Berkshire Hathaway announced it has acquired 6% of Chubb.

The EPS has climbed from $10 in 2016 to $22.5 in 2023, a CAGR of 12%. But despite share price increase, Chubb is currently priced at 12X forward PE. The valuation looks reasonable even though it was said that good years might have peaked.

Next I looked up Allianz SE, the forward PE is only 10-11X. Dividend yield is above 5%.

Although developed countries may have slower growth rate, but matured market may enjoy higher valuation. These two large insurers don't look expensive if compared with Malaysian counterparts.

2024 first interim dividend has reduced by 16%

The Edge covers the privatization offer for Great Eastern Holdings (GEH). There are a number of interesting points.

0.7X P/EV is the cheapest acquisition in Singapore in 20 years.

The second cheapest is 2021 HSBC’s acquisition of Axa Singapore life business at 0.8X (incidentally, HSBC Malaysia is Allianz Malaysia banca partner)

GEH was traded at 0.5X P/EV before the acquisition offer. I might be wrong, but I suspect one reason for the low valuation was the low liquidity prior to the offer. OCBC already controlled 89% and a few other shareholders are long term investors like Sg Bagan. Sometimes only a few thousand shares traded in a day. Similar situation to Allianz just not long ago.

While OCBC moves further towards a financial supermarket model that include banking and insurance, DBS and UOB believe otherwise as they believe insurance “manufacturing” and distribution require different core competences.

If I look at Malaysia, our largest bank Maybank owns Etiqa and until now has no plan to float it. A looser arrangement is Hong Leong Bank distributing for HLA which is sister company.

So who is right?

Thanks for your input.

Using today closing price, Allianz total market cap is RM7,694m.

Based on Maybank's input, the Jun 2023 general insurance equity is RM2.5b, and life insurance EV is RM3.5b.

Working backward, assume 1.4X book value for the GI business, the implied value of life business = RM7,694m – RM2.6b*1.4 = RM4,194m, or 4194/3500 = 1.2X EV

I hope Allianz EV methodology is conservative and prudent.

It’s possible.

However, the overall YoY trend is like this
1) decline in 1H23
2) increase in 2H23
3) decline again in Jan-Feb 24
4) increase in Mar-Apr 24

If 2023-24 was adversely affected by El Nino, UP should not have enjoyed bumper crops in 2H23. But they did as 2H23 CPO output was 156k MT vs 2H22 135k MT, i.e. +15% YoY.

More likely multiple factors were at work. Labor arrival in 2023 as suggested by Sardin played a part. Maybe local weather condition too. Biological resting phase once mentioned by the management may have also skewed the data.

The Tanahrata replanting during 2019-21 should have started to contribute. However, from the overall group perspective, the contribution should be gradual without any step change. For the past number of years, typically 1000+ ha is replanted each year -- except 2,444ha in FY19 after Pinehill/ Tanarata acquisition; and 462ha in 2022 probably due to labor shortage. So improvement due to high-yielding seeds should happen all the time but gradually.

In short, I can’t figure out any specific factor leading to the up and down in output. But without doubt, the continuous replanting regardless or market conditions will steadily lift output over the long term.

CPO production for Apr 23 was exceptionally low at 18k MT. Output for Apr 22, 21 and 20 were much higher, in the range of 21k-23k MT. In fact higher than Apr 24.

So last traded price is 0.5X EV. Privatisation offer is 0.7X EV.
But if assumptions in the EV methodology are broadly correct, rightfully the net present value of future profits should be roughly the same as the EV, even if there no more new business, right?
Was the market being too pessimistic with Great Eastern, or there are hidden risk in the EV assumptions?

Is RM11 possible? What could potentially drive share price above RM11?

Look no further than the the effect of 50 sen special dividend announced on 21 Feb.

Just a few days before the announcement, the share was traded at around RM9.4. But share price closed at RM10.3 on the day after the announcement. It was a 90 sen gain on 50 sen dividend announcement.

On 26 Mar just before the ex-date, the share price closed at RM10.7, representing RM1.3 gain.

In other words, the 50sen special dividend announcement has moved the share price higher by RM0.9 to RM1.3.

What has actually happened?

By reducing its cash, which earns a mere 3% bank interest, the company has actually become more valuable. The company intrinsic value has increased even though its cash balance has become smaller!

It shows all the while the market has been quite rational. It discounts excessive cash held on the company’s balance sheet.

Before the special dividend announcement, every excess RM1 cash is probably valued at just 20 sen. In other words, the net cash per share of RM5.4 before SD distribution contributed just RM1 to the share price.

But when the company signaled a change in attitude by returning 50 sen to shareholder, the market started to value its cash balance higher. Each RM1 in cash was now valued at probably 40sen, i.e. the RM5.4 net cash per share was valued at RM2.1, moving the share price higher by RM1.1.

Comes next quarterly report, if the company were to announce a 39 sen regular dividend + another 50 sen special dividend, not only will share price go above RM11, it may even go beyond RM12 as the market values its cash even higher.

Instead of hoping for market action, we have to hope for the company action!

Yeah. UP is proud of its research.

Looking at the UP Group CPO Yield chart, the UP Group yield has widened its lead over Malaysian average since 2016, which is a year with severe El Nino impact.
I suspect one of the reasons is the low CPO price during mid 2010s discouraged other companies from investing while UP ploughed on. The difference only showed up years later.

I see. I don’t follow other planters in details. However, when I tabulate the CPO yield per hectare of several large and mid-size companies like IOI, Simeplt, KLK, Kim Loong and Innoprise, they’re still about the same or below 2015/16 level. UP is the only one which has made sustainable gain due to improving FFB yield.

Yeah labor availability would help. So is uplift in productivity. The Annual Report mentions that UP Malaysia now runs its operation with 10% lower workforce despite 9% larger land bank as compared with pre-Covid period. Quite amazing.

@Sardin, refer to your statement. Do you mean that 2H23 was good weather and therefore it was exceptionally good for UP?

BTW do you study and compare against production data of other plantation companies? If yes, mind sharing the summary of your data?

Does UP refinery use own crop when CPO price is high, and use 3rd party crop bought at spot price when CPO price is low?

With due respect, I doubt it works this way.

If the refinery uses 3rd party crops bought at spot price on a large scale, what will its plantation business do with own crops?

If they sell their own crops, it’s still at spot price.

If they stock them up on a large scale waiting for better prices in the future, it will be speculation which is against their purpose of hedging in the first place. Besides it’s also unclear to me for how long the produce stocks can be kept in inventory.

In fact, as deduced from the balance sheet, UP keeps not more than half of a month of produce stocks.

@JrWarren,
The 20% QoQ production decline in 1Q24 (versus 4Q23) cannot be explained by seasonality alone.

From historical first quarter perspective, 1Q24 output of 55k MT is probably normal.

But 4Q23 output (70k MT), and in fact 3Q23 output (80k MT), are EXCEPTIONALLY high.

I draw this conclusion from the published production data. On YoY basis, 4Q23 and 3Q23 have recorded 15% to 16% increase. Quite unusual.

Own CPO (MT) Quarter YoY
55,446 1Q24 3%
70,149 4Q23 15%
79,641 3Q23 16%
62,295 2Q23 -7%
53,888 1Q23 -7%
60,851 4Q22 10%
68,942 3Q22 -4%
66,731 2Q22 0%
57,866 1Q22 -1%
55,474 4Q21 5%
71,449 3Q21 6%
66,460 2Q21 6%
58,217 1Q21 -2%

I wonder if the 2H23 output surge is an aberration.

@ooihk, what are the implication of Hari Raya and CNY on the same quarter, and by how much?

Note B2 explains that refinery segment revenue declines due to “due to lower sales volume”, I believe in tandem with the previously mentioned lower production volume.

QoQ, segment PBT declined 58%, and segment operating profit declined 56%.

Three reasons cited in the note
1. Lower volume hence lower profit
2. Higher forex loss at JV Unifuji (where share of profit declined from RM8m to RM1m)
3. Higher hedging losses as Unitata, which sold contracts earlier at lower prices, later had to unwind position and bought at higher prices to cover earlier position. Such hedging losses happened in a rising market just like in 2022. But when Unitata sells refined products, hopefully at higher prices too, a better margin could offset the losses.

Don’t know how to estimate the hedging effects on profits/ losses. If anyone has any idea, please share your working.

On plantation revenue, 1Q24 CPO volume was far lower than 4Q23. Note B2 explains “The revenue for plantation segment decreased by 8.3% in the current quarter from the preceding quarter due to lower production”

This was partly due to seasonality as CPO production declines from October to February (refer note A3).

However, a bigger factor is 4Q23 CPO production volume was exceptionally high at 70k MT, 15% higher than same period in 2022. 1Q24 CPO production volume has since moderated back to 55k MT.

Was the high production volume in 2H23 an aberration? How about decline in Jan-Feb and subsequent recovery in Mar? Has anyone studied other company outputs and how do they compare? Did the management say anything during the AGM?

The 1Q24 CPO production volume 55,446MT * RM4,179 = RM232m is about 75% of 1Q24 plantation revenue. The other one quarter revenue may be contributed by PK, coconut and other factors I’m not aware of.

I compared 1Q24 results against 4Q23. This is what I found. For those who have studied please share your findings too.

4Q23 revenue: RM544m
1Q24 revenue: RM477m (-12% QoQ)

4Q23 operating profit: RM255m
1Q24 operating profit: RM171m (-33% QoQ)



Plantation segment:

4Q23 segment revenue: RM337m
1Q24 segment revenue: RM309m (-8% QoQ)

4Q23 segment operating profit: RM218m
1Q24 segment operating profit: RM154m (-29% QoQ)



Refinery segment:

4Q23 segment revenue: RM376m
1Q24 segment revenue: RM320m (-15% QoQ)

4Q23 segment operating profit: RM38m
1Q24 segment operating profit: RM16m (-56% QoQ)

Problem with holding a physical AGM near its estate is that few loyal shareholders can attend. I strongly urge the management to consider holding a hybrid AGM next year, like what Bursa has done. UP can set the example as one of the first few listed companies that pioneer hybrid AGMs

Given such challenge, and BNM's caution in approving premium increase, is medical and health insurance a good business relative to other types of insurance? If not, why do insurers still offer such policies instead of freeing up their capital for other types of insurance business?

That means for an expected claim of RM100, premium is capped at RM125. The remaining RM25 (at max) needs to pay off commissions and management fees. Then not much will be left!

In comparison, the general insurance at least offers Allianz a combined ratio of 86%, i.e. underwriting margin is 14%.

Central medical claims data platform (Clause 12.2) – Does it benefit insurance IT service providers like Rexit?

Coincidentally, Rexit share price has a run-up right after the policy is published on 29-Feb.

Clause 8.20(a) mentions “The loading shall not exceed 25% of the premium/takaful contribution or COI/tabarru’ rate prior to the claims”.

Does it mean if COI (cost of insurance) including expected claims, management fee, and commissions add up to RM100, the maximum chargeable premium is RM125? In other words, profit before tax margin is capped at 20%.

The effect is on one hand BNM discourage unhealthy competitions, but on the other hand it also prevents insurers from reaping excessive profit.

However, PBT margin capped at 20%, or net margin capped at 15% should be acceptable as historically ALIM PBT margin is in the range of 5% to 10% only?

@wsb_investor, good sharing on the medical and health insurance policy document.

Before this new policy, are insurers already allowed to market products with co-payment feature? However, as BNM now mandates 5% co-payment (clause 9.4) in new products, it will prevent unhealthy competitions as insurers can no longer entice customers with 100% claim products. By discouraging avoidable claims BNM hopes to lower future premiums.

Similarly, commission limits (Clause 11.1) may have the effect of preventing new insurers from gaining market shares through aggressive sales and marketing.

Therefore the regulations are beneficial to existing players as they discourage cutthroat competitions.

Is this the right understanding?

Does El Nino affect UP?

Maybe you can study changes in yield per mature hectare for its Indonesian and Malaysian plantations respectively during the historical El Nino years.

The questions are
1. How does El Nino affect Peninsular Malaysia and Kalimantan?
2. Do we have strong or normal El Nino in 2024?
3. How does it affect CPO price?
4. What is the net result if there is declining yield but higher prices?

What about the prices and outputs of other competing oil crops?

I suspect even professional traders find it difficult to answer confidently.

First INED is not a director.
Next asked me if Bursa queried them.
Now suggest me to sell in protest???
Yeoh Chong Keng would be touched for the rock solid support he received.

Someone asked about China competition before. Up to now they still manage to hold their market as can be seen from their revenue and operating margin. The brothers believe that with their multiple brands occupying different market segments, and also through their own and 3rd party distribution channels, they have an edge over Chinese competitors. Despite running its own factory, they also get OEM supply from China.

I don’t know how sustainable it is. But deploying some of its net cash to expand their Singapore presence makes sense.

But the key attraction to me then (not now) was being cheap, with good downside protection given its dividend records. FCF over 5 years averaged at RM25m-RM30m per year. After recovery from Covid (with operational risk receded), for quite a while the share price hovered around RM1, pricing it at 15% to 20% FCF yield.

It’s harder to judge now. Historically such illiquid stock with no analyst coverage doesn’t command a high valuation. Yeoh Chong Keng was probably unsure too, as he disposed near RM1.9 shortly after the acquisition but bought back later.

So are we now in agreement that that INED is also a director subject to the disclosure requirement?

I’m not an insider so I won’t know if Bursa has asked for an explanation.

I would expect that any self-interested minority shareholders, who are not privy to the discussion during board meetings, will like these insiders to comply with the listing rules. Insiders’ buying and selling of company shares should be made public in a timely manner. Otherwise insiders will have even more unfair advantage.

Why would a shareholder try defending the director who has lapsed in his obligation? Mmm…

If a "non-independent and non- executive director" is not bound by the disclosure rule, why even bother to disclose after 5 months? He may as well just keep quiet. :)

If "non-independent and non- executive director" is NOT a "director", what is he? :)

All directors attend board meetings where confidential matters are discussed. Disclosure requirement applies to all directors, including non-independent and non-executive.

Refer to Bursa Guidance to Directors on Dealings in Securities, para 5.3a
"the directors and principal officers must, within 3 market days after the dealings has occurred, give notice of the dealing in writing by submitting Appendix DS-2 to the Company Secretary. The Company Secretary shall
make an immediate announcement through Bursa LINK of such dealing"

This disclosure is late by 5 months!

Director disposed shares in Nov 2023 but only made announcement in Mar 2024???

According to Furniture Today, the top furniture exporting countries to the US are
1. Vietnam, US$9.7b,
2. China, US$8.5b
3. Mexico, US$2.3b
4. Malaysia,US$1.571b
5. Canada, US$1.546b
6. Indonesia
7. Italy
8. India
9. Thailand, US$593m
10. Poland

Pohuat has factories in Vietnam. But in recent years it has not been doing as well as Liihen which is solely located in Malaysia

Very impressive analysis!

BTW you may want to update Diagram 3, which was wrongly pasted as duplicate of Diagram 2.

I have a few questions.
1. Could Statista’s data which shows 44% of global furniture market is in US be flawed? Even focusing on just developed world, US population of 330m is still less than 30% of the developed world population of 1.2 billion.
2. Could some Malaysian exporters have heavier exposure to US than indicated? Liihen used to classify some customers as Asia but they were resellers to the US end market.
3. Do you follow up on US furniture sales and inventory situation? If yes what is the company/ industry data that you rely on as leading indicators of furniture demand? What is the current situation?

Farm Fresh sales is over 80% Malaysia and remaining mostly Australia & Singapore. Dutch Lady focuses on Malaysia.

However, 80% of Able Global dairy products are exported, to countries in America, Africa and South East Asia. They don’t compete heads on.

Not to mention Able Global is also into tin can manufacturing and lately property development.

Could anyone trust Tan Teng Boo’s prediction?

This guy has parked half of iCAP’s fund as FDs. Not for one year. Not for two or three years. But for over a decade! He has been waiting for the market crash for as long as I can remember.

During this long period, we had 1MDB, the collapse of oil price in 2015 and in 2020, five prime ministers since 2018, and the Covid pandemic. Yet he picked up no bargain.

During those intervening years, on dividend adjusted basis,
1. QL was up from RM1 in 2011 in almost RM6 today
2. Allianz was up from RM3 to RM19
3. United Plantation was up from RM3 to RM21 (yes, iCAP did buy into UP lately, currently a tiny 2% of its portfolio)

Even Maybank was up from RM3.7 to RM9.5 during the period.

How much did iCAP’s earn from the cash that it locked in bank FD’s? Not to mentioned 1.5% was handed over as management fee every year.

TTB is also a big fan of China. What is China stock market return over these years?

With such track records, I’m actually worried that now he has a U-turn and starts predicting Bursa's bull run!

@Fabien, may I know where did you get the announcement that they abandoned the Guocera expansion plan?

If you have insight into the Israel-Hamas War, you can trade in many far better ways outside the Malaysian market. Just open a US stock trading account. Promote your view in Reddit.

Don’t waste time on BJFood, which has other problems besides on the on-going boycott. Unless you’re stuck with its shares bought at high prices.

Echo the other comment. Don’t bring race and religion into this forum.

The Board deserves praise for returning unused capital to shareholders through special dividend of 50 sen.

The total amount of special dividend is about RM157m, which is greater than the proceeds from disposal of HLIT (~RM36m) and HCB (~RM80m). But RM157m is only a small fraction of the latest company net cash at RM1.7b

As I’ve commented earlier, the share price will re-rate upwards if the Board returns more cash to shareholders. Today share price movement has just confirmed the point.

To reiterate my earlier comments, let’s compare against Bermaz Auto, which is probably the best run automotive local company. BAuto trailing twelve month revenue was about RM4b, supported by a net cash position of about RM400m, or about 10% of annual revenue.

Applying the same standard, HLI’s annual revenue of about RM3b needs only about RM300m of net cash as working capital. It could safely return RM1.7b - RM300m = RM1.4b of cash to shareholders without affecting its business operations. That works out to be about RM4.5 cash per share.

According to Kenanga, the passenger vehicle sector’s average forward PE is about 11 times. Applying this average, the share price is still worth 11 x RM0.927 (Kenanga’s 2024F EPS) = RM10.2.

In other words, if the Board is willing to put cash to better use, conservatively the share price could be RM10.2 plus special dividends of RM4.5! This has not even taken into account of HLI’s dominant market position. Besides, by showing it cares about minority shareholders' interest, it could enjoys an even higher PE multiple.

Moving forward, I hope the Board could give greater clarity to shareholders and the market how it would best utilise its cash.

For most people, the string of resignations is sufficient to raise an alarm bell. For those who choose to look the other way, no amount of evidence will be sufficient.

I’m not so naive as to expect I can get a straight answer from AGMs, regardless of whether I hold one share or > 20% of shares.

As said before, I continue to stay away from value traps. No, not even a single share.

Good luck to whoever hoping to sell close to or even higher than NAV.

This time round, will more directors leave due to “other commitments” or “personal health issues”?

What happened in 2020, besides Covid?

Could it be the innocuous single sentence mentioning RM6.68m dual listing expenses slipped into page 14 of 2020 Q4 report?

https://www.bursamalaysia.com/market_information/announcements/company_announcement/announcement_details?ann_id=3073067

On Nov-24 of the same year, it was the turn for the Chairman Datuk Ng to resign, initially giving no reason.

https://www.bursamalaysia.com/market_information/announcements/company_announcement/announcement_details?ann_id=3107685

But interestingly, an amended announcement was published a week later on Dec-1, with Datuk Ng’s resignation reason updated as “difference in opinion”.

https://www.bursamalaysia.com/market_information/announcements/company_announcement/announcement_details?ann_id=3110297

This was followed by the resignation of Darin Siah Li Mei on 3-Aug 2020, citing “health issue” too. Datin Siah joined the board only a year ago.

https://www.bursamalaysia.com/market_information/announcements/company_announcement/announcement_details?ann_id=3074128

Was serving the ICAP board not conducive to personal health? :)

The previous round of INED resignation happened in 2020.

On 24-Feb 2020 Madam Leong So Seh resigned citing “personal and health issue”

https://www.bursamalaysia.com/market_information/announcements/company_announcement/announcement_details?ann_id=3026283

Another independent director resigned.

Datuk Mohd Nasir, after serving merely 28 months, tendered resignation “due to his other commitments which require his attention and time”

https://www.bursamalaysia.com/market_information/announcements/company_announcement/announcement_details?ann_id=3419228

Really? Such a busy person?

@Patient investor, well, everyone is free to air his opinion. You may continue to promote yours, and hopefully it could boost confidence and sustaining the price.

I enjoy reading this forum, but I shall continue to stay away from value traps and keeping my investment on more solid ground. Good luck to anyone wishing to sell at above NAV!

Haha, indeed. The brand value has been cultivated over many years through newsletters and annual events. Unfortunately, it's non-transferable. If COL musters enough votes to shake up ICAP, the "Fan Club" goodwill will evaporate overnight.

Why will COL pay a premium for ICAP if the maximum value it could extract is merely the NAV per share, minus expenses?