New wants and needs matched by rising incomes
Smaller companies becoming larger over time
At Scottish Oriental, what excites us most about the portfolio is that we own smaller companies across Asia which have the potential to emerge as much larger businesses in future. They operate in underpenetrated sectors in large markets, which offer a long runway for growth. We believe these companies can grow multiple times their current size, as income levels per head of population (per-capita) across Asia continue their steady rise. We highlight a few of our key holdings below which could benefit from the changing demands in Asia.
Moving up the hierarchy of needs
A category where we see attractive growth opportunities is cooling products. In India, demand for air-conditioners is growing rapidly as heatwaves become more commonplace. With temperatures often breaching 40°C in the summer months, the use of air conditioners to cool people’s homes and workplaces is no longer considered a luxury – it is becoming a necessity.
A category where we see attractive growth opportunities is cooling products. In India, demand for air-conditioners is growing rapidly as heatwaves become more commonplace. With temperatures often breaching 40°C in the summer months, the use of air conditioners to cool people’s homes and workplaces is no longer considered a luxury – it is becoming a necessity.
Philippine Seven Corporation is the exclusive franchise operator for 7-Eleven stores in the Philippines, with a market cap of just US$1.4bn*. Under the leadership of Jose Victor Paterno, who comes from the founding family of the business, Philippine Seven has built a dominant position in convenience stores, with over 4,000 stores across the country and 58% market share – more than twice as large as its nearest competitor. The management has also broadened its product range to serve the evolving needs of consumers, such as fresh coffee and meal options as well as basic financial services.
We expect double-digit growth for the category, as air-conditioners become more important in the hierarchy of needs among Indians and is matched by rising incomes.
We expect double-digit growth for the category, as air-conditioners become more important in the hierarchy of needs among Indians and is matched by rising incomes. This should benefit Blue Star, a leading air-conditioner manufacturer in India, serving the consumer and projects segments. The company has experienced rapid growth in demand for air-conditioners and has continued to gain market share by optimising its product portfolio and expanding its distribution. The company’s product strategy has been twofold: focusing on the premium end of the market and geographic expansion.
Blue Star has built a formidable brand in the high-end segment since its establishment more than 80 years ago. It then expanded into North India with more affordable products and a broader distribution network, which grew its market share. Consumer financing, which now accounts for 60% of air-conditioner sales, has further expanded its reach, especially among first-time buyers. Meanwhile, its projects business has benefited from strong demand in infrastructure development, in areas such as metro rail projects and data centres.
Services too are seeing a boom, as incomes rise and consumers’ basic needs are met. Private healthcare, education, travel and entertainment are all expanding rapidly, driven by a more discerning consumer base. For example, the health insurance industry in India is expected to grow rapidly over the next decade, due to the limited availability of quality medical care from government healthcare facilities. This should benefit Niva Bupa Health Insurance, a leading health insurance company in India, 63%-owned by Bupa.
Another example is DPC Dash, the exclusive franchise operator of Domino’s Pizza in China. While Domino’s has been present in China since 1997, a group of entrepreneurs led by the current chairman acquired the franchise in 2010 and began expanding the business. It has grown rapidly in recent years and now has over 1,000 stores in more than 30 cities. In comparison, Yum China, the largest restaurant group in China, has more than 15,000 stores, which suggests there is plenty of room for DPC Dash to grow.
Services too are seeing a boom, as incomes rise and consumers’ basic needs are met. Private healthcare, education, travel and entertainment are all expanding rapidly, driven by a more discerning consumer base. For example, the health insurance industry in India is expected to grow rapidly over the next decade, due the limited availability of quality medical care from government healthcare facilities. This should benefit Niva Bupa Health Insurance, a leading health insurance company in India, 63%-owned by Bupa.
With over 30 general insurance companies operating in the segment, Niva Bupa is likely to consolidate among the market leaders. It has been gaining share consistently, with its share of health insurance premiums rising from 1.8% to 4.2% over the last decade*. With support from its parent, and initiatives related to strengthening its distribution reach and service quality, this is expected to continue. The company has a strong track record of profitability, with a combined ratio below 100% and conservatively managed investment portfolio. The business has potential to grow several times its current size over the long term.
A long history of investing in Asian small caps
At Scottish Oriental, our investment approach is aimed at preserving capital and growing it sensibly. This approach has remained steadfast since the Trust was established in 1995. We construct the portfolio by focusing on specific company quality over broader macroeconomic factors, meeting with hundreds of companies each year to seek out high-quality businesses with competent management teams and an established track record of performing well in different business environments.
After three decades of investing in Asia, we have built strong networks across the region. We are long-term investors, with an investment horizon of at least five years (and typically beyond), which means we are often viewed favourably by the owners and management teams of these companies as a long-term stakeholder.
We are excited about the long-term outlook for Scottish Oriental’s holdings and believe that they will continue to provide investors with attractive growth opportunities in the years ahead.
* All company data herein retrieved from company annual reports or other such investor reports. As at 31 August 2025 or otherwise noted.
About Scottish Oriental Smaller Companies Trust plc
Scottish Oriental is one of the longest running investment trusts that invests in Asian smaller companies.
Risk factors
Capital at risk. The value of investments and any income from them may go down as well as up and are not guaranteed. Investors may get back significantly less than the original amount invested.
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In the UK, issued by First Sentier Investors (UK) Funds Limited which is authorised and regulated by the Financial Conduct Authority (registration number 143359). Registered office Finsbury Circus House, 15 Finsbury Circus, London, EC2M 7EB number 2294743.
Scottish Oriental Smaller Companies Trust plc (“Company”) is an investment trust, incorporated in Scotland with registered number SC0156108, whose shares have been admitted to the Official List of the London Stock Exchange plc. The Company is an alternative investment fund and has appointed First Sentier Investors (UK) Funds Limited as the alternative investment fund manager for the Company. Further information is available from Client Services, First Sentier Investors (UK) Funds Limited, Finsbury Circus House, 15 Finsbury Circus, London, EC2M 7EB or by telephoning 0800 587 4141 between 9am and 5pm Monday to Friday or by visiting www.scottishoriental.com. Telephone calls with First Sentier Investors may be recorded.
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