Saturday, 8 April 2017

Power Talk: Cheah Cheng Hye (2)

I noticed that blogger "Off-Piste investing" (an excellent website for Asian value investing, highely recommended) made a very precise transcript of the talk by Cheah.

Cheah described his attempts at chess and counting cards at BlackJack, both very familiar to this blogger, besides reading and value investing.

Friday, 7 April 2017

Power Talk: Cheah Cheng Hye

Great talk by the founder of Value Partners, I wrote about him before.





Performance of the Value Partners Classic Fund:


The performance is measured in USD, which makes it even more impressive.

I myself own some units of the Value Partners High Dividend Stocks Fund, which also has done well, but has a shorter history.

Wednesday, 5 April 2017

EPF lost only RM 97 Million on FGV?

Article in The Star:

EPF records RM203.18mil realised loss from Felda Global Ventures stake

One snippet:


The Employees Provident Fund (EPF) recorded a realised loss of RM203.18mil from its investment in Felda Global Ventures Holdings Bhd (FGV) as at August last year.

In a written reply to Dr Ko Chung Sen (DAP-Kampar), the Finance Ministry said, however, that EPF had gained a dividend income of RM105.77mil.



The assumption that most readers will make reading the above is that the loss EPF made on the FGV investment was RM 203 Million, that EPF did however receive RM 106 Million dividends, for a total loss of RM 97 Million.

That is bad, but given that EPF had bought a total of 309M shares in August 2013 for about RM 1.45 Billion, the loss equates to about 7%.

There is one "tiny" problem with the above: the assumption has to be wrong.

EPF must have lost much more on their investment in FGV, my guess is around RM 600 Million, so after adding the dividend of RM 106 Million about RM 500 Million.

The confusion comes (most likely) from losses that EPF had already booked in previous years on the FGV investment. How much these losses were is not revealed.

By mentioning the dividend income of RM 106 Million (which is the total dividend received by EPF over all years), the confusion is further increased. Mixing losses over a limited time with dividends over the lifetime in one paragraph without any further explanation does not seem like a good idea.

My reasoning behind the estimate of much larger losses can be derived from the share graph of FGV:




The first phase (June 2012 until August 2013, from IPO up to the 1st red line) is the accumulation phase in which EPF bought 309 Million shares, for an average price of about RM 4.70, total cost about RM 1.45 Billion.

The second phase (September 2013 until March 2015, between the 1st and 2nd red line) EPF had disposed 110 Million shares, it will definetely have lost money on these trades, but still limited.

The third phase (April 2015 until August 2016, between the 2nd and 3rd red line) is the really painful one, EPF disposed of 199 Million shares and received on average clearly less than RM 2 for these shares, the losses in this phase alone must have been more than RM 500 Million. It is this 3rd phase which makes it obvious that the reported loss of RM 203 Million does not cover all losses.

After adding the RM 106 Million in dividends received and subtracting expenses occurred (brokerage, operational) the losses will be substantial to the tune of about half a Billion RM, much more than the implied losses of RM 97 Million. And that is even without taking into consideration the rather large opportunity costs.

I hope that in the future we can have more clear statements regarding financial matters.

Ajiya: poor accounting

Ajiya announced:


AJIYA reported an unaudited profit after taxation and minority interest of RM18.712 million in the unaudited financial statements of the Company for the year ended 30 November 2016 which was announced to Bursa Malaysia Securities Berhad (“Bursa Securities”) on 19 January 2017 compared to an audited profit after taxation and minority interest of RM14.494 million in the audited financial statements of the Company for the year ended 30 November 2016.

The variance of RM4.218 million between the profit after taxation and minority interest stated in the announced unaudited financial statements and the audited financial statements of the Company for the year ended 30 November 2016 represents a deviation of 22.54% (“Deviation”).

The Deviation was mainly due to the following reconciliations/adjustments made in the audited financial statements of the Company for the year ended 30 November 2016:-

1. Dividend to Minority Interest of a subsidiary company amounting to RM2.898 million;
2. Bad debts, foreign exchange loss and other administrative expenses amounting to RM1.011 million; and
3. Provision for taxation and deferred taxation amounting to RM0.309 million.


That is not impressive at all, especially the first reason given, how in earth could they have overlooked that? Ajiya needs to get its accounting house in order, quickly.

Monday, 3 April 2017

The Shame of Germany's Ship Owners

Article from Handelsblatt Global:

The Shame of Germany's Ship Owners

"No country is more irresponsible when it comes to disposing of its ships than Germany. Even the United Nations is protesting about it."

A snippet:


The list names and shames companies that have their end-of-life ships broken up on beaches in Bangladesh, India and Pakistan. The German ship owners were responsible for the “worst shipbreaking practices amongst all shipping nations,” according to Shipbreaking Platform.
Until now, this has been a taboo topic in Hamburg shipping offices, and for good reason. South Asian beaching yards are notorious for eschewing environmental and safety standards and abusing worker rights. Oil and toxic chemicals seep into the sea. Laborers are exposed to asbestos. Many die in accidents.





Rickmers is mentioned, which manages and majority owns Rickmers Maritime, a business trust listed on the SGX.

Saturday, 1 April 2017

Huishan: all INEDs resign at the same moment, coincidence?

China Huishan Dairy Holdings has been lately in the news, for all the wrong reasons (for instance here, here and here).

The company made an announcement regarding several issues at hand. One of them was the resignation by all four independent non-executive directors.

  • Mr. Song would like to spend more time on his other business and commitments
  • Mr. Gu is getting increasingly busy with his other commitments and is afraid he may not have sufficient time to perform his duties as an INED
  • Mr. Tsui would like to concentrate on his company’s business and personal commitment which requires more of his dedication
  • Mr. Kan would like to concentrate on his other own commitments which require more of his dedication

It must be noted that every statement is different which seems to add to the credibitly of each one.

I strongly doubt though the sincerity of the reasons stated. Surely the real reason is that the company is in turmoil and the INEDs don't want to get dragged into the matter any further.

The fact that all four resign exactly now can not be a coincidence.

I am very much against these kind of "useless statements", if the directors don't want to give the true reason then a simple statement like "no comment" is much better. At least the reader does not feel like he is taken for a fool.