Lim Kang Hoo's reverse psychology

Lim Kang Hoo is either a brilliant strategist or a desperate man. However, come to think of it - how is the deal between Ekovest and IWCITY  a desperate deal? Ekovest, which is a family controlled (>60%) company of Lim Kang Hoo, family and friends is offering to buy MINORITIES IWCITY's stake at RM1.50 per share.

He is not buying his shares of 37% in IWCITY which is held through IWH. He is buying the shares held by the other parties 62% - 63%. There is no injection of cash into IWCITY. He is not desperate to rescue IWCITY. In fact, he is taking OPPORTUNITY. This deal is done at its best so that it does not touch KPRJ which is related to the Sultan of Johor - it seems.

I am of course perplexed when the shares of Ekovest dropped massively - so stupidly I buy some more.

As can be seen IWH which is owned by Lim Kang Hoo and KPRJ will still directly own IWCITY which will be delisted. Ekovest is not buying Lim Kang Hoo's stake in IWCITY

Having said the above, I can understand the investment communities concerns. IWCITY holds land in Bandar Iskandar which to them cannot be transacted as there is a doldrum in properties especially down south. Moreover, Ekovest will need to fork out RM800 million which it does not have to buy over the minority stake - hence delisting IWCITY.

However, that is flawed thinking. IWCITY just did a deal worth around RM2.1 to RM2.3 billion with Greenland group from China and they are paying for 127 acres of land in Bandar Iskandar.

Because even reading yesterday's one pager announcement cannot even be done properly by those who invested into Ekovest, I hence will put down the payment schedule for IWCITY - Greenland deal below. There are obviously a lot of milestones and the sweet side is that IWCITY has collected the first payment of RM46.2 million. I know that's small but it also means the collection will be going to Ekovest in future rather than the listed IWCITY.

As for raising the RM800 million to buy up the IWCITY minorities stake, I have this prophesy. The payment schedule above will help a bit, then the amount paid by EPF of RM147 million just last week AND more importantly, in its announcement yesterday, one can also opt for an Ekovest share equivalent which is valued at RM1.50. Obviously, Ekovest shares is not worth RM1.50 now and the latest as at my writing now - it is priced at RM0.97. No chance to trade in shares?

If the transaction is done now, all IWCITY minorities will be opting for the cash - me too. But obviously again, the deal is not done now. It is many months down the road, if it is ever pulled through.

Now, my question to Tan Sri Lim Kang Hoo (who is many times more brilliant than me) is which option he prefers - cash or shares. If cash, then obviously again Ekovest is worth more than IWCITY at per share price of RM1.50 or more as he does not want to waste the value of Ekovest to be given to minorities. If shares, then IWCITY is more valuable.

Having seen how he does his deals, it is not going to be that smooth and straight forward. There will be challenges and hurdles.

On the strategy with this deal, as mentioned above there will be challenges but strategically it is there. IWCITY is a land owner. Ekovest is a developer, contractor. There are still some 900 acres of land in IWCITY after the sale to Greenland. Moreover, part of the deal will need IWCITY to reclaim (worth RM400 million) the land which Ekovest can obviously do.

To me what was obvious yesterday has now become murky. An analyst said that the deal is bad. He is perhaps not being straight or thinking clearly.

Or could it be I am too slow to have a clear head as I have become too complicated.

To me if the deal can be pulled through, it definitely looks like it is positive for Ekovest. If however, the deal is not able to be pulled through then back to original as it is today - but why the drop of 20 sen?

The connection between Tropicana and Top Glove

I like Top Glove, just like I like Hartalega, Airasia. I like companies in business segments which have room to grow as long as they are not expensive. I like companies that are dominant in their fields. In that respect, I had held Top Glove and Hartalega as well - not recently though.

I wish I had bought into Top Glove more than 10 years ago, as one would probably see a performance as below with the stock price achieving a more than 3x.

Price chart of Top Glove over 10 years

The company has not only provided its investors with capital appreciation but also improvement in dividends almost on yearly basis. This company has a good track record in terms of stock performance and that has to do with the management and with that, investors like them so much so that market is now giving it a more than 26x PE. To me, the Chairman of Top Glove, Lim Wee Chai is in the same mould as Liew Kee Sin, Tony Fernandes - Malaysians who are not only able to make their name from opportunities within Malaysia but also internationally. As an investor, I have always look upon and wanted to support them - as they are value creators. Wouldn't you and I as Malaysians be proud to have them?

Now what about the connection between Top Glove and Tropicana? One is in glove manufacturing, the other a property company. One would wonder, is there any synergy?

None at all - business wise.

However, if I am a shareholder of Tropicana, I would love to have a personality like Lim Wee Chai to be buying a significant stake in the company I invest into. And that just happened, where Lim Wee Chai personally - not through Top Glove - increased his stake into having a 10.24% portion in Tropicana. To me, that works well. If Tan Sri Lim is to have a controlling stake, that would have freaked me out - as he has never been a developer. That 10.24% act as an endorsement and beyond. Why?

Tropicana, under Danny Tan (the brother to Vincent Tan) - has been a developer for many years of his life - and a pretty good one as well. He has built Tropicana in Damansara into a premium brand and location for the wealthy and if one is to Google, Tan Sri Lim Wee Chai happens to stay there as well.

Today, Tropicana is not just having development in Damansara - as it is now an old address but also several major development in Kota Kemuning, Kajang, Bandar Iskandar and Penang - riding on the Tropicana brand. Agree, Tropicana is not able to create the aura of an EcoWorld development - but I would say it is one of the Top 5 - although in terms of size it in more like in the Top 10 in Malaysia.

As a business, there is not so much qualms about Tropicana, but in terms of it being an investment concern - I am sure there are those that would have advised people like me to stay away. I understand the concern. That single stock is more than 70% controlled by Danny Tan. It is an illiquid stock. It is not invested by any of the major funds. Understandably it is hugely undervalued - hence under my portfolio I bought a small portion of Tropicana.

Nobody, including me would have guessed Danny Tan would relinquish a portion of his shares - although he still comfortably controls the group with >60% stake.

However, in inviting Lim Wee Chai - it probably would have changed the perception towards Tropicana. Lim Wee Chai - as mentioned above is totally a different person when handling Top Glove as a traded stock. Top Glove is having a dual listing in Malaysia and Singapore - hence, he is the sort that is promoting to funds and markets beyond Malaysia.

Top Glove is invested by many of the funds in Malaysia - EPF, KWAP and various unit trust funds. I would say it is a darling stock although it is not a Composite Index stock. That basically tells that Top Glove knows how to attract outside investors and not having the fear of these investors making corporate moves against the company.

Hence, in terms of personality and experience - Lim Wee Chai's 10% stake could have made a difference to the perception of Tropicana towards the future. I am sure, based on observation it is not a short term holding - i.e. getting people to buy and then dump onto them as that is not the personality of this Top Glove Chairperson. He does not need to do that and for sure, do not want to be perceived as that.

By reducing the stake to a strong personality, it also POSSIBLY shows that Tropicana can be more open to investors.

When I bought Tropicana, besides the attractive valuation - I was attracted to the change in strategy within the group. As mentioned, it has a good brand name and its strategy of selling non-core assets (basically the investment assets like hotel, malls) and concentrate on large mixed development.

Obviously, this investment does not materialise to be successful yet. At that time, I was putting on the "contrarian" cap - where investors and analysts were fearful of its high gearing ratio. I was in fact correct in figuring out that the gearing would have improved as  when I studied the company it was buying several landbank while the sales of its assets have yet to translate to positive cashflow yet.

Today, as one can see Tropicana is carrying a very manageable 50% debt to equity ratio while allowing several of its development to mature despite the tough property market.

What's your guess on the price point that Tan Sri Lim Wee Chai bought from Tan Sri Danny Tan? While, the announcement was made when Tropicana was trading around RM0.93, I doubt it was transacted between the two at that range of pricing.  Why?  Tropicana has been buying back shares and subsequently redistribute the shares to shareholders since 2015. Most of these buybacks were made at between price range of RM0.90 to RM1.

It would not be easy to obtain shares at 93 sen from the market considering the low free float. Anyway, that's the transaction between the two. Lim Wee Chai as substantial shareholder can come in as being strategic towards the profiling of the company.

What I hope now, is that I see what Lim Wee Chai sees as well.

As it is Dataprep is worth 16 sen or less

Early this year, Dataprep which has very little business direction and continuous deterioration in revenue was being pushed - most probably by, various parties - bloggers, speculators and perhaps syndicates to 60 sen.

We can see that it is a company which does not have much left. This IT solution provider was dependent on government related projects back in 1990s to early 2000. After that, the company just went spiralling down with poor fundamentals. It was in fact controlled by Mirzan Mahathir and later when it was in trouble, the Genting's youngest son took over.

A lot of these businesses are very thematic at the particular part of time with very little core strength and competencies to be built into a competitive company. Moving passed 2005 and beyond, IT business is no longer the theme of the decade for Malaysia as we have moved on to oil and gas for the last decade and of course even that many O&G is now facing challenges.

Just yesterday, the controlling shareholder i.e. under Datuk Lim Chee Wah - the youngest son of Lim Goh Tong - sold off its controlling stake to one Tan Sri Muhamad Ikmal for 16 sen a share. We know that usually a company for its controlling stake would be sold at a premium and this possibly was sold at a premium.

Several times in my blogs, I have been critical and warned of businesses which have become of little value (or dwindling in value) as it is not able to turnaround and at the same time managed or led by non-visionary leaders in a tough competitive space. Dataprep is in that space. For people whom are deep into speculating such companies for sure they had hoped that Dataprep would have gone towards RM1.00 but these companies have no fundamentals that would enable them to stay at 60 sen and be deemed still undervalued.

From the surface, I am not able to see what the new owner will do with the listed company as it is still unknown. Through buying a 64% stake though, I can see that it is a significant controlling ownership - and from this, many types of structures it can do.

I am also sure there will be continuous speculation, but to me as it is 16 sen is the closest I think it is. Even then, until the company is clear on its direction - who would want to own the share of a company where we are not sure of its business direction.

Are you buying Media Prima? Seriously?

I remember a friend of mine whose parents owned TheStar's stock which they bought for RM2000 for ownership of 2,000 units way before it was listed - and years later (if I can remember in 1993), that 2,000 shares of TheStar became 22,000 stocks before listing. Basically, that one investment allowed his parents to send him and his sister to New Zealand and Australia to do their degrees as the shares later was easily worth more than RM150,000. That was 1990s.

Now, if I want to ask. Do you bother to reach out to newspaper the first thing you wake up? Berita Harian, NST, Star or would any person who is below 50 be reaching out to their mobile phone. Remember, 20 years ago it was a very different world.

Today, I can get my news from my facebook account, google - basically everywhere.

Now, there is this blog that have been asking people to buy Media Prima stock which I do not understand. Where is Media Prima heading? I don't know. Most probably downward. Basically, for a company which owns NST, BH, TV3, NTV7 and some of the radio channels - things are NOT looking brightly for the company.

Yes, one can possibly make short term upside as it could probably be oversold - but what if it does not pick up. This kind of stock will NEVER pick up anymore if it does know how to. What one gets is that one last puff from his cigarette butt.

And the last time I saw, it is not like Media Prima is on firesale. How much can one make from that company. Will it move to RM1.20? The way I see it is that the downside is clearer than the upside. If one got caught at the high, it will not come back.

This is the kind of stock which I would not even bother to read their financials and try to understand the purchase of Rev Asia's digital business as Rev Asia never really make money anyway. If RevAsia is good business, the owner would not sell. Whether, Media Prima writes off its Malaysian Newsprint Industries ownership or not does not matter.

There are space which we can easily figure out. Even if Media Prima will make extra from its advertisement - taking opportunity of the pending election spending. That is one last hurray.

Are we living in a country where one day - in the near future - Facebook, Google, Whatsapp, Baidu will be banned? Can one see who will win the content war? Why is it that TheStar introduced DimSUM.my in an ever crowded content platform. TheStar will not go anywhere with that introduction as it is facing a tough task to compete against many - Astro, iFlix, Netflix and all the OTTs (Over The Top) out there. Even with that, variety of platforms are trying to get our attention as compared to the traditional TV and Radio in the old days.

Today, TV is not even our second screen that we are using. First, it is mobile, then PC. TV is not needed anymore. Radio is something nice to have when we are in the car.

Has anyone heard of FANG stocks - basically the company that are dominating the content sphere - Facebook, Amazon, Netflix, Google.

Nothing that the government introduce will dramatically change Media Prima. The company's distribution could go fully digital - but that's about it. It can go save some money but how much will that save the traditional media business which Media Prima is largely immersed into?

One just have to be really careful and not be excited even if Morgan Stanley is buying.

The gist of thing is that if one wants to get people to push up Media Prima shares - why don't promote something else - as this stock could be a really painful stock to own.

Is UEM Edgenta sweating?

Today, The Star came out with the news that UEM Edgenta is looking at a longer term contract between UEM Edgenta and PLUS. I wonder why suddenly...

We also have read of news that there is a proposed acquisition by Abu Sahid to acquire PLUS at a price of RM36 billion. I am also wondering whether there is a possibility of savings in the maintenance of PLUS highway considering that the proposed acquisition is quite bold at a price higher than when UEM and EPF did a buyout of the highway back in 2011. At that time, the Enterprise Value (cash plus debt) paid for PLUS was RM34 billion. And one can imagine, for a concession that has enjoyed about 6+ years of revenue, another party would come and propose for an acquisition at a higher price considering that the concession period is now reduced.

The below is the filing made during Faber's acquisition of PROPEL in 2014. We now know that the icing in the cake for UEM and UEM Edgenta is Edgenta Propel (formerly PROPEL), the maintenance outfit for PLUS highway.

I can only imagine that if ever this very hard to maneuver deal is pulled through, contract between PLUS and Edgenta may not continue. Hence, I can also imagine that another sweet side of the cake besides the highway revenue is the maintenance contract.