Sunday 14 October 2018

DAP, Why the Inconsistency in Adoption of Project Delivery Partner (PDP) in Infrastructure Projects?

Before GE14: 
PDP in projects awarded by BNNOT OK 
PDP in projects awarded by DAPOK 

After GE14: 
PDP in projects awarded by BN: NOT OK. Changed to turnkey format 
PDP in project awarded by DAPOK. No need to change 

In his media statement dated 13 Feb 2012Tony Pua was critical on the PDP structure in MRT project.  

According to him, a 6% project fee is almost unheard of in a project of this scale. Based on an estimate that the KVMRT-SBK is expected to cost RM18 billion, the fees to the PDP alone will be RM1.08 billion. This fee will only be reduced if the PDP wins the tender for the underground tunnelling works - in which case the value of the tunnelling works will be excluded from the calculation of the fee.” 

He added, the structure of the agreement is such that the overall cost of the project is incentivised to be inflated.” 

Ironically, in 2015, the DAP-led Penang State Government appointed SRS Consortium to be the PDP for Penang Transport Master Plan.  

According to Dr Lim Mah Hui, “the selection of SRS as the project delivery partner (PDP) to implement the PTMP was not based on an open tender system, but through a Request-for-Proposal (RFP). 

In an open tender, a client that calls for a tender defines the project with detailed specifications. Parties that submit tenders must then conform to the specifications so that the cheapest tender can be selected. 

However, in an RFP, the tenderers submit different proposals to the client. No two proposals submitted under an RFP are similar, and therefore they cannot be compared. The procurement and negotiation processes thus become more prone to rigging or abuse. 

Wasn’t the adoption of PDP structure in PTMP inconsistent with Tony Pua/ DAP’s stand on PDP format?  

The confusion does not end here. 

After the change in the government on 9 May 2018, the new government are converting the PDP structure in MRT2 and LRT3 into turnkey contracts 

According to Tony Pua“[In PDP] contracts, they get 6% of the cost of the project. The incentive is for the project manager to inflate the cost of the project because it gets 6% of whatever the cost of the project is. So this structure needs to change.”

However, the PTMP by DAP-led Penang State Government will continue to adopt the PDP format in PTMP. (Source) 

DAP, why the inconsistency in adoption of Project Delivery Partner (PDP) in infrastructure projects?

Wednesday 3 October 2018

Vizione - Total Order Book vs Outstanding Order Book

I am not impressed how Vizione reported its order book in the latest annual report and quarterly results announcement, which I deem it as being misleading.

In the BFM interview today, Dato' Ng Aun Hooi, the Managing Director of Vizione said its order book of RM3.9b is about 7 times of its market cap.

For construction companies, the OUTSTANDING order book is a more common and appropriate number used to gauge the earnings visibility of a construction company, and not the "total order book" used by Vizione in its reporting.

An outstanding order book excludes revenue that has been recognised, reflecting only remaining revenue to be recognised from existing jobs in hand, whereas the total order book used by Vizione includes revenue that has been recognised previously.

The RM3.9b shown in FY18 annual report was total order book, and not OUTSTANDING order book. You get RM3.9b by summing up all the contract values shown in the diagram above.

WHY DIDN'T THE COMPANY REVEAL ITS OUTSTANDING ORDER BOOK, which is more meaningful, in its quarterly earnings announcements and annual report? 

Note that majority of the order book comes from private commercial projects. Vizione's investors should find out:

1. What are these projects?
2. Are all of them under implementation currently? Did the company include projects under planning in its order book?
3. Is it prudent to include projects that are still under planning and the implementation timelines are still uncertain?


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Friday 28 September 2018

Online Submission of AGM Proxy Form

Kudos to!

At 2013 AGM, Icapital proposed amendments to the articles of association of the company to allow for appointment of proxies by electronic means. Subsequently, it allowed submission of proxy form via facsimile.

It is a much efficient way of submitting proxy forms compared with submission via mail or handing in the proxy forms personally. It saves time, money, frustration of getting stuck in traffic jam and chance of missing mail.

For the upcoming AGM, has taken a step further. It now allows submission of proxy forms via online system.

Tricor Online system (TIIH Online) Share owner proxy form be electronically lodged via TIIH Online (applicable for individual share owner only). The website to access TIIH Online is 

Tutorial on how to register as a new user (video download) is probably the first listed company in Malaysia to introduce appointment of proxies by electronic means.

What the Minority Shareholders Wacth Group (MSWG) and shareholders can do to make proxy form submission easier is to suggest the adoption of online proxy form submission at AGMs of other listed companies.

A listed company has done it with an established share registrar. Why not?

P/s: However, handling fee of RM5 chargeable for each e-lodgement of document could be a hindrance

Tuesday 25 September 2018

List of e-wallet players in Malaysia

Boost (AXIATA)
KiplePay (GPACKET)
Maybank QRPay (Maybank)
Payfy (ASTRO)
Presto (PUC)
Razer Pay (BJCORP)
Samsung Pay
Sarawak Pay
Touch n Go
vcash (DIGI)
WeChat Pay

Sunday 2 September 2018

Among Bursa Malaysia listed companies that have exposure in Indonesia


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Sunday 10 June 2018

Golden Arbitrage Opportunity in YONGTAI-PA

YONGTAI closed at RM1.52 while its Irredeemable Convertible Preference Share (ICPS), YONGTAI-PA, closed at RM1.14 last Friday.

Profile of YONGTAI-PA can be found here.

The ICPS holders shall have the right to convert the ICPS into new YTB Shares based on the Conversion Price, at the option of the ICPS holder, at any time on any market day from 28 November 2019, being the 3rd anniversary of the date of issue of the ICPS, up to and including the Maturity Date.

Each YONGTAI-PA can be converted into one YONGTAI ordinary share from 28 November 2019 onwards, at the option of ICPS holder (not issuer). No additional cash payment is required for the conversion.

On dividend, 

The Company shall have the sole discretion to decide whether to declare any non-cumulative dividend and the quantum of such dividend, provided always that if dividends are declared to its ordinary shareholders, then dividends in respect of the ICPS shall be paid to the ICPS holders in preference.

If you are a YONGTAI shareholder and you intend to keep the shares for medium to long term investment, at least for 1.5 years, there is a golden arbitrage opportunity.

Sell YONGTAI shares and buy the same amount of YONGTAI-PA concurrently. Convert YONGTAI-PA from 28 Novermber 2019 and you will get back the same amount of YONGTAI ordinary shares. 

Based on last Friday's closing prices, for every 1,000 YONGTAI shares, you can bring down investment cost by RM380 (before transaction costs). That's more than 20% "instant gain".   

It sounds too good to be true.

YONGTAI-PA has a 30-day average daily volume of 214,036.

Encore Melaka is set to have its maiden performance on 1 July 2018.

According to UOB's report dated 31 May 2018, out of 1.4m annual seat capacity, 1m tickets have been taken by 6 local and foreign travel agents for the next 3 years, commited under offtake agreements. This represents a 70% take-up rate for the theatre based on 2 shows daily, at a 2,014 seat theatre.

Travel Agent
Target Market
Majestic Express Holidays
Apple Impression Holiday
Levingo Travel
Shanghai Ctrip International Travel Service Co
Coachliner 707 Travel & Tour
WTS Travel & Tours

Tuesday 15 May 2018

SAMCHEM - Eleventh hour inclusion of resolution of AGM

SAMCHEM scheduled its AGM on 18 May 2018. On 14 May 2018, the company included an additional agenda for tabling at the AGM. Is this legitimate, considering:

1. Insufficient notice period. The additional agenda was added with a notice period of less than 4 days. 

2. No revised proxy form issued. How do those shareholders who are unable to attend the AGM vote without a revised proxy form? Even if a revised proxy form was issued yesterday, it would be too rush to get the proxy form delivered  to the company 48 hours before the AGM. Furthermore, not every shareholder checks company announcement daily.

Sunday 18 March 2018

Ekovest - From a perspective of a minority shareholder

Ekovest will convene an EGM on 29 March to vote on the takeover of Iskandar Waterfront City Berhad (IWC). My thoughts on the takeover and EGM:

1. Does the takeover of IWC bring value to Ekovest minority shareholders?
It was obvious that the market reacted negatively to the news. After the announcement, the share price of Ekovest gaped down from its previous closing of RM1.16 to open at RM1.01 and close at RM0.95. If the takeover does not go through, it is not unreasonable to expect the share price of Ekovest to recover, at least partially.

2. Taking flexibility away from Ekovest and IWC shareholders.
I like the idea of Ekovest listing its toll concession business. Separating businesses under different listed entities enhances value. By doing so, it gives each minority shareholder the flexibility to decide which businesses to invest/ the weighting of investment in each business according to own preference. By marging Ekovest and IWC, shareholders who like only the concession business have to be exposed to the risks of IWC property business. The flexibility deserves a premium in target PE multiple. By merging Ekovest with IWC, it deprives the shareholders of the flexibility in investing either in Ekovest's existing businesses or IWC's property business. This leads to my point no.3.

3. Why pay RM1.50 when you can buy below RM1.50?
IWC shareholders would most likely opt for the RM1.50/share cash option instead of going for the 1-for-1 share swap as Ekovest share price is currently way below RM1.50. If the takeover goes through, Ekovest shareholders are indirectly paying RM1.50 for each IWC share. If you like IWC, why pay RM1.50/share when you can get it directly below RM1.50 if IWC remains status quo? And you get to decide the weighting/ level of exposure you would like to have in IWC.

4. Bedrock orders from related companies.
The circular highlighted one of the benefits of the takeover is Ekovest may expand its concept of river beautification and rehabilitation along the Gombak River to Johor Bahru through the land bank of the IWC along the Tebrau River, to be promoted as an iconic development in the State of Johor by the enlarged Ekovest Group. 

I do not think it is a big hindrance for Ekovest to get the river beautification and rehabilitation works even if Ekovest and IWC remain status quo. We have seen how related companies such as SUNCON, MGB and FFHB secure bedrock orders from its related companies. To me, this is not a very strong point for Ekovest minority shareholders to vote in favour of the takeover.

5. Late payment by Greenland.
Greenland delayed its second payment (RM46.3m) and third payment (RM46.3m) from 15 October 2017 and 15 January 2018 to 15 March 2018 and 15 April 2018 respectively. 

Why the payments were delayed? Can Greenland settle the huge outstanding amount of RM2.1b promptly?

IWC has yet to announce the receipt of payment for second instalment which has become due on 15 March 2018. 

CONCLUSION: In my opinion, the takeover does not appear to be attractive to Ekovest minority shareholders.

Friday 9 February 2018

It is the inflation of money supply that drives the stock markets

Read this interesting piece about 7 years ago. It is unconventional and contradicts the texbook. But I find it very relevant. It was the market liquidity that drove the market for the past 10 years and vice versa could be true when the liquidity is being withdrawn.

US is reversing QE and Central Banks worldwide are raising interest rates. These may lead to derating of stock PE multiples, leading stock prices to decline even though the earnings are holding up well. It may not be a right time to catch the falling knife and increase exposure in the stock market now. Key numbers to monitor are the money supply and interest rate.

Read the article -> How stock market and economy really work by Kel Kelly

or listen to the audio version at Youtube ->

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Saturday 6 January 2018

Sectors That Benefit From Strengthening of RM

Sectors that benefit from strengthening of RM are those that generate RM revenue in domestic market while having input costs denominated in foreign currencies, or enjoying stronger purchasing power in buying commodities.

F&B players - Import raw materials, or enjoy better purchasing power in procurement of commodities, and generate revenue mainly in RM. Eg. Nestle, Amway, Dlady, Bjfood

Auto Players – Auto parts imported from overseas become cheaper and sell them locally in RM.

Airline – Derive income mainly from domestic market but having input costs and liabilities denominated in foreign currency, mainly G3 (USD, Yen, Euro Dollar). Eg. Airasia.

Media players – Newsprint cost is denominated in USD. For Astro, imported content is largely denominated in USD.

Steelmakers – Input costs such as iron ore, scrap metal and coal quoted mainly in USD. Mainly domestic sales. Eg. Annjoo.

Poultry players – Having raw materials corn and soybean denominated in USD.

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Wednesday 3 January 2018

Window Dressing Stunt

Window dressing in Bursa Malaysia on the last trading day of the year is not uncommon, including year 2017.

The amount required to push up the index/ stocks is not small. So it likely involves big funds.

Which funds were so "generous" to push up the market abruptly and benefitedthe sellers.

Lembaga Tabung Haji was one of them.

On the last trading day of 2017, Ranhill share price jumped abruptly from RM0.735 at 4:44:57 to close at RM0.80

Note that there were only 1.2736m shares transacted for that entire day, of which 0.5996m shares were done at RM0.80. This left 0.674m shares traded between RM0.705 and RM0.735.

Lembaga Tabung Haji transacted 0.914m shares that day. This implied that the fund must have, at least partially, bought shares at RM0.80.

Is it acceptable to inflate the share price artificially like this?

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Tuesday 2 January 2018

SBCCORP - The Return of Jesselton Quay

Wrote about 3 stocks recently.

Reference price
Year-end closing price (RM)
Gain (%)

They stock picks were quite straight forward. Consistent historical trends, attractive valuation, sound balance sheet, high ROE, good margin etc.

Picking a deeply undervalued stock with a turnaround story is much tougher as we can't depend on historical trend to project future earnings. But the beauty of it is a stock with a trunaround story could be far more rewarding if it turns out to be a multi-bagger in a relatively short period of time as seen in ANNJOO, PETRON, HENGYUAN and HEVEA. 

A similarity observed in these stocks was the share price was depressed when the company performed badly financially but it rebounded following earnings recovery and the share price subsequently sky-rocketted, driven by strong earnings growth.

SBCCORP is potentially a stock with a turnaround story. It is a boutique developer with exposure in Klang Valley and Kota Kinabalu. While it is a KL-based company, its developments, The Peak Collection has made a name in Sabah. 

The share price has declined substantially from its peak, reflecting its weak results in recent quarters. In the latest quarter, it recorded a quarterly revenue of only RM2m, with a YTD loss of RM1.3m. This caused a further selldown in the stock.

Silver lining is around the corner

The weak results for the period ended September 17 was reflective of timing between the completion of earlier projects and the gradual work done of new projects. On its prospects,

In its 2017 annual report, the group expects to turn profitable from loss-making in FY17

If you did follow the stock, you probably would recall that the adjusted share price of the stock was driven to a peak of RM1.61 in 2014 when there was optimism surrounding the Jesselton Quay project. However, a longer-than-expected delay in securing approvals resulted in the stock being forgotten and neglected. Subsequently, Jesselton Quay was launched end-2016 and it enjoyed a very encouraging response from the buyers. The initial phase of 299 units soft-launched were fully booked within 2 hours!

The foundations for block 1 & 2 are being constructed (source) with building works expected to take place in 1Q18. Despite the significant advancement in the progress of the project, the share price is currently only about 1/3 of its peak.

The current market cap of the stock is merely RM130m (RM0.555 per share). What do investors get in return?

1. Traded at 1/3 of its book value, before revaluation of properties
It is currently traded at 34.3% of its book value. This has yet to include revaluation surplus from the long list of properties held under the group.

2. Jesselton Quay in Kota Kinabalu is the crown jewel of the group
It is a RM1.8b waterfront development in KK. Assuming a net margin of between 20% to 30%, this project could generate a potential net profit of RM360m to RM540m throughout the development period of 8 years, or an average net profit of RM45m to RM67.5m a year.

What I am positive on the development?
i. Very strategic location with superb seaview.
ii. Complemented by the proposed Sabah International Convention Centre, Kota Kinabalu International Cruise Terminal and Kota Kinabalu Convention City.
iii. Influx of Chinese tourists. A perfect getaway destination for those living in Hong Kong, Shenzen and Guangzhou due to its close proximity. Increasing direct flights from China. Growth potential in tourism as only about 130m or 10% of Chinese population have passports currently.
iv. Sabah being a favourite tourist spot. Kota Kinabalu International Airport is the second busiest airport in Malaysia
v. Shortages of hotels in Kota Kinabalu (source)
vi. Why was SBCCORP picked to build Jesselton Quay? (A privilege to build Jesselton Quay)

3. Having 25 acres of strategically located land in KL for future developments
The East Kiara land is located within a walking distance to Batu Metropolitan Park and Taman Wahyu KTM Komuter Station. Mahsing purchased 12 acres of leasehold land at Taman Wahyu for RM73m, equivalent to RM135psf in 2013. In the same year, Ecoworld bought 9.6 acres of freehold land in Taman Wahyu for RM70m, translating into RM167psf. Among the 3 locations, I tend to think East Kiara has the most strategic location, being nearest to KTM komuter station and Taman Metropolitan Batu, and having the most convenient access to KL City Centre among the 3 development projects. Just assume the remaining 25 acres is valued at RM135psf, the 25 acres of land is worth RM145m, giving it a revaluation surplus of RM108m. The revaluation surplus on the East Kiara land alone makes up 83% of its current market cap.

4. Remaining 1000 acres of township development at the foot of Genting Highland
It is in a 50% JV with Selangor State Development Corporation (PKNS) to develop 1800 acres of freehold land in Batang Kali. The township is at the foot of Genting Highland. Genting Premium Outlet and Genting Highland are just about 20km and 29km away respectively. About 800 acres of the land has been developed and low cost housing requirements have been fulfilled. Assuming 1 acre of land could accomodate 10 double storey houses and selling at RM500k each, the remaining 1000 acres of land can yield RM5bn of GDV, or RM2.5bn for SBCCORP's 50% stake. Genting Integrated Tourism Plan, including a 20th Century Fox World Theme Park which is scheduled to complete in 2018 could be a boost to the Batang Kali development project. A rerating catalyst could come from a potential JV with theme park or resort operator to enhance the value of its development project.

5. A substantial 86% discount to its RNAV
CIMB's report dated 24 Nov 2016 estimated SBCCORP having RNAV of RM944.8m. The current market cap is at a steep discount of 86% to the RNAV.

The current market cap of the stock is merely RM130m (RM0.555 per share). What does investors get in return?

1. Likely a beginning of an earnings growth cycle for SBCCORP.
2. Potential profit of between RM360m and RM540m from Jesselton Quay project.
3. 25 acres of prime land in KL with an estimated market value of RM145m and a revaluation surplus of RM108m.
4. The remaining 1000 acre of Bandar Ligamas @ Batang Kali township development at the foot of Genting Highland with a potential effective GDV of RM2.5b.
5. Share price at 1/3 of its book value before revaluation of properties.
6. 87% discount to its RNAV.
7. Undeveloped GDV of at least RM6bn.

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