Thursday 20 October 2016

KHEESAN and REACH to have general meetings in early morning hours and late afternoon hours

Headquartered at Seri Kembangan, Kheesan had been conducting its AGMs in Klang Valley. 

Bukit Jalil Gold & Country Resort
Bukit Jalil Gold & Country Resort
Bukit Jalil Gold & Country Resort
Bukit Jalil Gold & Country Resort
Bukit Jalil Gold & Country Resort
Mines Resort City, Seri Kembangan
Mines Resort City, Seri Kembangan
Mines Resort City, Seri Kembangan
Mines Resort City, Seri Kembangan
Mines Resort City, Seri Kembangan
Mines Resort City, Seri Kembangan
Mines Resort City, Seri Kembangan
Mines Resort City, Seri Kembangan
Mines Resort City, Seri Kembangan
Mines Resort City, Seri Kembangan
Mines Resort City, Seri Kembangan
Taman Perindustrian Desa Cemerlang, Ulu Tiram, Johor
However, for FY16, the group will convene its 22nd AGM at Ulu Tiram, Johor. Looking at the list of properties of the group shown in FY15 annual report, it did not show Kheesan owning any property in Ulu Tiram. The AGM will be held at London Biscuit's office in Ulu Tiram. London Biscuit is the largest shareholder of Kheesan.

Besides the unexpected change in meeting venue, the meeting is scheduled to start at 8a.m..

What could be the real reason of having the AGM so far away from its business address, and at such early hour if it is not trying to discourage minority shareholders from attending the AGM? Shareholders should seek clarifications from the management.

Separately, Reach Energy will be having its EGM on 4 Nov 2016 at 3.30pm. I think the reason of having the general meeting in late afternoon hours is to provide fair trading of its shares as the asset acquisition voting results are material to the movement of the share price, its warrants price in particular. It may take 1 to 2 hours for presentation on the proposed acquisition and Q&A session before the voting starts. By the time the results are released, stock market would probably have closed for the day. This prevents potential unfair advantage to those who know the results before announcement by the Chairman in the EGM or to those members attending the meeting versus those shareholders who do not.

Monday 10 October 2016

Bina Puri – Keep asking for money but where has the value gone?

Bina Puri had its IPO in November 1994. Based on IPO price of RM2.80/share, it carried a market value of RM112m. It has been about 22 years since its listing. However, its current market cap is below the value of the group during IPO time (based on IPO offer price).

Let’s not forget after IPO, Bina Puri has raised a total of RM150.4m from rights issue (RM40m), private placement (RM93.3m) and ESOS (RM17.1m). This has not taken into consideration that the group had capitalised RM20m of debt in 2009.

And last Friday, Bina Puri proposed a private placement of not more than 10% of enlarged share capital of the group. Again?

The company has been profitable since 2000. But why is it still stucked as a micro cap company? Furthermore, the total proceeds raised over the years after IPO alone (RM150.4m, excluding RM20m debt capitalisation) were already greater than its current market cap, even after deducting total dividend paid out since 2003!(historical records of dividend payout before 1999 were not available at Bursa website)

Despite it has been profitable since 2000, it had to carry out capital reduction (from par value per share of RM1 to RM0.50) in 2014 in order to new shares as the share price then was way below RM1. As highlighted above, the IPO offer price was RM2.80/share. What has gone wrong?

Is this company too undervalued that investors failed to appreciate the assets owned by the group and its earnings potential or is it something not right within the company that caused value destruction to the minority shareholders? Something for existing shareholders of Bina Puri and potential investors to look further into.

UPDATE: The group's cash and cash equivalents as of end June 2016 was RM-11.4m (negative cash!)

You may be interested to find out previous writing about Bina Puri: Is Bina Puri Cheap?

Sunday 2 October 2016

Is Bina Puri cheap?

Bina Puri was founded in 1975. It celebrated its 40th anniversary in 2015. Among its track records:

- Completed many types of civil and building projects in various parts of Malaysia, including East Malaysia 
- It has completed several projects in overseas (Thailand, Brunei, Russia, India, Nepal, Pakistan, UAE, China, and etc.)
- Completed Ampang LRT line extension
- Completed KLIA2 satelite building
- A group with turnover exceeding a billion RM (since 2010)
- Uninterrupted yearly profit since 2000

In terms of assets, the group has:

- Recurring income from power generation business in Indonesia (more than 30MW)
- 50% stake in LATAR Highway
- Net asset value per share of 93.47sen as of end June 2016
- Recurring income from Main Place shopping mall (33% effective stake)

For its construction division, it has a strong outstanding order book of RM2.0b. It is actively tendering for civil works such as LRT 3, MRT 2, and various highway projects.

However, some readers may not be aware that the group's market capitalisation is only RM101m (share price 41.5sen) last Friday.

Construction companies such as Gamuda, IJM were founded around 1970's or 1980's. Their market capitalisations have now exceeded RM10b. Late comer Gadang which Tan Sri Kok Onn took over the control in 90's, is having a market cap of RM742m. It has similar business segments as Bina Puri (construction, property and utilities). Construction specialists focusing in foundation works, Econpile, Ptaras have market caps of  RM904m, and RM582m.

Before reading further, what do you think?
a) The stock is grossly undervalued
b) There could be reasons for the uninspiring share price performance.

In 2013, Ng Keong Wee took up private placements by the group at RM1/share and emerged as a substantial shareholder with about 9% to 10% holding in the group. About 3 years down the road, his stake has been diluted to 5.8%. A bigger concern is the paper loss as the share price has declined to about 40sen/share now.

Some bloggers have recommended this stock but why is the share price fails to excite in a sustainable manner? 

Even though the numbers look good, unless there is a positive change in certain "qualitative" aspect of the group, I am skeptical that the share price will go far in a sustainable manner.

Separately, SJC is an advertising company. It is in net cash position with the value close to its market cap. This is before including some good properties owned by the group. The group has been profitable in recent years. It also pays dividend. Last week, it has just secured a 10-years concession from MRT which may double the group's revenue. Despite all these, there was no appreciation in terms of share price. This stock is under researched but I am sure there are investors who know the group and its financial standing. Other than share trading liquidity, what is lacking is the stock?

I see similar issue in Menang and AYS. Again, unless there is a positive change in certain "qualitative" aspect of the group, I tend to think the share prices of these listed companies won't go far.

Thursday 9 June 2016

JAYCORP - Potentially a good dividend yield stock?

For the past 5 years, JAYCORP has been quite generous in dividend payouts, with an average dividend payout ratio of 74%.

It recorded strong growth in EPS in 1HFY16. The 6 months earnings have already exceeded full year earnings achieved in FY14 and FY15.

If we annualise the EPS and assume a dividend payout of 50%, this translates into DPS of 8.45sen. At current share price of RM1.04, it offers an attractive dividend yield of 8.1%.

Annualise the EPS, the stock is trading at an undemanding PE multiple of 6.2x

As of Jan-16, it was in a net cash position of RM6.1m.

Sunday 29 May 2016

It is shocking that Tan Teng Boo missed the big picture

Tan Teng Boo was pessimistic about the economy of Malaysia. He sees the possibility of FBMKLCI dipping below 1,000 points in medium term.

In Capital Dynamics' newsletter dated 29 Jan 2016, he commented "MRT project is near completion with no viable large scale infrastructure projects imminent".

But... didn't he notice the following before the issuance of the newsletter dated 29 Jan 2016,

i) MMC-GAMUDA JV was appointed as the PDP for MRT line 2? (Bursa announcement dated 29 October 2014)
ii) Execution of PDP agreement for MRT line 2? (Bursa announcement dated 13 July 2015)
iii) NST artcile "Advance works for MRT Line 2 ongoing" published on 23 February 2016, just about a week before Tan Teng Boo's article
iv) Article by The Star dated 20 February 2016, saying MRT line 2 would be completed by 2022, published slightly more than a week before Tan Teng Boo's article.

MRT line 2 is expected to cost about RM28b to RM30b, the single largest construction project being implemented in Malaysia.

Besides MRT line 2, another mega project, Pan Borneo Highway was launched in 2015. (source)

On top of that, MRCB-GKENT JV was appointed as the PDP for RM9b LRT line 3 in September 2015. (source)

How could Mr Tan, which based in KL was so ignorant about the development in Malaysia and missed the information which is publicly available?

Separately, he has been complaining the distance between KLIA and KL city centre. To quote him, “Why was Sepang chosen to house the Kuala Lumpur International Airport (KLIA) and not Subang? The KLIA is 80km from Kuala Lumpur. Today the KLIA is the furthest airport from the city centre in the world." (Source)

However, if we "google map", the distance is about 60km. Which is right? Did Mr Tan get his fact right?

Capital Dynamics claims it is an independent fund management and investment advisory house. I wonder how this could be achieved. If he finds a very attractive stock in Bursa Malaysia, but the trading of the stock is not liquid, do you think Capital Dynamics will write about the stock in his newsletter before the funds under his management have accumulated sufficient amount of shares?

Sunday 22 May 2016

Are you a high networth individual?

Based on Securities Commission Malaysia's guidelines, a high networth individual is defined as:

An individual whose total net personal assets, or total net joint assets with his or her spouse, exceeds RM3 million or its equivalent in foreign currencies, excluding the value of the individual’s primary residence.

An individual who has a gross annual income exceeding RM300,000 or its equivalent in foreign currencies per annum in the preceding 12 months.

An individual who, jointly with his or her spouse, has a gross annual income of RM400,000 or its equivalent in foreign currencies per annum in the preceding 12 months.


Thursday 5 May 2016

Notice Of Person Ceasing To Be A Substantial Shareholder

Some blog postings highlighted a high profile investor filed the notice ceasing to be a substantial shareholder in a company very late after he has ceased to be a substantial shareholder.

Not very familiar with companies regulations but based on section 69G of Companies Act 1965,

Section 69G. Person who ceases to be substantial shareholder to notify company.
(1) A person who ceases to be a substantial shareholder in a company shall give notice in writing to the company stating his name and the date on which he ceased to be a substantial shareholder and full particulars of the circumstances by reason of which he ceased to be a substantial shareholder.

(2) The notice shall be given within seven days after the person ceased to be a substantial shareholder.

Form 29C

However, Securities Industries Acts 1983 allow 2 weeks to serve notice on substantial shareholdings and ceasing to be a substantial shareholders

Sunday 1 May 2016

Update on SPACs liquidation

CLIQ made an announcement last Friday, providing update on liquidation of the SPAC.

It reasoned why the SPAC is winding up the company pursuant to Section 218(1)(h) of the Companies Act 1965.

To me, the most important point in the announcement was paragraph 5(ii) where it stated:

The Liquidators will be permitted to make payment to and/or to take such necessary steps to meet the requirements as are provided for under Article 61C(7) of the Company’s Articles and to make a substantial interim payment to entitled shareholders.
I would not consider CLIQ as it is possibly involved in a judicial review which may drag the liquidation process. For SONA, it probably offers a return of 9% or more p.a. if a substantial interim payment is made to entitled shareholders, based on previous closing price of 44sen/share.

Wednesday 27 April 2016

Why are people still buying SONA-WA?

Sona has 3 months left before the SPAC expires.

i) It is tough to find another asset, make submission for the proposed acquisition and obtain SC's approval within such a short period

ii) Sona's independent director Datuk Mohamed Khadar Merican has said that Sona did not have plans to submit another proposal as management is aware that a few substantial shareholders are "yield investors", who are not keen on the oil assets.

iii) Even if there is another proposed acquisition, would the voting pattern swing drastically from an overwhelming NO?

Why people are buying SONA-WA when it is becoming "toilet paper"?

Monday 21 March 2016

Will the proposed acquisition by Sona go through?

Updated on 22 March 2016

For the deal to go through, the proposed acquisition requires approval of at least 75% of the total value of issued Sona shares held by all holders of Sona shares present and voting. The initial investors, holding 28,571,500 shares, are permitted to vote.

Credit Suisse holds 173,582,200 Sona shares (12.305%) and is crucial to the outcome of the EGM.

We saw Credit Suisse re-emerged as a substantial shareholder in Cliq (announcement dated 2 March 2016) after the company said it would soon be resolving the process towards its liquidation and returning monies in the trust account to the entitled shareholders. We can conclude that Credit Suisse is a yield investor in the case of Cliq, and probably in the case of Sona as well.

Assuming Credit Suisse is a yield investor and would vote against the Sona's proposed acquisition, what is the chance of the proposed acquisition going through?

Assuming all entitled shareholders vote (total 1,128,571,500 shares), it requires approval of at least 846,428,625 shares. Assuming Credit Suisse votes against and for the deal to go through, it requires 88.6% of approval from the remaining 954,989,300 shares. The required approval rate would be higher as it is unlikely that all entitled shareholders would vote.

I see the situation unfavourable to the management and initial investors. Let's see the outcome.

Saturday 23 January 2016


Similarities between GHLSYS and KOMARK:

1. Change in major shareholder(s)
2. Change in management team
3. Did not do so well financially before the change in major shareholder(s) and management team
4. Undertook rights issue after change in major shareholder(s) and management team
5. Underwent restructuring
6. Share price performed-well post rights-issue
7. Improvement is financial performance

Similar trend is observed in TPC:
1. Change in major shareholder (HUATLAI, largest egg producers in Malaysia)
2. Change in management team. Currently led by Huat Lai's MD
3. Did not performed well previously
4. Rights issue with free warrants were listed on 22 Jan 2016
5. Underwent PN17 regularisation plan
6. Share price holding up well on the first day of listing of rights shares and free warrants.
7. Turned profitable in FY15. Required 2 consecutive profitable quarters after the completion of regularisation plan to be lifted from PN17.

Current its market cap is only RM70m. The newly listed warrants (exercise price: 20sen/warrant) is traded at a premium of 10%, which I think is minimal for a low price warrant (18.5sen), and having  tenure of 5 years.

I have included the warrants in my watchlist.