LPI - Doing it rightly

LPI - Doing it rightly

LPI Capital Bhd (LPI)'s recently announced its 2nd Qtr results which was up by a whopping 67.5% jump in its net profit. The increased profits were due to LPI's selling a small percentage of Public Bank Berhad (PBB) shares in the open market in April and May at around the price between RM18.95 and RM19.14 per share.

As a result of those realised cash profits of RM39.2 million, LPI decided to utilise it in the best way for its loyal shareholders, i.e. returning the excess cash in the form of dividends.

The interim dividend is 20 sen which is actually a 50% increase compared to the interim (20 sen) of FY14. This is because LPI's one-for-two bonus issue went ex on Mar 25, 2015.

Yours truly's stakes in LPI also increased to 750 shares from 500 shares after the bonus exercise. Hence, my due dividend will be RM150.00.
 
Even after disposing of this "small" stakes of PBB shares in the open market, LPI still holds a sizable amount of 54.74 million PBB shares. Whether LPI will continue to practise this exercise of disposing a small portion of PBB shares in the coming quarters remains to be seen.

But if LPI continues to do so and it returns the realised profits back to its shareholders, nobody would be grumbling at all. In fact, shareholders should be smiling happily with the extra increased amount of dividends flowing into their respective bank accounts.

The balance of 54.74 millions PBB shares, assuming slowly being sold in the open market at say an average price of RM19 would yield in a big cash amount of around RM1 billion (I hope I am right with this rough calculation : 54.74 millions shares x RM19). Correct me if I am wrong as I am actually very poor when it comes to maths or accounting calculations. I actually flopped in the Maths subjects terribly.

The amount of money if redistributed to shareholders could mean a potential of around RM3 per share (I hope I am right again).

Kudos to the management of LPI for distributing the excess profits back to its shareholders.

Many companies should emulate the management of LPI. I know (and I know you know, too) that there are many cash and asset rich companies with zero debts that holds stakes in many good companies that actually do nothing at all with their holdings and bugling cash hoards.

These companies (with their china-man style of management or rather aggressive expanding style of business) are just contended to hold on the stakes of other companies for many many years.

Or they are always on the lookout for business expansion or setting up new ventures here and there, always utilising its good reserved cash for that purpose, thus rewarding shareholders with good dividends is definitely out of their minds.

Such companies are usually not in my criterias, if there are is due to those old days when I wasn't experienced enough to identify it.

Back to LPI, its' shareholders are likely to continue to enjoy generous dividends (and increased quantum as well) and as well also a slow gradual increase in its share price) over the time.

Yours truly is most fortunate that he had invest in LPI a few years back.

Since then, I have seen my investment appreciated in its share price by over several thousand and also received several hundred of ringgit dividends.

And both these double joys are likely to be repeated again and again in the coming years.


Buying during crisis is always safer

Remember during the last quarter of 2014 when oil price was crashing down severely and the market suffered panic selling for several weeks?

Many good companies' shares were sold down in a knee-reaction to it and many of the prices fell down to nearly new 52-week low. I took the opportunity to buy into three stocks that were down near its 52-week low, i.e. Thong Guan (bought 4,000 shares at RM1.86 on Dec 12, 2014), Supermax (bought 3,000 shares at RM1.67 on Dec 16, 2014) and Century Logistics (bought 6,000 shares at RM0.64 on Jan 6, 2015).

After these three purchases, the market recovered and many stocks's prices went up again. And I did not have the chance to purchase in the next several weeks.

It has been more than six months and I am pleased to find out that Century had appreciated by 40% (share price is now at RM0.90) and Supermax - up by 28% (share price is now at RM2.15). Thong Guan is the only odd one (RM1.78) - a loss of 4.3% because its last two quarters' results were .... well quiet disappointing for investors.

I am hoping Thong Guan will be able to turn itself in the coming subsequent quarters.

Currently I am still holding onto these three stocks. I have no idea how long I will keep on to these stocks at the moment.

So the next time there is a panic selling in the stock markets that last several weeks, one should be brave enough to start nibbling into those unjustified severely beaten down fundamental stocks.

The rewards could be very sweet when sentimental returns back again.