Harrisons - The Kingpin of East Malaysia

Harrisons - The Kingpin

of East Malaysia

What do DKSH Holdings (M) Bhd, Harrisons Holdings (M) Bhd and Yee Lee Corporation Bhd have one thing in common?

They are agencies and distribution companies dealing in products produced by all those multi-nationals companies in Malaysia and to a certain extend, from other parts of the world. You produce your goods and sell it to them and they sell it for you for a profit margin. I called them “distribution houses” or “agency houses”.

In simple term to understand, here is how it works. A big manufacturer for examples Nestles produces its products and sells it to one distribution house to sell. Nestles will only has to collect just one cheque payment from this distribution house. Then this distribution house sells its products to different dealers for a profit margin. How this distribution house deals with its so many different dealers regarding payments has nothing to do with Nestles anymore.

That is why if you are a big manufacturer of many products, it is better to engage out to some reputable distribution companies. It saves you a tremendous amount of time and cost for dealing out with so many dealers, not to mention collection of payment as well.

Of late and especially during since the last one year, there has been a good rally for this sector. Two distribution house companies, DKSH and Yee Lee have seen their share price appreciating to new highs, much to the delights of their shareholders.

DKSH must be  one of the few new darlings of Bursa Malaysia for its share price has risen tremendously from a 52-week low of RM3.26 to a 52-week high of RM9.20. At the time of posting, DKSH closed at RM8.39.

Yee Lee on the other hand might not be so spectacular as DKSH, but nevertheless, its share price has also risen from a 52-week low of RM84.5 to a 52-week high of RM1.82. At the time of posting, Yee Lee closed at RM1.81.

Why did investors chase after the shares of these two companies that sent the share price shooting into the sky? The reason is consistent, reasonable and gradual growing profits. Quarterly  and quarterly of reporting improving profits attracted more and more investors to buy up the shares.

DKSH for one has actually seen its quarterly profits rising steadily  whereas Yee Lee is also appreciated for its stakes in its associates listed profitable company Spritzer in the consumer section. This rally however was not “participated” by Harrisons because Harrisons was still trying to sort out its taxes issue with Kastam DiRaja Malaysia since early Feb, 2012. Harrisons has seen its shares price hardly moving neither here or there or anywhere during the last one year. Its traded at between its 52-week low of RM2.79 to a 52-week high of RM3.40 until April 4, 2014 when it announced that its taxes issue has been settled after the closing market. Harrisons closed at RM3.09 on that day.

Since that announcement (supposedly to be good news for Harrisons shareholders), Harrisons has seen its share price doing some “catching up” with its competitors to even touch a high of RM3.51 although it eventually closed at RM3.38 on April 11 at the time of posting.

Will there be more rooms for Harrisons to move up?

I know a few good things about Harrisons. After all, I have been a Harrisons shareholder since 2004! Let me share it with you.

Still Strong Financial Position

The 2012 Annual Report stated that Harrisons’ has RM92 million vs Borrowings of RM65 million while trade and other receivables is RM229 million vs trade and other payables of RM154 million. (The 2013 Annual Report is not yet out). Based on this, Harrisons will still be in a healthy financial position even after settling its taxes with Kastam DiRaja Malaysia.

Strong Profit and Earning Per Share

Harrisons’ profit for Year 2013 was RM28 million. For a company with a share base of only 68,489,200 shares, it was an earning per share of 41.42 sen! How many companies in Bursa Malaysia earned that kind of eps? Flashback back one year earlier and you will be shocked to learn that in 2011, Harrisons made RM35 million. That was an earning per share of 52 sen! Incidentally, after I started to invest in Harrisons in 2004, Harrisons continued to post higher and higher record profits until 2011. Since then, its profit have softened down, but that is expected after a spectacular run of record earnings for so many years.

Strong Dividends Payout

Harrisons has never failed to pay out dividends since the last decade. Its dividends payment kept on increasing gradually in tandem with its rising profits, especially during the last ten years. There was even a final dividend and a special dividend totalling RM700 for financial year 2011. At the moment of posting, the dividends for Financial year 2013 has yet to be announced.

Strong in East Malaysia

Harrisons is very strong in the East Malaysia. In fact, it holds the monopoly market in East Malaysia. Harrisons has been in the East Malaysia market for so many years that it is unlikely another distribution house would want to go over there and spend considerable huge amount of cost i.e. the engagement of staff, warehousing and other resources to cover such a wide geographical reach in East Malaysia just to challenge its business. I would rate Harrisons as the “Kingpin” of East Malaysia and DKSH as the “Kingpin” of West Malaysia. Surely there must be a GOOD premium  TO BE ACCORDED FOR HARRISONS SHARES DUE TO its stronghold alone in East Malaysia!

Expanding into West Malaysia

Since securing the Coca-Cola agency, Harrisons has also gradually expanded into West Malaysia in Batu Pahat,  Muar and Penang. The expansion into West Malaysia will need some time to turn into an additional profitable investment.

Tightly held by its 30 largest shareholders

Harrisons shares are tightly held by its 30 largest shareholders. The 2012 Annual Report revealed that together, the 30 largest shareholders held up to 81.16%. That means there are not much shares left in the open market. The largest shareholders, Bumi Raya International Holding Company Limited, collectively hold about 28 millions shares or about 40%. There were also two unsuccessful attempts to take Harrisons private in 2008, but to no avail.

Kassim - The early bird again!

Kassim first came to know about Harrisons as early as in the year 2004. Attracted by its simple and easy way to understand how it runs its business, Kassim confidently bought 10,000 shares of Harrisons on Dec 7, 2004 at RM1.35. Kassim has been holding on to his stakes until today and has been rewarded with a total dividends of RM15,350.00 (dividends received since the purchase’s date until today) which is more than the RM13,630.60 (purchase price plus broker’s fee).

Thus, Kassim is already sitting on a realised cash gain of RM1,719.40 plus the current 10,000 shares of Harrisons which are considered as FREE!

In view of the unmoving share prices of Harrisons since more than a year and especially the tremendous surging shares price of its two competitors, Kassim believed it will be a matter of time before investors start to appreciate this profitable and good paying dividend stock when the taxes issue was settled eventually.

Coincidentally again, the settlement of the taxes issues announcement came after the closing market on April 4. Kassim had bought ADDITIONAL 3,000 shares of Harrisons at RM3.08 on that very day. Although I already owned 10,000 shares of Harrisons. I still believe that there will be at least some uptrends for the share price for this “hardly-moving” stock in times to come, thus I decided to increase my “business participations”.

Even if Harrisons does not move, at least it is still strongly supported by its consistent profitable business which ensures that regular good dividends are delivered to the patient shareholders.

(Please be advised that if you are going to buy Harrisons share after reading this article, you are doing it so at your own risk. But then again, there is no such thing as a “free lunch” in the investment world. Every time, we invest in Bursa Malaysia, we are doing so with a certain degree of risk, like it or not).

One question from OS on April 1 about : Any stocks with high growth and high dividend? That’s the ideal situation.

Kassim’s view is that you must be the early bird to invest. If not, by the time everyone spots it, the stock will become expensive. Buy when it is earning just the average profits consistently with consistent dividends and wait patiently ... just as I did with Fimacor and well ... Harrisons again! Join me, OS?

Do Retailers Make Money From Investing?

Do Retailers Make Money

From Investing?

This is a question I have always asked around among many people (retailers, remisers and those working in the finance and stock broking firms and a few fund managers from some units trust companies).

It seemed that the answers I received are not very encouraging at all and it must be true. Most retailers tend to lose money in investing in Bursa Malaysia.

Although no official statistics or surveys are done, it is believed that only a very small handful of retailers are able to make some profits, even then the profits are perhaps at a paltry amount only. Only a few “elites” are able to make monsters’ gains in a more consistent manners.

From my personal experience, most of my friends (retailers) don’t have much good memories with Bursa Malaysia. They have lost money when they sold their stocks at lower prices which they bought at higher prices knowing that they should be buying lower and selling higher.

Many of them have become long term investors because they are still holding on to some stocks bought at high prices and now have become penny stocks. Many of my friends have not even trade at all during the last several years. They jokingly asked if their accounts are still activated or not.

Let me share with you one true story of a company going for listing in 1995. At that time, most of the employees were not even having an account to trade. The listing exercise provided the “novice” employees a opportunity to profit some money from the share market. At the time, the market was on a rally, especially the then Second Board which saw many counters trading at more than RM10.

The rally went on and on with more ups than downs. Making some money from the contra period was easy. Overnight, those “novice” employees became “master” players in the stock market. They became bolder and bolder. They bought more and more stocks hoping for a contra gain. I still remembered one of them bought a so-called stock Instantgreen at more than RM10. She said her “master” friend recommended strongly.

Well, we all know that the rally party came to a nightmarish ending with the onslaught of the 1997 Asian Financial Crisis which saw most of the region’s currencies depreciating to unprecedented levels.

Most of the stocks felt down to unprecedented levels, too. My friend’s Instantgreen became penny stock instantly. Until today, many of my friends do not even bother to find out what happens to their stocks. Some of them have become long-term investors by choice.

There was even this young chap in his early twenties (from that company) making small gains from contra trading in his initial trades. He went on to make more and more contra gains. He became braver in buying in more stocks on contra. As I knew him personally, I advised him of the danger should the market turns the other way round. Well, he said to me :  “You DON’T KNOW about trading contra. I have been making money all this while playing contra.”

When the market turned south, he went in for more contra trades to cover his earlier positions (bought at higher prices). But when the market went down even further giving no opportunity for him to average out his investments, he had to cut his losses for he had no capital to take up the shares.

Worse, he had no money to pay for his massive contra losses.

Today, I really DON’T KNOW where this young man is because he went missing from work a few days later and is never seen until today.

Another strong reason among many retailers is if making money (consistent or from time to time) is easier than losing money investing in Bursa Malaysia, why do so many of us are still working for someone? Why are many of us still fighting through the morning jam to be in the office by 9am and toiling ourselves until the end of the day?

We all should be full-time retailers spending our time in front of the trading screen in the stock broking firm. In this internet era, many of us would not need even to go out from their homes. I know of many of my friends whose computers are connected to Bursa Malaysia, thus providing them instant trading prices.

There would not be much needed for fund managers, too. In fact, there would not be even enough seats in the trading gallery if making money from investing in Bursa Malaysia is really easy.

So in conclusion, I must readily admit that one should always accept the fact that investing in Bursa Malaysia is a two way traffic. You either see your investment price maintains at a slight plus or minus level, appreciates to a higher or even higher levels or depreciates to become a loss.

Minimizing our potential loss should be one of the top priorities. That is why one should always does a lot of homework doing research and understanding the business you are going to invest and eventually develop your own style of choosing a particular company to invest.

For some, they are not bother if the company is in debt or not. Some don’t even bother if the company does not pay out dividends at all. Some rather look for growth even knowing the company is carrying big amount of debts. Some look for companies which are cash-rich that pays regular dividends like the writer.

Finally identified one worthy stock

after three months of soul searching.

I have not bought a single stock since the start of 2014. Not because I did not want to, but because I was searching high and low for a worthy counter worthed investing. Such counter required me to spend some considerable amount of time for analysis and research.

Indeed  there  was one such stock  worth investing for  the mid  to  long  term. (again, this is only from my personal view, so please treat this with caution should you feel you would like to join in the party later). I had purchased a handful lots of that stock at the time of posting on April 4, 2014.

I would be more than pleased to share it in my next blog. That is a promise from me.

A simple idea to use less plastic

Each time we go to do some shopping in the hypermarket, we would be using that thin white plastic sheet to wrap the foods. For example, a sheet is required when you buy some apples. Another sheet is required again when you buy some carrots. Imagine how many thin white plastic sheets we carry home each time we come back from shopping. Here is an idea which I have recently started to apply. The sheet used for the apples can be reused again the next time. All we need to do is only to REVERSE the plastic sheet from the inside so that the side with the price tag is now inside whereas the outside sheet is now a clear side (for the cashier to stick a new price tag on it for your next shopping trip).

This way, the plastic sheet could be used twice (hence, cutting down the amount of plastic usage by 50% or more) and you will also have less plastics to keep (or throw, which is you know I know that plastic is something that could not be easily recycled and is harmful for environment.

If you really care for environment, please support this idea and share it with your friends.

NCB - At a crossroads?

NCB - At a crossroads?

The share price of logistics provider and port operator NCB Holdings Bhd has been dropping to new and newer 52 week-low lately (compared from its 52 week-high of RM4.90 done on Aug 5, 2013). At the time of posting on March 21, NCB closed at RM3.25.

Long term and short term shareholders, especially the minorities must now be feeling they are at a crossroads time. Why? Should they hang on to their investment or dispose of it while they can or hope for the best that NCB will have a fast turnaround recovery?

No thanks to NCB which recently released a rather "poor" set of  results for its Financial Year 2013 - making just an eps of 11.4 sen. This poor set of results is due to a pre-tax loss of RM72.8 million (for Financial Year 2013)  suffered by one of its division, Kontena Nasional. Kontena Nasional also made a RM19.2 million loss for Financial Year 2012 according to claims in May last year.

The Malaysian Anti-Corruption Commission said it would begin investigations into the matter. The Edge reported that when it contacted NCB for updates on the financial clean-up, NCB declined to comment.

Now whether there will be more element of surprises from Kontena Nasional  which may result in more losses for NCB is still a naggling thought in the minds of investors.

The loss suffered by Kontena Nasional is severely dragging down the profitable profits of NCB's other divisions  Compare it to its previous many years and one will know find it hard to believe it.

Those previous years' good results were accompanied by a string of interim, special and final dividends announcements that were exceptionally high. But for Financial Year 2013, no news of a final or special dividends were announced (NCB normally announce it together with the 4th Quarterly results). So far, a meagre interim dividend of only RM35 was paid on Oct 10, 2013.  Chances of a final or even a special dividend are virtually gone (in my opinion).

On the plus side, NCB's new wharf, which came on-stream in December last year could be the much-needed boost. The new Wharf 8A, which is part of Northport's Container Terminal 4, will bring Northport's total annual throughput capacity to 5.6 million twenty-foot equivalent units, up to 600,000 TEUs.

But NCB still has a strong competitor in Westport Holdings Bhd. However, a market observer says that for NCB to compete with Westports, it has to establish that it can be just as efficient.

Several research house have given different target price for NCB. Maybank Investment Bank research has a "buy" call on the stock with a target price of RM4.84 while RHB Research has placed a "neutral" call at RM3.50.

Which research house would you trust?

High Dividends during the last few years

A check on the website of www.malaysiastock.biz revealed that from Financial Year 2006 to 2012, NCB has always paid out an Interim and Final Dividend including Special Dividend. And these dividends were quiet a big amounts for the shareholders. From 2006 to 2012, the dividends were RM265 (2006), RM250 (2007), RM250 (2008), RM280 (2009), RM370 (2010), RM760 (2011) and RM655 (2012).

Going forward, unless the uncertainty of Kontena Nasional is totally removed, one can only hope that NCB will see a strong recovery in Financial Year 2014.

NCB's parent company, Permodalan Nasional Bhd (PNB) has a controlling stake of 47.71% in the company through Skim Amanah Saham Bumiputera. The other major shareholders are MISC Bhd (15.73%) and Retirement Fund Inc (9.135).

Kassim is also a shareholder of NCB. I bought  NCB at RM3.15 on Feb 19, 2010. Having seen my "paper profit" evaporating from NCB's spiralling down trend price, I am perhaps "comforted" by the massive amount dividends I have received totalling RM3,710.00 since my purchase date.

The perils of not locking in profits

The downtrend price (back to my original buying price) also bring to mind the perils of not taking profits especially profits that exceeded 30%. As  an investor, making an investment to buy a counter is not that difficult. Once a counter has been bought (say at RM2), as long as the share price of that counter stays plus minus at the RM2 levels , we are unlikely to be affected at all. In fact, if it stays at that tight range, we are likely not to even check on the share price at all. (What for as there won't be any wide movement of the share price thence we are just wasting our time to check on it).

However should the counter's share price starts to move north gradually and higher and higher and of course sometimes retreats a bit, but somehow remains higher and stays at that level, chances are we would feel excited about this "new increase of wealth although still in paper profit". Checking on its share price now and then would be a looking forward activity for each time the share moves up a bit would bring the smiles out.

After all, the main purpose of investing is always to see our investment appreciate over the times and also to protect our profits especially reasonable profits of over 30%.

But sometimes, we are always reminded by the teaching ideas by so many "stock and investment gurus" about the benefit of long-term investment. So much so that many times, when we are in a position to lock in our huge gains, we refuse to do so and when it starts to retreat, we still cling on to our investment believing that it is only a mild correction or profit taking and will rebounce back to its original high again.

Why I did not lock in profits this time from my investment in NCB? I had every opportunity and time in the world to do so. From April to Aug 21, 2013, the NCB's share price was always above RM4.50. It touched a high of RM4.90 on Aug 7. How could I allow NCB to retreat back all the gains and worse, at a price that is above my original buying price? I am a seasoned investor since 1993 yet I could not protect my winning investment in NCB this time. (This goes to show that we are forever learning something everytime). In this case, I learned the bitter lesson of not taking profit when the opportunity was still there.

At the moment, I am still at the crossroads. Should I sell my investment in NCB off before it gets worse or hope for a speedy recovery? You see, not doing anything right now is also considered as making a decision to hold on to my investment in NCB.

Perhaps a more telling time would be when NCB announces its 1st Quarter Results on April or May this year. Should there be a normalised results (assuming very minimum loss or no loss from Kontena Nasional), I have to believe that NCB would regain some grounds and be trading at a higher price. But it the losses of Kontena Nasional continues and affect the overall result of NCB, then I won't be surprised if NCB plunges below the RM3 levels.

"Kudos" to McDonalds Malaysia

On March 15, 2014, McDonalds Malaysia carried out a half-page colour advertisement in The Star. In the advertisement, McDonalds extended their sincere hope and prayer for the safety and well-being of the passengers and cabin crew of Malaysia Airlines Flight MH370.

In light of the current developments surrounding Flight MH370, McDonalds announced the postponement of National Breakfast Day 2014 which was scheduled to take place on March 17, 2014.

At times like this when the whole nation is coming together as one, I am extremely pleased that McDonalds has displayed great social responsibility as a corporate company to postpone the National Breakfast Day to a more suitable time.

Thank you McDonalds for sharing the deep feelings of the whole nation for MH370. Together we must continue to pray hard for the passengers and cabin crew of Malaysia Airlines Flight MH370.