The Great Bursa Sale

The Great Bursa Sale

When a Mall/supermarket/hypermarket  announced special Big Sales, many shoppers will come in droves and many items would be snapped up faster than you think.

Some items would be sold out after one or two hours of business opening. I can vouch for it because I spend a lot of my times at these places and I experienced several disappointing trips there because there were early "bargain hunters" than yours truly and my spouse.

I have even witnessed this dramatic scene at a mall where a lady shopper  grabbed a whole tray of fruits (to be sold at Reduced Price) into her trolley  from the worker's mobile trolley before any one else can choose.

What happened later was that this lady would then slowly check through again the "Reduced Price" packets of fruits. If she finds any packet that the fruits are too rotten and too poor quality, she will then put it back.

Luckily not all shoppers are like her or else you can imagine how the scene would be when the worker push out the mobile trolley containing several stack-up trays of "Reduced Price" foods that are fruits and vegetables.

Human nature is understandable. After all, wouldn't you want to pay less for something when there is an opportunity?

That is the reason why when a Mall/supermarket/hypermarket has a Big Sale, there are bounds to be big crowd "hunting" for discounted price items/foods and one must not be late.

On the other side, Bursa Malaysia has been experiencing "Great Bargain Sale" since the last few weeks - no thanks to several factors happening locally and internationally, the latest being China devaluing its strong currency by 2%.

I shall not dwell on all those factors as I believed you know & I know what has been happening in Malaysia and the outside world.

Most stocks has been retreating to new 52-week low again. The last time this happened was during the last quarter of 2014 and the early month of January 2015.

However this time, the number of stocks falling to new 52-week low are much higher (which actually shocked me). In fact, in a more broad based basis. So much so that I actually am confused of which stock to buy this time. There are just too many to buy this time.

Many "supposedly-to-be" strong fundamental stocks are experiencing new 52-week low and as well new low of the last several years.

However, I did observed that those strong quality stocks' decline were ACTUALLY accompanied by very low volume only. What did this suggest? In my opinion, it means only a few number of weak holders are letting go of those quality stocks and corresponding due to the current poor sentiment, only a few buyers emerged to snap up at depressed price.

Hence, we witnessed some good stocks declined by between 10 - 40 sen accompanied by less than 100,000 shares. I would like to term this as artificial decline in this current situation. Therefore, investors should not really feel worry as the moment sentiment and confidence return, these stocks would resume back sharply and quickly.

Investors should only worry if their stocks are experiencing poor business or even losses. As long as their stocks continue to report reasonable good profits and reward shareholders with again reasonable good dividends, investors should not be too concerned.

This current Great Bursa Sale has given me an opportunity to "cherry-pick". However, one must also be cautious as the Great Bursa Sale can even become Greater Bursa Sale in weeks or months to come.

I hope I would be able to come out with some strategies to profit from this depressed market in my next blog.

Proposed takeover of KAF-Seagroatt

& Campbell (KAFSC)

by KAF Investment Bank (KAFIB)

KAF Investment Bank (KAFIB) has proposed a takeover of KAF-Seagroatt & Campbell (KAFSC) for RM248.6 million, or RM2.70 per share, by acquiring 92.1 million shares or 76.7% of the company from vendors. KAFIB entered into a conditional share sale agreement with the vendors, Akka SB, Akka Holdings SB, Datuk Khatijah Ahmad and Thariq Usman Ahmad, for the proposed acquisition recently.

So finally the cat is out of the bag! For a long time, this cash-rich, well-established standalone stockbroking company has been the subject of numerous mergers/takeover exercise by its major shareholders.

As early as Feb 2015, investors who had acted on the news published by The Edge daily : Insider Asia's Stock of the Day of KAF would be laughing all the way since the news of the takeover in July.

It highlighted that KAF has severely understated properties acquired at low price.

The jewel in its crown is a plot of prime freehold land measuring 34,217 sq ft at Changkat Kia Peng, near the KLCC complex, carried at just RM5.7 million or RM166.20 psf, and last revalued in 1998. In 2013, I-Berhad bought 1.05 acres in adjacent Jalan Kia Peng for RM132 million or RM2,886 psf.

A revaluation of KAF Seagroatt’s land to around RM2,500 psf suggests the land could be worth 15 times higher at RM85.54 million, with a potential revaluation gain of RM79.8 million or 66.5 sen per share. This could boost its book value from RM2.01 sen to RM2.68 per share, making the stock potentially trading at 0.6 times revalued book.

KAF also has seven acres of residential and commercial lands in Port Dickson, Negeri Sembilan with a book value of RM2.69 million, or RM8.82 psf. The lands were acquired and last revalued in 2005.

Interestingly apart from these undervalued stated properties/lands, KAF is also a solid cash-rich stock with net cash of RM180 plus million (which is equivalent to around RM1.50 per share).

KAF is actually a good share to invest and hold although its share price hardly moved and stayed below RM2 for the last decade. What is remarkable about KAF is its consistent dividend payments since 2004. Stocks like these are a rare breed on Bursa Malaysia as it traded just the average of RM1.50 range normally. It only inched up to RM1.60-RM1.70 the last few years as investors took notice of its increased dividends payout.

KAF also paid a special bumper dividend of RM352 in 2007.

I know of one patient investor who has been keeping this cash rich share since 2005 or ten years ago! I really believe that not many investors are able to hold on to shares for more than ten years. If there are, most probably the shares must be rotten shares or those veteran investors keeping quality shares like Public Bank or London Pacific Insurance.

Back to KAF, this patient investor who bought KAF at RM1.41 on Mar 29. 2005 has been rewarded with 17 times of dividend payments (interims, finals and special dividends). Total gross dividend amounts to RM1,352.00.

So the cost for this patient investor has been reduced to just RM72 only. Yet this patient investor is now being offered to sell his share back at RM2.70 by KAFIB. That is a gain of nearly RM2,000.00!

Will this patient investor accepts the offer or join in the minorities to band together and force KAFIB to offer a higher revised price. If you know who this patient investor is, most probably you would know his decision.

By the way, this patient investor is .... yours truly!