No real correlation between Insas and Insas-PA (Updated)

All the 3 Insas shares made some move today (see below). While that is good for my holdings, as I do have all the 3 stocks, just wanted to highlight that there are no correlation between Insas and Insas-PA.

Share price of Insas'es as at midday 9Apr2015

I have provided some background on Insas-PA here and I want to be clear again of the following characteristics of the Preference share.

IT IS NOT CONVERTIBLE INTO INSAS SHARES. Insas-PA is redeemable at RM1.00 after 5 years. This means that the company - Insas - will give you back RM1.00 for every share that you hold. If you hold 10,000 shares of Insas-PA, they will pay you RM10,000.
In addition to that, it is paying 4% of dividend every year to you as a shareholder.

The only small correlation is that investors are more confident of the redemption by Insas with the upward movement of the share price.
In addition to that, as highlighted through one of the comment, the Preference share can be used to surrender for the conversion of the warrant. This can be a useful tool in the event the Preference share is traded at below RM1.00.

The behavior of investors as they have gotten interested in the preference shares shows that the market is not efficient even in today's times when information is available almost anywhere.

On the other hand, Insas-WB has correlation to Insas as the exercise price is at RM1.00. Currently, it is out of the money - which is quite usual.

Sold Airport and Bought TA Enterprise

Just sold all the Airport stocks and bought more of TA Enterprise.

I have bought some of TA Enterprise shares before and it was proven to be largely unsuccessful over the short run. The shares which I have bought now dropped to RM0.695. As mentioned before, TA is a defensive stock with strong overseas assets. With the decrease in Malaysian currencies, I would think that these overseas assets would worth more. However, as it also has substantial foreign currencies loans, I would believe those differences would not be that substantial anymore. It sort of even out.

The announcement made yesterday over its latest quarterly performance, I guess cause its shares to drop 7.33% today. This is because it registered a loss before tax of RM23.8 million for the quarter. However, while we are shocked by this, do read what it has to announce. Let's just focus on the two divisions - investment holding and credit and lending.

The Group reported loss before tax of RM23.8million and revenue of RM232.0million for the current fourth quarter, compared to profit before tax of RM40.5million and revenue of RM281.7million respectively achieved in the previous year’s corresponding quarter. Credit and lending and investment holding are the main divisions that caused the drop in Group’s results in the current fourth quarter. The performance of the Group, analysed by its key operating segments is as follows:- 


Investment holding  for 4Q2015
Investment holding division reported loss before tax of RM66.7million in the current year’s fourth quarter, as compared to profit before tax of RM34.3million in the previous year’s corresponding quarter. Despite higher investment interest income, the current year’s fourth quarter results was dragged down by foreign exchange losses realized upon the dissolution of foreign subsidiaries and fair value loss on investment securities. For the current year-to-date, this division reported loss before tax of RM58.0million, as compared to loss before tax of RM2.6million in the preceding year. Despite higher investment interest income and fair value gain on derivatives, current year’s loss before tax was higher primarily attributable to higher fair value loss on investment securities, and acquisition related cost incurred.


Credit and lending for 4Q2015 i.e. latest quarter
For the current year’s fourth quarter, credit and lending division contributed RM29.9million profit before tax to the Group, as compared to profit before tax of RM72.2million in the previous year’s corresponding quarter. Despite higher investment interest income, current year’s fourth quarter results was dragged down by higher fair value loss on derivative and investment securities, and lower loan recovery income. This division achieved a current year-to-date profit before tax of RM154.9million, as compared to RM107.3million in the preceding year. Despite higher fair value loss on derivatives and investment securities, the division’s performance was boosted by loan recovery, foreign exchange gain on translation of AUD and CAD denominated balances, and higher investment interest income. 

What was reported for 4Q2014
Credit and lending For the current year’s fourth quarter, credit and lending division contributed RM68.1 million profit before tax to the Group, as compared to profit before tax of RM1.7million in the previous year’s corresponding quarter. For the current year-to-date, this division achieved profit before tax of RM104.0million, as compared to RM19.4million in the preceding year. This division enjoyed higher revenue and profit before tax resulted from loan recovery, gain on sale of investment securities, investment interest income, and foreign exchange translation gain on CAD and AUD denominated inter-co balances. 

What do we noticed from what was picked up? These are cyclical in nature mainly due to fluctuations in currencies exchange and investment securities as TA held a large portion of its assets through investments securities.

Just to note, do look below - the fair value loss on investments was RM93 million

As against for the previous year:

See the difference! These are mainly accounting in nature as long as these investments are to be held over a longer period.

Malaysian Airport's rights

I have decided to pick up the rights from Malaysia Airport's issues and applied for 92 units extra of excess to make up into board lot.

Below are the updated holdings of MAHB.

This shows that sometimes (not all the times), rights are beneficial to the shareholders, if one is looking at shorter term trading.

Between Insas, Keuro and TA

For those who follow or you can check out here, I do own all the three stocks - Insas, Keuro and TA Enterprise. There is one question recently, on which one does a person choose and did I buy TA and Insas because of its relative low Price/NA.

I guess if anyone choose either of these stocks or any other, it depends on ones understanding or appetite. (I do not recommend you to buy, but in many of my cases, there is a reason I buy these stocks and I usually put them down in this blog.)

Perhaps, one does not really understand why I buy many of the stocks that I picked. All three stocks have a strong margin of safety in my mind. (Have not been using this word,  but perhaps the best way to describe is Graham's Margin of Safety)

Keuro - Rimbayu project I deemed to be almost valuable as in the price I paid for the entire stock, Rimbayu's value alone I see it as equivalent to Keuro which I paid for. Remember I said, WCE is a bonus and if it is successful, it is a huge bonus - enormous. I visited many times Rimbayu before I decided to buy Keuro? And yet the main jewel is not Rimbayu yet. I do not have the opportunity to visit WCE.

Insas - same thing Inari has strong value and in itself it is worth around the price I paid for Insas. And Insas has many other businesses. It has recently been purchasing, Ho Hup - I see a good angle for it to do so. And in my blog I mentioned I talked to people in Inari, and they may not know the reason for me talking to them. I also talked to people (companies) who gives projects to Inari.

TA - The foreign properties acts as a strong hedge and they could be undervalued to the books.

However, one most important trait is that they must have good growth, or if not, strong in the future. Things I can see that will make the company valuable looking forward. No point buying a business like telco (Maxis, Digi or worse still Green Packet) when I can't see growth in the future. Telco used to be a darling stock 10 - 15 years ago. Not anymore, today. (Probably only, the one telco which I see value moving forward is TimeCom. Surprise?)

In each of the stocks I picked there are something which I see valuable.

Rimbayu, WCE - good strong projects especially WCE when it is completed.

Inari - a strong business with -remember I mentioned management. But I wanted a margin of safety, which I could not get directly from Inari. Insas, as I see it today seems to be different from Insas 10 years ago. Today's Insas has a sense of direction, which is probably why they are raising funds. Insas 10 years ago, was a careful investor - no doubt good but lacked action.

TA - well, much more defensive, but they know what they are doing and they buy good properties in good locations. Basically you can see that TA is buying for the future value. Which is also why you do not see me buying a lot. It is a strong hedging stock, with decent dividends. This company listed in Bursa is quite unique as probably I cannot find a similar one (unless you buy TA Global), much more asset hedged and top up with it, is undervalued. I would say, if one is to buy gold or silver for that matter, I like TA better.

I like businesses where they go out and work for their value. Strong differentiation and value. You do not see that in both Insas and TA - but others like DKSH, Airport, NTPM, Padini (to some extent) have that.

Well, one can say I am also boring - balik-balik same stocks. There is one place where you can get daily tips and I strongly recommend, the Edgemarkets.

Insas-PA

I know most people not so keen to look at longer term (3 to 5 years). Insas Preference shares is out today traded.

It has the following profile:

- Non-Convertible;
- Redeemable at RM1 after 5 years;
- Dividend of 4% payable every half-yearly;

The preference shares is offered at RM1.00 with 2 warrants attached for every preference shares purchased.

During the last 1-1/2 months, I have been asked about what will happen to the price of the preference shares as seemingly its 4% dividend is not attractive. I knew that it would have dropped below RM1.00. In fact, I thought that RM0.90 is a good price to even purchase for those whom would want to hold it longer for the dividends and lower entry price.

Today, upon opening it dropped to RM0.795 and as at this time of writing, it is at RM0.82. Just a note at RM0.82 and with brokerage fees paid, one's return is at 8.652% for 5 years (see below).

Purchased at RM0.82 with brokerage at 0.42%

Obviously, it is not too shabby at all, assuming we are confident that Insas can pay its dividends and repay the RM1 after 5 years. I am confident.

Think of it, if you are paying 5% for your housing loan or your car loan, do not be a smart-Alex to pay them off early.

Note: Anything that you do is at your own risk.

Just a note, at RM0.90, Insas-PA's return is at 6.43%. Well, if you look at it, is below what EPF gave last year!

If purchased at RM0.90

Also, since I picked up 4,400 of the Insas-PA (with it attached 8,800 Insas-WB), do find the latest record on fund here.