Buying more WCE

I have decided to purchase some 13,200 units of WCEHB. In the process, I have sold 5,700 units of Power Root for the fund.

I have held the stock, WCE for a long time since 2014 and this drop largely to do with fear of termination of most tolled highways in Malaysia, I think is overdone. There is no denying that any government of the day can do whatever they like - or could they?

More than 50% of tolled highway assets are owned by government linked organizations such as EPF, PNB, Khazanah. Those examples are PLUS Expressway, AKLEH, LKSA, SILK and several more under Prolintas. Many investors do not differentiate the difference between government linked and government. These highways are not owned by government but by the people. Best example is PLUS which is 51% owned through Khazanah and 49% by EPF. The government does not hold ownership of EPF but run the organization on the people's behalf.

By terminating PLUS without fair compensation towards EPF especially will be bad for the governance and future investment profile of the country.

WCE Sdn Bhd is indirectly semi-private and public, as I call it. 20% of the highway is owned by IJM direct, and the largest shareholder for IJM is EPF (yet again). Although it is professionally run by a set of managers, its 2nd and 3rd largest shareholders are Amanah Saham Bumiputera and Tabung Haji respectively. Besides that IJM also holds 26% of WCE Holdings, the listed company which I am buying.

In the event the government is exercising its pitch of eliminating toll highways, it will hugely impact the stock market - and not just tolled highway stocks.

At the price of RM0.75, I think the market is already putting the company on the huge assumption that the highway will not continue. Todate, WCE is 51% completed and it seems that they are continuing with the project without stopping.

On the other hand, as it seems MWE - the other 26% shareholder is picking up its shares of the additional funds - through rights - that is to be raised for the company in the next few months. If the project is affected, usually no one will inject more money. MWE is actually going private which means its company's largest shareholder is now having a larger effective stake of WCEHB.

On the merit of the highway, I do not think there is much change. The government could hold back on price toll increases in the long run which may affect WCE. I still think at RM750 million valuation, it is compensated for whatever that may be negative.

Teguran ke atas Khazanah...

On Malaysiakini today,

"Perdana Menteri Tun Dr Mahathir Mohamad mendakwa syarikat pelaburan negara Khazanah Nasional telah menyimpang daripada matlamat asalnya untuk membantu bumiputera.

Dalam wawancara dengan laman web perniagaan Investvine, Mahathir turut berkata mahu memotong gaji tinggi bos syarikat-syarikat berkaitan kerajaan (GLC)

Bercakap mengenai Khazanah yang ditubuhkan pada 1993 ketika kali pertama pentadbirannya, Mahathir berkata firma pelaburan itu ditubuhkan untuk memegang saham bumiputera, sehingga mereka mempunyai keupayaan untuk membeli saham tersebut.

"Tetapi dalam proses itu, Khazanah memutuskan ia perlu mengambil semua saham itu untuk syarikat itu dan jika ia suatu saham yang baik mengapa tidak mendapatkan saham berkenaan semasa penyenaraiannya ketika harga saham itu masih sangat rendah dan lantaran itu mereka lupa sepenuhnya tentang memegang saham untuk bumiputera.

Kecenderungan jual saham

"Mereka memutuskan perlu memegang saham berkenaan untuk selama-lamanya menjadi sebahagian daripada syarikat-syarikat kerajaan yang dimiliki oleh kerajaan," katanya.

Ini menurut beliau kerana bumiputera yang mendapat saham berkenaan memiliki kecenderungan untuk menjual saham itu dan memperkayakan diri mereka sendiri.

Beliau berkata Putrajaya kini sedang meneliti pegangan saham Khazanah dalam syarikat-syarikat tersebut dan akan menyusunnya mengikut kategori keuntungan serta mengembalikan tujuan asal penubuhan Khazanah.

"Kami perlu bersetuju untuk beberapa syarikat ini mengurangkan bilangan (saham yang dipegang oleh Khazanah) dan setakat ini kembali ke niat asal untuk memegang saham yang diperuntukkan kepada bumiputera sehingga tiba masa apabila mereka boleh membelinya," katanya.

Era lantikan politik bergaji besar telah tamat

Sementara itu mengulas syarikat berkaitan kerajaan (GLC), Mahathir berkata zaman pemegang jawatan lantikan politik mengetuai firma tersebut dan meraih gaji besar telah berakhir.

"Gaji orang-orang ini (dilantik politik) sangat tinggi dan mereka menikmati gaji tinggi tanpa ambil peduli sama ada syarikat itu membuat keuntungan atau tidak.

"Di sisi lain, kami mahu meletakkan profesional dan gaji mereka tidaklah terlalu tinggi, ia mungkin sedikit lebih tinggi daripada gaji perkhidmatan awam, tetapi jika prestasi mereka bagus maka kami akan membayar mereka bonus.

"Sekiranya mereka tidak bagus, mereka tidak akan mendapat pendapatan tinggi yang mereka dapatkan sekarang dan kami akan mengubah pengurusan supaya kami dapat melantik golongan profesional (tidak kira) sama ada mereka orang parti atau tidak, itu semua tidak penting, tetapi mereka mestilah profesional yang mahir dalam urusan perniagaan syarikat itu," katanya.

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My comment

1. I did not know that Khazanah was meant to hold shares on behalf of bumiputra's. Has always thought that it is meant to be a sovereign fund which is the country's wealth.

2. Since this is mentioned, we have to be mindful of the past days of Halim Saad, Tajuddin Ramli, Samsudin Abu Hassan whose businesses were rescued by government eventually. They did not just get millions in salaries but many people know what they did. MAS, Renong, Time, UEM. Where do these companies ended up today?

3. Khazanah's dividend currently goes to the government which is used for development, operational expenses of the government. We as a country could do more with entrepreneurship but threading this is a fine balancing act between good and bad.

4. At the very least when the new government takes over today, those under Khazanah need not be rescued. Maybe except for MAS and Silterra. The Renongs and UEMs of those days were ripped apart - by business people.

5. Hence, while promoting entrepreneurs is important, we have to thread this very carefully. Many people are on the high over the new government - me included. But when "rubber hits the road", we have to be also be mindful of what we wish for.

RM1 trillion debt: We have gotten the measurement and messaging wrong?

I like less corruption. I like the ability to change the management of the government as long as they are for the people. I like a government that is transparent. I like a government which is more truthful and not trying to spin.

My article here is to put Malaysians into the mindset to think rather than be blindly led. I have always been supportive of this government or the people behind them long before the change. But things have to be put into clear perspective.

Over the last 6 weeks, we have been bombarded with the RM1 trillion debt message. I think no one single day, we have been told and drilled that Malaysia is now a country with huge debt and we have to tighten our belt, and to show patriotism there is a a save the country fund called Tabung Harapan. To be fair, the government has also told us that the fund is not meant to repay all the RM1 trillion debt but it is more of being a message to allow Malaysian to show that we care about the dire situation of this country.

First of all, let me put this question into the mind of all Malaysians. Are we serious with the message of having a ZERO debt country. Name me a country that has zero debt. Singapore? China? US? Japan? South Korea? These are countries which we are taking as our benchmark. Countries which have almost no debt - Norway, Saudi - and we know how their wealth came from. I have not heard from their government that they want to pay off their debt.

(Prof Jomo and Zeti are in the Council of Elders. I would love to hear from them on this perspective, as they have been quiet.) So far the ones that have drilled the high debt message are the politicians - Lim Guan Eng, Tony Pua, Mahathir Mohamed. They still want to win more seats in parliament, please remember. I want to hear from the professionals. The BNM governor, ex and current and others whom have been helping the government.

We mentioned that our debt during then was about RM200 billion. Today, it is RM1 trillion - I am not going to challenge the ones used by Moody's as their record still shows our debt is RM650 billion. In fact, I have not heard from any other government that they are willing to show to people how bad is their debt situation when they are the government. Is this a manner to create confidence? As opposition, yes! Not as the ruling government.

Now, let me give a case study from our past in 1990s and now. One of the barometer to show the difference between those days and today is the wealth of Khazanah. To put into perspective, look at this link to see the history of Khazanah. From its creation in 1994, now Khazanah has Net Worth of RM116 billion and assets of RM157 billion. Back in 1994, it was probably zero in assets.

There is a difference between then and now. TimeDotCom, Malaysia Airport, PLUS Expressway, UEM, Axiata, IHH and many more were under private hands. Today, it is owned by the government and obviously it can be sold. With more assets, there is a chance that there would be more debt. One of the measurement which have been used largely to measure how much debt the country can take is Debt/GDP. Even then as above, it is not the right measurement as countries like China and Singapore for example have huge reserves. They have huge sovereign controlled assets which can be utilised when needed.

Besides Khazanah, there are several more sovereign funds which are owned by the country such as KWAP, Johor Corp. Back then in 1990s these organizations were worse off than today. Example, KFC which is now part of Johor Corp was under private hands and the good company was wrongly mismanaged.

As a country, the private savings is also much healthier. EPF is now having fund size of around RM700 billion. I believe back then it was probably around RM200 billion. The wealth of the people is also the wealth of the country.

Truth be told, our country has progressed but of course as compared to many other countries and even our neighbors, we may not have come out ahead. Generally, the world has moved on to the better. And we have to call spade a spade.

Anyone who is saying I am not fair to this government should read this where I wrote it in 2013. A spade is better off being shown as a spade. So that as the people of this nation we are better off better educated - on the economy.

How to not miss the Airasia's 2017 AGM

If one is not able to make it to the AGM which happens to be held in a far away land in Sepang where it is some 90km from heart of KL, do spend 22 minutes to watch this IR video. Believe me, you will not miss much.

Basically, during the AGM which covered more than 150 minutes, Tony Fernandes presented the strategy of the company and the bulk of his presentation was spent on its digital strategy. He went on to say that analysts until today do not know how to value Airasia while he deemed the company to be more of a digital company than an airline company. Or at least he wants people (especially investors) to deem it that way.

For me, as an investor, basically I want to put a message that in buying Airasia, one is buying into a company which really has strong substance (with good profits) and it has game plan which will put the company into becoming more than an airline  for the next 10 years.

(Despite painting the plane blue in one instance), Tony I can say is ahead of its time when coming to do with strategy for its group.

Normally, for any thriving or not so thriving airline, it will try to find disruption points and react to it. Airasia is trying to be the disruptor. It is not looking at just being an airline but it also looks at the tourism and even e-payment industry. Through its platform, it goes into the business where Expedia is in. It goes after Alipay. But in other ways, it also complements Expedia, Airbnb. Think of this, while Jack Ma manages to convince people that Alipay is potentially bigger than Alibaba, and raising funds to that value, it is not that crazy to pursue Airasia in that manner. In most areas, it does not compete against Alibaba but in areas on digital payment, e-commerce it may be.

Many companies which are burning money such as Grab, GoJek are moving into adjacent areas such as e-wallet, delivery service and they are today valued at much higher valuation than Airasia. Grab was just valued at USD10 billion by Toyota while Airasia is valued at RM10 billion from its market cap.

Even among its peers (VietJet, SIA etc) in the airline business, Airasia is much lesser valued.

Do watch through the video, and think and compare against other companies of today.

Good start, but it is not just Bernas!

I applaud the government for having the guts to go against a monopoly which was created more than 15 years ago. Almost every time I take rice, I am mindful of the staple of this country is a business that is monopolised by one single company.

I am just hoping that with this the current government can also look at other monopolies as well. The list of those are as follows:

- Astro - being the only one which has satellite license;
- Tenaga Nasional - yes controlled by PNB but we need to allow an open system for power;
- Malaysia Airport - except for Senai airport, all airports have been under the control of this company. Look at what opening on ownership of airports have done for Europe and US. We need to lead the way and I am confident Malaysia today is even more ahead against our neighboring countries;
- Telekom Malaysia and Timedotcom for fiber optic usage. I think their control is the main reason why our internet is expensive. Although the current Multimedia Minister has mentioned of wanting to reduce the costs of broadband by half and increase the speed 2x, these are trends which are happening all over the world. Even without the Minister saying it, it is bound to happen. More need to be done i.e. democratising or relook at the ownership of broadband fiber rather than having Telekom to own the most of it;
- Grab - yes, Grab pretty much has no competitor, the weakness of previous government at the height of election period just do not know what to do when Uber was taken over by Grab. The government today under a much proactive Minister of Transport I hope is doing something about this. We complained about the previous taxi license misuse but Grab is heading that direction;
- relook at e-commerce as it is going to be monopolised by large groups which believe or not will impact Malaysian businesses;
- unit trusts - while it is not monopolised, please look at the charges - perhaps MOF or Minister of Economic Affairs can look at this;
- PUSPAKOM - under Ministry of Transport as well;
- FOMEMA - well Ministry of Health or Human Resource. Why is it we do not have options when we want to hire foreign workers for healthcheck?;
- MYEG - I think this is coming as the shares have largely tracked back. People are expecting things to change I guess as the owners obviously have connections to the previous government?;
- yes buses as well - Prasarana seems to be in huge debt but obviously this structure is not the most efficient.