Thursday, November 9, 2017

Ekovest: seen many times funds vs owners & retailers

First of all, I am not a trader. Hence, this post does not mean I mainly look at trades, however as an investor I have to be smart on short term movements, psychology in among traders especially funds.

Ekovest, if one notice its latest Annual Report has added on institutional investors. While many have opinions that institutional are good, to me IT DEPENDS. Ekovest's shares have been bought by institutionals especially when Datuk Haris sold his block. During then, Ekovest's shares have huge volatility and of course when there are huge swings, many retailers like to take part. Some are caught at around RM1.45 to RM1.50 (one has to note that Ekovest's shares have split from 1 to 2.5 early this year and has given 25 sen dividend after its sale of 40% of DUKE).

This time around, it seems (while I am positive or rather see very little impact), I think funds are negative on Ekovest's proposal to acquire as they deem it as a rescue of IWCITY. I obviously differ in my opinion.

To me, it is quite obvious - the owners and sponsors see this deal as positive for Ekovest. They have hence in the short period of time decided to buy more shares of the company they control. I see this as quite common actually. While funds are funds and they can impact the short term trade of the stocks they own, they however move in herds.

I have actually seen this in many strong fundamental stocks - Airasia, NTPM, Padini are among some of them. All of them have funds relinquishing and frankly Airasia was the classic. One guy from Hong Kong gave a negative comment and some of the large funds (in US) started to sell (strongly advice to read this link and reflect again) - at a period when the fundamentals actually turned to the positive. It is most of the time started with the same concern - gearing and gearing.

As long as the fundamental of the company is sound - the idealogy is when funds sell, we slowly pick. Again, as long as the fundamental is strong - this is important.

In Ekovest, I see that same. Ekovest is not used to funds investing in their stocks. One can run through their annual reports of yesteryears. This year is the difference where funds are started to pick up the stock.

As a small retail investor, I see these as opportunities - which is why I say, one can be small but we can actually perform better. Some people simply call this as "contrarian" strategy.

Friday, November 3, 2017

Sold off Tropicana-WA and bought 6500 Ekovest

Through the sudden reaction on Ekovest's shares, I have decided to buy more Ekovest and sold off Tropicana-WA.

The reason I sold off Tropicana-WA is because it is a warrant and I wanted to reduce my short to medium term exposure risks. Also, as I am going to put my money into a construction, property related stock, it is better to keep the exposure at a certain percentage. Tropicana, on my other investments in fact I still keep to my investment as the emergence of Tan Sri Lim Wee Chai is good for the company business-wise and investment wise. It is just that my fund over here which I started with RM50,000 is limited and I have to make the best use of it.

Ekovest is a stock which I have liked. I have in fact invested into this company - for this fund - prior to it being split from its bonus issue early this year.

I also find it ironic that UOB KayHian is downgrading Ekovest from RM1.45 to RM1.04 i.e. a drop of 41 sen with the announcement of the proposed acquisition of IWCITY. That is a downgrade of RM877 million and this amount is more than what Ekovest is going to pay for the 62% of the minority stake of IWCITY which is RM800 million cash or RM1.50 / share towards the IWCITY minority shareholders if it is using cash.

I usually like to target these funds as funds are supposed to be principled when they write their calls as they are so-called professionals. Investors are supposed to trust them. I however find some of them to be not-principled as they put a price without good justifications.

I have written quite a bit on this company and here are some of them.

Is Ekovest Investible?
A look into Ekovest
Do not sell Airasia, WCE and Ekovest
What is IRR 10% - where I first invested into Ekovest for this fund at RM1.30 for its warrant

One can also find the funds here.

Wednesday, November 1, 2017

Lim Kang Hoo's reverse psychology

Lim Kang Hoo is either a brilliant strategist or a desperate man. However, come to think of it - how is the deal between Ekovest and IWCITY  a desperate deal? Ekovest, which is a family controlled (>60%) company of Lim Kang Hoo, family and friends is offering to buy MINORITIES IWCITY's stake at RM1.50 per share.

He is not buying his shares of 37% in IWCITY which is held through IWH. He is buying the shares held by the other parties 62% - 63%. There is no injection of cash into IWCITY. He is not desperate to rescue IWCITY. In fact, he is taking OPPORTUNITY. This deal is done at its best so that it does not touch KPRJ which is related to the Sultan of Johor - it seems.

I am of course perplexed when the shares of Ekovest dropped massively - so stupidly I buy some more.

As can be seen IWH which is owned by Lim Kang Hoo and KPRJ will still directly own IWCITY which will be delisted. Ekovest is not buying Lim Kang Hoo's stake in IWCITY

Having said the above, I can understand the investment communities concerns. IWCITY holds land in Bandar Iskandar which to them cannot be transacted as there is a doldrum in properties especially down south. Moreover, Ekovest will need to fork out RM800 million which it does not have to buy over the minority stake - hence delisting IWCITY.

However, that is flawed thinking. IWCITY just did a deal worth around RM2.1 to RM2.3 billion with Greenland group from China and they are paying for 127 acres of land in Bandar Iskandar.

Because even reading yesterday's one pager announcement cannot even be done properly by those who invested into Ekovest, I hence will put down the payment schedule for IWCITY - Greenland deal below. There are obviously a lot of milestones and the sweet side is that IWCITY has collected the first payment of RM46.2 million. I know that's small but it also means the collection will be going to Ekovest in future rather than the listed IWCITY.

As for raising the RM800 million to buy up the IWCITY minorities stake, I have this prophesy. The payment schedule above will help a bit, then the amount paid by EPF of RM147 million just last week AND more importantly, in its announcement yesterday, one can also opt for an Ekovest share equivalent which is valued at RM1.50. Obviously, Ekovest shares is not worth RM1.50 now and the latest as at my writing now - it is priced at RM0.97. No chance to trade in shares?

If the transaction is done now, all IWCITY minorities will be opting for the cash - me too. But obviously again, the deal is not done now. It is many months down the road, if it is ever pulled through.

Now, my question to Tan Sri Lim Kang Hoo (who is many times more brilliant than me) is which option he prefers - cash or shares. If cash, then obviously again Ekovest is worth more than IWCITY at per share price of RM1.50 or more as he does not want to waste the value of Ekovest to be given to minorities. If shares, then IWCITY is more valuable.

Having seen how he does his deals, it is not going to be that smooth and straight forward. There will be challenges and hurdles.

On the strategy with this deal, as mentioned above there will be challenges but strategically it is there. IWCITY is a land owner. Ekovest is a developer, contractor. There are still some 900 acres of land in IWCITY after the sale to Greenland. Moreover, part of the deal will need IWCITY to reclaim (worth RM400 million) the land which Ekovest can obviously do.

To me what was obvious yesterday has now become murky. An analyst said that the deal is bad. He is perhaps not being straight or thinking clearly.

Or could it be I am too slow to have a clear head as I have become too complicated.

To me if the deal can be pulled through, it definitely looks like it is positive for Ekovest. If however, the deal is not able to be pulled through then back to original as it is today - but why the drop of 20 sen?