Wednesday, September 4, 2019

Sold Armada

I have decided to sell Bumi Armada largely because I do not know how to value this company at the moment.

As mentioned before, the previous reaction towards the company was because of over-reaction on its balance sheet and projects difficulties faced.



This has never going to be a long term holding, though, hence the sale. Additionally, since WCE is coming on stream for its additional rights, this sale is to allow cash accumulation.

Friday, August 30, 2019

The PLUS asset should remain where it is now

Frankly, with proposals by various parties on the toll assets - where it is reported there are a total 15 highways in proposal and under review. Among them, the Gamuda, IJM and PLUS's highways. Let me put these thoughts from the 3 proposals perspective:

1) proposal by MOF to buy the 4 highways controlled by Gamuda - which we know is the government's money, although Tony Pua's argument is that the government does not need to come out with extras. That's what he said. But he also claimed that Malaysia's debt has exceeded RM1 trillion. Buying the Gamuda's highway will add the debt no doubt, despite it is ring-fenced against the proceeds from the toll collection. The idea is buying over the assets will increase the country's debt no doubt. Additionally at a time where we are promoting privatisation for Malaysia, this act is in the opposite which is nationalisation of assets. This is also against PH's manifesto.

2) proposal by Khazanah - it is reported that Khazanah has submitted a proposal to purchase 15 highways owned by Gamuda, IJM and including the PLUS highway. Among them, the largest in contention is the PLUS asset. As we know, PLUS is already controlled by Khazanah through its 100% unit - UEM. In my opinion, Gamuda and IJM can manage these assets better than Khazanah. Can Khazanah have other ways besides not collecting toll? If yes, I would like to listen. The largest asset among the many is the PLUS asset which is around RM30 billion or more. Can Khazanah afford to reduce the toll collection fee? The other 49% owner of PLUS highway is owned by EPF which is the bulk of Malaysians money anyway - the owner is the one which will use the assets anyway. Why pass to the government. As an EPF contributor, I would prefer this asset. Can EPF find any better alternative after this sale? Also, this exercise seems like a left pocket - right pocket exercise as IJM and Gamuda are largely owned by the Malaysian institutional funds anyway. Why give more fees to the investment bankers and for them to take home more bonuses next year? Isn't that what we do not want? Giving money to the rich again for doing nothing much but shuffling assets.

3) proposal by Maju - Maju is a private party. In the past, its proposal was backed by Evercore - a large Private Equity. Maju as it is, is not very rich. Tun Mahathir's past has shown that he was willing to support entrepreneurs if they are willing. (Think Yahaya Ahmad, and many more) However, tolled highways are not difficult assets to manage, as long as managed well - unlike building a car. Hence, there is a huge probability that foreign PEs will make a killing as Maju itself may not have the capability financially to do this. Why give a large part of EPF's earnings for example to parties like Evercore and several more? They do not bring any additional value to us besides again shuffling papers.

All in all - I feel that it should remain status quo as the assets are owned largely by Malaysian institutions. This is just like what we like to term "Small little problem, but we go and dig (create) for more problems."

Thursday, August 22, 2019

The next wave of stocks will be companies that have dealings overseas

Ever since 2016 and 2018, i.e. 2 major events, the drop in oil price generally and change of government from BN to PH, we are seeing major shifts in the way we should look at companies. In my context, as I am talking about listed stocks, these are the shifts that we should be looking at. In those 2 events in 2016 and 2018, there have been transitions. Firstly, because of the drop in oil prices, our country's dependency on one major commodity to finance a large part of our budget is diminishing. Although in 2019's budget that has been brought back as the MOF has asked for more money from Petronas to support the GST repayment - this will not be a yearly event, but rather a one off situation.

Secondly, because of the gradual decline of Malaysia against other competing countries, our policies and actions have been focusing on B40 and to a lesser extent M40. Note that I am not saying that Malaysia is declining but against other regional competing countries, we are not better off. Obviously, for businesses - with the focus on the poorer group, the country will face difficulties to drive the businesses that have been largely dependent on local consumptions and investments.

Malaysia's private debt to GDP is one of highest in the world - around 82% (2018) and from here we know that the push by our policy makers previously for consumption driven economy is not going to be as strong as previously. One can only spend so much either from our own's income as well as from our borrowings. We must be mindful that personal debt must be paid off.

On the other hand, the new government of PH is looking at reducing its government budget over the longer run. The current government as in its previous message of RM1 trillion debt is looking at reduced government spending.

So how does a PH government continues to drive the economy or at the very least maintain the GDP growth of 4.5% to 5%, you might ask - as government spending is to be lessen while consumption is curtailed.

Some of the drive that I see is the government's strategy of putting more spending power into the median and average income earner - and those are the M40s and B40s. In today's many economic policies globally - when the disparity of income widens, many governments today are trying hard to reduce that. Malaysia is no different. However, for many Malaysian businesses, we are neither here nor there. These challenges in addressing the needs of the B40s, will cause the government to not do any positive fiscal actions for larger companies in Malaysia. One can see it through the increase in gaming tax on Genting Malaysia as well as introduction of traveller's levy. They need to bring in more income hence the focused taxes.

So, in short, because the government needs to squeeze more money from the larger corporations and pass them to the lower income group, I do not see the Composite Index (which comprises of normally Top 30 companies) to be exciting. Most probably, the best it can move on to is 1800 level over the long run - until 2022. This is because, I do not see much growth potentials from these group of companies.

With all the gloom, where would the growth be then?

Businesses that are dependent on overseas dealings and where there are transactions involving international transacts.

One of the small positives which I am seeing - but have yet to bear fruits is the drive for automations (they term it Industry 4WRD or Industry 4.0) and they try to get more investments money to the SMEs. Both are interlinked in some cases.

SMEs as in any other businesses will not invest when they do not see potentials. The local consumption story is a much lesser potential as there will not be as strong local spendings as in the past. Just to give an example, the furniture retailer in Malaysia will not invests much when the housing market is slowing - and that has links to the private debt as many just cannot afford to increase their borrowings anymore.

What has potentials then? Despite the slow down in global economy, I do see Malaysia's trading economy situation (i.e. our trade internationally) NOT to be highly impacted. As it is, Malaysia is still a middle income nation and there are positive trades when a country just do good trades. From my study of the impact of Trade War, I see Malaysia to be positively impacted once the situation becomes clearer. Nations still need to trade whether there are trade frictions or not. At the current situations, many companies or businesses that are dependent on international supply chain are busy reallocating their supply chain. What does this means? A company like Wal-Mart or Amazon for example, will consider Vietnam or Cambodia as an alternative manufacturing site - and they are doing this much more aggressively.

Malaysia is not Vietnam. The higher value add of the supply chain - there is a potential it may land in Malaysia. When US imposes tariffs (whether they do it for long term or by 2020 it is solved) onto China, things are going to change anyway. As it is, China's costs advantage is diminishing. There will be a different type of engagement between China and US in the next 20 years.

Malaysia as a trading and manufacturing hub will be benefiting if we are fast and certain in our actions. That is if we know the right thing to do. The government must put more effort to drive these businesses and entrepreneurs.

On the perspective of stocks, I foresee companies that have international engagements will see more and more international engagements. Some of them are getting ready for more deals and businesses as it is.

I am identifying some of these companies for investments. Let me know if you come across any of them. There are rooms for discussions.

Monday, July 29, 2019

Why PIE Industrial is a stock for the trade war

By now, many would have known what the term trade war is about. It started during the Trump's administration which felt that to reign the growth of China, one of the method is to rebalance the trade deficit faced by US against China. Since the admittance of China into WTO, US has faced trade deficits against China and it felt that the unfair support provided by the Chinese government towards its exporters is the main culprit. Whereas, many has also felt that the reason why US has become so petty is because of the growth of China as a world superpower especially given that China is now quite strong technologically in some areas which is of concern to US.

Of course, the US government felt that the way to control the growth of China is through imposition of tariffs of up to 25% on $200 billion worth of goods from China. Since the late 20th Century, China has been steadily growing as the world's manufacturer, and this trade war is set with the intention to reduce that dependencies on China. Funnily, China which is now the second largest economy globally is already planning for this since the beginning of this 2010 decade. Since Xi Jinping has taken the helm in 2012, he has largely been trying to drive China to be a consumer and technological power.

In any case, Malaysia having been one of the larger semiconductor based products manufacturer would have been affected by this "trade war" disruption as many companies especially whom are dependent on China as a supply based are now reevaluating themselves. To this end, I can say all the semiconductor companies would be affected one way or another. To see this clearly, we have to understand in which value chain would many of these E&E companies would play. The diagram below, would provide a good indicator although there are other ways to slice that presentation.

Many of the products that are exported to US would be at the end of the value chain, i.e. box build and this is where the 25% tariffs is being imposed on. Box build basically means the phones, routers, switches, accessories etc that are assembled and exported. Malaysia is not a big exporter of final value chain products but rather the component exporters - pretty much at the Intel, Broadcom, Osram and Inari level.

At the moment, due to the disruption caused by the tariff, the component sellers are affected as most definitely many buyers are reducing their purchases due to the wait-and-see attitude from the negotiations between the Trump and Xi's trade team.

In any case, I see that the trade war is something which is not only due to Trump but is coming nevertheless. US as a country would not allow China to surpass them as it has been dominant since World War 2 -  i.e the world's superpower without much competition for 75 years.

This phenomenon will see changes in terms of supply chain. I do see some Malaysian companies getting larger orders as they have been building themselves as the system builders (box-build).

One of them is PIE Industrial - a final system exporter. Ironically, the company has not been doing that well for the last few years due to several reasons - such as shortages of supply and lost of customers. This trade war will see difference as in the management discussion (2018 Annual Report) provided below.

I have decided to buy 4500 units of PIE.


Sold PowerRoot and PowerRoot-WA

Recently with the rise, I sold both the Power Root and Power Root's warrant.



For both stocks I have sold all.

Total PWROOT sold was 2460 units, while PWROOT-WA sold was 1360 units. Total received was RM4626.73 and RM994.80.

Tuesday, March 12, 2019

Jaks recent rise is almost a given

From lows of 42 sen, Jaks shares had made a comeback quite quickly - to now 79 sen. In that period of between 18 December 2018 to now, these were the happenings:

- Ang Lam Poah awarded himself 25.164 million shares under the Restricted Share Plan scheme. That's about 5% of new shares for free.
- Jaks had to bear a RM 25.5 million charge on its loss given Star exercised on the bank guarantee in January 2019
- Ang Lam Poah had a close call as an old man fought him tooth and nail over the company, in the process asked him to do all kinds of things including issuing free warrants. (There could be more which I did not manage to track)
- Additional warrants were also issued with Jaks issuing a 1 warrant for 2 shares held. These warrants were not free but one has to pay 25 sen for it. (This basically also additionally cornered KYY as he probably had to come out with a substantial sum of money for the warrants)

Checking back, I have written this article on Jaks 2 years ago. At that time, I knew KYY was going to corner himself given the amount that he had been purchasing. He went to buy more after that and the highest he and his wife were holding was close to 30%. He was basically asking the public to bail him out. See below.





Of course, in that fight over shareholdings, as I have mentioned Ang Lam Poah would have fought back, and fought back he did. He did not have the funds to challenge and given the ridicularity of the exercise, there would not be a 2 party proxy fight.

Ang Lam Poah knew he had the upper hand. In the end, the condition of the market (which was bad after GE14) as well as the selling by smaller shareholders whom were taking opportunity to sometimes sell to KYY, it was obvious there would be huge pullback. The pullback was further made worse by a huge selling (including margin calls) of close to 30%. Imagine 30% or more shares changed hands over a period of 6 months. There was bound to be oversold position especially when the fundamental was little change - except for the RM50 million bank guarantee which was call upon in the Star vs Jaks case.

All in all, KYY was not honest, and I remember reading somewhere where he said the purchase of Jaks was meant for the long term - which obviously was a lie.

On Jaks and whether at this price is it fairly priced

In another one of my article, I have mentioned that Jaks had a lucrative contract. It is not yet completed and scheduled to be completed partially only by 2020. I am not so sure of Jaks' capabilities in the execution, but with its China's partner - it should as CPECC does have the capabilities. At its current market capitalisation of around RM461 million despite Ang Lam Poah giving himself free shares, it is probably still undervalued as that power plant contract itself is substantial.

Another potential upside is that if we check around situations around Vietnam, currently it is facing shortages of power supplies towards the future, given that it is hugely industrialised now. The US China trade war presents a lot of opportunities for Vietnam and power is needed.

Personally, I do not like the way free shares were awarded to the CEO and his director, but I guess he also did it to protect himself. Another person that comes along may be more professional and deeper pockets than KYY.

But, as in any person sometimes there are some trading opportunities and this seems to be one of it.

Friday, March 1, 2019

Airasia's 4Q18 results shows purchasing power is weak

Airasia is going to be fine. They have positioned themselves to grow when there's space for them to. Although the leasing of planes that they have sold are committed, the commitment is not long. In any case, the way Airasia positions itself, it will need the planes anyway. It has rooms to grow in Philippines, India and even Indonesia and Japan. Whether those new additions will translate into immediate profits is however arguable. Hence, comes to the bigger issues.

I know where and what Airasia is thinking, to an extent. It wants to be the dominant ASEAN airline - forget me saying about low costs airlines as even in Malaysia one can see that they have 58% market share. If that is the number, this means low costs airlines is now mainstream, and full fledged is going out of mainstream. The way Airasia positioned that, to me - in the short run will have some issues. If one is to buy tickets, pricing wise, the competition is scarce especially in Malaysia. To fly to Singapore from KL though, we have additional options for cheap fares.

However, for Malaysia, that option is almost now negligible. Airasia is actually fighting against Airasia in terms of pricing. For example, if I want to fly from Penang to KL around 8pm to 10pm, I have options in terms of pricing - all from Airasia. If I go out of Airasia, then I have to pay considerably more. Hence, Airasia has positioned themselves as such. It has crowd out Malindo and MAS. It plans to also crowd out others in other countries that it operates in - such as Thailand, maybe Philippines in the longer term. For Indonesia, it will be tough as Lion Air is very strong despite the sad event last year.

For 2019 and 2020, what used to not be its strategy for last 2 years, it has brought back into decision. Hedging fuel price. Hence, so far so good. It has hedged 52% of fuel for 2019 at USD63 and 40% for 2020 at USD60. That, by itself shows that Airasia knows what is the price point, people will be willing to buy its tickets. Hence, by eliminating some of the uncertainties in costs, it can strategize better.

Now, then if Airasia is doing that well, why is it announcing such a bad result. To me, it was triple whammy for the last quarter. What supposed to be the most promising quarter usually as it is holiday period, they turned in losses - massive. The first thing was fuel costs. Something went wrong. I know they did not hedge as at last year's policy but it was USD91 jet fuel. The highest Brent crude went was about USD80, then towards November it went down to as low as USD52 in December. I also understand that Airasia sells a lot of their tickets upfront but at USD91 is surprising.

Second thing, of course is the weak currencies throughout ASEAN. A lot of the costs are in USD - from lease to fuel to interests payment.

The third thing, for Airasia is the lease costs which it has to now bear because it has sold a substantial number of its planes and need to leaseback. These are costs which will stay. I do not see our ASEAN currencies to be significantly stronger in the next few quarters. Neither will the lease be going off soon.

However, one BIG thing which I do not put in as a whammy is the weak pricing of its tickets. Its RASK is 14.82 sen for 4Q18 against 15.46 sen in 4Q17. It can say that its total available seats has grown substantially by more than 20%, but that drop is also bad. Suffice to say that the load factor has also gone down from 88% to 84%. As mentioned, usually, this is the period where people travel - many a times for leisure. Hence, its pricing is now elastic, significantly elastic - which is no good. Perhaps, Airasia for regionally has no longer become the airline for leisure but business travel has become a big part of its business. When people take off for holiday or stay at home, its yield suffers - as they have become leisure traveller rather than business traveller, perhaps.

I may be wrong in some part - but the argument of huge disparity of income is potentially true. The richer ones are travelling to Europe, or Japan. The poorer ones are no longer flying for holidays or maybe very petty when comes pricing.

No good for the economy. Airasia will overcome that in the longer run as it now understands demand and readjust. It has readjusted partially, as mentioned above in hedging the fuel price early. But the poor spending behaviour shows that people are very timid when comes to purchasing. What I fear is that the trend that Airasia has shown being a regional airline is that not even Malaysia, regionally people are not having that much freedom to buy.

I have seen in some of the results, not even on Airasia but others. The larger scale of things, we do not know how big will the impact be in the shorter term future. I have mentioned about what's dangerous in the near term, but this is one which is really I am seeing signs that shows what is potentially coming.

Wednesday, February 27, 2019

Toll highways: When a Pitch has turned into a Promise but has now become a Problem

I was born and grew up from a "Project Perumahan Rakyat", one of the first of its kind during the 70s, when government during then was trying as usual solving housing problems. My parents was paying about RM36 a month to be able to rent the one bedroom 400+sq ft place which later on we were allowed to own. That by itself is a rent to own scheme. I know what B40 is about and obviously have gone through life being in that category. During then, the term B40 did not exist but in my community as a child, my grandmother was always careful that I do not take the elevator alone as there are a lot of drug addicts in the area where I dwell in. The place that I stay, we cannot fix a ceiling fan as the height of the unit is only about 8 ft. Among some of my neighbors, there could also be families with 10 people staying in a 400sq ft unit as during then and now, people are just hoping to have a roof over their heads.

Of course, over the period I have studied in a good public school and I have always been immersing myself with books and knowledge. My family as I can say it take books as our source of knowledge. I would claim that my fondness on numbers and later on finance and investment since young comes to the appreciation in understanding business. Of course, living in Malaysia, we have to understand politics and constant pressure faced by politicians. I am still learning and this is one area which I constantly overlooked.

2018 of course was unprecedented, and I do not need to say what happened as from May until now it is already 9 months. As in every Malaysian, we have to go on with life. We have to make Malaysia better under the constant pressure from new economic powers further from Malaysia or even among our neighbors. Today, North Korea's Kim Jong Un is talking to Trump on disarmament of nuclear weapons in a country called VIETNAM. Having that discussion in Vietnam itself is historic as who would have thought of that discussion being held in a country that just gotten itself out of war not too long ago. Malaysia is facing new pressure from these type of countries, never mind our four neighbours, Singapore, Thailand, Philippines and Indonesia.

In that, Malaysia has to move faster, smarter but still carefully. In my many discussions with businessmen who do business in Vietnam, Malaysia still has many advantage against that country. But yet, we are still competing against them on many fronts.

The new government in addressing the B40 (rightly so), still has to grapple with bringing the country forward. In that, the budget, expenses, policies and later deliveries have to right and precise. To bring forward economic comfort to the people, many forgot that one, as a country, we have to fix the economy first. With that, together we have to address the plight of the people. Of course, today the challenge faced by many government of the day is to fix the disparity of income. This is the flaws and product of globalism, where a particular company thrives and become stronger while few competitors survives. Example, how does one address a monopoly or soon to be of Grab, Lazada et.al.? We complained about the taxi license holder of the past but these are one company dominating an important space on the new economy.

The new government, unfortunately, with the manifesto, todate it is more of a filling the potholes from the promises provided during the election. Some of the people that I talked to, still felt that Malaysia has not gotten itself out of the election fever. True enough, in one seminar that I attended recently, one of the politician turned government hence policy maker today still talk about the triumph of May 9 - 9 months after.

Since liberal democracy has been proven to be a governing model, it has been seen that one of the way to fix the economy is to promote capital markets, direct investments and entrepreneulism. Malaysia, in that respect practices open economy. Our DNA has been about getting companies to take up risk and we encourage them by giving incentives. When companies profited, we can once a while complain but of course in the process, we see better Malaysian entities come out of it. In fact, our open investment policy also helped non-Malaysian companies to thrive out of Malaysia. If one goes to Penang or even Johor, we see many, but we just do not realise it. We helped many non-Malaysian companies to be successful and we should be proud if it. However, our bigger hope is to see Malaysian company that is able to compete globally.

The elimination of tolled highways is one of the promises among the many promises. I however felt that it is an over-promise which has not been studied carefully. If we put it and give a simple question to the masses, they of course will not want to be paying toll. Nobody wants to pay anything especially when the B40 and M40 earn below RM8500 household income. However, the past government, since 80s i.e. Penang Bridge have already started privatisation of roads whenever we feel there is a need to develop infrastructure. Fast forward today, that perhaps been slightly overdone - but it is not easy to reverse a strategy that has been created for so long. In getting private to invest and charge, our budget on development has been allocated elsewhere. More recent analysis has provided that to buy out all the concessions it will costs RM150 billion.

The government has talked about RM1 trillion debt. While RM1 trillion is deemed high, another RM150 billion is not helping. Every year, in our budget, Malaysia for quite a while has not been putting that much on development expenditure as our operating costs has been a bigger problem. We tried to solve that through private-public partnership (the 3Ps). It is a good effort, but as usual to make that happen the one that takes the lead i.e. PUBLIC has to make themselves consistent i.e. then only the companies will be comfortable.

While in my past article, I am supporting the purchase of Gamuda's toll concession assets, to do it much more aggressively on several others is a dangerous precedent. We just do not have the capacity. The public, like it or not has to be educated, just the same where they have to be educated on personal financial management - to fish rather than to be given fish is an old proverb but still relevant. This toll topic is hugely complex and I believe only a small percentage can comprehend, but nevertheless a policy has to be clear and we have to stick to it. Otherwise, fewer companies will be willing to invest and that could present a bigger PROBLEM to the country.

Monday, February 25, 2019

The idea to buy Gamuda's related toll highways probably is the most rational (among the rest)

Prime Minister's Department made an announcement where it is in negotiation to buy the concession owned by Gamuda, and this is probably the most rational.

Gamuda as mentioned owns 44% of LITRAK which has LDP and SPRINT under that vehicle, 50% of SMART in partnership with MMC, and 70% KESAS in partnership with Selangor State. These highways pass through the most populated areas of Klang Valley, hence by buying them, it probably sends a message that they are doing something to their promises. It would impact the most number of people although we can say that whatever that is forgone towards development in the rural is provided to the urban. The fact of the matter is that, cost of living is most dearly felt in the urban area than the rural.

Most of Gamuda's related highways except for SMART is highly profitable. Most of those tolled highways additionally are left with short tenure, which makes it more reasonable to buyback. Costs to the government will not be as high. LITRAK's highways will end by 2030 while KESAS should have ended by 2024. I believe SPRINT should have ended by 2034 to 2036.

The most significant piece of the proposal is that the government is exploring to impose "congestion charge" pretty much like Singapore's concept - without the smartness yet, as Singapore's concept is charged based on traffic, where it is proposed for the current charges is charged as congestion charge for 6 hours during the peak hours. Between 11pm to 5am, it is proposed for non toll charges while 30% discount will be given for off-peak times.

This concept is a good idea as it probably disperse traffic more evenly, hence basically asking companies and people to relook at the working time. It is current, as most ideas are towards flexi hour working, which to me brings even more productivity than not. A simple fact that can be argued is that with people spending less time on the road as well as better utilisation of mass transportation services, it by itself already causes better management of facilities and time.

Before this, I have always wanted to suggest towards creation of a "transportation fund" as part of the ways to address the promise towards reducing toll highways. It seems that this one is a way to start. The collection from the full fare in peak hours and further 30% discount is a model that can be worked on. To impose congestion charges even on roads that are non-tolled at the moment will not be a popular idea, but that is one which the government must look at holistically, as in the future our KL city will be almost deadlocked, if we do not look at the revise transportation model. As it is MRT3 is being postponed and the current situation will not allow the government to even consider more tolled roads.

The transportation fund that I have thought of can be used to buy up some of the tolled roads as and when they become available for purchase. The government need not buy them off in one go but it can be done in stages. One of the entity that government could work with is Khazanah and I believe Datuk Shahril the current CEO of Khazanah should be experience enough to look at this.

Why Gamuda rather than PLUS for example?

If one looks at the highways that Gamuda has control of, they probably are less affected by gearing. LITRAK's debt for example is about RM1 billion. And if the government is to take over the concession, they can also take up the debt. The PLUS one is much bigger, which I believe the debt through bonds is still around RM30 billion. Moreover, who is to compensate the EPF's contributors whom have funded the purchase of the concessionaire 8 years ago at RM34 billion enterprise value?

The ones owned by Prolintas under PNB are also more challenging as we know PNB is an investment arm for a large part of the community and they can be sensitive. Many of PNB's highways are also just breaking even. And they are still building 2 new ones - DASH and SUKE - if I am not mistaken.

As above mentioned, LDP and KESAS should be the ones that are more compelling to be purchased back and show that this is the model to go forward towards highway or road charges.

I believe the purchase of the concessions of LITRAK, KESAS, and SMART should be at fair value with some small discounts. A look below shows that the majority of the shareholders for LITRAK for example are owned by funds. I believe except for Gamuda which owns 43.58%, funds own almost 50% of LITRAK.


In buying up assets especially on the part of the government, one should be very careful as it cannot afford to be seen as overpaying while the capital markets be seeing it as non-punishing towards them. A small step that is taken wrong would impact the market as well as the economy on a macro level.

On whether this is value depreciative towards the other highway concessionaires especially like WCE, Ekovest or even Taliworks, I think it should not. To make the transportation fund model (as above) works even better, I suggest for incentives through capital markets such as the ones like Real Estate Trusts (for highways) to be created. From this, renegotiation on toll rates could also be initiated as the companies that are incentivised through various means may even reconsider the pre-negotiated contractual rates. A simple example, the Transport Fund could invest into the listed highways and from there push for "congestion charges" type of model from within. Highways that do that could be incentivised through various means and that could also include maintenance contracts for other non-tolled roads.

In reality, as I see it, after the 9 months in power, the current government is getting a better hold of the situation and understands both segment - people and market economy - much better. As it is, one can see that remarks that are made suddenly has been much reduced. They also do seem to understand that to elevate the current situation, it is not just by giving but in its entirety: the people's cost of living, the business sector, the general economy are intertwined. Even this time around the Gamuda's situation is handled better than the one when part of the package for MRT2 was terminated suddenly.

I am actually seeing more positive signs last few months except for the constant pressure to win by-elections.

Thursday, February 21, 2019

CIMB's downward revision on Bumi Armada is weird

Since my purchase of Bumi Armada two days ago, CIMB came out with a downward revision of the target price of Armada from 70 sen to 30 sen. If the summary that TheStar is made correctly, I feel that it is weird that CIMB has taken the probability of a right issue to be called by Armada at 70% and it will stay status quo at 30%. Hence, based on that probability the analyst downgraded the call to 30sen.

First of all, if ever Bumi Armada is doing a cash call through rights issue, there should not be a revision in target price as a rights is a new call altogether. It should not affect the price unless, he is really looking at short term and not fundamentals. Secondly, as seen from his detailed analysis, he did a very thorough sum of parts analysis on the company identifying and valuing all the projects - after which he put a discount to the value - which to me is correct. However to put a weightage on the rights call probability and reduce the target based on that does not come from the "valuation book". There's no CFA that teaches that.

It additionally says that because Armada is contemplating to bid for new projects, hence it will need rights issue call. Again, the fact that Armada is looking at expansion by itself is not a bad thing, in fact it is a good thing.

Tuesday, February 19, 2019

Buy Armada, Sell Gamuda

For the last 1-1/2 months, Bumi Armada has been a highly traded stock, which is probably unusual considering that it used to be a Composite stock. On a daily basis, its volume can go as high as 500 million stocks traded, i.e. almost 9% of its 5.871 billion issued shares. This shows that there are a lot of traders and speculators with probably syndicates involve in the stock.

When this happens, usually the fundamentals are out of whack. At the moment, there is a tense situation concerning its short term fundamentals and among the analysts even they could not agree closely on the valuation of the company among themselves. The UOB Kay Hian analyst gave a 10sen valuation for Bumi Armada whereas the CIMB analyst gave a 71 sen valuation for the company.

Basically, for me if the UOB's valuation is correct it basically can almost call for bankruptcy or almost liquidation for the company as one of the major concern for Armada is its short term liquidity.

I had written a piece on the stock, and I have less fear over its short term liquidity. I think it is something that can be addressed, which is why I am more inclined towards the analysis provided by CIMB. Hence, I have made a 25,000 units purchase of Armada for the fund and at the same time Sold Gamuda. If one can remember, when I bought Gamuda few months ago, it was also probably out of whack in terms of its pricing for a very good company. The almost termination (underground portion) of MRT2 for Gamuda caused selldown on the stock. It was lingering at around RM2.30 to RM2.45. Now it has gone up and I am taking profits although I do think it will continue to go up.



At the moment, in my opinion, many of the stocks are attractive hence giving me difficulties to pick stocks. With Bumi Armada, I am taking opportunity of its volatility and selldown which I think is wrongly sold especially when it has become a traders stock.

I think over the long run, it will readjust itself, hence I decide to take a small purchase of the stock.

Wednesday, February 13, 2019

MMHE: A quarterly report which is not worth reading

MMHE, a 66.5% owned subsidiary of MISC which in return is a subsidiary of our largest corporate, Petronas just reported a poorer results turning in a net loss of RM25 million for the 4th quarter from profits a year earlier. I do not invest into MMHE and I just would like to know the trend of the business. However to my dismay, it is not worth reading. Just see below from its financial performance announcement.

What do we learn from this reporting? Nothing. I can get this done by a trainee employee, and I would not be satisfied.

MMHE has 9 directors and I am sure professionally hired management but when can we expect professionally provided report?

Sunday, February 10, 2019

Not all Oil and Gas companies are made the same

I have been reading this week's Edge which discusses about Scomi and the challenges that it faces. Under the title "Scomi Group on the Brink", it highlights the predicament that the group is facing as well as giving us an account of its colorful past where it was a vehicle controlled by Datuk Kamaruddin Abdullah, the son of Malaysian 5th Prime Minister, Abdullah Badawi. Of course, the best period experienced by Scomi was when Badawi was PM. After that, it was downhill for the company.

This gives us a lesson and remind us that it is hard to evaluate O&G companies. Why? To me, many O&G companies in Malaysia need a different type of business connection and it is hard to make out their actual strengths and capabilities. That we have seen - the best opportunity for several of the sons of Malaysian PMs to become successful in business is through this sector. It has been proven before.

Whether they are capable business, it is hard to read. This sector however does allow people whom have connections to either our country's oil business, the federal or state government to succeed. O&G is quite a unique business where in many countries, the assets are state owned. This is similar in Malaysia where the asset is owned by Petronas and ultimately the PM's office control.

This was especially so when oil touched $120 per barrel and at that period Petronas was probably more relaxed in developing Malaysian O&G companies. When oil comes down to $60, it will be a different story. I believe Petronas will be more careful. At this period, it will be the time to separate the boys from the men, as someone would say it.

As an investor, it is important to figure out and try to eliminate what is investible and which one is potentially high risk. The retail business is investible and those include PDB and Petron. Then there are the equipment suppliers, companies like Wah Seong, Favelle Favco. Dialog is another one where they have made it successful in the business and they are proven company.

Then there are those that very hard to read, in terms capabilities especially to our Malaysian service providers which largely only supplies towards local projects. Those include Carimin, Perisai, Perdana Petroleum, Dayang, Icon Offshore and few others.

There are several companies that have made it overseas. Those include Yinson, Bumi Armada, Sapura Energy, Wah Seong, MISC. These are the companies that will provide a good basis for us to make our study as this is an international business and the ones that are able to compete internationally shows their competitiveness. The ones that have more than 80% of their business dependent on Malaysian contracts is just too risky.

The recent rise among O&G companies brought back an early exuberant towards the sector but we must be able to separate which are capable to compete and which ones are not. What has not really happened and to my disappointment is the lack of consolidation among the companies. There have been very little M&As within the sector and I feel that there are just too many companies. Although there will be natural attrition, the amount of consolidation is just too few.

I do think that while there seems to be a pick up in the sector, many of these companies will still find it hard to make ends meet. A run through of what the companies say in terms of prospects for 2019 and near term just shows that the good old days are far and between. It is true though that many stocks have touched their all time low. These provides huge opportunities.

To understand the sector, it is not just about how many contracts Petronas can dish out as I believe they are also very careful nowadays. It is about geopolitical. It is also about the politics of Trump and Saudi with Russia in the fray as well. Even the killing of Khashoggi has its impact on the price of oil. Shale from US plays a big role. How will they impact the strategy among the oil majors and OPEC? What about the global initiatives on alternative energy such as solar, electric car etc?

If one is just promoting based on how many rigs Petronas has, I think it is pure shortsightedness and not thorough in their thinking. In this space, one has to be clear on the macro as well as micro economic situation. Is Hengyuan a retailer and refiner? What would the impact of excess supply from US shale brings to their margin?

What about the companies in the exploration space? Are there new activities and are there oversupply among the players. Can I call it the buyers (companies that awards contracts) market?

There are companies that have some debt issues and such are Bumi Armada, Sapura, Perisai Petroleum, Scomi Energy. Can they overcome that? As I have mentioned, some of them are world class competitors. Will they be back stronger if ever they are able to resolve their debt issues?

Then there are some companies which have taken opportunities as they are late entrants in the business when the oil price collapse. When others were struggling with overcapacity and debt, they had just raised new funds and their balance sheet were fresh and unleveraged. Such companies include Hibiscus, DNEX.

All in all, during times of uncertainty there presents opportunities, but we have to be very careful as not all of them are worthwhile.

Thursday, January 31, 2019

What's dangerous for 2019

The first month for 2019 is almost going to see its close. While very few of Malaysian companies have reported earnings, US companies are midway through their reporting. From my daily watching and reading, I would say it has been a mix bag. Seldom do I really follow through and be tied down to quarterly earnings. This time though, it has a sizeable threat.

CHINA! and semiconductors.

Several of the companies that are largely dependent on business from China is seeing deterioration. Companies like Nvidia, Intel, Apple, Caterpillar - they have reported earnings or guidance that seems to show that China is slowing down. All of them has indicated that their business has slowed in China. Whether this is wide spread i.e. over the entire China's economy or certain particular economy i.e. semiconductor, construction is unknown. One other factor is also because of the trade conflict between China and US, the Chinese are now being patriotic and they are preferring Chinese brands. This is seen from the market share growth of Huawei's phones as against Apple's IPhones.

However, the other two companies being Intel and Nvidia, despite the trade friction, if the demand is still there, the Chinese companies will still be buying as there are very little alternatives. Intel as we know is largely providing CPUs for PCs, servers and modem chips for Iphones. Nvidia is another chip company whose business supplies to the gamers, data centers, autonomous mobility market.

It is still hard to read how bad the Chinese economy is going to affect the world this year. There are already signals as provided by Alibaba's VP, Micheal Evans a month ago, where he indicated that volume growth has slowed. In China, many economists and businessman are already expecting slowing growth - but to how much? Will there be a recession. Official data from the Chinese government still shows growth of 6% to 7%. Is this true?

What is the impact to Malaysia

Malaysia is a huge trading partner to China especially when it comes to exporting semiconductor components to China, for them to assemble them into full product. Among the companies that exports to China via Malaysia are companies like Intel, Broadcom, Infineon. Malaysian listed companies such as Inari Amertron is a supplier to Broadcom especially for the RF filters. As we have seen, Inari has already been affected somewhat, but not massive.

What about the automation companies like Vitrox, Pentamaster? I presume as we see the trend affecting Intel and Nvidia, there is a possibility that China may see under utilisation of its capacity. With that, there are good chance that these Malaysian companies may see slower growth as well. With the threat of the trade war, many companies are also looking for alternative manufacturing sites. Vietnam, Malaysia, Indonesia, Thailand would definitely be explored. I do not see it to be immediate though as China is working on its under utilisation.

Palm Oil is in danger

The trade war also sees China offering to purchase a vast quantity of soy bean oil to make up for the trade imbalance. As it is, the details are still very vague but considering that if some agreements are to be materialised, soybean will be used as a trading commodity. What's good for soybean farmer in US will not be good for palm oil as they are substitutes. I am very wary of palm as China has not many traded goods to show to the American exporters to make up the imbalance besides cars, Boeing planes, beefs.

A slowing down China towards Malaysia

As it is, at the moment it will be hard to figure out the actual impact. I fear though that the initiatives by Malaysia government to reduce debt will not be able to materialise unless we start to sell national assets especially those held through Khazanah. The government is adamant on reducing debt. Hence, medium term i.e. for the next 3 - 5 years, we will see corporate exercise happening where these assets will be privatised.

Saturday, January 26, 2019

First Wing Tai, then MWE this year Suiwah

2017 it was Wing Tai Malaysia.
2018 MWE.
This year 2019, it is Suiwah.

Let me tell you they use the same formula i.e. little trading. Why little trading? It is because they have no intention to expose themselves to the shareholders. These are companies that treat the company as their private company anyway. Remember, where Jho Low comes from. What is the background of his family. Where his father, Larry Low was attached to as a director before? MWE. And coincidentally, all these companies have background from Penang.

They learned from each other.

I can bet you that Suiwah is buying from public very very cheap. High chance, it is going to use Mercury as advisor, or maybe M&A Securities. At the point of writing the Net Asset Value of Suiwah was RM3.30 per share and, it is offering RM2.80. It probably did not do revaluation for a long while.

Be careful on these type of companies. They are not keen to treat the shareholders well at all. At AGMs, they are hoping that the AGMs end fast so that we do not ask questions. They do not think of WIN - Win. The good ones in their business, they pass to their family business. For us investors, we do not mind if our win is smaller but at least they treat us a partners.

In their case, they are using us as like their gambling playground.

Note: I am NOT particularly referring the scenario towards Wing Tai, MWE or Suiwah but these are certainly true for some companies that are listed in Malaysia.

Friday, January 18, 2019

Fear on Bumi Armada is probably overdone

Imagine this! A global company which does business on almost all parts of the world supplying to the large oil and gas companies, top 5 largest FPSO valued for less than RM1 billion or USD250 million that is.

As we see here from a diagram picked from BW Offshore, Armada is one of the largest players in this space

One can say that it  is now largely in debt (about RM11 billion) and huge portion of it is in short term debt hence its liquidity is an issue. With that we can probably put a discount because of the risks but those that fear over it defaulting in its debt probably is worrying too much.

Bumi Armada, as we know is controlled by one of the richest man in South East Asia, Ananda Krishnan and in himself, there is a certain level of ethics which he has shown and practiced towards the investment community in the past few decades from what we know.

We know that he has taken some companies private before and put them back again in the public. (All his major holdings Maxis, Astro, Bumi Armada have gone through that route) Through that route, which I was critical of them, he had actually not let many of his investors down as those holdings were profitably for most of the shareholders. This is unlike some of the companies that have gone private where the party who is privatising the shareholders have taken investors for a ride buying them way below intrinsic value.

This time around Bumi Armada has gone into a little bit of trouble largely due to the poor oil price since 2015.

Bumi Armada has two main core, the first which is OSV or Offshore Service Vessel and the other FPSO which stands for Floating Production Service Offloading. Because of the poor oil price, OSV has largely been impacted and because the OSV's business has less barrier of entry, it is hugely competitive in times where activities on exploration, offshore production is kept low. Many companies in the OSV space are not able to be kept afloat.

FPSO on other hand is a more complex business. It is a partner to the oil companies which is extracting out the commodity from the sea. There are not that many companies which are capable of getting into this business. As mentioned above, Bumi Armada is one of the largest. Yinson from Malaysia is the other. Bumi Armada as we see it is less preferred than Yinson - mainly because of its balance sheet, not its capability. Yinson in fact, is a lesser size player. FPSO is not a dying business and it has much less competitors.

When as outside investors see that the company is in liquidity crunch, the two things that comes in mind is additional injection - which means more capital and the other being liquidation which is the worst of the two. Either one however, during times like this is less preferable. Bumi Armada has come out on record to say that it is not looking at raising funds through additional injection. Coming from them, I would say I trust what they are doing. Instead, it is looking at restructuring its short term debt - which is still a problem - and trying to renegotiate the rates. The CEO of Armada, in its letter to its employees, has written and advice to keep the level of new business development low as they are going to restructure the loans. From this perspective, I take it that it is trying to be careful rather than being in serious condition until it defaults.

Why do I say this? As a start, the level of business operations activities for Armada for the last 1 year is at its highest for the last 5 years. It has just gotten acceptances for 2 of its largest FPSO projects through Armada Kraken and Armada Olombendo. These are the 2 projects which are more complex than its earlier projects - and the key is that it has gotten acceptances, where from here the contractual work should be more smooth flowing. All in all, Armada has over RM20 billion of contracts in hand and another RM10 billion of extension options.

I would also like to highlight that the high gearing over the last few years is also because of mainly the 2 large projects. From 2014 to 2017 as shown below, it has been investing into these business.


What Armada has gotten into trouble is from the OSV business and the termination (Armada Claire) and bankruptcy of one of its client in Nigeria. These largely caused them to be sunk into some liquidity issue.

I do not think these are issues which cannot be solved especially given that it has solved the larger operational issue from Armada Kraken. Looking forward, I would like to think that despite oil price being lower than the best years between 2012 - 2014, many of the oil producing countries have gotten hold of the shock better than what they experienced in 2015. Oil price may not go as high as USD90 or USD100 anymore as it is now having shale as a competitor but they are better prepared.

In analysing Bumi Armada, it is not easy as it is going into chartering and there are different degree of complexities in its business. One of the better explained analysis is coming from CIMB here (page 52 to 57). Its analysis is extensive and I think it looks at it objectively especially on individual projects. Today, we hear that it is keeping its call unchanged. I feel it is right as to me fundamentally it has not changed much.

What the analyst as usual has not taken into account yet is the strength of the brand, relationship, customer exposure, processes that the company has built over the years. With that, it should be worth more.

I do not think the risk of defaulting is high. It may face high interest costs but it should also not be worth just around RM1 billion for a company this level.

Monday, January 14, 2019

Should we be fearful or fearless

Seriously, this is one of the better times to buy Malaysian stocks unless we are very sure that 2019 or early 2020 will be recession year(s). 2 years ago, I was short of stocks to pick, this time around it is a different way round.

World Recession

Let me get to a brief discussion on recession (or will there be one) before identifying whether we should buy and what type of stocks to pick. Will the next 12 to 15 months be recession period? US indicators does not seem so, and in fact there is this "grumble by you know who" about the Fed raising interest rates in December. The Fed will not raise interest rates when the economy is tumbling, and in fact they were worried over inflation - and they have mentioned of normalising interest rates (a number where nobody knows what is the optimal). The 10% drop in US stocks last month were largely due to few reasons - fear that the Fed will continue to raise interest rates, program trading and holiday period.

That fear especially where the Fed is going to be "hawkish" has been laid to rest when Powell, the Fed Chairman mentioned that they will delay their plan to raise rates if there is an indication of economic slowdown or more importantly recession.

Now, if US seems to be pretty safe except that the economy is not going to be as expansionary as 2018, what about other countries - such as China and Europe?

Europe and UK have been facing slowdown  in growth largely similar to the Japan syndrome for a long time now. Its economy while significant in size has sort of cooled and as such it is not a shock anymore if anything untoward happens to Europe. The larger worry is the second largest economy i.e. China.

China, this time is the biggest unknown. There are a lot of indications that China is slowing down - but to how much? Every economic indicators show that it is going below 7% growth, a territory that has not been seen for more than a decade. Well, what is more worrying about China is whether it is facing credit problem among its industries and property sectors.

We know that China has strong reserves but what we do not know is whether there is the "House of Cards" symptoms facing the industrial sector especially when the Trade War is on the doorstep.

Trade War

While the Chinese government has realised that they cannot depend on capital pushed growth since few years ago, they did see the pushback from US coming so soon.

US under Trump in his 2nd year in office has tried to hit China hard and that has sort of shaken the Chinese - at least among its export industries.

The trade war is a term but in effect, what US wanted to reign on China is towards its technology sector which can be worrying for US' dominance in the future. Today, we are already seeing many of Chinese companies have shown their appetite to grow and invest heavily into technologies. US knows this is a threat and what is mentioned as Trade War is more of a Technology War. As such, through the use of tariffs US is trying to slow the Chinese down. The effort then is for US - at its strongest for within the last decade - to pushback the Chinese businesses.

But sometimes when someone is trying to cause ripples, tsunami may happen. That is the one worrying. In many scenarios, we could not see the tsunamis that is being stirred.

While, the worry is plenty, I foresee that both countries may come to some agreement in the short term as they are interdependent on each other. A much weakened China economically will not be good for Trump who is running for his reelection in 2020.

Malaysia's economy, politics and stocks

The Malaysian stock market is an awkward one as we had just went through a massive government change - first time ever in the history of Malaysia. Many counters which have been providing services and where their businesses depended on government budget will continue to see uncertainties.

A theme that I have continuously trump on is look for quality companies that are run by quality management. More often than not, when there is quality, Malaysian government cannot ignore. (This is the reason why I invested into Gamuda, a company where the Penang state government when DAP was the opposition at the federal side was even willing to award a multi billion contract)

I can understand when a new government (especially after claiming that the country is in very weak financial situation when they take over) is trying to work on its finances.

Imagine this. On its first few weeks, a new management - especially after announcing elimination of GST which will reduce its revenue by RM20 - 25 billion, what will they do? CUT for sure. RM25 billion is significant - for someone who cannot imagine, that is about 7% of the government's expenditure.

Only after they have gotten a better hold of the financial situation, the government can look at its development expenditures. This is because, more often than not operating expenditures are the one harder to get the "snips" as it involves the people's rice-bowl.

While the bulk of the "SNIPPING" have been done last year, this year will continue to be the discovery period i.e. who are the cronies and who are the ones really can deliver based on their capabilities. No government in their right frame of mind would want to create downfall to well-managed Malaysian companies, not when as a country we do not have that many to claim for. A government in its right frame of mind will understand that they need the companies to continue to help build the country whether they are from construction, manufacturing or even plantations.

As a country, we will still need to grow through careful "development initiatives". And that means spending on development. While operating is the one keeping the engine running, development is the one pushing us forward.

For stocks, my take is that while the government is still at discovery mode and learning, we should continue to put money into companies that have delivered and have put effort to learn and grow. Many of these companies are great companies but because of investors' fear their stock price have suffered. We should however know whether some of these companies can be caught by "disruptive" trends.

What about the stocks in which they are not so related to government contracts?

At the same time, due to global economic pressures as well as internal trends, several companies have seen years low. These companies have very little to do with the government - whether it is governed by PH or BN. I could name a few i.e. DKSH, Bumi Armada, Freight Management, Hibiscus, P.I.E. These are companies as we know have dropped because they are part of the "fear factor" in the latest global economic trend. Some of them are more defensive than others but what I noticed is that the 2017 or 2016 stories did not differ much from the 2018 and 2019 stories.

Then why did they drop?

A big part of it is because of us, human being - we are inconsistent in our feeling.

Friday, January 11, 2019

The politics of insuring the people

First of all, I have not really been agreeable to the concept of forcing the foreign insurance companies to part with 30% of their shares to locals. Think of it, usually the local organizations that can afford to take up sizeable stakes are those like EPF, KWAP, LTAT. The price for insurers the size of Great Eastern Life, AIG would be high when they sell these 30% stake to our locals. Perhaps the good part is EPF will have additional options to invest into. When we put up conditions like this, it often scares companies from doing business in Malaysia as we now can put up conditions as and when we sees fit.

Pushing these insurance to sell with a dateline is even harder as valuation where both parties can come to agreement is not going to be easy. Anyway, when the government tells us that in Malaysia 80% of the insurance business is controlled by foreign companies, that is also a cause for concern. Besides banks, size matters even more in insurance business. Many large risks are not able to be taken up by smaller business as they sometimes cannot swallow the risks.

However, I am concerned over government working with the insurance companies to cover the B40 group for some level of coverage. First question is, what about M40 and the rests?

Insurance thrives on scale and masses. I would like to think that government is of enough scale to provide the coverage. The taxes and revenues that it collects is supposed to provide the coverage to a target group be it the less  able etc. This public private partnership concept may sound good for the B40s but if we look at it through a larger picture, there are many questions than answers. Always when you get something, you forgo something else. This does not sound like win-win.

The question is when Great Eastern (GE) is willing to allocate RM2 billion for coverage for the B40s, is that the price it is willing to pay for it not to dilute its stake. This means that there is a price one can pay to opt out for something. Great Eastern is the largest life insurer in Malaysia. What is the price Prudential Malaysia is willing to pay to get itself off the hook assuming it is smaller than GE, for example?

What about Tokio Marine, AIG, MSIGs of Malaysia assuming they have not met the 30% local ownership threshold?

Then, my other question is whether is this another form of votes buying? We had concerns over BRIMs before as it only targets certain groups. Previously, I thought the message was that focus is more towards the handicaps, less able group while we are going to teach the "able" B40s how to fish rather than giving them the fish. That has been partly what we have been voting for - now there seems there is a change in approach but similar in style.

Monday, January 7, 2019

Why does a Rubber Research Institute need RM2.28 billion?

By now, we would have already read on an issue regarding the Kwasa Land where EPF have bought a 2,330 acre land at RM2.28 billion from Aset Tanah Nasional Berhad (ATNB) whom have presumably acted as a middle man after it has bought them from Rubber Research Institute for RM1.5 billion.

That transaction has become a big "hoohah" as it seems to be that RRI has sold the land at below market valuation. The issue now here is whether - ATNB, a wholly owned subsidiary of MoF - did it shortchange RRI, another wholly owned entity of the government?

Despite we have been hearing of 1MDB, Tabung Haji, I think this issue may not be that big as compared to those (unless the auditors have found mismanagement with the usage of funds from the profit made by ATNB).

I would like to make my thoughts in a different manner.

From the proceeds, what would RRI be needing a RM2.28 billion for? I think during then, even if RRI is to have sold the land for exactly RM2.28 billion, the government would have asked RRI to remit a portion of that money to government's coffer as it does not makes sense for a research institute to hold such an amount of money.

I have tried to find out about RRI. It does not even have a website and when I tried to click on RRI, it linked me to Malaysian Rubber Board. Today, rubber is a very small portion of Malaysia's economy and I do not think the research institute despite its previous contributions will need that kind of amount. Today, the biggest contribution probably from RRI is towards the rubber gloves industry, and perhaps condoms as well.

The bigger question now is that how is the ATNB's money being utilised. I think it is best for the audit be made public as we do not want every shuffling of funds be made an issue!

Frankly, I am more concerned over the low rubber and palm oil price today. Should we, as a nation be less dependent on Palm Oil and what are the efforts to be done to educate us on what to do as it seems palm oil may not come back to its good old days in the near to medium term.