Monday, March 27, 2017

JKG: Sharing is caring???

Sharing is CARING? Not in the dictionary.

This is what happened when an owner is already too rich and has too much food on the table.


Basically, the rights nobody dare to take and it is trading at RM0.005 - i.e. a price that cannot go lower anymore.

JKG Land, has a project in Segambut (formerly Goh Ban Huat's land). The project is called The Era, and it has a GDV of RM2.1 billion.

If nobody takes up the rights, the owner will just take all as in the circular, as the main controlling shareholder has underwritten all the rights issuance. It comes to RM151.7 million. Hence, my guess is that the owner will not even buy the OR as he can get the shares at 10 sen - why bother to even buy the 0.5 sen OR?


Talking about sharing wealth, philanthropy and one man takes all. They just do not jive.

My question is, what's the point of listing?


Saturday, March 25, 2017

Not all things on Alibaba (or Jack Ma) is great

When Jack Ma said that he is not taking salary being an advisor on Malaysian digital economy aspiration - he does not need to. How much that position pays anyway? There is a word of caution on getting too close and give up too much to these people.

When a person is rich, he is always a hero. That's a reality. Heroes are made from the winners, not losers.

In turning Malaysia as a digital free trade zone hub is great, but too much given to Jack Ma is potentially not good.

I would like to point to the event from these articles where one can read from here, here, here.  You can also find out the event, by googling "Jack Ma Yahoo Alipay".

That event literally, puts into contention that Jack Ma transferred the entire Alipay into his own holding - and both its largest shareholders being Yahoo and Softbank claimed that they did not know about it. In the western world, there would be lawsuits, but in China it is different. Note that Alipay is worth in excess of USD50 billion today. That's a big loss to Yahoo.

Shall I say, in that event, there is this "40 thieves" element in Alibaba. If he did not do wrong, why would he gave up some portion of return to Yahoo in the event of IPO - only later when Yahoo complained?

One should note that there is NO WAY these kind of things can be churned out in most parts of the world except China. When your investors are Yahoo and Softbank, there is no way I can even dare to dream of doing this, but he did it.

Jack Ma is a businessman and a Chinese (from China) man. There is this saying, "The only thing straight about a China man is the hair."

This is the kind of person where our Malaysian government is dealing with. He is a businessman and again a China man. Of course, you welcome him, he will come - he already has business intentions here by virtue of buying stake in Lazada. He has nothing to lose but much to gain.

On a side note, I also noticed that in today's article Thestar, What's cooking in penny stocks, it was mentioned:

Using these big numbers and the China factor, blogs have started talking up the likes of Dataprep Holdings BhdGHL Systems BhdRev Asia BhdCuscapi Bhd, Malaysia Airport Holdings Bhd, AirAsia Bhd, DKSH Bhd and Tropicana Bhd, among others.


Airasia, DKSH and Tropicana are linked to my article. I hope that the writer from Star can distinguish a joke and a serious opinion. While Airasia could benefit a little, obviously, DKSH and Tropicana have nothing to do with the DFTZ! The only thing that can be positive from there is that if Malaysian economy is doing well, these companies will do well - but there is no obvious linkage.

Note:
If one is to read the Jack Ma's story, it is a highly inspirational story - from a real underdog and truly a rags to riches.
I am also all for a DFTZ concept as in my other articles.

Friday, March 24, 2017

Buying Gamuda-WE and selling Ecoworld and Insas-WB

I have to admit, I trade much lesser than many. Usually, my style is to buy and lay low during bad market times. When it gets hot like what it is right now, I will try to reposition some of my holdings. I can do this because I see stocks as a long term investment and if you read most of articles, these money that I put in is meant to be held long term.

For those that have need for the shorter term, such as children's education needs, medical, house deposits, car deposits, my style of investment is not really ideal. You can however still invest based on the percentage that you are comfortable with.

All these while, if you have looked at my past records, all of those purchases that are made are really fundamental stocks except for a small handful which fundamental have changed. Among those are YFG and Parkson and maybe even AEON.

Over the last 2 days, besides buying Freight Management, I have also done the following:


  1. sold all of my Ecoworld at RM1.50.

I thought that since there are potentially other stocks which may be more attractive, I can opt to let go EcoWorld and revisit this stock later. There is no doubt that EcoWorld is still a very attractive stock. It has the best management, which is why I have bought them, and this company will be one of the best property players (if not the best) in the years to come.

In selling, Ecoworld, I have also opt to take the offer for shareholders to take up EcoWorld International which is going for IPO soon. I was offered only 700 units but I did apply for excess and I will report when if I am provided more.

2. sold all of Insas-WB


I think this is because of the premium of about 41 sen and perhaps it is a little too high for my liking. I will still hold Insas.

3. Purchase 3500 of Gamuda-WE


If Insas-WB has a high premium, Gamuda-WE (exercise price-RM4.05) on the other hand, has a 3.21% premium and it has 4 more years (6 March 2021) to expiry. In purchasing Gamuda-WE, I obviously am confident of the parent company. It is trading at RM5.29 now. To be in the money, Gamuda has to move to RM5.44. I am confident of it able to move beyond RM5.50 or more, in the next few years considering the projects that it has gotten. One of the largest, where Gamuda is the project delivery partner - MRT2, has just commenced.

As compared to many of my other holdings, I do not think I will need to introduce Gamuda much. Most of the analysis done are about to what I believe. It owns toll concession assets - Litrak, Kesas, SPRINT. It is trying to sell its water concession - SPLASH.

Has many construction projects on hand - MRT2, completing MRT1, Pan Borneo  (to the tune of RM8 billion order book) and many are speculating the company is in very good position to at least get future rail projects such as Gemas-JB rail, East Coast Rail Line. Basically, this is one of the best construction firm in Malaysia and currently construction theme is still pretty hot.

The run up of a penny stock

The recent run up of some of the penny stocks is just an opportunity for the owners to get out. The below is one of them. All of them are sales and in very large quantities - more than 10% of the total stocks available (done in a day or two) - can one imagine?


The link here, is just one of the example. For any speculators (who gambles), one should wish that he/she followed the right wave. Otherwise, there would not be any more comebacks as these are stocks which the controlling shareholders do not want at all. In fact, they know they do not want the warrants especially to be converted. They just want to dump it out. Even if it is converted, one do not know how they are going to use the money raised.

If there is a second wave, it is really luck. I would not want to touch these in all scenarios although can be tempting.

Disclaimer: Not all penny stocks are bad, but the above is not one of the good ones.

Thursday, March 23, 2017

Revisiting Freight Management as an investment

Traditionally, Malaysia has always been a strong hub for trade. With trade, comes the services needed towards trade, i.e. logistics, which involved the services required of it including, haulage, trucking, clearance etc. Now, I believe will involve another wave of logistic enhancements in Malaysia especially with the expansion of e-commerce.

If one can remember in 2012/2013, DRB-Hicom made a huge purchase of Proton. The Proton deal does not do good for the group as it created huge losses over the last few years. However, if one can remember, at almost the same time, it also acquired a controlling stake (then was around 30+%) in POS Malaysia.

Over time, it has managed to hold a more than 50% of POS Malaysia through several exercises - among them acquisition of Konsortium Logistik Berhad, restructuring through injection of KLAS and several other smaller companies.

Why is it doing this? It sees opportunities.

Along this period as well, there have been so many strategic partnerships or business investments involving the logistic companies. I only need to point a few here (besides the DRB's move) and one will be able to see it - Yamato's entry into GDEX, Tasco's acquisition of Gold Cold chain, Korea's CJ acquisition into Century Logistic and several more. Why out of a sudden?

The government over the last few years have been talking about expansion in this area of business. Logistics involve plenty - from ports, highways, airports, business infrastructure, people talent and the business enablement. Imagine, we are continuously talking about building new ports or at the very least expanding the existing ones.

I strongly believe that the continuous investment into this area of business will successfully enhance Malaysia as a strong logistic hub. I believe that in several areas, such as banking, plantations, upstream oil and gas and even construction - we can only do so much in Malaysia. But in logistics, because of our geographical location - we can have more than our country's capacity can provide. It definitely involves services strength and Freight Management is largely about that.

What about Freight Management that interests me

Not a household name, but in any case there are rarely household names in freight businesses.
As a listed company, it is one of the least noticeable. (The lesser the people notices, the better.) It is in a growing space and it has great management which I will explain below. Also, importantly, it is not expensive (RM245 million market cap, PE around 10x-12x) and yet to really move much in terms of stock price as compared to many other companies recently. Dividend is also consistent and yield is good.

Not everything requires the ownership of the entire foodchain - integrated offerings no doubt - but one does not need to own all. Freight Management is about that. I had an article which I would like to bring back. In fact, there has not been much changes of its business since that article. Additionally, one can understand the business more here and here. In terms of business, I like it for its asset light-er strategy as compared to many other competitors.

When a company has a strategy of less asset, it has to have a strong services and integration arm.

The statement by the CEO sums it:


(The company specialises in transporting less than a container load (LCL) for customers which Chew says is a niche business. “We are probably the only listed company that sees freight being our core business. Some other similar companies may be strong in third-party logistics, warehousing or even the last mile delivery,”)


Diagram 1: Last 5 years numbers

For the last two years, its revenue has stagnated a bit but this has picked up for its FY2017 as highlight below. The main thing is that though, its revenue growth is pretty consistent (as well as Profits) over the last 10 years which signifies the strength of the management. The CEO has mentioned of 15% growth target annually.



During 2015 and 2016, there was a period where business volume has gotten tougher partly due to challenges in reduced consumption due to GST and the challenging international trade scenario, as probably volume in/out China has been affected. This is also, as mentioned in the article, where the company invested into a new warehouse for pharmaceuticals and healthcare. Hence, its depreciation has increased.

Freight's strength is in seafreight business (quite common) while 3PL & warehousing and airfreight comes in a distant second and third.


In terms of the type of services and container mode, its import and export is quite balance - potentially signifies that, Freight mainly does operations for its export clients which will be importing and value add and later exports those products AND/OR, its customer type is just well-balanced.


On e-commerce, it has embarked on that space by having a 65% stake in FM Hubwire Sdn Bhd. This is still preliminary and it is not profitable. It just to show that it is looking at this space as an opportunity.

Dividends

As provided in Diagram 1 above, its dividend numbers have been pretty consistent - upped from 4% in FY2012 to 5% in FY2016. This is despite its profit coming down for 2015 and 2016. Normally, for a company to be able to do that - it has 2 things in mind - the reduced profitability is only short term in nature (hence it has comfort to provide a consistent dividend) and cashflow is strong enough for it to do that. At 5% dividend, that translates to about 3.78% dividend yield. (I know that at this moment, it is not that important when stocks are appreciating, but when the tides run low - you know what the rest of the sentence will say).

I have decided to purchase 7000 units at RM1.32.



Note: Not all freight and logistic companies do well, but Freight Management seems to be the one that does well.