My Bet on Integrax was Spot On!

My Bet on Integrax

was Spot On!

One of the most important traits in investing is to have that ability to be early enough to spot on potential undiscovered good stocks trading at very undemanding value.

Should one has that ability and spotted one, one should have the courage to buy some shares in that company and patiently wait for the time to come.

In 2013, I went for a two day one night trip at Pulau Pangkor. I had the opportunity to see the ports at Lumut were having a very busy schedule all day long. Coming home, I did some research and was thrilled to see that the busy ports belonged to Integrax Berhad.

A further "check" revealed that Integrax is in cash rich position and not one single individual or company owned a very substantial stakes in the company, examples 40% or 51% stakes.

In fact, the three major share holders holds  a total collectively 60.67% - 22.81% by Amin Halim Rasip (original founding shareholder), 22.12% by Tenaga Nasional Berhad and 15.74% by Perak Corporation Berhad.

A thought came up to me that if these three major shareholders decided to take Integrax private one day, it would not face much resistance. Perhaps the major resistance would have come from the Integrax's number five top shareholders i.e. TSM Global Berhad holding 12,000 million shares or 3.99%.

Based on that, I bought a handful of Integrax shares at an average price of RM1.85 in 2013.

When I posted the blog : Integrax's Future Potential Kingmaker on January 27, 2014,  at that time, I believed that Tenaga, being a government-linked stock and Perak Corp - also a state agency under the government would have no problem teaming up together and if they can get the support of Amin, would possibly launch a takeover offer for Integrax at any time.

Should that happens, then TSM would be in a Kingmaker's position to support or even ask for a higher offer. But things are not what we expect to be. Instead it was Tenaga alone launching the takeover offer.

Why Tenaga wants Integrax?

It is not difficult to understand why Tenaga wants to own Integrax fully or at least having strong management control, but of course it would be better to fully own it rather than not.

Being the major user of the port and with more coals shipment coming in the future, it makes sense to fully own the port and dictate control. But now it cannot because the other two major shareholders have different plans, directions and social responsibilities for Integrax.

I strongly believe Tenaga has big plans for Integrax once it is fully under its control or privatised. But of course, Tenaga would not be telling us right now. Instead, Tenaga is "supported" by some "stupid" analysts who recommended that at RM2.75, it is a fantastic offer considering that Integrax never traded at the price during the last ten years.

Sorry if I am a little blunt in calling those analysts stupid. Analysts are supposed to be very educated people who graduated with high honours. That is why they are able to analyse this and that and come out with a recommendation. This time, they think the minorities shareholders are easy to misled them in parting with Integrax shares to Tenaga.

Did they think of the future potential business of Integrax or are they talking about the past performance of Integrax only? The present offer price doesn't mean it is fair based on the past performance of Integrax.

Obviously there is a hidden agenda from Tenaga which of course we can only guess this and that only.

Why Amin refused to sell at RM2.75?

Amin Halim Rasip (the original founding shareholder) is someone who knows the enterprising values of Integrax more than anyone else. If not for his statement issued, I sincerely would not have known so much the potential earnings and future business of Integrax.

For example, I did not know that Integrax is one of the few ports in the world with one of the main terminals operating in deep water.

Furthermore, Integrax holds cash as much as RM154 million which translated into cash per share of 50 sen. That means Tenaga is only valuing Integrax at a PE of only 16.5 and not 20.

That also means Tenaga is effectively paying only RM2.25 per share for each Integrax share which is even lower than the pre-offer price!

If Tenaga is sincere enough, Tenaga should offer significantly higher then RM2.75 per share plus the distribution of RM154 million to each shareholder. Then perhaps this might sound a bit tempting. Otherwise, it is not an attractive offer at all.

I am with you, Encik Amin.

It is about time those "Davids" team up with Encik Amin and show it to Tenaga that the offer price is extremely too low! Interestingly, TSM with a 12,000 millions shares are now pondering which sides to take. Years back, my 36,000 shares of TSM was forcefully taken privatised by the company even though I could not be bothered to  go to the stock broking firm to sign the documents to hand over my shares to them. They simply sent me a check.

So what goes around must come around. This time, TSM are in a position  as I was several years back. And this time, ironically, TSM and I owned shares of the same company together!

So to Encik Amin, you have my supports and my followers' as well. I appeal to other minorities to join Encik Amin to challenge Tenaga this time.

Minorities should be brave enough  to show their support. When we have strong support, Tenaga would be forced to make a revised offer which must be attractive enough.

In fact, I am suggesting that first, Tenaga must make a very significant higher revised offer and also the distribution of Integrax's cash hoard of RM154 million to all shareholders!

Hear it, Tenaga Nasional Berhad?

Delloyd Ventures Bhd's privatisation is on!

Delloyd Ventures Bhd (DVB) obtained its shareholders' approval at the extraordinary general meeting held on Jan 15, 2015 for the takeover by major shareholders.

The Selective Capital Reduction will result in entitled shareholders receiving a total capital repayment of RM181.15 million, or RM5.15 per share.

DVB's Managing Director Datuk Seri Tee Boon Kee said that the privatization exercise will be completed by end-March and delisting of DVB from the bourse will take place in April.

Once again, I have lost another battle to keep my shares when it came to a privatisation exercise. Recall that on Aug 19, 2014, I bought 2,000 shares of Delloyd hoping that the privatisation exercise would not be a successful one. Well, it looked like the major minorities' approval were easily obtained at the extraordinary general meeting.

Stocks prices have recovered at the moment

During the last two weeks, I have not been able to purchase any stocks which fit into my requirements' lists.  Some which I have earlier identified have recovered substantially and some in between 52 week high and low.

But I am still monitoring and as such, should an opportunity presents itself, you can bet that I will be making a purchase on it. Stay tune.

Mr Sim on Jan 12, 2015 asked this question:

What do you think about Uchi Tech in these ringgit depreciation?

It give 5.6% of net dividend annually...

Dear Mr Sim,

Uchi Tech will benefit from the stronger dollar's rise as most of its revenue is quoted in the green back.

That is why Uchi Tech is now trading higher its 52 week high. Dividend payout is also attractive. What do you think?

   

Braveheart of Bursa Malaysia

Braveheart of Bursa Malaysia

Braveheart is a 1995 epic historical medieval war drama film directed by and starring Mel Gibson. Gibson portrays William Wallace, a 13th-century Scottish warrior who led the Scots in the First War of Scottish Independence against King Edward I of England.

The story is based on Blind Harry's epic poem The Actes and Deidis of the Illustre and Vallyeant Campioun Schir William Wallace and was adapted for the screen by Randall Wallace. It has been described as one of the most historically inaccurate modern films.

The film was nominated for ten Academy Awards at the 68th Academy Awards and won five: Best Picture, Best Makeup, Best Cinematography, Best Sound Editing, and Best Director.

I really like this movie and must have seen it several times. I like the fighting scenes and I like the bravery shown by William Wallace in inspiring the Scottish people to fight in that final dramatic battle against the superior undefeated English army.

In the current turbulence times at Bursa Malaysia where "red bloods" scenes are almost an every day affair, I am sure there are only few Bravehearts who would dare to pick up cheap fundamental shares to keep for the longer term.

But first, A true story about our own local Bravehearts. In the early part of 2008, my good friend, let us call him Braveheart seeked my advice about his decision to invest a 1,000 shares in Tenaga. At that time, Tenaga was traded at around RM6.50 to RM7.00. I shared with him my opinion but the final decision must come from him.

Braveheart went on to purchase at below RM7.00 and several months later sold at around RM8.50 plus level. Elated with his good profits within several months, he wanted to go for the next more expensive share, Public Bank at around RM9.00 level.

At RM9.00, the share price of Public Bank at that time was considered at its peak's high. But as good coverage and buys initiated by so many research houses were too much to resist at that time, Braveheart was brave enough to go ahead and became a 1,000 shareowners of Malaysia's bluest and most fundamental bank.

Braveheart's timing of purchasing Public Bank shares was just shortly before the beginning of early September 2008 when the US subprime mortage crisis reached a critical stage.

For the next several months and into 2009, the US subprime mortage crisis went on to snowball into the famous Global Financial Crisis of 2008-2009.

The whole world stock market plumented to unprecendental levels. Stock prices kept on falling. Those without fundamental and strong balance sheet and coupled with high debts fell faster than the speed of DC's famous comic hero, Flash.

If you were an investor at that time, you would have that wish that you had never touch the stock market and had contendedly kept your hard earned cash in bank earning paltry interest. At least you could sleep soundly at that time.

Those with strong balance sheet and with fundamental business such as Public Bank was also slowly and gradually declining in share price, day by day. Braveheart was worried by the days and the on-going turmoil that went on for several months affected him physically and mentally.

His daily life was not the same anymore. His daily work was also affected as he could not concentrate properly. Braveheart asked me again if holding on or selling at a loss was a better option. I shared with him my opinion that I would not know the future direction of the stock market, either it goes down or it goes up again.

But Braveheart was worried that his Public Bank share price would keep on declining further, possible from RM7 to RM6 and then to RM5 or keep on going down. If that happened, Braveheart would not be able to stomach such "colossal" loss as that money meant a lot to him. Worse, he would  be highly stressed for as long as that situation persisted.

Eventually, Braveheart decided enough is enough and sold his Public Bank shares at just the RM7 level to another investor (let us called him the New Braveheart).

Well, we shall never know what happened to this New Braveheart who bought this Public Bank share at just RM7. But if this New Braveheart had kept the shares until today, the New Braveheart would have reaped massive profits from his purchase - done at that very turbulence time when all shares were "offered" at a massive bargain by weak investors.

The REWARDS for this New Braveheart is if he had kept the shares until today is something like this ..... Dividends from 2010 until 2014 is a total of RM2560.00. There was a share dividend of 1 for 68 shares in 2010. In June 2014, there was a right issue of 1 for 10 at RM13.80.

The current share price of Public Bank is RM17.50 plus. Yet Public Bank touched a record high of RM21.60 this year.

Today, I am sure my good friend Braveheart must have rued his decision to let go of Public Bank share at times ....when everything seemed gone.

What can we learn

from this above story?

For one, when crisis happens, stock market prices tend to be affected. Weak shareholders would sell in droves after droves. Strong investors who can hold on for a longer time frame will try to bid at lower price. Hence, we see many good companies trading at a huge discount.

It is at this time that those with bravehearts would venture in to buy at bargain prices for some of the most fundamental companies with strong balance sheet and sound management and with a good dividend policy.

We should be the BRAVEHEARTS now with this oil plunging regime offering us opportunities to buy many good stocks trading at near 52-week low.

Only few months back, we would be dreaming to buy those good stocks as there were trading at 52-week high or near that.

As such, I am continuing to purchase more shares that trade near its 52-week low.

Buying 6,000 shares of

Century Logistics Holdings Berhad.

at RM0.64 on Jan 6, 2015.

Century Logistics Holdings Berhad is a Malaysia-based investment holding company. It operates in two divisions: total logistics services and procurement logistics services.

In oil and gas logistics, the Company provides floating storage and transshipment services for international oil trading companies. It also provides procurement logistics services to electrical and electronics customers.

The Company is involved in the supply chain management and ship husbandry for fuel oil traders, including the services for floating storage units (FSU) within the port limits of PTP and Pasir Gudang in Johor.

Century Logistics pays reasonable good dividends, normally an interim followed by a final dividend. Recently it paid out a 2 sen interim dividend on Dec 19, 2014. Let us hope that there will be a usual final dividend when it announces its 4th Qtr results on Feb 2015.

On Sep 23, Century undertook a Bonus Split of 1 : 2 and then a Bonus Issue of 1 : 2. On Oct 2, it closed at RM2.34 and the next day following the adjusted price, closed at 78 sen.

At the height of the oil crisis, it touched a low of 53 sen on Dec 16. So I am not exactly buying at the the 52 week low, but also not near its adjusted high of 78 sen.