing several water management initiatives, including the use of efficient water fixtures, wastewater treatment, rainwater harvesting, and the reuse of recycled water for HVAC, flushing, landscaping, and gardening. These efforts have resulted in significant water savings.

How has the company performed since we invested in it?

Since we first invested in it in November 2024, the share price of Phoenix Mills has been flat (-0.1% in GBP terms), proving more resilient than the MSCI AC Asia ex Japan Small Cap Index, which returned -7.6%. As relatively new shareholders of Phoenix Mills we are excited about the company's prospects given its unique portfolio of assets that are well-positioned to benefit from the rise of India's middle-class.

Condensed Statement of Comprehensive Income (unaudited)

Condensed Statement of Financial Position (unaudited)

Condensed Statement of Changes in Equity (unaudited)

Condensed Statement of Cash Flows (unaudited)

Notes to the Financial Statements

For the six months ended 31 January 2025

Alternative Performance Measures ("APMs")

Copies of the Company's Half Yearly Report for the six months ended 31 January 2025 will be posted to shareholders in April 2025 and will be available thereafter on the Company's website: asia-focus.co.uk *.

Please note that past performance is not necessarily a guide to the future and that the value of investments and the income from them may fall as well as rise and may be affected by exchange rate movements.  Investors may not get back the amount they originally invested.

* Neither the content of the Company's website nor the content of any website accessible from hyperlinks on the Company's website (or any other website) is (or is deemed to be) incorporated into, or forms (or is deemed to form) part of this announcement.

abrdn Holdings Limited

Secretaries

28 March 2025