Friday, June 23, 2017

Wing Tai: 50% discount and still it is reasonable?

Wing Tai Malaysia (Wing TM) has offered to privatise the company with the current controlling shareholder offering the shares at 50% discount from the fair value of RM3.55 to RM3.59.

The summary is here or alternatively one can read the full detail of the advise from Mercury Securities here. I really have doubt over the appointment of the adviser as it is really a small outfit and moreover Mercury is originally from Penang. So was Wing Tai which was Dragon Phoenix many years ago.

Wing TM is currently trading at around the offer price of RM1.80 which means that there has been some buying (by some parties) and the potential of it reaching 90% for compulsory takeover is very high given that there are very loose shareholders in its Top 30 except for the largest shareholder which on paper holds more than 66% - i.e. the Cheng family.

One should take note of the intrinsic value which is below.

I am wondering on the rationale that is provided i.e. lack of trade volume and the offer is a premium from its historical price trade. That is obvious isn't it as who would sell if it is below or at the market price. Just read the rationale provided by Mercury below.


However, no matter what it is I believe that Wing Tai's controlling shareholders and insiders have accumulated enough and it is a difficult fight to keep it afloat and there is no guarantee that the management is going to treat one fairly anyway after this. One less of these kind of company in Bursa Malaysia is for a healthier exchange.

Also, in the future if Mercury provides advise again, do be careful as apparently they also advised on The Store deal.

Thursday, June 1, 2017

BFM has some way to improve

I woke up this morning listening to my favorite radio station over the BFM app as I am in Penang today and there is no airwaves coverage for 89.9 unless I go through the digital route.

In today's interview for the Breakfast Grille which usually airs for 30 minutes over 8.00 to 8.30am slot, they were interviewing a VP of Nokia. I thought they have a very good organization representative with good strong potential line of questions. I was excited until I hear the interviewer - a new guy to BFM, Tan Chung Han - less than 1 year I presume.

Besides not having the right interviewer mindset, his line as well as flow of questioning is not really strong.

If I am an interviewer, I would be very interested to know where did Nokia go wrong and how they see the future of smartphones is going to be. What makes them making a comeback and how they are trying to change the landscape.

I would want to understand the landscape better. Where is Nokia's positioning.


There is no problem on Tan Chung Han's knowledge as perhaps he had done homework before the interview.

I seriously felt that the opportunity given is not being used to the best possible way. BFM is the only financial channel in town and I fully support it. Yet, there are many ways to improve. To those guys Julian and Tan Chung Han - try looking at how Bernie Lo, Andrew Ross Sorkin pose and build their questions. Bernie especially can be critical but he puts the line of questions well. There are many more.

We as listeners can hope for better informative interviews from these opportunities. I really wish if only Umapagan Ampikaipagan is interested in economics and finance.


Tuesday, May 30, 2017

Sold Insas and Bought Airasia

Market has been correcting. I am hence taking the opportunity to move my portfolio from Insas to Airasia.


Insas is cheap, but I guess the company is not much transparent which I do not like. On the other hand, Airasia is transparent to an extent that many shareholders would have not been comfortable with it.

There are not many companies that have tried as hard to sell its business to investors as much as Airasia to a degree where some people are not comfortable.

Anyhow, I see where Tony Fernandes has been selling. He is aggressive. The company is growing.

When I bought the shares at RM1.12 for this fund 1-1/2 years ago, Airasia was on the verge of turning around as competition loosened up. This time around, that observation really happens.

I can see that the price competition has not gone as hard as few years ago. The new MAS CEO is concentrating on what MAS is supposed to concentrate on.

Malindo is getting into becoming a full-fledged airline. I am now questioning, if that is the case would they serve food on board? Now Lion Air owns both full fledged and low costs.

I can also see, things are already probably getting easier for Tony and his crew members. He is selling hard but probably not as hard as previously. His delivery and model is being appreciated, but still I do not see it being appreciated by Malaysian stock market.

The low costs airline model is very fine. What we see is that Asian airlines are now facing the brunt. For the matter of local tourism, countries have to embrace airlines that are willing to bring traffic into their countries. You can see Cambodia is offering Airasia to have a hub. They probably can see things clearer than many countries as that country is smaller. Small guys tend to do things that is different from the rest.

I think there is a long runway for companies like Airasia - in the mold of 10 or more years. Whenever I say Airasia is like Ryanair in Europe, I sometimes get shot down. Not 100% similar but there is this similar good trend.

Imagine, 20 years ago, low costs was not even in existent in Asia. Now, Singapore saw that and scrambled to buy up Tiger.

Airline is a high capex business but yet again things are changing as there are more leasing companies whom are willing to provide competitive rates. Hence, there increasingly is a model where there will be company that holds assets, do leasing. Then there are companies doing the operations i.e. negotiating with airports, selling price competitive tickets etc.

I see things are getting clearer now.

By the way, this is a very good account from its AGM. One can see that things are so fresh where 2 years ago, we do not see initiatives in Airasia, coming on board.

Thursday, May 4, 2017

Changing Ekovest-WB to Ekovest

I am not here to proof a point but purely taking a position that Ekovest-WB's pricing is 20 cents different to Ekovest (the warrant exercise price is RM0.48). Hence, with all these fluctuations, I have decided to sell Ekovest-WB and buy Ekovest. Let's call it I decided to do my exercise this morning at a 28 sen discount.


On whether Ekovest can be purchased as at now fresh from the news of Bandar Malaysia's termination, I actually do not know.

It is true that Ekovest has many ongoing projects and there are higher likelihoods that they may not be terminated. In fact, the SPE has already commenced and DUKE 2 is completing soon.

In this debacle, one will also see the benefits of EPF being a project shareholder for DUKE 1 and 2, as it is harder for government to terminate a contract with EPF as shareholder.

The reason I am also sticking to the share is that I do not see enough details to sell the shares especially fresh from my earlier article last month. This I want to proof a point. Fundamentally, there are not much difference. I am not here to share with you that I am a good trader, which I am not. In fact, in writing this blog, I have some responsibility to share my experience in evaluating situations and businesses. I may be right - I may be wrong in some situations - but hopefully there are much more rights than wrongs.

Physically the group which also include IWCITY, there may be some impact which I cannot deliberate too much. It all depends on the owners and management as some may take a different approach like expanding overseas rather than locally. Some may take it with stride and move on with another project.

Definitely, I do not know what's behind the scene. However, in my opinion a large scale project such as Bandar Malaysia, there sure are many challenges. I do not see money as the largest concern especially for the purchase of the land which costs more than RM7.4 billion. It is a huge sum but with a partner which involves CREC, it is doable. Let's just say, as a government, there are many ways to kill a project.

IT IS MUCH LARGER THAN THIS.

Anyway, I do not have the clout to comment much on this but to continue looking for good investments.

Wednesday, May 3, 2017

My thoughts on the terminated Bandar Malaysia deal

Something that I learn today. In this current government which has been around for 8 years - a contract can still be terminated. No matter how foolish it was when one signed them during then. It is probably the only deal that one government should not make - and they had to do it as it was under immense pressure. I actually would like Malaysia to own Bandar Malaysia rather than a consortium which comprise of a tycoon, Chinese state company and Johor state.
There is no other better land left other than Bandar Malaysia which has immense value. This is a 486 acre land in the city - or near the golden triangle. In any case, if we have sold the controlling rights - I have also made to believe that the government still has a lot of says in the development order.
I was also being brought to think that the current government would not terminate a deal. One thing I thought (until today) that the current government has been doing well is its consistency - consistent in making good promises as well as consistent in making mistakes. Whatever it is, one has to be consistent - so that there are no surprises. Trustworthiness is worth many tens of billions (to a country), if you know what I mean. And it is priceless in fact.
What I have liked before (so far) is in the present government - A deal is a deal, that's what I was brought to have thought on. But yes today, things changed - a contract can be terminated as well. Yes, there has been statements that the other party have yet to fulfil its promises, but we investment public is caught unaware. 
Doesn't matter that the investment involves a Chinese party. How then would it impact say other projects that China's investment parties are involved in? Forest City? ECRL? Port projects? What about other countries? such as the recent deal between Saudi and Petronas in Pengerang?
Decisions are decisions - once a promise been made, we have to live by it.
No matter what, I have always been brought up and later telling the story (to convince other people ) that the Malaysian government would make promise on what it signs on. Why? This is because we are an open economy that has always been open to investment - since the 1970s. We are different compared to many African government. We are different compared to India. We are also among the more trustworthy countries and commit to its agreement.
This I have to take back - for the moment.
This lesson will make me readjust on my investment too, as would it happen to any other projects that the government has signed on?
Well, we are also living in a times where US is also considering pulling back NAFTA. But yet again, Malaysia and US are different - right? One has an immensely large local economy. Another has a much interdependent economy.

Thursday, April 20, 2017

DO NOT SELL WCE, Airasia and Ekovest

This is a reminder that I gave to myself. Everyone will have their own preferences according to what they are comfortable with. I am comfortable with Airasia, Ekovest and WCE. Those are obvious. In investment as what are mentioned by the top notched investors - it is difficult to find gems all the time.

To some people, they may like diamond, some may like ruby. Others may like Emerald. To me, investments is the same.

THIS DOES NOT MEAN I WILL HOLD THEM FOR LIFE.

However, I am very comfortable with what I have found. Some people may be very comfortable with Top Glove for example as they know the business. Some may be very comfortable with Inari as again they know the business and are confident of their views on the semiconductor sector.

For the 3 stocks, I discovered WCE back in 2013/14. Those people who read my blog would know I have done lots of research on the company and its business. This article is not about me saying again what I have said on the business and company as you can find them here.

Then 2015, Airasia went to ridiculous low price. Around RM1.50 was my price point of buying in. You know the fantastic thing is that I knew while oil price was dropping like from USD100 to USD50, many people were focusing on Airasia's debt which it definitely can service - they were ramping up to fight, hence the debt but those assets were already generating cashflow. Not all high debts are bad! So, while the stock price should have gone up, people were selling down - I should have thanked the Hong Kong research house. So who says Malaysians are not smart - we were buying, they were selling (or could it be talking it down to buy?) - Perhaps, they are smarter. I was perhaps the stupid guy who was telling the truth on how cheap and good Airasia was.

(You would also know I was negative on Airasia X, but not Airasia. I am right until now.) So, you may ask - how is it that businesses in almost the same space can be different although run by the same management? I can be wrong in terms of share price in the short term, but in the long run, I hope I am right.

Last year, 2016 was when I realised Ekovest is realising its asset value and having a fantastic business. They are not the best of contractors but good enough. The thing is though, again I shall say this - they have fantastic assets, which many are already realising cashflows.

Yes, of course I can make mistakes. However, you would note that in many cases of businesses that I have put positive comments - they are good businesses run by good people. Some may face the wrath of situations - such as Parkson, Aeon example. Even YFG - look at how they really try hard to revive the business!

Whenever, I write here - I do not write for purchase in the short term - hit and run. Or pump and dump. The above three stocks are testimony of that. The same goes for Padini, Power Root, Insas, Tropicana, TA, Freight Management etc.

My style is very different. You can read this article and if you believe the same as me - one does not need to read another article of mine for next 3 years. Come back when there is a major catastrophe or war in the Middle East. I am very different from many of the "sifus" out there (which I am not on par with them, because they can work wonders by buying a SCADA system company which they do not understand about - as they only look at the financial numbers.) As mentioned here, I look at business first then financials (although I am a financial person). Note, they are definitely not wrong as there are many ways to skin a cat.

BTW, that SCADA system company is a good company, just that I do not feel comfortable enough to put lots of my money into it. 

I am also not the type of feeling remorse when I did not buy Inari (although I know enough of them) when it was trading at 35 sen 6 years back - this company has achieved a 10 bagger - as I was not comfortable enough - again. Why? Because it was a single customer company - Avago (today's Broadcom). Who knows how its "taiko" is going to treat them? Today, it is still largely single customer although it tries to diversify. Again, some people may know enough to be comfortable. That feeling discomfort caused me lots of potential gain, but I would have sold them long time ago anyway.

In the longer run (10-20 years), things can change. Airasia can be facing new challenges for example or it could have gone overpriced. Similar to Ekovest or even WCE. Sometimes, even in the short term, it can be particularly bad for some companies - example oil price goes through the roof for airlines business. Airasia could be facing regulatory challenges in India and Indonesia or even Vietnam.

I am always (or hope) aware of these. Again, I am not sleeping with my stocks but I am also not careless to sell them when they are growing. This is like you have prepared and provided for your 18 year kid - when is time to realise the benefit - we stop supporting them.

Wednesday, April 12, 2017

Sold some Insas and Bought Power Root

Recently as Insas grew to a price point which I think I would like to forgo, I decided to sell a portion of the share and move a safer (I presume) stock.

Hence, I have decided to sell 10,000 units of Insas and Bought Power Root.


For those whom do not know Power Root, it is a company that sells the Alicafe and Ah Huat coffee brand. If I am a normal investor, I would have thought it would struggle in a crowded ready to drink coffee market. This market has Nescafe, Oldtown, Aik Cheong, Super brand, Pappa Rich and several more (even Starbucks included).

Despite these challenges, perhaps these figures would change some person's mind. Me included.

Power Root's financial numbers over last 7 years
I have separated the financial revenue into local sales versus international sales. This is because I think it is important to separate out and highlight its numbers from it overseas sales which has been rather impressive. From my reading a huge portion of its sales is from the Middle Eastern market. Today, Power Root has a plant in UAE as it has grown to a certain size which allows it to decide to build one and logistically, I think it will be positive for its operations in the future.


Translating those numbers into a chart, perhaps this is clearer and shows that the overseas revenue has grown from a negligible RM5 million in 4Q10 (Dec 2009-Feb2010) to RM50 million in its latest quarter. That is a 10x.

Local sales on the other hand has a respectable growth although not as strong as its overseas sales. Based on that trend, I would not be surprise that its overseas sales would exceed its local sales in the near future.

In terms of profitability?


I am not one of those who would sweat over quarter to quarter numbers. However if you look at the long term trend, it is fantastic. This shows that despite the tough market environment, the players are pretty obedient in terms of keeping their margin in check. I did not show the revenue numbers in comparison between Oldtown and Power Root but I can say that Oldtown's ready to drink business is smaller than Power Root. However, Oldtown's margin is better. Oldtown's challenge is its cafe chain, which I think is also doing a turnaround (although this is a different article from me in the future).

As I have seen, the management of Power Root are pretty solid. They are founded by three people and just recently, they have done an exercise to include a substantial shareholder towards its International Sales GM. It has converted the shares in UAE into the holding company. I think looking at its performance towards its international sales, it is fair.

Additionally, its dividend yield is at an attractive 4.35% and seems like growing. This business has very strong cashflow and I think I am just back to basics i.e. buying cashflow based company and with very minimal debt.

Tuesday, April 11, 2017

Sold EWINT-WA

I just sold Ecoworld International's WA as it is too small in number that I owned, and also the premium is just too high with its exercise price at RM1.45 and the shares is selling at RM0.395.


I just would like to add that the recent craze over penny stocks as well as warrants running much faster than its parent share is just too unbelievable. It should not happen this way but stock markets are never efficient right?

I still believe in the stock market for this year as we had very poor run over more than 3 years for Bursa. However, one should also be wary of some of the stocks being over-run.

I do not want to mention stock names as people can be saying that I am discouraging investments. Do however look for companies that have yet to make any movement while those that have very little fundamentals but yet they have moved 50% or more.

One must also consider that in times like this, everyone is a super investor and smart. This is also the time for owners of weak companies to dispose to the smaller shareholders as they do not intend to hold to their stocks anymore. In times like this, it is more often that non-fundamental companies to run as the owners may not even be focusing on their business but become a stock market player.

Only the good companies with focused management will focus on running their businesses as it is the harder thing to do rather than playing the market.

Sunday, April 2, 2017

Ecoworld International - 2000 units

Ecoworld International is to be listed on 3 April 2017. I have just been allocated 2000 units of the shares as I have held Ecoworld Development prior to this. The subscription price is RM1.20 per share.

Below is the details. Additionally, Ecoworld International comes with 2 for 5 warrants.


Latest update for the portfolio is here.

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.

Wednesday, March 22, 2017

My AliBaba story

I have been thinking of my AliBaba story since a lot of people are trying to figure out where to put their money - you see Jack Ma is in town and this is the time to really make a killing. He in fact already has a company which he controls and in case you want to take the opportunity of buying his holdings, can approach Lazada for a private sale.

Anyway, as I have been thinking, I realised I have almost all the plans and investments lined up except for filling in one or two gaps that are still there. You see many years ago, I already knew that e-commerce was going to be big in Malaysia and this region. With e-commerce, there will be distribution, transportation and lastly finance.

WCE

When the government approved the alignment for the new highway for West Coast Expressway (formerly Keuro), I knew that it was going to be a major highway to connect the main ports. Alibaba is about logistics and connectivity. WCE is connecting Port Klang to KLIA. It is also the faster route from Port Klang to Lumut and to Penang Port. WCE's management has already mentioned of WCE potentially being a port to port connecting highway and since it is a much flatter route, it is very friendly towards trucks and heavy vehicles.

Now, I have already road, what about air?

Airasia

Can you see, Airasia? Long, long time ago before Jack Ma stepped foot onto Malaysia or even knew Malaysia existed (I believe that as Jack Ma has always claimed that he was never a clever person anyway, hence his direction and geography is pretty bad), Tony Fernandez already knew of AliBaba. Hence, he created a direct route from KLIA to Hangzhou, where AliBaba's head office is.

MAS never had that route. So, you can see that Tony really had that foresight. Now, today with Jack Ma coming to Malaysia in a big way, it is going to be really positive for Airasia. There will be a lot of people connecting between Hangzhou and KL, not needing to go through Shanghai which is another 1 hour away.

For AliBaba's staffs, speed is important. Airasia is now transporting people as well as goods (cargo). Hence, the connectivity between Hangzhou and KL is really getting important. I am really glad that the company I invested in has that foresight.

DKSH

Even before Airasia and WCE, I have put my money into DKSH. As everyone know, DKSH is a logistic company. It in fact is one of the largest distributor in Malaysia. Malaysia is building itself into a distribution hub. Through that, DKSH will be in a good position.

Maybe, AliBaba will want to acquire DKSH? (Purely, speculative) You see, in acquiring DKSH, the Swiss parent, it will be able to acquire a substantial operation for South East Asia region.

Now, since I have road, air and distribution figured out, I am looking for sea (anyone can help here?)

Tropicana and Ecoworld

Everyone knows now that Alibaba is a Top 10 market company globally. It has hence created a lot of millionaires and billionaires. Its employees are definitely doing very well. When they come to Malaysia, they would want to buy nice big homes which are nearer to KLIA - the distribution hub proposed. Ecoworld's EcoMajestic and Tropicana Aman is just 20 km away and they produced the most beautiful homes and "taman" in South Klang Valley. Surely, the employees from Alibaba will be buying or at least renting these homes.

Insas

You see, the largest holding for Insas is a company called Inari. Inari is building semiconductor chips and Alibaba being a technology based company can make use of Inari chips? I am sure there are some relevancy here as Inari produces for Broadcom and Broadcom is very big in data center chip solutions. Alibaba going big into Aliyun (data center cloud services - much like Amazon Web Services) will definitely be beneficial for Inari, hence Insas.

What about me? The poor TA

As you can see, Alibaba is also going big into consumer credit (micro) businesses - through AliPay. Jack Ma knows that he cannot buy a bank as it is not possible regulations wise. He hence looks out for companies that provide transaction services. In Malaysia, some of these companies holds credit lending license - and TA is one of them. TA is in fact ideal as it has the strong credit standing, reach and perhaps the owners are now more keen on doing properties than credit and stockbroking. Hence, Jack! if you want to buy a credit licence, perhaps can consult me? Hey...

Ekovest leh?

Simple. Ekovest is linked to IWCITY. IWCITY is linked to Bandar Malaysia. And Bandar Malaysia is linked to HSR rail and KLIA as well. See...

I hope my story is much more bombastic yet believable than many out there including here, here, and another one from DNEX.

Note: Most of the stories are fake and please do not bring to SC and say that I have been convincing you to buy these stocks. You see, I do not do "pump and dump", because generally I am too dumb not to dump.

However, it is true to my believe that transportation, logistics are key to the growth of e-commerce in the region which is the main gist of my holdings.

Saturday, March 18, 2017

What is not rightly written on JAKS by KYY

KYY has the tendency of not saying it all whenever he writes. 

Let me put into perspective. on this article that he writes. (Why I bought in JAKS)

His statements:



Malaysia’s first IPP
The YTL Group was just like any other ordinary contractor before the company was awarded its maiden IPP in Malaysia. From a humble beginning, YTL Corporation Bhd’s market cap today stands at RM1.65 bil (actually this is a mistake, it is RM16.5 billion and much more dividends before this), that of YTL Power International Bhd at RM12.8 bil and  YTL Land and Development Bhd (RM578 mil).

Additionally, the YTL Group also owns YTL Cement Bhd, YTL Hospitality REIT, among others.

Investors would recall that on Sept 29, 1992, a total power blackout engulfed the nation for several days. This landmark incident sparked a privatisation of the power generation sector that broke the dawn for IPPs in Malaysia.

In the process, Tenaga Nasional Bhd’s monopoly of the power generation sector was dismantled by then-Prime Minister Tun Dr Mahathir Mohamad as YTL Power was awarded the nation’s first IPP licence in 1993.

As a result, the YTL Group has been making unprecedented amount of profit every year. Before it secured the IPP, the YTL Group was just an ordinary contractor but today, it is so different.

What is not correct in his statement?


YTL's IPP during then was the sweetest ever that nobody else would have gotten it. Tenaga was sort of forced to do an offtake. Tenaga was asked to take up YTL's generation whether Tenaga needed it or not. In another words, in layman's term, whether there is such demand for example, 80% of the generation, Tenaga has to take it - even if there is no such usage demand. Another thing which is very important in that deal is that YTL's costs is fixed - meaning the fuel generation costs are already subsidised at a fixed rate. Other parties - if not wrong Tenaga and Petronas has to consume the fluctuations.


Please read this article if you are serious into investing into JAKS.


How Malaysia's IPP was born. 

This is obviously correct, as it comes from the horses mouth - the Executive Chairman of Tenaga then, and many more people know about this.

In fact, if you walk into Tenaga and asked people whom are in the know of the deal during those days, they will say, they will never give a project to YTL anymore, NO MATTER WHAT! That was more than 20 years back and many people today will not know about it.


Think about it, if YTL can pull a deal then in a year, why does it need JAKS to pull a deal in Vietnam over 6 years. It is not that sweet. 

Another of his statement which is not true until now


Many people also ask me when will I sell my holdings. Since I know JAKS will be making a lot of profit in the next 3 years during the construction and 40% of the profit from the sales of electricity for 25 years, I intend to keep all my shares for many years.


I obviously do not know KYY's net worth - it seems it is a lot, but HE HAS BEEN BUYING ON CREDIT. His purchases if you really read is all on pledged account. He and his wife's. How do you read this? Look at the red boxes.




JAKS although it is good, it is not generating good important cashflow for it to pay dividends even for few years to come. For a person to hold it until beyond 2020, he needs to get the company to pay him back (to support his pledged accounts) - either dividend or capital appreciation! JAKS is not going to pay dividend. Does anyone know that JAKS has never paid dividend before - not in last 17 years! Unless, KYY arm-twist the company to do that it is not obliged to pay dividend. And the company has no cashflow to do that.

If dividend is not forthcoming, he has to sell to pay his interests from the sale of his shares in JAKS. Hence, he will not hold for long term, he will sell some. He is pumping and dumping along the way.


His other holdings e.g. Latitude Tree has proven that.


See below. He bought a substantial stake (more than 5%) and continue to buy more after November 2014.




However, by Nov 2015, he has ceased to be a substantial shareholder. That's a year. He IS NOT A LONG TERM INVESTOR. PERIOD. He buys in and ask you to buy so that he can buy out.



What is unsure...

The profit of about RM400 mil for JAKS will flow back into the JV company to fund JAKS’ equity portion. In other words, JAKS only needs to fork out RM203mil to own a 30% stake in the power plant. JAKS is also given an option to buy up another 10% of the JV company.


Nowhere in JAKS announcement that says it is using the profit to put back into the JV company. Unless, he has inside information, which I would like to know as well. Also, usually, deals are not done that way - unless of course the China partner is such a nice partner - could happen.


What is correct in JAKS?


1. Please read my article here. JAKS in getting this project, assuming they can complete this project will be very good for the company, but one must know that JAKS has only 30% of the IPP (and option to grow to 40%, but even then the costs of buying the additional 10% is not known) - it is not even the controlling shareholder in that IPP anymore. However, the keyword is assuming they complete this project, which I think they can do - but remember it is 2020. At this moment, JAKS is sucking cashflow until 2020. 


2. JAKS would not be getting a deal as lucrative as YTL. In fact, no one gets a deal as lucrative as YTL. I again request you to read that article by Kinibiz (put it up again), as it is long and mind consuming to read it - including for me.


3. IPP (or concession like) projects with good IRR is great and I like projects like this - which is also why I bought into company like WCE but they will not get as sweet a deal as that company. It is true that the deal alone made YTL what it is today and even more that you do not see. (Such as with the cashflow, they were able to buy Starhill, Marriott and Lot10 at ridiculous low price during the 1997 crisis - in fact, 1 year profit and cashflow from the IPP enabled it to buy that entire piece of place in Bukit Bintang. That's how powerful it was. YTL Power was generating around RM500 million cashflow and they can buy these prime properties at RM323 million at worst of times, whose money - Tenaga and our rakyat's money!)


4. Despite whatever we can say good abut JAKS, all the good things that is written about JAKS, its main shareholders has not done anything to proof to me they are good directors and will share their returns with shareholders. This I am aware.


What is being speculated by me on KYY's latest article?

I am obliged to declare that I am the largest shareholder of JAKS and that I’m not asking readers to buy JAKS to support its share price. If readers decide to buy, then they are doing so at their own risk.

No, as proven again and again, he is asking us to support the share price so that he can dump onto us. Why? He seems to be in a rock and a hard place. While he has bought until 26% of JAKS, it appears that the current, controlling shareholder is not playing ball. They are calling a placement. It seems that there is no truce yet. The current shareholder can't push up (but fighting) to support KYY's sale, hence calling this placement in such a hurry.

Why I am writing this? I see writing by a so-called super investor as something that people follow a lot. It is important to write responsibly. I am not attacking him but would want to put things into right perspective. In fact, I am holding JAKS as well - not in large volume. I could have let him have his writing and I ride along as well. But investment is not for one to just pump and dump onto other shareholders. But for all to enjoy a long term ride. JAKS can still be a long term share.

I am surprised. I am half his age but yet has more responsibility when writing. (I need more money than him, but all the money in this world is not everything. Moreover, in investment, if one is careful and humble enough, we can survive and do well, better than taking a passive stand - this I believe)

Recently, obviously with the much speculation in shares (which is good), there are many more of these writers whom are just being greedy and irresponsible when writing. Some of whom, I have no intention of even countering. But it is for investors to be really careful and study.

Thanks to KYY for JAKS

Thanks to KYY for JAKS. At the very least he has managed to get the management of JAKS to issue a private placement at a better price for the current shareholders.


He is not the minority anymore as the latest announcement is that he and his wife owns now close to 26% of JAKS. I believe at RM1.36, he is getting his money worth assuming that JAKS's Private Placement is fully subscribed.

In this round, he has managed to get the management to take care of the smaller guys.

What is he going to do with such high percentage of holding beats me? I however suggest, perhaps he can do a Warren Buffett - i.e. what he did to Berkshire Hathaway 51 years ago. Not too late...

My earlier article on JAKS is below:


Jaks: Great Idea but is it great execution?

Thursday, March 16, 2017

Some part of SC's site down

I have been trying to get data on unit trusts - just to understand the growth (or decline) of public's investments.

For Jan 2017, I have managed to get this as below (part of it shown).


However, as I clicked through for 2016 data and even prior to those years, all I got is this. I gave it benefit of doubt for past one week as it was down then, but tried for several times, still down today. Think SC can do better than this.




Tuesday, March 14, 2017

Cronyism still key

Sometimes cronyism is important to certain business - basically see where YTL Power is now. It had done nothing much since. Government changed contracts changes. TNB is not going to give any more new projects to YTL - if yes, there are not going to be as sweet anymore.

The new project as mentioned in the below structure seems very much like JAKS in my previous article - isn't it surprising - a RM500 million company against a RM11 billion company. Both uses China's route.


Saturday, March 4, 2017

JAKS: Great idea but is it great execution?

I have to give it to Mr Koon Yew Yin. He sees a good company with a very good project. Basically, Jaks Resources without the power plant project is an average company but with the IPP project it is a more than an average company with an attractive price.

What has it gotten with the IPP in Vietnam? Basically as below, a BOT (transfer - after 25 years) project and its partner CPECC has bought into the project by funding a huge portion of it.

What JAKS has to do now (which it has done) is to fulfill its portion by coming out with USD140.14 million while CPECC will come out with the other portion. In addition, CPECC will build the bulk of the project and come out with Redeemable Convertible Preference Shares (RCPS) to fulfill the equity portion. (On top of that, the RCPS comes with zero dividend costs) CPECC has also gotten the financing for the project as well with its corporate guarantee. It should be noted that CPECC is huge power plant consulting company in China. Its parent, China Energy Engineering is a HKD43B company, which means and says a lot.

The structure is as per below:

Ultimately, JAKS can own up to 40% of the project and it now has a partner whom can deliver. On top of that, it gets a substantial portion of work which can be translated into construction profits from this project.

Do I have reason to believe it can be delivered? Yes.
Do I have reason to trust the project has decent to good return? I should think so considering the interest from CPECC. It has country risks obviously, but this one sounds to be more secure.

Now, all that is good as if it is able to secure good IRR, this basically is a great investment with Jaks trading at about RM535 million valuation. (Jaks has mentioned of it eyeing at least a 10% IRR.)

With that, it is definitely not wrong for a person who understands construction to wallop - and wallop he did. Another point to note is that the controlling shareholder - Mr Ang Lam Poah only owns around 8% to 9% of the company on paper. (I would tend to think he definitely has supports from his other friendly shareholders.) What Mr Ang did wrong was that he took a long time to accumulate the shares, probably thinking of getting them at cheap - below RM1.

Seeing opportunities (probably), Mr Koon Yew Yin bought the shares in a very quick manner and in the process, accumulated more than 11% over a short period of time. (Mr Koon is now, the single largest shareholder) At the point of him becoming a substantial shareholder, it triggered the attention of Ang's group, I believe. Jaks announced an unusual quarterly 31 Dec 2016 loss and at the same time, announced that it is to do a 10% private placement.

KYY's holding has increased to 11.7% by 1 March 2017
Does Jaks has enough bullets to defend the onslaught? I should think so. It has many defensive tools to do that - and it has already done so by announcing a private placements. Private placements as we know can go to friendly parties. Basically, Jaks can do many more of private placements and as long as Koon does not acquire enough to take control - he can't do much. (That has been proven in the case where QL was unable to takeover Lay Hong, and QL I would think is even deeper pockets, but they can't do much.)

Can Mr Koon do much? We shall see. And I do not think he is keen to takeover anyway - as the project is for Mr Ang to lose (he is the person, whom have worked hard to pull everything together), moreover Koon is not in the right age to do that. A new management could jeopardize the project.

Mr Koon's past records have been more of a short to medium term investor - come in - make a kill and go. With that, (I would think) Mr Ang has reasons to be afraid and not to entertain much requests. The ball is in Ang's court to play and decide how to play.

(You see, if I have Warren Buffett as my shareholder, I should feel proud. But, if I have Carl Icahn as my shareholder - I would put on more defences surrounding me, because of animal instincts. In this case though, activists investing may not work well.)

Will someone like Mr Koon ask for a favourable return from the shares? Almost a surety. Why would he invests into Jaks anyway? - and this manner of buying.

The biggest question is - if Jaks current controlling shareholders do not want to play ball - the shares can be stuck at RM1.10 to RM1.30 for a long time - something that a shorter term shareholder would not want! It could end up being you buy to push up your own share price. You can buy but you cannot sell at a profit.

One thing for sure (unless with a deal being made, the private placements may not be that cheap - at least not the type of price which Ang and his group have been buying at i.e. around RM1 - and the way Mr Koon has been buying.)

This is quite interesting turns out and a lesson to note in the long term.

DRB has the tendency of not getting deal done

Despite them needing the deal to be completed, this company has the tendency of dragging and over-negotiate. I should know this, for some reasons.

Just to give one example, in the deal where Proton was to be acquired by DRB-Hicom back in 2012, they were required to reduce their stake in Bank Muamalat to an associate stake. Where is that deal now?

The below statement could be a plan by Geely, but I am not too surprised. For Geely to come out and mention this, there are many hiccups it seems in this deal. One must remember for Geely to come into Malaysia and get a deal done, it has to be FRIENDLY. This is a marriage, not a forced takeover. DRB has appeared many times to say that they will continue to have substantial stake in Proton - hence Geely will still need DRB as a partner.

Geely knows. Because they need to get the support to survive in a tough environment. But does DRB thinks and acts that way? Although, they will know as well.



It now goes back to who needs who more. DRB needs to get rid of Proton as it is bleeding more than RM1 billion a year and getting to a 'path of no return' i.e. oblivion. The only way is for it to survive is to do a deal or government to impose taxes which is even higher than the ones during Mahathir days.

With Proton, DRB will be in trouble although it is a separate subsidiary and can be left to rot. Does it want to do that?

If there is a deal which is fair to DRB, then possibly the group could be worth much more than today - but that is still far from the case.

Perhaps, it needs a "Lim Kang Hoo" to show the way...