ICAP: Pros and Cons of Share Buyback

Due to the steep and persistent share price to NAV/share discount, share buyback has been a contentious issue at ICAP AGMs. 

Does share buyback make sense for ICAP?

Based on the latest quarterly results (end-August 2021) and assuming that ICAP buys back 10m at RM2.43 (last Friday closing), spending about 5%  of the NAV to perform share buyback will enhance the NAV/share by 2.3%.

While it can enhance the value for shareowners, the downsides are:

i) Lower share trading liquidity due to reduced number of shares, and this may lead to illiquidity discount; and

ii)  Reduced fund size, which means lower fee (in absolute terms) for the fund manager .

What say you?

Beli Lokal

Most of the businesses, especially small local businesses are suffering due to Covid pandemic. The government has limited resources to assist these business owners after spending billions battling the pandemic. Therefore, it is crucial that the Rakyat support the local businesses so that they can survive through the challenging time.

For the longer term, supporting local businesses provides job opportunities to the locals and industries along the value chain, including supporting services such as financing, which help to grow our economy.

Besides, buying local products (such as local fruits) or buying from businesses within walking distance from our house/ office is more environmental friendly as it reduces emission of carbon and traffic congestion. 

We have local brands that make us proud. These include:

MYKUALI

• MyKuali Penang White Curry Noodle rated as Top #1 Best Instant Noodles of All Time 2014 
• MyKuali Penang Red Tom Yum Goong Noodle rated as Top #1 Best Instant Noodles of All Time 2015
• MyKuali Penang Hokkien Prawn Noodle rated as Top #2 Best Instant Noodles of All Time 2016
• MyKuali Penang Hokkien Prawn Soup Rice Bihun rated as Top #1 
• MyKuali Hokkien Prawn Cup Noodle rated as Top #2 Instant Cup Noodles of All Time 2019/2020
• MyKuali White Fish Broth Bihun rated as Top #1 Instant Rice Noodles of All Time 2020 
• MyKuali White Fish Broth Cup Noodle rated as Top #1 Instant Cup Noodles of All Time 2020/2021 

SPRITZER

Clinical trials conducted in UK had shown that SPRITZER, the silica rich natural mineral water is very effective in removing aluminium, a neurotoxin that is linked to Alzheimer's disease from the body through urine.

Spritzer has won World Branding Awards for 2014-2015, 2016, 2017, 2018, 2019, 2020-2021. 

MING 

Ming Thein, Malaysian, is the name, designer behind the brand of the Ming luxury watch. His watch 'Mosaic', which was released last year and sold out, costs SFr 14.500 or about RM65,000 each. He and the brand were featured in Financial Times. 

 AIRASIA

Thanks to AirAsia, overseas travel has become affordable for Malaysians. 

AirAsia which has strong presence in ASEAN is building a unicorn of Asian super-apps. 

Grab, which has presence in 8 Asean countries, namely Singapore, Indonesia, Malaysia, Cambodia, Myanmar, Philippines, Thailand and Vietnam, and is scheduled to list in US with an estimated market cap of US$40b.

Don't we hope to see a successful Malaysian unicorn? And potentially becoming the biggest listed company in Bursa Malaysia one day?

FARM FRESH

Heading for a listing on Bursa Malaysia Main Market, Farm Fresh is the only integrated dairy company of scale in Malaysia that produces (i) chilled RTD milk, (ii) ambient RTD milk, (iii) edible yoghurt, and (iv) drinking yoghurt without using reconstituted /recombined milk or milk powder sources for our own FarmFresh branded products.

Farm Fresh's ready-to-drink milk and yoghurt have been gaining market share.

MARRYBROWN

Celebrating its 40th anniversary this year, the Malaysian brand quick service restaurant has more than  500 restaurants in 16 countries, with majority of them located overseas. 

While the entries of Japanese and Korean convenient stores to Malaysia have caused a frenzy among some Malaysians, the owners of Marrybrown introduce Malaysian local delicacies in foreign soil.

It deserves better recognition in the local market.

Other local brands that are worth mentioning include:

Photo by: moonstarbyulie

SUPER RING - Popularised in South Korea by Blackpink's Jisoo and Jennie

KAWAN FOOD - World's first frozen paratha producer with more than 40 years of production experience 

JULIE's - Well-known for its peanut butter biscuits. Its products are exported to over 80 countries. In 2014, it managed to attract Hershey's to collaborate with Julie's to rollout 6 variants of Julie's Hershey's cookies which were sold in all 10 ASEAN countries.

So let's Beli Lokal and build Malaysian brands together! 

A related article by YB Sim Tze Tzin titled 'Development plans must make 'Made in Malaysia' great again'. 

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Another capital protected grower scheme with a guaranteed yield of 18% to 50%?

Came across another grower scheme on facebook. 

• CAPITAL PROJECTED 
• Passive income Low entry from RM10k onwards 
• High GUARANTEED yield from 18% - 50% 

My points: 

• 1. Since the project is so secured, why does the company not source financing from the banks as funding cost is much cheaper than guaranteed yield of 18% - 50% to be paid to investors? 

• 2. Why does the company set the minimum investment amount so low to target small investors? Why not approach the smart high net worth investors to significantly reduce number of accounts to be managed by the company? 

• 3. If the scheme is so attractive and lucrative, it would have likely been fully and overly subscribed by super-rich and well-connected VIPs. Does such incredible deal come to commoners like you and me? Does the company really have to advertise in the first place? 

• 4. Where would there be such a big frog hopping around the street? (邊度會有咁大隻蛤乸隨街跳㗎?) 

From a puzzled amateur investor 

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Is it time to take a relook at United Plantations Berhad?

1) 2Q21 results

2Q21 was a record quarter for UTDPLT in terms of revenue (RM481.9m) and PATAMI (RM135.8m). This was despite the fact that 2Q21 results were dragged by RM34.1m of realised losses on commodities futures contracts.

PE multiple for the stock is 10.5x if we annualise the 2Q PATAMI.

Palm oil prices ranged between RM3,200/MT and RM4,500/MT in 1H21. However, UTDPLT recorded relatively lower average selling price of RM2,967/MT (Malaysia: RM3,020/MT; Indonesia: RM2,751/MT) in 1H21.

This was because UTDPLT practises a forward sale policy. In a rising trend, UTDPLT would record lower average selling price than market average, and vice versa. 

2) Likely higher average CPO selling prices in coming quarters

Given the palm oil price is on an uptrend, UTDPLT is likely to report stronger average selling prices  in coming quarters versus that of 2Q21.

UTDPLT is likely to report stronger average selling prices in coming quarters (vs 2Q21) as UTDPLT's 1H21 average selling price was significantly lower than year-to-date average, even lower than the lowest of year-to-date daily palm oil price.

3) Improved margin of safety after a divergence between CPO price and share price

UTDPLT share price closed at 1-year high of RM15.00 on 21 September 2020 while CPO price closed at RM2,909.50/MT on the same day. Since then, UTDPLT share price has eased to RM13.72 last Friday but the CPO price ended significantly higher at RM4,364.50/MT. Due to the divergence, margin of safety for UTDPLT has improved.

12-month share price performance of UTDPLT.

4) In net cash with minimal borrowing 

As of end-2Q21, it was in a net cash position of RM411.4m, or 7.2% of its existing market cap.

5) Decent dividend yield

Assuming it can maintain FY20 dividend payout of 85sen/share, this will translate into a dividend yield of 6.2%.

6) Most importantly, UTDPLT is a well-run company

a) It recorded a CPO yield of 5.93MT/ha for FY20 (Dec), among the highest in the industry.

IOICORP 4.64MT/ha for FY20 (Jun);

KLK 4.81MT/ha for FY20 (Sep); 

IJM 4.2MT/ha for FY20 (Mar)

Superior CPO yield

b) It has 587km of light railway system within its estates to facilitates an efficient transport of harvested FFB to the palm oil mill for production of high quality palm oil. 

Light rail system within UTDPLT estates

c) The total cost of production including depreciation and additional remuneration/ bonuses is among the lowest in the industry at RM1,235/MT for 2020 and RM1,286/MT for 2019. 

d) On average UTDPLT can harvest 12ha/worker versus industry average of 8ha/worker. 

e) World's first RSPO certified company.

f) Among the earliest to issue annual report. UTDPLT issued FY20 (Dec) annual report on 22 February 2021. As the company is able to issue the annual report within 2 months from the close of the financial year end, Bursa has allowed UTDPLT to dispense the announcement of 4Q results. 

Is it time to relook at United Plantations Berhad?

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CTOS Digital Berhad vs Credit Bureau Asia Limited

CTOS is en route for listing on Bursa Malaysia Main Market on 19 July 2021. 

There are no Bursa-listed companies that are directly comparable to CTOS. The most comparable listed company could be Credit Bureau Asia listed in Singapore Exchange. 

A brief comparison is made between the two companies.

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