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.