Integrax's Future Potential Kingmaker

 

Integrax's Future Potential Kingmaker

If there is one issue regular (long or short-term) investors will experience is the issues of your stocks going to be privatised by the major shareholders or some buy-out exercise by some offerors at some point of times. And as usual there will be some (minorities normally) who cry "unfair play" as they feel that the offered prices are too low or cheap compared to its higher NAV (net asset value) or whatever method used to justify the fair price.

The recent article in The Star on Jan 22, 2014 : “Will minority shareholders triumph in seeking higher value?” The article discussed about the privatisations exercised proposed by two stocks: Triumphal and Perak Corporation Bhd.

In the very first place, minorities and the major shareholders are miles apart although they both are stakeholders of the same company. Minorities like me do not have access to the real "insight" situations of the company while the major shareholders are always in the advantage positions to determine the next move.

Take for example, an employee working in a public listed company is likely to know more than a shareholder (but not an employee of that company).

The employee may not know the real insight, but at least he is working there in the company to see how the performance is.

As a ordinary layman in the street, fighting against the major shareholders in a privatisation exercise is normally a futile attempt. Many times, I have refused to give in only to read that it has become a Mandatory Take-over Offer. So when that occurs, even if you do not be bothered to go the stock broking firm to fill up the forms and send it to them, they will still send you a cheque in the end!

TSM Global Berhad

On December 2011, there was this cash-rich stock TSM Global Berhad which had fallen substantially from a high of RM2 plus to only RM1 plus. As I have invested in TSM before and exited for a 50% profit early, the pulling back of the price was a golden opportunity to accumulate the stock again. After all, it was backed by a cash per share of almost RM0.88 at that time.

One of the main reason why TSM's share fell was because of its "unfortunately ill-timed" investment in Kenseisha (M) Sdn Bhd acquired on May 2010. Kenseisha is involved in the die-casting and precision machining of parts for the hard-disk drive (HDD) industry.

TSM was confident it could recapitalized and restructured Kenseisha into a business which would achieve break-even on the operation level by Feb 2011. Unfortunately the devastating Japan earthquake and tsunami in March put jeopardized the company badly. TSM decided to liquidate the company eventually resulting in making some RM32.2 million provision.

The famous quote of investing : "invest during the crises" couldn't be more true than this time. Investors threw down its shares and the share prices simply nose-dived faster than one could imagine.

I "urged" my followers to go for it. I set the tone by buying 36,000 shares at an average price of RM1.13. I still remembered only one follower was brave enough to buy and this brave follower bought about 15,000 shares.

I reckoned that TSM would be starting on a new slate again without the involvement in Kenseisha anymore. The beaten share price has already been priced in. At a price of just above RM1 plus was simply too good to be true for a company still backed by a strong balance sheet and with a strong business involving  in making automotive wiring harnesses, high-tension ignition cables and PVC wires and cables.

Even at that time, The Edge reported in its March 29, 2012 issue that the head of equities at Montpelier Offshore Wealth Management, Sharn Lee as saying he had spotted an under-valued gem.

"With cash and cash equivalents of over RM100 million and with the company's earnings at RM20 million to RM30 million, I thought it was a steal to buy TSM shares at RM1.10 then."

"At the time, TSM was getting rid of its loss-making hard disk drive manufacturing business. So, the company's prospects were good." Sharn said.

A general offer of RM1.25 per share was not in Sharn's equation when he was evaluating the investment risks. So was Kassim. Unfortunately, the company received the takeover offer two months later.

Despite strong feeling that this takeover price was too low, minorities still continued to accept the offer. Finally, the offeror succeded in getting more than 90% of the shares not held by the offeror.  and it eventually became a Mandatory Take-over Offer. Most probably, Kassim was the last few men standing as a minority in this case. I urged my follower not to accept the offer, but he decided to throw in the towel anyway.

And for the first time I have ever experienced in a takeover bid, I RECEIVED TWO TIMES hand phone calls from representatives of the offerors. Both times I told them I would not accept the offer. Alas, I am just a "David" in this case against the "Goliath".

I did not bother to do anything about it. But in August, I received a cheque for the total amount of my shares in TSM, like it or not. As allowed by the Capital Market and Services Act 2007 ("CMSA") and Companies Act, 1965, the offerors can invoke the compulsory acquisition of the remaining shares not held by them if the remaining dissenting shareholders (Kassim is one of them) decide not to take up the offer under the privatisation.

It is going to be almost two years since the TSM was taken private. As expected, there was no news about the company's financial performance so far at all. No more red tapes, I guess.

My personal bet it that the company should be doing good or even better because the sales of hybrid cars were very brisk, especially the last two years.  Hybrid cars requires more wiring parts which means more business for TSM.

Integrax Berhad

But wait, there is another potential hidden jewel from TSM. That potential hidden jewel is in their investment in port-operator Integrax Berhad, incidentally majority-owned by Perak Corp, which itself is in the midst of a privatisation exercise.

According to Integrax's Annual Report 2012, TSM is the 5th largest shareholders holding 12,000 shares (3.99%). TSM has been slowly and quietly building up its stakes in Integrax. It started to emerge with a 4,500 shares (1.5%) as at May 2010. Then it increased to 6,150 shares (2.04%) as at May 2011. Will there be a surprise of TSM's stakes increasing again when Integrax releases its 2013 Annual Report in the coming months?

Should Perak Corp's privatisation be successful, the next spotlight could be  on Integrax Berhad. We all know the Integrax is poised to be even more busy with so much activity going on there in Lumut. (My nephew who was based there for a few month's duty told me that the ports were really really very busy all day round). Tenaga Nasional Berhad is the largest shareholders in Integrax with 66,538,269 shares (22.12%).

With Tenaga's share price rising strongly to over RM11 and Tenaga itself one of the main users of the port, perhaps there could be one day some corporate exercise to take over Integrax. Should this happens, TSM would be one of the Kingmakers in this exercise. It would be in a good position to even derail the attempt unless the offer is of a very generous one.

Since the take-over bid of Perak Corp has begin, Integrax's share price has also been on a steady uptrend. It has steadily stays at the RM2.20 - RM2.30 levels for the last several days.

Coincidentally, Kassim bought a handful of Integrax shares at an average price of RM1.85 last year. Kassim is confident that it will be a matter of time the full potential of Integrax's business will be felt in its share price.

Based on the current share price of RM2.20 of Integrax, TSM's stakes of 12,000 shares amounts to some RM26 million. Any increase in the share price in Integrax would only be good for the shareholders of the company. And the privatised TSM's owners are now more than happy than ever.

Once again, I like to take this golden opportunity to wish a very Healthy and Prosperous Chinese New Year to all those celebrating in this Year of The Horse. No matter what happens, staying healthy is the most important criteria of all. For I have always believed that Good Health is Wealth!

One rich generous printing and plantation son

One rich generous printing

and plantation son

Last year RHB Bank created history by being the first bank in Malaysia to be featured in a commemorative stamp collection in conjunction with its 100th anniversary celebrations. The stamp collection captured four historic moments in the bank's history. The collection sets yet another milestone by being the first stamp to be printed in a diamond shape, a reflection of the Group's iconic logo.

A total of 1.2 million stamps, each valued at 60 sen, were printed while the first-day cover and folder were each priced at 50 sen and RM5.50 respectively. The items went on sale at Pos Malaysia offices nationwide from Nov 23, 2013.

So who printed the stamps for Pos all these while? Any Tom, Dick and Harry company?

No. The company is called Fima Corporation Berhad (Fimacor), otherwise known as the cash-rich son of its also cash-rich mother Kumpulan Fima Berhad (Kfima). It is believed that Fimacor is also printing stamps for a dozen other countries. True, both mother and son are loaded with cash in their kitty that are getting more and more heavy every year.

So much so has been said about these two companies that what I want to say will sound like recycled comments only. So perhaps the writer will share his personal's "association" with Fimacor and how he became a shareholder as well.

Fima Corporation Berhad (Fimacor)

Initially, what I liked about Fimacor was its consistent and secure printing business and to a smaller extend, business property management, some cash in its kitty and its average dividend payout.

In 2007, when Fimacor decided to venture into plantation business in Indonesia, I was pessimistic about this new venture. You see, I am the type of investor who like to invest in company that knows their main business best and do not simply diversify into another different business. I was worried that this new plantation business would not do well and would be a drag to its good balance sheet, thus affecting the regular good dividends.

As a matter of fact, if I am not mistaken, Fimacor took some loan for the purchase of the plantation business.

Lady luck must be on Fimacor's side as crude palm oil's price was on a steady uptrend after the purchase. Consequently, when Fimacor's quarterly profits were announced, the profits was more and more as the result of the good contribution from the plantation business. So much so that until today, Fimacor is sitting on a huge cash hoard of RM225 million according to its latest 2nd Qtr 2014 result's announcement.

Even today, plantation remain an extra good revenue and profit for Fimacor even though CPO is trading just above RM2,000.00. Managing Director Roslan Hamir said as long as CPO price stays above RM2,000.00 per tonne, it is still ringing in profit for Fimacor. At the time of posting, CPO's price has been on an uptrend again.

Today, the plantation division contributed about 30% to the group revenue.

Fimacor is also on the lookout for acquisition opportunities to grow. Fimacor announced that the Proposed Acquisition by Cendana Laksana Sdn Bhd, of 2 parcels of agricultural leasehold lands held under HSD 398, Lot PT 757 P, Mukim Tebak, Daerah Kemaman, Negeri Terengganu measuring approximately 1,000 acres & PN 7602, Lot 2925 (Formerly HSD 2406, PT 1037P), Mukim Tebak, Daerah Kemaman, Negeri Terengganu measuring approximately 940.73 acres was completed on Jan 6, 2014.  Fimacor also plans to buy plantation land in Papua New Guinea.

Excellent dividends paymaster

The last few years has been exceptionally good for Fimacor. Its last five years' average eps is 81 sen which is considered very high for a company with a share base of only 82,426,810.

Predictably, on Nov 26, 2013, Fimacor reported an eps of 23.78 sen for its 2nd Qtr September, bringing its half year's total eps to 41 sen.

More fantastic for its shareholders is the continuous increasing of dividends payout from the last five years. Gross dividend for 2009 was 17 sen and increased to a high of 38.5 sen for 2013. At the current price of around RM6.30, a 38.5 sen dividend indicates a dividend yield of 6.1%. Fimacor recently paid a single-tier interim dividend of 15% payable for the year ending Mar 2014 on Dec 27, 2013.

At its last Annual General Meeting, Managing Director Roslan Hamir said that Fimacor has always maintained dividend at the same level compared with previous financial year. Isn't this good news for dividend lovers? People especially like me!

Huge cash hoard of RM225 Million

as at 2nd Qtr September 2013

for financial year ending March 2014.

The current price of Fimacor is RM6.30 (at the time of writing). It is  backed by its huge cash hoard that amounts to a cash per share of RM2.80. Stripping out this cash per share of RM2.80 and investor would only be paying about RM3.50 for each 1,000 Fimacor share that would imply a Price Earning Ratio of less than 4.5 only!

Supported by its steady consistent printing business, property management and its plantation business, its earnings are quite a predictable one. If CPO price is on an uptrend, you can bet Fimacor will report an even higher profit.

CPO price has been trading higher and higher during the last few months and looked set to maintain the pace for the coming months. This should brings more smiles to the shareholders of Fimacor and Kumpulan Fima (Kfima) eventually.

From time to time since several years ago, there were some reports about the merger between its parent company Kfima and Fimacor. Each time such news surfaced, there would be some spike up in the shares prices of both companies.

I am personally at a loss to explain why the merger does not take place or why Kfima does not take a privatisation exercise on Fimacor. If a privatisation exercise is to happens, how would the minorities shareholders of Fimacor react? There must be a big massive dividend payout to appease the minorities shareholders. Also take note that as Kfima holds a 60% stake in Fimacor, they would also benefit from this dividend payout.

Time will tell whether a merger between these cash-rich mother and son companies perhaps involving some shares swap would take place or when a privatisation exercise is announced. Whatever it is, it must result in a win-win situation for both companies.

I was "lucky" enough to be the one of early birds' investor of Fimacor when they were just focussing on their printing business and property management.

I bought 2,000 shares of Fimacor at RM1.42 on Oct 21, 2004 and again another 2,000 shares of Fimacor also at RM1.42 on Oct 26, 2004. To date, the writer has received dividends totalling around RM8,000.00 plus which is more than his original capital investments of RM5,722.36 in Fimacor.  Which means the present 4,000 shares of Fimacor are effectively FREE!

What a good son Fimacor has turned out to be for Kassim. Dishing out regular good dividends all those years and many more years to come. Can we call it another "next mini Public Bank company"? Again, only time will tell.

The writer intends to keep this generous son with a big heart for as long as possible.

You know why, right?

One "Layman" asked me about Suria Capital.

Seriously, there are over 1,000 companies in Bursa Malaysia. Many companies I do not know what they are doing unless one is to go the internet to search. I have always thought that Suria Capital was mainly involved in port business.

OMG! Suria Capital is involved in so many business. It is an investment holding company. The Company, through its subsidiaries, operates in five segments: investment holding, including investments in fixed deposits and short term investments, property development, including development of residential and commercial properties, port operations, including provision of port and related services, distributor of port cargo handling equipment and related spare parts, and provision of equipment maintenance services, logistics and bunkering, including the provision of bunkering and related services, and contract and engineering, which is engaged as construction contractor and the provision of project management and technical support services.

Judging by the movement of its share price of 62 sen recorded on Mar 16, 2009 to the current price of around RM2.50 (its high was RM2.77 on Dec 2, 2013), the company must be doing quite all right in mostly all its business directions.

Suria also paid interim and final dividends during the last few years although the amount is nothing much to shout about. But at least the company was profitable enough to be able to do so.

I would say a good company to invest for the long term although I do not own a single share of it. Over to you, Layman.

One Seng Up, Another Seng Down

One Seng Up ,

Another Seng Down

The Year of the Horse saw one good "Seng" of Bursa Malaysia i.e. biscuit maker Hup Seng Industries Berhad galloping unstoppably to the number one top gainer on the opening trading day on 2nd Jan 2014.

Hup Seng went up to touch an all time high record price of RM7.04 before closing down on RM6.90. Long term investors of this good paying dividend stock could not have asked for a better and bigger "Ang Pow" package than this.

Why did Hup Seng's share price continue to rally again and again? I do not have the slightest ideas at all. Apart from its proposed share and bonus splits exercise (yet to be carried out), there are no other material announcement from the company that could have an impact on the share rally. Or unless Hup Seng must have done so tremendously well in the last quarter (Oct to Dec 2013) that somebody knew the final dividend will have to be a big one.

Based on my experience, a stock's price cannot keep on rising and rising all the times. It must be "accompanied" by its consistent earnings or potential future higher and higher earnings or having a lot of valuable assets to be unlocked.

The massive rise in Hup Seng's share price defied logics in my personal opinion. Nevertheless, this is called the mystery of stock market. When one (in this case, Kassim) thinks the stock (Hup Seng) is overvalued, there are many who think it is still undervalued. That is why when it comes to investing, one will never be able to sell at the highest level. If we are able to generate a fairly amount of profits from our investment, we should be grateful enough.

In contrast, the other "Seng" of Bursa Malaysia, i.e. Keck Seng (M) Berhad saw its share price declining further from its closing price on the last trading day of 2013.  At the time of writing, Keck Seng closed further down 5 sen to RM6.73 on Jan 3, 2014.

Those waiting eagerly "Bumper Dividend" hopeful investors have come to realisation that the Bumper Dividend is as good as gone.  There was no announcement from the Directors of Keck Seng at all.

Again, what is going to happen to that amount of money not declared out as dividend? Different views are being expressed in the chat-line of klse.i3investor.com with some saying the money will be forfeited. Others said the money is still with the company. We see so many contradicting statements which confused us.

Can anyone help to clarify on this, please?

Without this bumper dividend, the stock is poised for decline from time to come. At what point of support is also a question one can only see in time to come. As I said before, I feel for those "who came to the party late", especially those who bought at RM7 and above and are still holding on.

So what are the future catalysts that will propel the share price of Keck Seng? More assets revaluation exercise? This seems like old stories already. What will minority investors benefit from a an asset revaluation exercise? Fact is any asset revaluation exercise will merely creates minor interest only. It is nothing new.

So many analysts have already "calculated" the net asset per share of Keck Seng in the past. Virtually net asset per share is as high as more than RM10 yet the share price is so far behind all the time. What does this tell us? Unless some of the land is revalued at current market price and sold to some developers with the proceeds being paid as special dividend to all shareholders will we be able to see its share price spiking up.

Sadly I do not see this as happening at all or going to happen in the future. I have to come to the conclusion that the Directors of Keck Seng are actually going to do nothing at all at the moment. 

Two siblings rising high

in tandem with each other

Pblic Bank Bhd., (PBB) and LPI Capital Bhd. (LPI), are two companies that can be considered as very close siblings brothers or sisters or whatever as you can name it.

According to LPI's 2012 Annual Report, LPI holds two tranches of shares in PBB. It has 28,812.490 shares and another 26,864.332 shares, totalling 55,676.822 shares i.e. 1.59% of PBB.

Similarly, PBB's 2012 Annual Report stated that 6 of its unit trust funds hold reasonable amount of shares in LPI as well.

PBB, arguably one of Malaysia's most solid bank, reported a strong set of earnings in the third quarter ended Sept 30, 2013, with net profit at RM1.047bil, up 7.6% from the RM972.66mil in 2012. Its' improved earnings were mainly due to higher net interest income, higher net fee and commission income and higher investment income partially offset by higher loan impairment allowances.

Revenue increased by 7.8% to RM3.869bil from RM3.588bil. Earnings per share were 29.9 sen compared with 27.77 sen. Its share price has been rising steadily since 2010. 

PBB opened at RM16.28 on Jan 2 and closed at RM19.40 on Dec 31 for a gain of RM3.12. Together with dividends totalling 52sen paid in 2013, the gain is RM3.64 or 22.3%!

LPI, formerly known as London & Pacific Insurance Company Berhad, is an investment holding company. After a rationalisation scheme, LPI transferred its entire insurance business to its wholly-owned subsidiary Lonpac Insurance Bhd on 1 May 1999 and at the same time changed its name from London & Pacific Insurance Company Berhad to LPI Capital Bhd.

LPI has also seen its share price rising in tandem with the rise of PBB share price. LPI opened at RM14.56 on Jan 2 and closed at RM17.44 on Dec 31 for a gain of RM2.88. Together with dividends totalling 68sen paid in 2013, the gain is RM3.56 or 24.4%!

Both PBB and LPI  are fabulous good dividends paymasters. Long term investors of both companies must be the happiest ones in Bursa Malaysia, having the best of both worlds - seeing sharp appreciation in share prices and receiving high dividends years after years.

Both companies practise very high standard of corporate governance. They are also amongst the earliest to report their quarterly results with LPI normally announcing its results within ten days after every quarterly while PBB announces it within the third or fourth weeks.

The writer was not being able to resist from not becoming a PBB shareholder for quiet some time. On  July 18, 2012, the writer bought 500 shares of LPI at RM13.80. The writer was hoping to ride on the strength of PBB which would surely have a great positive impact on LPI.

So far, the writer has been absolutely correct as LPI's share price is now trading at RM17.46. The writer has also received three dividends amounting to RM415. The current price at RM17.46 showed a return of "paper profit" of RM1.83,(not calculating the broker fee at the moment) and including the RM415 dividends and the profit at the moment is RM2245.00, a rise of 32%!

So far so good. The writer is experiencing the feeling of having the best of both worlds, too! The writer also expects LPI will be declaring a good final dividend in the first two weeks of 2014.