@Patient investor, maybe many small cap companies have been knocking at ICAP doors of many years. Yet ICAP was still sold at a discount for at least a decade.

You may also argue that COL does not want to liquidate ICAP. COL is willing to pay a premium over ICAP’s NAV as it sees so much potential (although COL’s purchase records over a decade show otherwise)

Some businesses do sell at a premium over its book value. Think of Heineken, Carlsberg, Nestle. The businesses have competitive advantages in the form of brands, product portfolios, distribution network and so on.

But for a fund like ICAP, what competitive advantages does it have? It’s just a collection of other company shares and bank FDs.

Of course TTB may say he IS the competitive advantage. He is THE REASON of the premium.

But if COL treasures TTB so much, they would have handed their money for TTB to manage in a separate fund instead of engaging in a decade old feud.

COL will never pay premium for ICAP shares

“For iCap shareholders who want to sell, take advantage of the situation by queuing at high price as close as possible to NAV, or even at a premium.”

Such opinion assumes COL is willing to pay a price up to, or even exceeding NAV per share.

But what is the maximum value that COL can realise if, a very big IF, that it gains control of ICAP?

Unfortunately, the maximum value per share in liquidating the fund will be no larger than NAV per share.

In fact, given that ICAP's portfolio contains some pretty illiquid stocks, any disorderly disposal will cause share price to collapse. So in practice, the liquidation value is less than NAV per share.

If COL is rational, why should it incur losses by buying above NAV per share?

Anyone can place their sales order at or above NAV. Just that the orders will not be fulfilled.

The fund manager wrote in the latest quarterly report
“As I wrote in the iconic i Capital publication …”
“… I gave a rare presentation on Malaysia’s longer term investment outlook”

Iconic! Rare! He put Warren Buffett to shame.

AIG got into trouble because it recklessly sold “insurance” to other hedge funds betting against the housing market. Such situation does not exist in Malaysia.

Check the types of investments owned by Allianz Malaysia in Note 8 of Annual Report.

“Active shareholders may attempt to realise the full value of the CEF by proposing a share repurchase, conversion to an open-end structure, takeover or liquidation.”

Well said.

Story of Benjamin Graham shaked up Northern Pipeline
https://www.businessinsider.com/benjamin-graham-was-the-first-shareholder-activist-2016-6

I hope Malaysia could emulate US investing scene. We should have activist investors to shake up complacent and self interested management for the benefits of all shareholders.

The father of value investing, Benjamin Graham, famously asked in 1932 “Is American Business Worth More Dead than Alive?”

The same question applies to ICAP today.

observatory, 
you got the rights to challenge the board as long you are shareholder, looking towards it. Ain't the discount happens before the 6.6 million charges?

__________________________

I don’t have the right to vote and challenge the board as I’m not a shareholder. Anyway I have no intention to be a shareholder in this value trap.

But I do have the right to air my opinion here and point out the inactions and failures of the board. And I look forward anyone showing me, with facts and logic, why I’m wrong.

The failure of the board to stop him from charging the RM6.6m was even more outrageous. The board should have asked themselves who pay their salary, the fundholders or the fund manager?

Shortly after this incident, several board members did resign, including the Chairman, and a newly elected board member, though they invariably cited “personal reasons”. What could you infer from their actions?

If I have the votes in AGMs, I would definitely vote against these pliant board members. I would be more than happy to vote in any new faces to shake up the place, be it Lo Kok Lee or any others. Not to mention from internet I can see Lo Kok Lee has a good rack records and background.

The only attractive thing about ICAP is some of the good comments here. The only reason I continue to pay attention to this value trap.

I was once attracted by ICAP seemingly deep NAV discount.

But the RM6.6m dual listing expenses charged to ICAP fund holders shows why it was justified to trade at huge discount.

First, no shareholders’ approval. Second, anyone with some foreign stocks experience knows dual listing does not narrow NAV discount as claimed. Many stocks traded at a discount in their secondary market as investors there are not familiar with the stock. Is the ICAP fund manager ignorant? Or is it a diversionary tactic in the face of criticism on the widening discount?

Why it took him so many years to “study”? And after all those wasted years with widening discount gap, he had the cheek to pass the bill to the fundholders!

Intelligence? Integrity? Haha.

Global asset managers are investing in infrastructure funds
https://www.reuters.com/business/finance/blackrock-quarterly-profit-rises-strong-assets-under-management-2024-01-12/

What is the implication for AGIC if it eventually win or lose its case against MyCC?
https://www.bursamalaysia.com/market_information/announcements/company_announcement/announcement_details?ann_id=3415175

Good sharing. As a principle, a person should not be able to claim more than his actual expenses from his medical insurance policies. Any extra benefits should come from other types like critical illness policies. Isn't that how it should work?

Thanks for the explanation. Your point that medical inflation is not projected by actuaries and not reflected in CSM is important one.

@wsb, how big is the medical business contribution in terms of premium and profit? How might MOH policies affect it?

https://www.bnm.gov.my/insurance-takaful

I'm not familiar with banks. But I don't think banks can freely define their non performing loans, which are classified as those overdue for >90 days. Remember banks are heavily regulated by the Bank Negara.

The LLC mentioned here excludes regulatory reserve. Otherwise it would be even higher.
Besides, since RHB management claimed their loans are well collateralized, they don't need so much provision.
However, bad loans are not static figures. When economy turns sour, it could rise fast, and the coverage ratio will drop. Heavy provisions will be needed which hit earnings. Maybe this is why some other banks are prudent by maintaining their LLC at high level.
But this is just one of the many variables. Among local banks RHB has the highest CET-1 ratio.
Honestly I find it hard to understand banks' earnings. They have many levers to adjust and smooth their earnings through provision, write back and so on. Unless one can understand how the different pieces work together, otherwise it's hard to compare the profitability of one bank with another over a short term basis.

RHB management said they were comfortable with lower LLC because their problematic loans are well collagenized.
However, there are only two banks where LLC as of 3Q23 is lower than the pre-pandemic 4Q19. For RHB it's 75% vs 86%. The other is BIMB which is 127% vs 174%.
Public Bank, for example, has increased to 187% from 124%.

All is relative. Assuming RHB management is right, and the economy continues to improve, RHB will not need to do extra provision. Profits will not be hit.
Meanwhile other well provisioned banks will have the option to write back their earlier provision, giving their profits extra boosts. This option is no not available to RHB.

Anyway, there are many factors to consider besides LLC and dividend yields. It's unclear to me which banks will outperform. The simpler approach is to distribute the bets.

Not just RHB but other bank stocks also experienced selling pressure lately. As for EPF, despite lots of activities, its shareholding is maintained around 41% , +/- 1%. Long term shareholders could simply ignore EPF actions.

It's possible that Airport major shareholders make mistakes. But for whatever reasons that they accumulate Airport shares, I'm quite sure it's not for the purpose of price support or charity to minority shareholders.
Beside it's difficult to compare RHB with Airport as they are in different industries with different competitive landscapes.
Better to compare RHB with other banks. Why is RHB a better buy than say Maybank, Public Bank, Hong Leong Bank, and Ambank?

Under normal circumstances, what could major shareholders gain from providing price support?
You may look at the historical loss suffered by Airport during the pandemic period. But they may well be looking at the future prospects of post Covid recovery and favourable government actions.
For the same reason, these managers also look beyond the historical profits and dividends of RHB.
Interpreting their actions from the framework of price support is misleading.

Why should EPF support the share price? What are the benefits for EPF and EPF contributors in maintaining a high share price level, only for other investors/ speculators to take advantage by dumping their shares to EPF?

HLI disposed HLI Trading Limited to a related party. This came after the disposal of Hume Cemboard Industries 6 months ago

It's difficult to predict winners, especially on a short term basis

The dividend adjusted return over the period of
(1) 10 years
Hong Leong Bank 85%
Maybank 75%
Public Bank 64%
CIMB 10%
RHB 9%

(2) 5 years
RHB 38%
Maybank 35%
CIMB 24%
Hong Leong Bank 6%
Public Bank 2%

(3) 3 year basis
CIMB 48%
Maybank 28%
RHB 21%
Public Bank 10%
Hong Leong Bank 10%

(4) 1 year basis
Maybank 12%
CIMB 8%
RHB 3%
Public Bank 0%
Hong Leong Bank -3%

For long term investors, just enjoy the dividend and don't be overly concerned about share price. If management is capable and company fundamentals are good, it will show in future results and share price shall follow. Time will tell.

Dividend seekers choose Maybank and RHB. For asset quality, Public Bank and Hong Leong Bank. For growth, Hong Leong Bank. For those who are not sure, just take a small position in each bank when valuation isn't demanding.

If you believe in the collective wisdom of analysts, this is the latest concensus for the six large and mid size banks.
Maybank, 8 buy/ 11 hold/ 2 sell, consensus TP RM9.38, upside 4%
Public Bank, 14 buy/ 5 hold/ 2 sell, consensus TP RM4.73, upside 11%
CIMB, 16 buy/ 3 hold/ 0 sell, consensus TP RM6.31, upside 10%
Hong Leong Bank, 14 buy/ 1 hold/ 1 sell, consensus TP RM22.50, upside 17%
RHB, 6 buy/ 8 hold/ 3 sell, consensus TP RM6.08, upside 11%
AM Bank, 12 buy/ 3 hold/ 0 sell, consensus TP RM4.37, upside 8%

Yes, I only picked up the negative aspects because I tried to explain why the market might not be giving RHB a higher price despite the earning and dividends you mentioned

According to Annual Report, Wessex Water RAB value at year end was £4.1 billion (RM24.4 billion).
However, we need to take debt into account, as the assets are funded by both debt and equity.
For example, Hong Leong assumes 1.2 times Enterprise Value/ RAB, and puts the equity value after debt at RM11.5b (yes, it's still a large sum versus YTL Power market cap of RM18.6b). But whether it's 1.0, 1.2 or 1.4 times are also subjective, depending on historical transactions and current market conditions.
Lastly, we also have to consider that a high EV/ RAB value can only be realized during disposal. We can't directly unlock the value. Therefore such assets are usually traded at a discount, though the level of discount is again debatable.

@dragon328, thank you for your always useful explanations!

For telecommunication, he expected regulated return of 9%, but did not elaborate. I don't understand that. Unlike Wessex Water or Tenaga, there is no regulated return for YES. What does the 9% mean?
He said second 5G network would not impact YES since government has promised both DNB and the second network will offer the same wholesale prices. Really? If there is no differentiation, why would Maxis push hard for the second network?

MSWG asked about sustainability of Power Seraya's strong earnings. The company is confident about short term prospect, but beyond that it depends on market condictions which they can't control.
I didn't hear very clearly about his response to shareholders' questions on whether they expect earnings to revert to norm based on latest contracts.
Can anyone who attend share his response?

In this morning AGM, Dato' Yeoh explained how Wessex Water RAB value increases proportionally with the inflation rate. If annual inflation is 10%, RAB value for next year increases by 10%. As the future tariff is calculated based on the RAB, the business is essentially protected from inflation.

The market is not just looking at last quarter earning or current dividend yield. It is also responding to some negative developments. Among others:

1. Loan loss coverage (LLC) has declined from 109% (1Q23), to 83% (2Q23), to the latest 75% (3Q23), lower than pre-pandemic level
2. Management has guided higher cost income ratio at 47%-47.5%, from 44.6% previously
3. Management has guided lower ROE at 10%, from 11% previously.

Long term investors should focus on corporate governance (checked), company fundamentals (checked), industry outlook (not so sure), valuation (not so sure) rather than other institutions' trading decisions. These institutions have their own reasons for buying & selling, which doesn't necessarily mean the current share price is under/ over-valued.
In fact, compare to other plantation stocks, UP share price is a lot less volatile. If you think the valuation is right, buying at RM16.5 or RM17.1 is just a difference of over a few percent, which is immaterial over a multi-year horizon.
No doubt the current dividend yield is high, and I expect it to remain high in the near future. But an important consideration is, as ooihk899 mentioned, this is a cyclical stock. A more prudent, but also more difficult approach, is to estimate the future revenue and margin over a full cycle and then work out the valuation.

Thanks for explaining. It's not easy to estimate future growth based on quarter to quarter CSM number. Is NBV still the best indicator of growth?

Yeah, rightfully life insurance valuation = Embedded Value + VNB * multiplier
In practice, some life insurers are valued at below 1X EV.
For Allianz Malaysia, both RHB and Maybank value it at 1X PE, but no premium is given, i.e. VNB multiplier is zero.

Thanks for pointing out. I actually missed slide #7 while trying to find answer in the quarterly report!
Note 1 explains RM69m increase in CSM due to "non-financial assumptions update".
However, note 2 also mentions "higher CSM release due to non-financial assumption update", which is -RM321.4m
Does it mean the assumption changes somehow cancel out one another?

In the same slide #7, "expected growth" contributes RM163.8m.
What is "expected growth"? Does it refer to the expected return from investments, say 7% yield from equity portfolio?
Or does it refer to the extra return expected from investments, example by revising assumed future return from 7% to 8%?
If it's the former, the contribution will be recurring. But if it's the latter, the increase is only a one-time contribution that could be reversed in the future.

Another very good quarter.
It's especially good to see that growth is picking up at Allianz Life. ANP grew at 18.5% outpacing the industry. Now market share has exceeded 10%.
For the first time, the company has also provided agent recruitment info (slide 22). The CEO Program was also mentioned in the Annual Report.

Slide 3 shows 9M CSM grows at an impressive 11.5%, but NBV only grows at 3.1%. I wonder why is CSM growing much faster than NBV, given NBV is an important contributor to CSM.
I worked out the quarterly increases. 3Q CSM increases by 3,156m - 2,993m = RM163m. 3Q NBV increases by 236m - 147m = RM89m. The difference is about RM74m.
Does CSM increase faster mainly because no dividend has been paid in Q3 this year? (Allianz Group paid RM323m of dividends in FY22, contributed by both life and GI)
Or most likely due to some assumption changes?
I wonder, over the next few years, could Allianz life business grows at a high single digit. That could support a higher valuation.

MARGMA's prediction in Aug 2022:
Margma president Dr Supramaniam Shanmugam said industry players are navigating through a challenging time dealing with multiple dynamics with global risks including the prolonged Russia-Ukraine war.
“The association is, nevertheless, confident the industry will see a demand growth of 10% to 12% in 2022,” he said.
“As a consequence of increased global healthcare awareness and enhanced regulatory requirements, such demand will grow by 12% to 15% in 2023,” he said.
The global demand for gloves is estimated at 399 billion in 2022, and Malaysia is estimated to produce 240 billion gloves in 2022, according to Margma’s report.
https://www.freemalaysiatoday.com/category/business/local-business/2022/08/03/malaysia-likely-to-export-rm23-bil-worth-of-rubber-gloves-this-year/

MARGMA's prediction in Mar 2022:
Malaysia is set to retain its position as the world’s number one rubber glove-producing nation in 2022 with export volume likely to expand by between 12 and 15 per cent, according to the Malaysian Rubber Glove Manufacturers Association (MARGMA).
It anticipated global demand for rubber gloves for the year to be at 452 billion units, or 14,333 gloves used every second.
https://www.mida.gov.my/mida-news/malaysias-rubber-glove-exports-projected-to-grow-12-15-pct-in-2022/

MARGMA's prediction in May 2021:
Even with global production expected to ramp up to 420 billion this year from 380 billion last year and annual growth of 10-15%, Supramaniam said excess demand could run into 2023. Malaysia expects to supply 280 billion, or 67%, of that increased global supply.
https://www.reuters.com/article/us-malaysia-gloves-idUSKBN2B709W/

MARGMA president Dr Supramaniam Shanmugam is just an industry cheerleader. You can check the accuracy of his past predictions.

From FY18 (Apr 2017) to 2QFY24, RCE eps on adjusted basis has grown at a compound annual growth rate of 9.4%.
During the same period, dividend has grown at CAGR of 32%! This is achieved as payout ratio increases from 27% in FY2018 to 76% in the last 4 quarters. Last year there was also a special dividend.

In short, the impressive dividend has increased on the back of strong earning growth, compounded by trippling in payout ratio. Moving forward, however, payout ratio is likely to plateau as it's already at 76%.

As for earning growth, there are two sources:
1) Percentage of Non-interest income (NII) as total operating income has increased from a low point of 16% to 33% now, helped by higher interest earned and customer refinancing. In other words, NII has increased a very fast pace in the last few years. It has to slow at some point. But I haven't seen it slowing.
2) The last four quarters have seen financing receivables growing at 6% to 8%, much higher than the 2% to 3% growth in FY21 to FY22. This is the fundamental source of growth. The growth rate is higher than banking sector, exceeding the management promise.

On asset quality. Over the last 3 quarters, GIL ratio stays below 4%. Credit cost on last 4Q basis remains at acceptable 133 basis points. So far so good.

I will continue to hold and keep an eye on performance. But I won't buy.

@DividendGuy67, you touched on Heineken and Carlsberg. Instead of discussing here, I PM you. Refer to the little blue icon MQ Chat at the top right of your PC screen. Feel free to share your insight there or at HEIM or Carlsberg forums.

Dividend yield = dividend/ price.
The nominator "dividend" is based on historical dividend. The amount remains fixed until the next dividend is declared.

However, the denominator "price" is forward looking. Price declines in anticipation of future profit/ dividend decline.
As future prospect dims, and share price declines, while dividend remains constant for the time being, the dividend yield appears to go higher. Dividend yield stays high until the next round of dividend cut.

Next the price declines further, and dividend yield appears high again. The process repeats.
It's a downward spiral. But the dividend yield appears high throughout the decline.

Like it or not, this is the situation with BAT for the last 7 to 8 years. But not for Heineken or Carlsberg. At least not yet.

Note that I don't have any interest in BAT, be it short or long. I'm attracted here by the comments of DividendGuy67.

@dumbMoney, your analysis on Insas owner's possible intention and defense strategy is very good. It's a lot clearer to me now. Thumbs up.