Emma Wall: Hello, and welcome to Morningstar. I'm Emma Wall and here with me today is Omar Negyal, manager of the JPMorgan Global Emerging Markets Income Trust, to give me his three stock tips.
Hello, Omar.
Omar Negyal: Hello.
Wall: So, what's your first stock?
Negyal: My first stock is called Delta Electronics. It's a Taiwanese technology company. So anyone who owns a laptop has got a very good chance of owning something made by Delta, because many years ago they carved out a dominant position in power supplies for laptops and PCs. And because they have a dominant position globally, they've managed to generate very good profitability from that business and that’s one reason it's a very successful company.
Wall: And what's the yielding at the moment?
Negyal: It’s a 4% yield company. So it really fits into our core kind of holding, because it's a 4% yield, which is good, higher than the market, but it is also generating decent growth going forward.
Wall: What's the risk with that stock?
Negyal: Well, the risk is that it has been related to the PC sector and there's a structural problem in the PC sector. But what I really like about this company is the management of the company realized this a few years ago and have successfully diversified into other areas. So, now it's competing, for example, in China in industrial automation, machinery with the likes of Siemens, and again it's doing that very successfully. So, it has developed new growth areas for the future.
Wall: What's your second stock?
Negyal: Mysecond stock is called Bidvest. It's a company in South Africa, and it's a very good example of a high dividend growth company. So, this is a lower yield than the previous stocks at 3% yield, but I think the growth of dividends going forward will be pretty positive.
Wall: And that growth offers a bit of inflation hedge then, doesn't it?
Negyal: Something you definitely need in South Africa. So this is a diversified industrial company. It operates over a wide, broad range of areas. But one very good example is the foodservices industry. It has got a very good position here. All it is doing is simply delivering on a wholesale basis food and ingredients to companies like hotels and restaurants. It's a kind of business where if you build a good network if you have economies of scale, you can be very profitable and Bidvest has done that very successfully.
Wall: I mean, that delivering of services – I know there has been some unrest in Africa. Is that a hindrance to the company?
Negyal: One thing this company prides itself on is its labor relations. If you look at the track record of the management, it's very, very good compared to some other examples in terms of the interaction between the company and the workforce. So, from that point of view, I don't really have any issues.
Wall: And what's your third stock?
Negyal: My third stock is a company called Tüpraş in Turkey. This is a refinery company. So a refiner may not be the most obvious dividend play, but this is a company where actually there is some structural advantages because of its dominant position in the country. So, it's able to generate high returns on equity. It is able to generate cash through the cycle and it pays that back as dividends to shareholders like us. So, that's achieving, even in a tough time today, a 6% yield.
Wall: That's pretty impressive. I mean Turkey and oil refineries, sort of, screams two risks for me there. It's the social unrest that's its going on in Turkey, but also how reliant on the oil price is that stock?
Negyal: As a refiner, clearly it's the downstream prices that are important. Turkey is very different from other emerging markets because there’s free pricing. So that's very good. It means the company has pricing power, and it is also competing against refiners from let's say the South of Europe, which are much less competitive. So, it's these advantages in terms of the operations which really add to the attractiveness of the company.
Wall: Turkey's political situation doesn't affect this stock?
Negyal: We don't think that's a major issue for this company. It's a dollarised business effectively. It is run by very good management team. It is owned by the Koç Group, where we have very good view on corporate governance. So a positive view there.
Wall: Omar, thank you very much.
Negyal: Thank you.
Wall: This is Emma Wall for Morningstar. Thank you for watching.
