About the discussion of the discount to NAV, I have missed one very important part that mentioned by TTB. TTB said in the AGM that he was puzzled about the discounting situation in ICAP. He suggested that the discount could be due to investors in Bursa Malaysia still has long way to pick up their confidence to invest in the share market, and thus there are still quite a number of companies traded in discount to their net asset values or net book values and ICAP is one of them. Moreover, majority of close-end funds are typically traded in discount, either be those funds are local fund or foreign fund. However, according to TTB’s view, he believes that ICAP would be back to trade in premium due to cost awareness, no derivatives, no leveraging and more important is value investing philosophy.
TTB further argued that why investors should not take the share price too heavily when making investment decision. Indeed he always encourages investors to look into value, and for the case of ICAP, the yardstick to evaluate its value is to refer to its NAV. Since ICAP is currently trading in discount, it’s a very good period for investors to buy ICAP now. Because TTB believes that ICAP is well managed and thus its future NAV will be higher than the current NAV. So it’s better to have a discount to a rising NAV rather than to have an NAV that is falling. He further provided an example at February 2009, ICAP’s NAV was about RM1.5 and it was then traded in a huge discount at a price roughly of RM1.2. Subsequently the ICAP’s NAV recovered during the share market rally and stand at about RM2.2, the market price of ICAP also increased along side with the NAV as well to RM1.9. He further told the shareholders if any investor who bought ICAP shares at February 2009 and hold those shares until today, the investor would have made more than 50% of return within 1.5 years even thought the share price is still traded in discount to its NAV today.
(to be continued)
