Valuecap seen to make moderate investments

  • Business
  • Saturday, 10 May 2003

Online investment advisor writes on prospects for Valuecap

SEARCHING for Valuecap ? It seemed rather long ago, but Valuecap Sdn Bhd indeed created a bang when its commencement was officially announced on Jan 10.  

From a low of 626.68 on Jan 9, the KLSE Composite Index (CI) was chased up to a high of 675.87 about two weeks later on Jan 21. The rest is of course history, as the CI has gone back to square one, closing at 627.73 on April 25. 

As we mentioned previously, the mid-January rally was likely to have been driven more by other investors buying in anticipation of Valuecap, rather than Valuecap itself. 

Is it really value quest? To recap, Valuecap was formed with a fund size of RM10bil, and owned equally by Khazanah Holdings, Permodalan Nasional and Kumpulan Wang Amanah Pencen.  

Its formation did trigger considerable controversy in that it was seen by some quarters as a vehicle for the government to “prop up” the market and to “bail out” ailing government-linked companies. 

On the other hand, various officials have stressed that Valuecap is about value investing over the long term, and expressed confidence that its presence would over time help improve the efficiency of market valuation and raise liquidity in the process. 

Initial official records supportive of value investing. As with most cases, only time would tell and admittedly, we are still at fairly early stages with Valuecap being less than half a year old.  

Turning to official statements for guidance, it has been reported that Valuecap has invested less than 25% of its RM10bil fund size to date.  

Meanwhile, the latest annual reports of listed companies are starting to reveal the initial investments of Valuecap, which to date, are also supportive of its value objective.  

Based on annual reports filed with the KLSE up to April 26, Valuecap has emerged among the top 30 shareholders of seven listed companies, as tabulated below. 

Moderate investments so far. Its investments in all the seven companies are of moderate size, ranging from a 0.25% stake in JT International (RM4.10) to 1.54% in Bintulu Port (RM2.31).  

Of the seven companies, only two are government-linked, i.e. Bintulu Port and Commerce Asset (RM2.91) while two others are in fact foreign-controlled MNCs, i.e. BAT (RM39.50) and JT International. BAT, in particular, ranks as the largest investment among the seven so far. 

Focus on dividends? Also of note is the rather evident preference for high dividend stocks based on current available information.  

Six out of the seven stocks listed above, apart from Commerce Asset, offer superior net dividend yields, exceeding 5% in the case of BAT and JT International. 

Taking a leaf from Valuecap? We will certainly keep a close eye on upcoming annual reports of listed companies to track Valuecap’s investments and update readers accordingly. Before then, can other investors take a leaf from Valuecap’s investments so far?  

BUY/Trading BUY for Commerce, PPB Oil Palms, Public Bank and Public Finance. Of the seven stocks, we are BUYers of PPB Oil Palms (RM2.95), Public Bank (RM2.16) and Public Finance (RM7.45).  

Here, investors should note that Public Finance will soon be privatised and is de-facto an indirect entry into Public Bank.  

Meanwhile, Commerce Asset is a Trading BUY at just above 1X net tangible asset, noting its higher share price volatility and the challenging environment for banks in general. 

HOLD BAT and JTI, prefer Guinness. Meanwhile, we would HOLD BAT and JT International where we see strong support from generous dividends, management and corporate governance but no excitement in terms of operations.  

We are not sure as to whether Valuecap is restricted from investing in beer companies, but for investors without such constraints, our preference among consumer MNCs is Guinness (RM3.62). 

Bintulu Port only a HOLD. On the other hand, we are not so keen on Bintulu Port given the near-term dampener from the recent Petronas request to reduce port charges.  

The attraction is its balance sheet (net cash of more than RM1 per share) and dividends, but even then, we note that the next dividend is sometime away as the 2002 dividend offering 4.6% net yield was recently paid on Feb 15, 2003. Bintulu Port is only a HOLD. 

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