ICAP's 6th Annual General Meeting (Part 4)

Finally it came to the voting session to approve those proposed agenda. However, there was an incident happened during the voting process. The company secretary wanted voters to raise their hand with the ‘shareholder card’ given in order to indicate they approve the said agenda. However, we were confused at that moment because we did not receive any ‘shareholder card’ from the organiser. So the voting process was becoming chaos and shareholders inquired why we need to show the ‘shareholder card’ then only we can vote and we were not given with the card. The company secretary explained to us that some shareholders might assign proxies to attend the AGM, and it was possible a shareholder could assign two proxies. In order to limit one shareholder only have 1 vote, so one of the two proxies, who were assigned from the same delegation, can vote if he has the card. Later the company secretary apologised to us that she made a mistake because the rule of voting with the card had been cancelled and thus every shareholders or proxies can vote. I was not quite pleasure to this announcement made by the lady because she should not make this kind of mistake and confuse the shareholders. Some more she was doing a right move initially because there was only one proxy can vote with the delegation of voting right from the shareholder. And now everyone can votes will lead to a situation that two proxies can vote from the same delegation and thus it is unfair to those shareholders who do not assign two proxies to vote. Luckily the shareholders had no different opinion or dispute over the 6 agenda and approved the agenda unanimously or else the voting result can be challenged in the court. I hope this kind of mistake will not repeat in the next AGM.

The second half of the AGM was the presentation of investment portfolio of ICAP by TTB. I divide the presentation into two parts: presentations of the investment portfolio and of the economic outlooks.

The following information is the listed companies that the fund held as at 16-June-2010 (refer to the 2010 annual report):-
1) Parkson Holdings;
2) F & N Holdings;
3) Boustead;
4) Petronas Dagangan;
5) Padini Holdings Bhd;
6) PIE;
7) Suria Capital;
8) Integrax;
9) Tong Herr Resources;
10) Malaysia Smelting Corp;
11) Mieco Chipboard; and
12) Hai-O Enterprise.

TTB also explained to shareholders why the fund disposed the share of the following companies as stated below:-
1) Astro All Asia Network plc;
2) Kuala Lumpur Kepong Berhad;
3) Lion Diversified Holdings Berhad;
4) Poh Kong Holdings Berhad;
5) Swee Joo Berhad;
6) Telekom Malaysia Berhad; and
7) Hai-O Enterprise.

(to be continued)

ICAP's 6th Annual General Meeting (Part 3)

I still recalled the ICAP’s extraordinary general meeting holding at last year of which the motion of investing overseas was rejected by most of the shareholders. In view of this, the management of ICAP mentioned that the board and fund manager was proposing another plan to invest overseas and they were waiting for the approval from the relevant authorities. However, after so many months, there is no any feedback from the relevant authorities as told by the Board. Though they kept telling us that once they received any new update from the authorities, they will let the shareholders know about the latest update via announcement. Even TTB once almost want to tell the shareholders what is the proposal they are working on hardly to get the authorities approve, as TTB told us his hair growing grayer and grayer during these few months as a result of this issue, but he just stopped telling almost us more due to the confidential of the proposal and probably the company is barred from disclosing any immaterialised proposal to the public.Anyway, TTB said there are still a lot of opportunities in Bursa as the fund is still able to achieve a remarkable return by just investing in Bursa. He pointed out that investing overseas is no rocket science that can guarantee us a higher return. He further provided more evidence to prove that even investing in Bursa can have a return that equal or bit a lot of overseas counters such as DBS, Cheong Kong and even Berkshire Harthaway. The return of the fund of also at least equal or more than a lot of local famous stocks like Genting and Maybank (interesting to know that Maybank’s share price still lower than its pre-Lehman crisis price) of which a lot of investors might not aware of.

The next issue to be discussed is the share price of ICAP is traded in discount to its net asset value (“NAV”). As a shareholder stated that ICAP’s share price has traded in discount since the Lehman crisis. He hoped the management can take the discount seriously and make some effort to close the gap in between share price and NAV. Because his concern was that if he invests ICAP for short term and would like to dispose it in the nearcoming future, he might just liquidate the position in ICAP for a loss. TTB immediately rebuff that he would not take a short term investment decision into consideration to solve the discount issue, as he explained the fund ‘s objective has stated clearly in the IPO prospectus that it is a fund aims to achieve capital appreciation in long-term period. So he will not let any individual short term investors to influence the fund not to comply with its mandate. So I interpreted that TTB just indirectly told the shareholder that it is his own mistake to make losses by investing ICAP due to his short-term tenure, instead he should not have invested into the fund from the beginning.

Some shareholders also proposed that the fund to distribute dividend with a yield rate to be par with the fixed deposit rate or the fund can initiate a share buy back scheme and distribute those treasury shares as share dividend. While I’m quite interesting to the proposal of share buy back, I totally object the distribution of dividend. As I have mentioned in many elsewhere before that the objective of setting up the ICAP fund is to make capital appreciation in long run. So what is the purpose of distributing cash back to shareholers? What is the purpose we invest capital into a fund and later want to take back the cash before it is long enough for the capital to appreciate, and end up need to put the cash back to the fund again?

Don’t forget that ICAP is a close-end (“CE”) fund, it is not like the open-end Unit Trust (“UT”) fund that can issue new units to get fresh proceed if those unit holders re-invest the dividend. For a CE fund, once it distributed cash, it has less proceed to invest and whatever the re-investment decision made by unit holders has nothing to do with the CE fund, and thus the dividend policy greatly reduce the speed to accumulate wealth through the fund and thus defeat the objective of setting up the fund. ICAP’s another objective is to implement value investing strategy, which means it always need to sits with a lot of cash and wait to buy stocks at a price that discount to their valuation at a right time. So after distribute cash back to shareholders, then how the hell ICAP going to buy cheap stocks? Sometimes I just dislike why there are lot of old man buying ICAP shares (as I observed that a lot of aged fellows who attended the AGM and year by year keep asking the fund the pay dividend) and not the young people be the majority shareholders of ICAP? So old people with age retiring mind please leave ICAP alone and pick other dividend stocks instead (for those people who are old but with young mind you are still welcome). And as usual, TTB just took the dividend proposal back to the shareholders that it is up to the shareholders to decide. If in the next AGM the shareholders decide to have dividend to be distributed, the fund will then deviate from its long term value investing objective, I’m sure I’ll be the first one to dispose its shares and other value investors may follow so, then we will see if the price discount issue will be solved or becoming wider.

Regarding the share buy back scheme, TTB mentioned that he will consider to advise the fund to work on the scheme if the market price of ICAP is deeply traded discount to its NAV, for example a 50% discount. Whereby my opinion is not to reject share buy back scheme, but we first need to consider some of its disadvantages and whether could it really solve the discount issue. First, share buy back will reduce the free-float number of ICAP shares and liquidity will reduce subsequently, thus it may not narrow the discount and instead it could make an even wider discount. Second, ICAP may use the cash to invest some potential investments that give a very attractive return which could outperform the discount. Currently the discount of ICAP’s price to its NAV range from a 10% to 19%, so we assume as ICAP could buy back its own shares at an average price of 15% to its NAV, however it can also invest the cash to buy other more potential stocks that achieve a return that higher than 15%, so which one is a better choice?

(to be continued)

ICAP's 6th Annual General Meeting (Part 2)

The shareholders continually stood out to inquire more questions during the agenda session. One of the shareholders asked what is the rational that the fund is holding so much of cash as reported by the annual report. TTB was not pleased that the shareholder was asking this question due to he not reading the annual report of which at page 3 has stated that “…your Fund sold all of them before 15 April 2010 as it wanted to raise its cash holdings It was extremely worried over a full-scale currency and trade war breaking out between the US and China. Such an outbreak would be extremely harmful to the global economy.” He asked the shareholder goes to read the page himself about the reason why the fund is holding cash.


Another shareholder further request TTB should reduce the cash holding at a high level at RM103million, and he wants the fund to utilise the cash efficiently rather sitting it in the fixed deposit account. TTB then said as the US unemployment is still high at around 9% and he is troubled by the US politicians might try to convince the US voters that the high unemployment rate is caused by the Chinese’s manipulation of the yuan currency and thus the threat of trade war due to the friction in between the US and China still exists, especially during the period that the US is going to have a state election at end of this year. Anyhow, TTB mentioned that if the threat of the trade war fades away, he will try to seek opportunities with good bargain prices and invest the excessive cash.


One of the interesting questions being raised by the shareholders was that why the Company hires Harun Bin Halim Rasip (“Harun”), who is the co-chief executive officer of Integrax Berhad (“Integrax”), as the independent non-executive director. As the shareholders are concerned about the conflict of interest in between Integrax and ICAP since ICAP has substantial investment at Integrax. The shareholder further pointed out that to have an Integrax’s CEO in the board of ICAP, it may cause a perception that ICAP could be using insider news of Integrax to trade. For my opinion, conflict of interest happens not only possible that ICAP to take advantage of Integrax by using insider news to trade, it could happen the other way that the related party to Integrax might also try to influence ICAP to invest more into Intregrax. Though TTB and Harun tried to explain that the fund manager’s investment decision would not be affected by the Board of ICAP and they further provided other reasons to justify the conflict of interest is minimal, I was not convinced by the justification. Anyway, it’s a norm that a person can be directors for multiple companies due to Bursa Listing Requirement of which allows him to do so. Hope Bursa can amend such requirement to curb the conflict of interest incident.


Before the agenda session was going to through the voting process, there were 3 more issues being raised by shareholders of which I was also quite interested to. The 3 issues were the update of the approval of the relevant authorities to ICAP’s proposal to invest overseas, the discount of market price to net asset value and the dividend policy.


(to be continue)

'跌就收长期，涨就卖短期'是否可行?

很多人都想投资很简单，认为短期暴涨就做短期，短期暴跌就做中长期(在这我称他们为无原则的投资者)，自以为靠些小聪明就能一举成功，那Warren Buffet等的众股神也不在话下。我想这些投资者已经不知觉已经堕入只注重股价(Price)而不是股值(Value)的想法中。

很多时候这些无原则的投资者因为对价值的无知而高价买进已经高估的股票后其股价下跌就标榜自己为长期投资者，焉不知公司已无价所以股价可以跌至收盘。而当以低价超值买进的股票后却因不知价值，所以当股价上升了一小段就成为短期投资仓促卖出，结果在RM1买入RM2卖出不久后股价升上RM10就暗捶。

通常投资者可能在买进某股票的时候，已经为此股票设定了卖出的止损价(Stop Loss)和卖出的心水价(Target Price)。但由于无原则的投资者认为自己是长中短期皆可，那谁会相信他们会在达到止损价不卖出以做长期或达到心水价后就会短期卖出吗?

很多是时候就是因为没原则，所以这些投资者在到达当初设定价时可能已经受到当时的情况影响而改变注意，结果当初认为下跌了该收长期时因为恐慌而变短期卖，股票暴上升了后该做短期卖却因为贪婪以赚更多而变收长期。那到底这些投资者是要短期还是要长期?

那所谓'跌就收长期，涨就卖短期'说是简单，要实践就不容易了，更多时候这只不过是自欺欺人的说法。这些无原则的投资者通常都因为轻易受到外在因素的影响而犹豫并长长都卖在不适当的时机而遭受损失，典型的被自以为的小聪明所误。

ICAP's 6th Annual General Meeting (Part 1)

Last Saturday (14-Aug-2010), I went together with a friend to attend the icapital.biz Berhad’s 6^th Annual General Meeting (“AGM”) at KLCC Convention Centre. We reached at the said location at 8.30 a.m. After the shareholder registration, we were given a door gift voucher and subsequently we went to a counter to claim the door gift. Later we realised that there was no refreshment being served before the commencement of the AGM, though we were provided with the afternoon lunch voucher anyway, but you would find out later WTF was the lunch then. I think icapital.biz (“ICAP” or “the Company”) is becoming more ‘thrifty’ nowadays despite it is making profit…^_^!!

The AGM started at around 9 a.m. As usual, the chairman of ICAP hold the speaking of the proposal for the 6 agenda to be approved by the shareholders. The chairman and fund manager were tried to reply any inquiries about the agenda and the ICAP’s annual report for year 2010 from shareholders. However, I felt that the quality of the questions asked by shareholders was deteriorating year by year and this year the AGM would have the dumbest Q&A session from shareholders!

An uncle who looks like in his 60’s coming to ask few questions and those questions were so stupid that I didn’t want to hear his voice. Anyway, I still remembered clearly his first questions was related to the sources of the amount of the “Others Expenses” for year 2010. He seemed not happy that the Company was spending RM39,300 on this “Others Expenses”. The fund manager of ICAP, Tan Teng Boo (“fund manager” or “TTB”), patiently replied to the fellow that the “Others Expenses” contain few category of expenses of which he cannot remember the exact detail of the categories. Anyway, he later address this query that the “Others Expenses” do contain advertisement fees, printing fees, the cost of holding the AGM and other small small miscellaneous expenses. I was afraid later the uncle would then further inquired what is the ‘miscellaneous expenses’ and fortunately he didn’t do so or else I would stand out to stop him to waste our time.

The other 2 questions raised by this old uncle were related to those stocks that the fund manager has invested in. For the detail of the question I can’t recall exactly, but I still remember TTB mentioned that he would revert back to the old uncle with the 2 questions during the presentation of investment portfolio of the Company. However the old uncle not satisfied that TTB not addressing his questions and keep raising his voice to emphasise his questions need to be answered immediately. But TTB insist he would only mention those questions that related to the stocks the fund invested during the presentation. The old uncle who felt not happy with that TTB’s reply and grumble all the way during the meeting.

(to be continue)

Start to update the blog again

After stop updating my blog for the last few months as I was busy to prepare to sit for the CFA Level III exam, it's time for me to update my blog after complete the exam and knowing the result few days ago. I would update the blog more frequently whenever I encounter something interesting or post my investment research.