Moving from DKSH to Tunepro and Ekovest

After reading the article on DKSH, I decided to reduce my position on DKSH. In the long run, DKSH is still a strong company and I believe its business model and positioning is very strong.  It will be the least impacted by the revolution in retailing that is happening now - at a very fast pace i.e. a lot of purchases are moving towards online. Just a note, I have made more than 20 transactions purchasing things online from buying shoes to padlock to fridge this year alone. That was from zero online purchase 2 years before.

That behaviour of mine is going to affect traditional retailing as I can really see the effects that Jack Ma and Jeff Bezos are impacting the traditional business lines.

Anyway, the reason why companies like DKSH may probably not be enjoying very good growth for this year is due to the prolonged impact of GST as well as weak Malaysian currencies. In fact, the blame on GST I think is not as correct, but most probably the weak Malaysian currencies as well as reduction of subsidies are really affecting many people on the streets. This as mentioned is going to affect DKSH who is distributing goods such as milk, cheese and pharmaceutical products.

On the other hand, I am putting my money on Tune Protect which has dropped from circa RM1.60 to now RM1.12. I am also putting more money into Ekovest.

The reason I am putting money into Tune Protect is because it is largely tied to how well Airasia's volume performance. IT IS TRUE that Tune Protect is affected by the ruling to bar automatic add-ons by Malaysian Aviation, however I felt that the price dropped is already compensated by that ruling.

The general thought is that with the barring of that automatic add-ons, it has affected Tune's revenue by some 35% - 40%. The below graph by Airasia in its slide presentation says that it has dropped by 39% on a per passenger contribution basis.

With that drop, Tune Protect's travel insurance business should hence start from this piece of situation. I believe that it is now growing in tandem with Airasia's passenger volume growth which is low double digit - from 2017 onward. In the long run, as long as the travel insurance business is tied to Airasia's growth - it should be above average.

Tune Protect is also building its other parts of insurance business i.e. motor, personal accident etc. The deregulation of the motor insurance rates may provide opportunities for Tune Protect to be more aggressive and winning market shares as its business model is less complex against the more traditional insurers whom have been around for a longer period.

Anyway, lets see as I purchase 8000 units of Tune Protect for this portfolio.

I have also added 5000 units of Ekovest as I feel that the impact of IWCITY - whom may not be bidding for the Bandar Malaysia will be minimal towards Ekovest. I felt that the drop in its price is an opportunity for me to add-on to the company - and this also follows my thoughts of having Airasia, WCE and Ekovest as my 3 main holdings.

One should note that the contract that Ekovest has is for the upmost long term - up to 50 to 60 years. As in any country, once a contract has commenced - it will be almost impossible to terminate them - be it there is a government change.

The case of IWCITY and Bandar Malaysia is different as it was not effective yet - although my initial propagation was that it was not going to be terminated.

Anyway, as I can see for Ekovest it is now completing half of DUKE 2 and has already commenced Setiawangsa-Pantai Expressway.

Those will be the main revenue generator for the group in the long term to come. I also do not think the market is putting any value towards its new projects such as River of Life and the proposed highway to Klang.

Why I still keep my portfolio

I noticed that there are quite a lot of views on the portfolio that I keep and I thought that I owe some of the people what I do think of it - where after a long while I have not been talking about it.

Right now, the stocks that I hold through the Felice's Fund is as below:

Alternatively, you can also view them here.

One would have noticed, I seldom buy and sell as compared to some other bloggers - some of them I have been critical of. Why? Firstly, if I am to share my portfolio or how I deal with my investment, I always believe that I have to be responsible. If I trade them often, then it is unfair towards the readers. I am not stupid to see that some people do take notice and tend to have a followers mentality (although the decision to invest is ultimately the readers themselves) and just emulate.

You would notice that over the last 2 -3 years some of those stocks that I have bought, would have moved lower than my purchase price during certain times. These happened to stocks like EcoWorld, Ekovest-WB, WCE, Insas. In fact, some of these stocks are still trading below my purchase price - e.g. Tropicana and TA.

(Hence, the moral of the above paragraph is not to follow me as the stock I pick does not tend to have immediate upside. You can in fact wait.)

Those whom have read my articles, would know that in the stocks I picked, I tend to be more careful and have deep thoughts and research over them. In fact, the stocks I picked here in my blog, I am even more careful as opposed to my other personal investment account - where I tend to be more aggressive. In times where stock market is on the uptrend, generally being aggressive would bring more upside. But over the last 50 days where market have been more active, I have not even shown a single trade in my portfolio.

Why?

First of all, I am still very happy with the portfolio that I have. There could be some readjustment...for example, I could have bought more Ekovest and TA - but generally these are just as good.

You would also know that my investment horizon is over many many years to an extent that I have penned down it is a 2027 target. Basically, this means very long term investment. For those whom do not have that kind of horizon, please do not try to emulate.

Why again WCE

As an example again, WCE - one will not see good positive numbers until few years down the road. The only number I tend to follow is how much its development expenditure has gone up to. Through that, it gave me an indication that the project is progressing - although not the best indicator. Besides that, I also see its borrowings level. These numbers will not tell me whether the company is able to keep the construction within budget - but to me as long as it is within certain range, it is good enough for me.

WCE definitely is not a "sure thing" stock, but I have certain confidence that I think it has a good probability to succeed well. My margin of safety is the upside is huge while the downside is lower. Just to give an example (which sometimes I have mentioned before but did not elaborate).

WCE is a holding company. It holds 2 main companies - WCE, the highway which it owns 80% and Rimbayu which it owns 40%. We know that Rimbayu is quite safe as it has land and these projects are now selling albeit slower due to the slowdown in property sector - but it will get there. Whether the project is 15 years or 20 years, there are limited downside in my opinion. But the upside is not that much - perhaps slightly more than RM1 billion in total?

As for WCE, the highway subsidiary, currently the company is raising hundreds of millions to pump into the project. People who invest mostly would know that the holding company is ring-fenced against its subsidiary's bad performance. Assuming (which I do not think so), WCE the highway is so bad that it does not perform at all - something like the Seremban - PD highway. Then WCE Holding's return from WCE highway is zero. It will not be negative as they are different entities and one should note that some of the bonds are guaranteed by Danajamin. Even if WCE Expressway needs more funds injections, there are ways to get around it without affecting WCE Holdings that negatively.

On the other hand, its performance on the upside is tremendous even with say 8% IRR. I will not show you the cashflow but people in finance will be able to figure it out. Or else, just think of it this way after the completion (with an IRR of 8%), the compounding would be just crazy over 50 years. This is why I take note of the progress of the project.

What about others?

Again, most of the stocks I hold are for long term. These applies to Ekovest - which has similar trait to WCE but with more immediate return. The structure is quite different. With WCE, it is more direct, which is why I hold WCE more as well.

I do not have to put much mention on Airasia. The more I say, there are certain groups which would say I try to move the stock - but if you look at its daily volume, you would know that no 1 single individual can do anything to Airasia's stock performance. At this moment, I can say is that I admit the structure is not simple (and that is admitted by Tony Fernandes). The devil is in the detail, and once it gets simpler, many things would be clearer. Another thing is that the group does do things. They talk a lot and they do a lot as well. Some companies do a lot of talking but do not do. Airasia REALLY sells tickets.

As for DKSH, well to me it is one of the cheapest consumer stock which can have large upside. To me, DKSH has yet to perform to its ability - which is why it is my longest holding stock i.e. since I started this portfolio.

What about Ecoworld? Just purely a fantastic property company. Anyone who is in the premium property business would have wished that PNB did not do a big controlling purchase of SP Setia - because it created a bigger monster. And ironically, it competes BIG against SP Setia as well.

Insas? Inari is real and through that alone Insas is certainly cheap, just that one would wish that the controlling shareholders provide a fair deal towards its shareholders. There is a tendency for the controlling guys to do an ICap which is not fair. The only thing I can say is if one gets older - there is a higher chance they get more sensible. Insas controlling shareholders are not getting younger.

TA? Quite similar to Insas but (don't know why) I am more confident towards the attitude of the TA's shareholders. For one thing, in the past (many many years ago), TA was a darling, hot stock. Today TA is no longer that and the controlling shareholders I hope does not have that mentality. It is just that - it is true, TA did not perform well financially in the past few years and many people just does not understand its financials which can be more complex. In this case, I hope time is my friend.

Tropicana? Wow, like I have said before Tropicana has changed in its business strategy and not many people understand that. It no longer holds single individual properties all over the place but holds huge development land in attractive places. It is not Ecoworld for sure, but do go over to have a look at Tropicana's projects and you would realise that it is not a RM1.4 billion property company.

DKSH should still be a strong company

I know I do owe some of you some of my opinion on DKSH. It has done well for the 2Q16 registering RM20.4 million net profit. However, that number has dwindled to RM5.4 million in its 3Q16, which can be shocking for some shareholders as we may not be used to such volatility for a company like DKSH. To be frank, there should not be much seasonality in this business, but I believe the quarter with Hari Raya could have impacted it as it is in the distribution business.

Other than that, there should not be much of a reason for its profits to be that way except that it took a much higher provision for impairment in receivables of RM9.72 million (see below). While it is not a good thing for the company, I guess it sometimes an unavoidable thing - being part of business.

The company took a RM9.72 million impairment charge for 3Q16

For those that are worried over this, I do not think this is a concern.

I actually have someone who asked me and being concern over its low cash in the balance sheet. Its cash as shown below was left at RM9.674 million. Again, I do not think that it is a cause for concern as DKSH certainly has short term working capital funding from banks. It may just happen that for its closing 3Q16, its cash position seemed to be on the low side.

Cash at RM9.7 million

Because of the nature of its business, do not expect DKSH to have very high profit margin - as it is more of a trading company. I would however be happy if it is able to manage that better. It did better in 2Q16 as compared to 3Q16.

For DKSH or many companies for that matter, we should not be too concerned over its quarter to quarter results but more of its medium to long term fundamental.

It does provide guidance and below is what it says. It does provide a decent to positive outlook of its future.

The reason I own DKSH is that it does have a certain moat as its actual competitors in terms of what it can do is not that many. It is a distributor, not a retailer. Retailers are getting challenges from e-commerce, but DKSH should be able to survive that as its business is more of a B2B rather than B2C.

Further, if one is to look at its reasoning for its growth, the second reason is a very strong reason - companies are more and more looking at doing ONLY what it does best. Which means especially the foreign importers, they will focus on using companies like DKSH to do the market expansion, distribution rather than doing it themselves. This is a global trend now and moving forward.

DKSH: 1H2016 webcast

I am still holding DKSH and on private note, in fact I bought more but in small quantum. It is a unique company with very little competitors in Malaysia. The only thing is it was not performing as well, but recently in the recent quarter results it managed to do better which causes its share price to rise recently. To be frank, I was not happy with its cashflow last 2 -3 years, but I feel that there are not that many similar opportunities just like this company. In its latest announcement, it terminated a telco business and it seems it replaces the business with a smaller telco. I am not sure who, but it seems that the margin was too small, hence the termination of the bigger telco.

I am not going to provide guidance, but one will need to understand the business better. From this webcast, you will know the uniqueness of the company although it is for entire Asia.

Listen to the webcast for DKSH's 1H2016 parent. Again, to invest one will need to understand the business.

I like its business, its strength and uniqueness. As countries (Malaysia included) push for consumption based economic growth, DKSH will benefit more. In the webcast, it says DSKH takes opportunity from companies who want to turn its fixed costs to variable costs, hence its engagement with DKSH who has larger and stronger presence to any company who wants to do business in those countries. More and more companies are focusing on what they do best, hence leaving DKSH on distribution and marketing.

There were many questions with regards to its competitors and according to the Group CEO, he sees only 2 major competitors - Li & Fung and Zuellig. Zuellig has presence in Malaysia but I do not see Li & Fung.

In future, I do see however China distribution company wanting a piece of the pie here in SEA region but it is not that easy to take DKSH's strength away.

Is DKSH still worth it?

Blankly, I do not know actually. People who read my blog would know that I actually look at the business and company first before looking at the stock. When I first discovered DKSH, I knew the company as its office was just quite near where I hang out usually, at that time. Now no more. There are a lot of brands which uses DKSH to distribute its products. Hence, if a person is observant, they would not miss the company. Usually the brand is the brand, say Enfagrow, the distributor can be DKSH. It does the distribution or market expansion thing for companies like Mead Johnson. People whom have kids will know the brand.

In fact, DKSH does extensive distribution for a lot of pharma brands, and of course people who are in the medical field would know DKSH as well. DKSH is into distribution of many products for many overseas brands in Malaysia as well as the region. In fact, if I call them a distributor, one day I may get a call and ask me not to term the company as a distributor but a "Market Expansion Company", which is precisely what they do.

Over the last few years, especially since the crisis, many Europe and US companies are looking for expansion. You can see it from Heineken's bid for the beer distribution and bottling business in F&N. Many of these companies are willing to pay a good price for prized Asian assets as long as they are good, strong and decently well managed. Why? Because when you want to expand, the best thing to have is a good well managed company so that you can hit the road running from Day 1.

Turning around sounds good, because usually it is cheap, but turning around are for turnaround experts. Look at Dell, Micheal Dell is now doing a turnaround but he is still doubting himself by not paying more for privatising Dell at its current stage. Hence turnaround is not easy.

As a CEO, if I want to say build my market presence in South East Asia, I would want to buy a good company not a bad one. And as said before, many of these companies are looking for good companies in Asia.

The next best thing to look for if you do not want to look for acquisition is to look for a market expansion company. Say, you have a decent brand in Europe (Germany). You do not have a presence in Asia, strong that is. To build that network, you cannot do it your own. It will take years. As I see it, DKSH is a good candidate. It has the billing, collection and distribution system and it is the best in Malaysia.

The beautiful thing is that many companies now could possibly be looking at expanding in Malaysia with this country being part of Asia. DKSH seems like a good fit in assisting.

When I looked at DKSH, it was trading at around RM0.70 - ridiculously cheap by today's standard. But DKSH was not a hit with investors then. It was most of the time untraded, just had a turnaround (remember the turnaround thing I said). But in this case, the company had all the things in place. It was a good company which probably needed better management of its system and finances. It was good but not excellent. I guess today it is moving towards excellence with the financial performance.

At RM0.70, though it was trading at some RM120 million market cap. Ridiculous. Remember I was putting a wild guess in my very early article of the company could be worth at least RM500 million. Now, at RM5.00++, it is trading at around RM800 million valuation. Can you think whether it is worth that amount?

Now, let's not think of PE, or profits or anything else in terms of the usual valuation. Would a business that wants to build a network like DKSH, be buying DKSH Malaysia at RM800 million? Coca-cola is spending billions to build a factory and getting the distribution network ready after the split from F&N. Even then it is not yet ready today, as I can see it. There are still issues with the system.

A company needs refining especially when you are into a new country, and if you can get some help, you will need all the help you can get. We have talked about Parkson facing challenges in the countries it is exploring into - like Vietnam, Indonesia. But there are things you need to do and you need to do. To build a business takes time and this is where I see the value is in for DKSH i.e. to help to speed up the building process.

Harrisons' RM92 million problem - what to do about it

Harrisons Holdings is a company which I do follow. It has businesses somewhat similar to DKSH. The reason I do not buy Harrisons is due to I already put myself into DKSH and I deem DKSH to be slightly of my preference than Harrisons. Someone pointed to me that Harrisons in fact has better margin than DKSH. Quite rightly commented. Harrisons Gross Profit (GP) margin is slightly above 10% while DKSH's GP is about 7%. That itself is a good benchmark to tell which company is able to sell the products it distributes at a higher price while having a better negotiation power over its suppliers.

However, one has to know where Harrisons strength is versus DKSH. Harrisons traditional strength is in East Malaysia. I would like to think that Harrisons has much better reach and channels in the East where reaching out, having strong contacts with its base is of much importance. If you notice, Harrisons customers include Nestle, F&N, Asia Pacific Brewery for FMCG products. Why such large multinationals where they probably already have strong distribution channels in Malaysia? Because of the channels that Harrisons has built over the years in East Malaysia. Harrisons has that strength. Obviously, with that bargaining power, margins can be higher.

Why do I pick DKSH over Harrisons

For strategic reasons, I feel that DKSH being a regional player with large operations in Asia would be looking to grow much more than Harrisons. If you notice, Harrisons Tradings's arm was bought over by a group of investors from the original Harrisons and Crosfield, one of the largest plantation company in Malaysia, once upon a time. Harrisons and Crosfield later became Golden Hope and of course all those are history with now Sime Darby being the larger group which holds Harrisons Plantations assets.

Now, with that - Harrisons with its large and strong distribution operations in East Malaysia is a company which will not be that aggressive anymore - that's what I think. And because of that DKSH is my preference.  Together with DKSH's bigger operations which is based in Malaysia, it is obvious that DKSH will be a larger operations as well as with more competition. I am an investor with less fear over competition if the company has a far larger advantage. That's what I felt on DKSH for its distributions operations in Malaysia.

Anyway, back to the title. Recently, Harrisons price has dropped some 17% from around RM3.50 to more recent RM2.92. But read below:

This is serious and worrying. What do I think about this? It is a company with huge and strong operations in Sabah. If (you know what) is not able to resolve issues with the Customs, operations of Harrisons can be affected. While, Harrisons obviously can absorb this large penalty, it obviously will try not to pay the RM92 million fine if possible. RM92 million for a company with RM200 million market capitalization is huge. This is not Apple or Sime Darby being slapped with a RM92 million fine.

We do not know whether Harrisons is in the wrong or perhaps the Customs had made the wrong judgement. But I would say lets wait this out - and if Harrisons is in the wrong, it may even change the scenario of its East Malaysia's operations which has been its strength all the while.

DKSH: Still good?

Looking for consumer related stocks still? One that does well, good growth prospects? Well managed?

One of the companies which has continued to do well over the last few years after its internal restructuring in 2008 / 09 but still attractive is DKSH. It has just announced another growing numbers in its latest half yearly numbers. What does it do? It does distribution for consumer related, pharmaceutical companies. From that, it owns a logistic arm and I think some would have heard of Famous Amos - which it owns as well. The revenue size is a big as Nestle Malaysia, the largest consumer stock - but obviously DKSH (much smaller) is only distributing for others while Nestle sells its own product.

This was the first company which I bought under the portfolio and I would dare to say at its performance below, it is possibly still undervalued - to me.

Current Market Capitalisation is around RM320 million. PE on course to be below 7x for the year. I will continue to say that one of the largest distributor (maybe largest) in Malaysia should at least be worth RM500 million as it has the scale, ability and name to do that. It represents many consumer stocks in Asia and with the debacle of Heineken and many others looking at Asia, there are bound to be companies looking at this region to sell their products. If you do not have a good distribution channel, who do you look for? Company like DKSH- which is why I think it will still continue to grow.

One of the biggest problem with DKSH was the parent company and LTAT owning a total combined 90% of the stock - hence it was low in float.

Last one year however LTAT has been selling down to about 10% hence increasing the float to 15% which is good. It will attract more investors which is why you already see more volume traded.

Portfolio Update - 18 June 2012

From the last update on 6 April 2012, there were no change in the portfolio. I still maintain the 4 stocks in the portfolio i.e. DKSH, AEON, Oldtown and Wellcall. I have also mentioned why I like these 4 stocks in the previous update.

I believe that if there are no necessity to change the holdings, don't change. In terms of performance, over the period of 507 days since the portfolio was created, it achieved a nice 81.88% return thumping the KLCI (4.11%) and Fixed Deposits at 3.2% fixed rate (4.23%).

You would have noticed that among the 4 stocks, the largest is AEON which only has a RM3.2 billion market capitalization. None of them are KLCI stocks. The other 3 are below RM1 billion stocks. If you follow my blog, this does not mean I do not like large cap stocks but to me sometimes these stocks are dominated by EPF which is the largest fund by far. Their action can move any stocks in Malaysia hence it is difficult to anticipate what their next move be like. Anyway, stocks that are invested by EPF or even Khazanah, although some of them are quality stocks are normally quite fully priced, I believe. I am not saying they are doing the wrong thing as it is not easy to manage a RM470billion fund than managing a RM50k personal fund.

Also, if you check around seldom analysts cover stocks such as DKSH, Wellcall or even Oldtown. In fact, I have read more sell calls for Oldtown than buy call which is rare. Analysts tend to have more buy calls than sell calls as by having sell calls they have nothing to "sell".

This portfolio is not for any reader to follow my call as these are purely my own decision and opinion. Any decisions to buy or sell is entirely up to you. The reason for me to do this is to show that by being diligent and if we have a certain program, stocks may be a better longer term investment than your safer bet of putting money in FD or under our bed. Some people may like gold, some may like properties - go ahead if you think is right. Just that I prefer stocks.

Earlier updates:

6 April 2012

27 May 2011 
6 April 2011
14 Feb 2011 
 

DKSH: Europe put a high price on the stock, why aren't Malaysians?

After a long period staying private, DKSH (the holding company) is now going public in the Swiss market. Book builders are projecting a total value of Swiss Franc (CHF) 2.8 billion (equivalent to RM9.24 billion) effectively valuing DKSH around 18.4x.

DKSH which has a large presence in Asia is predominantly successful in China, Thailand and Malaysia. Malaysia, in my calculation provides around 12% to DKSH Group's revenue.

In Malaysia, DKSH owns 75% of the listed company. In fact, there was a rumour that DKSH was planning to delist from the Malaysian exchange, which it denied. It is currently trading at RM300 million market capitalization (price RM1.90) hence valued at below 7x PE. Besides the low free float, it beats me why DKSH Malaysia is trading at such a low PE as compared to the valuation it gets from Europe. This is a company which has potential still.

Isn't Europe supposed to be struggling? Perhaps DKSH is one of the few companies that has such large presence in Asia where investors in Europe are excited to. Another thing is that, Europe investors are excited over China rather than Malaysia, but why the vast difference in valuations?

Do check out my other blog on DKSH, here.

Reproduced from Marketwatch:

DKSH offering may revive Europe's IPO market

-- DKSH seeks to list shares on Swiss stock market in March

-- Market capitalization could reach up to CHF3 billion

-- Listing could inspire more IPOs across Europe

ZURICH -(MarketWatch)- Zurich-based trade and services firm DKSH on Thursday said it plans to float its shares on the Swiss stock exchange this month, potentially helping to revive the European market for initial public offerings that has been slowed by the region's debt crisis.

DKSH, which helps other companies expand and organize operations in countries such as China, said it will offer around 30% of its shares at a price of 42 francs ($45) to 48 francs a share. A successful listing could translate into a market capitalization of up to CHF3 billion, making the IPO one of the largest in recent years in Switzerland.

"The objectives of the IPO are to allow its majority shareholder, Diethelm Keller Holding, to diversify its investment portfolio...and to help DKSH enhance brand recognition," the company said. Diethelm Keller, which will keep a significant stake in the firm, currently holds more than 60% in DKSH.

The float will be of existing shares and won't raise new capital.

The decision to list the shares in Switzerland, the company said, is partly due to the company's Swiss roots and DKSH's already-strong local investor base--which includes Swiss entrepreneurs and financiers such as billionaire philanthropist Stephan Schmidheiny, investor Rainer-Marc Frey and private banker Pierre Mirabaud.

Analysts and traders said the IPO price range was roughly in line with expectations and reflects the solid growth prospects of the company, which is predominantly active in Asia. DKSH, which has grown at an annual rate of more than 10% in the past, posted sales in excess of CHF7 billion in 2011, with the bulk coming from markets such as Thailand, China and Malaysia.

"Given the company's 2011 net profit of CHF152 million on sales of CHF7.34 billion, a fair price-earnings ratio of around 18.4 times could result in a market capitalization of CHF2.8 billion, or around CHF45 per share," a Zurich-based trader said. Given the company's target to provide dividend payout ratio of 25%-35% of net profit, the listing price could even be higher, the trader said.

Bookbuilding for investors will run March 8-20, with the first trading day set for March 21. UBS AG  and Deutsche Bank AG are acting as joint global coordinators, and together with Berenberg Bank and Credit Suisse Group as joint bookrunners. Several market participants said that the demand for the IPO looks solid at this point.

Analysts expect that the planned listing of DKSH and the scheduled IPO of Dutch cable firm Ziggo could rekindle interest for public listings in Europe, which have come to a near standstill in 2011. According to PricewaterhouseCoopers, 430 IPOs were registered in 2011 in Europe, with momentum falling markedly in the fourth quarter, when 78 IPOs raised just EUR866 million, an 81% drop compared with the third quarter and a 83% fall compared with the year-ago period.

But 2012 could see an improvement, albeit traders say that the recovery will only be a mild one given the euro zone's protracted prospects and limited upward momentum for stock prices.

"Companies considering an IPO in 2012 should prepare and position themselves to be ready to go when the [IPO] windows open," said Martin Scholz of PwC. "Exactly when markets will pick up again is uncertain. The Olympics may be well under way by the time the markets get out of the starting blocks. In order to access the key IPO windows in 2012, companies will have to ensure that the groundwork is completed well in advance."

Among potential IPO candidates analysts point to firms such as Germany's specialty chemicals firm Evonik Industries and Siemens AG's [SI] lighting unit Osram. But they say a recovery in stock prices and an improvement of the euro zone's debt crisis is needed before these firms may go public later this year.

Serious Investing! 

visit  www.fb.com/MalaysianInvest

Why did I buy DKSH? Cheap

You would have noticed that I put my hands into a stock called DKSH. Who are they? Why I decided to put money into such a company? When I looked at the odd stock, it attracted me, however due to the low free float, it puts me on a cautionary position.

When I said odd, this is because DKSH is a stock that nobody follows, no analysts provide recommendation to this stock. Well, analysts only takes care of their own rice bowl. You do not make money out of a company where it is difficult to get hold of the stock. The free float value for the stocks at the time I put my money in was some RM12 - RM14 million. Nobody follows stocks that has such a low free float.

However, it does not leave my sight when I see a good, well run company. The parent company in Switzerland owns 74.3% of the company. LTAT (Lembaga Tabung Angkatan Tentera) - Malaysian military fund, owns 15%. Hence, it is left with about 10% free float. I am sure based on the list there are some shareholders who do not sell. Hence it is a very low liquidity stock. In fact, back in Switzerland, DKSH is a private company. Why it is listed in Malaysia, I do not know. DKSH has very strong presence in Asia. It calls itself a market expansion company, but in easier terms it is a distributor of products with its strong logistic presence in the countries it operates in. It has a very strong warehouse and logistic management that allows companies which do not have a strong distribution strength in the respective countries to engage them.

DKSH in Malaysia distributes for Wyeth, Mead Johnson, Pfizer, even for some Kraft products. These are no small companies. Although, DKSH has competitors such as Harrisons Holdings and other smaller companies, it does have a strong competitive position. Larger companies like Nestle, F&N, Dutch Lady do their own distribution. Other than that, DKSH is a winner in what it does - at least in Malaysia.

So at what price do you put for a company that is a winner? Think of it this way - what price would you pay for a company that has a strong distribution strength in Malaysia? I don't know actually, but for an economy like Malaysia, if you ask for a number I feel that it may cost around... maybe RM500 million is a number which sounds not too high. Hence when I bought at RM0.87 or at RM140 million market capitalisation, does it sound cheap even for a company that has low free float? Perhaps. It was trading at around 5x PE for a company that is probably the strongest in what it does specifically in Malaysia. I like cheap and well managed companies. DKSH meets that criteria.

And I look at my portfolio, I seek to invest for long term. DKSH seems ok even though I may not enjoy capital appreciation over the short term. Voila! However, this stock appreciates to RM1.02 at the point of writing, but this is just making me smile but I am not cashing the gain. And if you do a bit of research, reading its Annual Report, for a small free float company who perhaps have to do proper reporting to its 2 largest shareholder only, they report very well. They, to me - maybe is one of the best Bursa Malaysia listed company in terms of reporting. Better than even Nestle, F&N, or any of the bank companies who year in year out win the not so coveted "Best Annual Report". I think the party that does the awarding does not know how to award.

Well, I can only say with signs that says do not touch a company that has low trade volume - this one screams to me - Buy me! I am cheap.

Serious Investing!

Portfolio Position - 6 Apr 2011

After investing for less than 3 months (the first investment was done on 28 January 2011) and with RM27,500, here is the portfolio position (the below is a real portfolio): Remember, I was talking about putting in money for my child's education. Let's see whether we can do it. I am going to put in more cash into investments if the time is right for me to put in more or any of the stocks become attractive in terms of prices. During the period, I have sold twice and made RM677.90 (although the below table shows RM612.58, the actual profit is higher due to lower brokerage fee paid as compared to the reported table). Cash position stands at RM245.90.
Hence in effect, the profitability is as follows:

This blog is in effect to proof to those potential investors that with a small amount, you can still make a difference with the money you have. A caution though, while investments do provide better returns over a long period, it can be more volatile. Hence do not be let down if your investments do not return you as expected. More importantly, learn from mistakes and do your homework. Can be fun!

Serious Investing!