Wednesday, 28 September 2016

AirAsia: were all parties at the EGM equally informed? (2)

Announcement from AirAsia:


" ..... that the Company and the Subscriber have entered into a third supplemental letter dated 27 September 2016 in respect of the Subscription Agreement to extend the Cut-off Date of 27 September 2016 for a further period of sixty (60) days and expiring on 26 November 2016, or such longer period as the Parties may mutually agree in writing."


The first announcement about this share placement was on April 1st, 2016, about half a year ago.

Basically what the founders of AirAsia have received is a free call option on 559 Million AirAsia shares.

With AirAsia not paying any dividend (in other words no loss by buying the shares later) and the Cut-off Date being extended several times (saving interest charges, at least a few Million RM per month), it looks like a rather sweet deal for the founders of AirAsia.

I wrote before about this placement.

Tuesday, 27 September 2016

Poor earnings growth for Bursa listed companies (5)

Quick update on the earnings of the Top 30 listed companies on Bursa:



The companies with year end in December still have to report two quarterly earnings results, companies with year end in January have completed their 2016 results already and have started reporting their 2017 earnings.

At the moment it looks like that the earnings will come in around RM 53 Billion, lower than the 2012 results, about 12% lower than the 2014 results.

Counted in USD (for foreign investors), the results will be worse.

Wednesday, 21 September 2016

Open letter to iCapital.biz Berhad

Below is a open letter from Tan Tuan Phin who contacted me and asked me to publish the below letter. I hope many people can attend the AGM and vote according to their opinion, and possibly voice their concerns (if any). 




To ICAPITAL.BIZ Berhad,


Being a shareholder which owns 274,300 shares not including the shareholdings of my close family members, I wish to voice out my concerns regarding about the recent performance of ICAPITAL.BIZ BERHAD and wish it can be discussed in the Q&A session in the coming AGM on 24 September 2016.


Sadly I am not able to attend the AGM due to another appointment on 24 September 2016.

You may refer to my enquiries to ICAPITAL.BIZ Berhad as follows:

1)      Relative Poor Performance of the Fund from 2011 to 2016



ICAPITAL.BIZ Berhad
2016
2015
2014
2013
2012
2011
Cash Level
    303,481,263
    257,951,378
   240,390,544
   208,005,028
   133,735,511
   115,907,950
Investment
    126,022,371
    145,596,798
   185,731,507
   209,700,211
   262,657,722
   270,506,528
Total Valuation
    429,503,634
    403,548,176
   426,122,051
   417,705,239
   396,393,233
   386,414,478








% Cash VS Total Valuation
71%
64%
56%
50%
34%
30%



Based on the figures extracted from the annual report, the Compounding Annual Growth Rate of total investment plus cash and cash equivalents since year 2011 to 2016 is performed poorly at a CAGR of 1.78% per annum which is almost equivalent to non-performance at all or in another terms, basically wasted 6 years opportunity to grow the fund for the benefit of shareholders. Not every shareholders have a lot of 6 years to wait.



Kindly address and explain why has the fund performed so poorly for the past 6 years.





2)      Increased Management and Advisory Fees



ICAPITAL.BIZ Berhad
2016
2015
2014
2013
2012
2011
Management & Advisory fee
         6,150,684
         6,374,708
       6,218,982
       6,179,782
       5,789,726
       5,105,346



The management & advisory fee has been increasing at an annual compounding rate of 3.15%, while the performance of the investment fund is only growth at CAGR of 1.78% as highlight in my question No. 1. The growth rate of management and advisory fee is not in-line with the growth of the fund, while the growth pace of management & advisory fee is getting higher than the fund’s performance. (CAGR of Management & Advisory Fee = 3.15% > CAGR of Cash plus Investment = 1.78%)



Kindly address and explain why the CAGR of the increase in Management & Advisory Fee is higher and comparatively faster than the CAGR growth of the Cash plus Investment of ICAPITAL.BIZ Berhad.





3)      Increased in Impairment Loss on Investment



ICAPITAL.BIZ Berhad
2016
2015
2014
2013
2012
2011
Impairment loss
       12,506,585
         2,392,124
           513,988
                       -  
                       -  
                       -  



The impairment loss of the fund’s investment has been on an increasing trend. Especially for Boustead Holdings Berhad which is currently sit at an unrealised loss of RM2,177,080 and yet to be impaired.



a)      What is the rationale for not impairing the remaining RM2,177,080 of Boustead Holdings Berhad although almost similar amount (RM2,392,124) has being impaired for Malaysia Smelting Corporation Berhad? Does this practice comply with the Malaysian Financial Reporting Standards?



b)      The Fund has great opportunity to sell both Boustead Holdings Berhad and Parkson Holdings Berhad during year 2011 where both companies’ share were valued at peak of RM40,073,148 and RM54,901,782, however, the opportunity was not properly seize by the management and resulting in significant losses after 5 years.



Did the management of ICAPITAL.BIZ Berhad constantly followed up on the companies in their portfolio such as regular company visit or meeting with their management?



What are the policies and steps to be taken by the management to avoid making such wrong decision in future?





4)      Comparison of ICAPITAL.BIZ Berhad vs Berkshire Hathaway



As at 31 July Each Year
2016
2015
2014
2013
2012
2011
Berkshire Hathaway ($)
             216,000
             214,000
           188,124
           173,900
           127,445
           111,500
ICAPITAL.BIZ Berhad (RM)
                    2.29
                    2.28
                  2.46
                  2.40
                  2.24
                  2.16



After peruse through several years of ICAPITAL.BIZ Berhad’s annual report, I noticed that the management loves to compare the Fund’s performance against Berkshire Hathaway since both funds are closed-end fund.



The table above clearly explains the significant gap in performance of the both fund. If a person invested in both fund respectively, the CAGR of Berkshire Hathaway’s Share is 11.65% compared against the relative sluggish performance of ICAPITAL.BIZ Berhad’s 0.98% from year 2011 to 2016.



Which means ICAPITAL.BIZ Berhad has not performed at all for the past 6 years. This lead us back to the justification whether the management and advisory fees are commensurate for the poor performance of ICAPITAL.Biz Berhad.



Kindly address this issue and advise the management next course of action in order to improve in the Fund’s performance or reduce the management and advisory fees that reflects the actual performance of the fund.



Does the directors of ICAPITAL.BIZ Berhad review the fund manager performance in a periodic basis? What is the directors’ yardstick on the measurement of fund manager’s performance?



Or in a much serious scenario, if the fund still perform poorly in the coming years, have the board ever consider replace the fund manager or liquidate the fund that will give a higher return for the benefit of shareholders?



Regards,

A Very Concerned Shareholder

Tan Tuan Phin

Tuesday, 20 September 2016

Sona Petroleum is winding up

Article from The Malaysian Reserve:


Malaysian oil and gas (O&G) special-purpose acquisition company (SPAC) Sona Petroleum Bhd pledged to pay shareholders 97% of the funds held in its trust account by November 2016, weeks after the deadline for it to secure a qualifying asset passed on July 29.

The remaining 3% will be paid within two years from then, after deductions for the liquidation and obtaining tax clearance.


That was to be expected. Regarding its last proposed qualifying acquisition:


Canadian oil company Mitra Energy Inc purchased the Stag oilfield in Australia for US$10 million, just three months after Sona Petroleum asked investors to approve a US$25 million deal for the same asset.

Stag, an ageing field that used to be owned by the Australian oil giant, is currently producing about 4,000 barrels of oil per day.

Sona Petroleum came close to purchasing the asset after it received the go-ahead from the Securities Commission Malaysia this year, but investors wary of declining industry conditions voted resoundingly against the buy.


Mitra Energy only paid 40% of the price Sona proposed to pay for the acquisition.

The deal was deemed to be "not fair", so it seems that assessment was pretty accurate.

Current shareholders get back a decent amount of money, but lots of money has been lost, through the many expenses: wages, rental (a rather plush office in Menara Petronas 3), IPO related, etc..

From its last financial results:



Next to that there are rather high opportunity costs, at the very least the money could have been compounded risk free at 4% interest per year.

Was it all worth it? I doubt it, but then again, I have been skeptical about SPACs from the word "go".