Investment Trust Insider: which of last year's laggards are 2013's winners?

Last week’s article noted that some of the best-performing investment companies of 2012 were stocks that had previously disappointed. There is a long list of disappointing stocks to trawl through to identify what might surprise on the upside in 2013 but one I have been meaning to write about for ages turned out to be one of the worst-performing funds in 2012: Origo Partners.

The decline was dramatic – the share price fell from a high of more than 51p in June 2011 to 13.375p today; the stock was trading at more than 30p as recently as last March.

Rise and fall

Origo started life late in 2006 as Origo Sino-India, and was designed to invest in fast-growing Chinese and Indian private companies. Its share price collapsed as the credit crisis took hold and, in September 2009, it was merged with Origo Resources (a separate fund launched in November 2007, which had also fallen out of favour with investors).

At the same time, it moved its focus away from the Indian side of the business to China and changed its name to Origo Partners. The fund is now designed to be a play on China’s rapid urbanisation and industrialisation, the idea being that this will fuel demand for resources and a need for investment in renewable energy and clean technology. The portfolio is quite concentrated, with the top 10 investments accounting for 90%.

The company was expanded through a couple of share issues (June 2010, raising £20 million at 25p, and December 2011, raising £21 million at 36p) and an issue of $60 million of zero-dividend convertible preference shares in March 2011.

The preferences mature in March 2016, when holders can opt for $1.28 in cash or, at any time before maturity, choose to exchange them for ordinary shares at $0.95 each.

At the end of December 2011, Origo had net assets (less the preference shares) of $241 million; by September 2012, this had fallen to $202 million or 57 cents per share. This is the last published net asset value (NAV). While we can only guess at the likely NAV decline since then, it still seems likely Origo is trading at a substantial discount.

In 2011, the company initiated a $1.5 NAV buyback programme, which, while modest, should be NAV-enhancing. Net cash in September was $25.8 million, so there is room to step up share repurchases in future.

Origo is self-managed, with more than 50 employees and ongoing expenses (excluding performance fees) of about $6 million. The senior management positions are held by executive chairman Wang Chao Yong, chief executive Chris Rynning and chief financial officer Niklas Ponnert.