Highlights
KLSE: DAIBOCI (8125)       DAIBOCHI PLASTIC & PACKAGING INDUSTRY BHD MAIN : Industrial Products
Last Price Today's Change   Day's Range   Trading Volume
2.71   0.00 (0.00%)  2.71 - 2.72  326,000
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Financials


Market Cap: 889 Million

Market Cap 889 Million
NOSH 328 Million

Latest Audited Result:  31-Jul-2020

Latest Audited Result: 31-Jul-2020
Announcement Date 17-Nov-2020
Next Audited Result: 31-Jul-2021
Est. Ann. Date: 17-Nov-2021
Est. Ann. Due Date: 27-Jan-2022

Latest Quarter:  31-Jul-2021 [#4]

Latest Quarter: 31-Jul-2021 [#4]
Announcement Date 28-Sep-2021
Next Quarter: 31-Oct-2021
Est. Ann. Date: 16-Dec-2021
Est. Ann. Due Date: 30-Dec-2021
QoQ | YoY   -13.36%  |    -20.83%

Annual (Unaudited) ( EPS: 14.34, P/E: 18.90 )

Revenue | NP to SH 601,869  |  47,029
RPS | P/RPS 183.54 Cent  |  1.48
EPS | P/E | EY 14.34 Cent  |  18.90  |  5.29%
DPS | DY | Payout % 2.00 Cent  |  0.74%  |  13.92%
NAPS | P/NAPS 0.85  |  3.19
YoY   -1.34%
NP Margin | ROE 7.74%  |  16.90%
F.Y. | Ann. Date 31-Jul-2021  |  28-Sep-2021

T4Q Result ( EPS: 14.34, P/E: 18.90 )

Revenue | NP to SH 601,869  |  47,029
RPS | P/RPS 183.54 Cent  |  1.48
EPS | P/E | EY 14.34 Cent  |  18.90  |  5.29%
DPS | DY | Payout % 2.00 Cent  |  0.74%  |  13.92%
NAPS | P/NAPS 0.85  |  3.19
QoQ | YoY   -4.74%  |    -1.34%
NP Margin | ROE 7.74%  |  16.90%
F.Y. | Ann. Date 31-Jul-2021  |  28-Sep-2021

Annualized Result ( EPS: 14.34, P/E: 18.90 )

Revenue | NP to SH 601,869  |  47,029
RPS | P/RPS 183.54 Cent  |  1.48
EPS | P/E | EY 14.34 Cent  |  18.90  |  5.29%
DPS | DY | Payout % -
NAPS | P/NAPS -
QoQ | YoY   -7.53%  |    -1.34%
NP Margin | ROE 7.74%  |  16.90%
F.Y. | Ann. Date 31-Jul-2021  |  28-Sep-2021



Business Performance

Business Performance (By Quarter)

Trailing 4 Quarters Trailing 8 Quarters
Available Quarters 4 Quarters 8 Quarters
Continuous Quarters Of Revenue Growth 0 / 4 0.00% 0 / 8 0.00%
Total Positive Profit Years 4 / 4 100.00% 8 / 8 100.00%
Continuous Quarters Of Positive Profit 4 / 4 100.00% 8 / 8 100.00%
Continuous Quarters Of Profit Growth 0 / 4 0.00% 0 / 8 0.00%
Continuous Quarters Of Adjusted EPS Growth 0 / 4 0.00% 0 / 8 0.00%
Total Dividend Years 1 / 4 25.00% 3 / 8 38.00%
Continuous Quarters Of Dividend 0 / 4 0.00% 0 / 8 0.00%
Continuous Quarters Of Dividend Growth 0 / 4 0.00% 0 / 8 0.00%
Continuous Quarters Of Adjusted Dps Growth 0 / 4 0.00% 0 / 8 0.00%
Average ROE 4.33% 4.69%
Average Net Profit Margin 7.66% 7.67%

Business Performance (By Year)

Last 5 Financial Years Last 10 Financial Years
Available Years 5 Years 10 Years
Continuous Years Of Revenue Growth 0 / 5 0.00% 0 / 10 0.00%
Total Positive Profit Years 4 / 5 80.00% 9 / 10 90.00%
Continuous Years Of Positive Profit 4 / 5 80.00% 4 / 10 40.00%
Continuous Years Of Profit Growth 0 / 5 0.00% 0 / 10 0.00%
Continuous Years Of Adjusted EPS Growth 0 / 5 0.00% 0 / 10 0.00%
Total Dividend Years 4 / 5 80.00% 9 / 10 90.00%
Continuous Years Of Dividend 4 / 5 80.00% 4 / 10 40.00%
Continuous Years Of Dividend Growth 0 / 5 0.00% 0 / 10 0.00%
Continuous Years Of Adjusted Dps Growth 0 / 5 0.00% 0 / 10 0.00%
Average ROE 10.39% 11.50%
Average Net Profit Margin 4.45% 5.93%

Key Result

Key Result

T4Q Annualized Annual (Unaudited) Last 10 FY Average Last 5 FY Average
Revenue 601,869 601,869 601,869 411,080 470,247
NP to SH 47,029 47,029 47,029 25,563 25,447
Dividend 6,547 6,547 6,547 14,056 8,969
Adjusted EPS 14.34 14.34 14.34 7.80 7.76
Adjusted DPS 2.00 2.00 2.00 4.29 2.74

NP to SH = Net Profit Attributable to Shareholder, EPS = Earning Per Share, DPS = Dividend Per Share

All figures in '000 unless specified.

EPS & DPS's figures in Cent.


Growth

Growth (By Quarter)

LQ QoQ LQ YoY CQ YoY LQ vs Average of T4Q LQ vs Average of T8Q
Revenue -10.92% -14.15% -2.81% -11.13% -12.39%
NP to Owner -13.36% -20.83% -1.34% -24.41% -24.92%
Dividend 0.00% 0.00% -60.00% 0.00% 0.00%
Adj. EPS -13.36% -20.83% -1.34% -24.41% -24.92%
Adj. DPS 0.00% 0.00% -60.00% 0.00% 0.00%

LQ = Latest Quarter, CQ = Cumulative Quarter, T4Q = Trailing 4 Quarters, T8Q = Trailing 8 Quarters, QoQ = Quarter on Quarter, YoY = Year on Year

Growth (By Year)

T4Q vs LFY T4Q vs AL5FY T4Q vs AL10FY AQR vs LFY AQR vs AL5FY AQR vs AL10FY LFY YoY LFY vs AL5FY LFY vs AL10FY
Revenue 0.00% 27.99% 46.41% 0.00% 27.99% 46.41% -2.81% 27.99% 46.41%
NP to Owner 0.00% 84.81% 83.97% 0.00% 84.81% 83.97% -1.34% 84.81% 83.97%
Dividend 0.00% -27.00% -53.42% - % - % - % -60.00% -27.00% -53.42%
Adj. EPS 0.00% 84.81% 83.97% 0.00% 84.81% 83.97% -1.34% 84.81% 83.97%
Adj. DPS 0.00% -27.00% -53.42% - % - % - % -60.00% -27.00% -53.42%

T4Q = Trailing 4 Quarters, T8Q = Trailing 8 Quarters, AL5FY = Average of Last 5 Financial Years, AL10FY = Average of Last 10 Financial Years, LFY = Latest Financial Year AQR = Annualized Quarter Result, YoY = Year on Year

Analyze this stock with MQ Trader system
  leehs8 likes this.
 
iknownuts So fast sold most of your wb already? At 40c i presume?



Posted by dragon328 > Oct 4, 2021 5:26 PM | Report Abuse

@iknownuts, thanks for the note on warrant.

I do not have much daibochi wb left in my portfolio but more mother shares for long term holding.
05/10/2021 4:06 PM
dragon328 I did not manage to sell any daibochi-wb at 40 sen lah, that was only 100 shares traded at 40 sen last week. I sold most at 0.34-0.365 but still keep some till year end. This balance wb is considered free already.
05/10/2021 5:36 PM
BeatySwalls My oh my, observatory. Apollo's articles https://www.apolloinvestment.com/whatsnew.htm were superb. chuckles. A first reading a raging diatribe by an activist investor who knows her stuff. (Pirates of the Dai-bo-chi?? lol)

iknownuts twas refreshing reading the suaveness of Datuk David Goh https://www.theedgemarkets.com/article/david-vs-goliath-ccb-privatisation-stalemate

Swooning at the smoothness. "I don’t want to portray myself as a kingmaker or anything" "I am not here to make enemies, and I am not here to scuttle somebody’s deal" "If you offer me a good price, I will sell it to you" "But even if you don’t, that’s fine with me too" "We are all businessmen who look at the bottom line, not to make foes"

An exciting contrast, Crazy Rich Asian-esque businessman meets Angry Rich Brit's nasty condemnations. Most thrilling both are old time Asian specialists. One chose the path of Asian humility and diplomacy. The other, the path of raging activism in developing EMs. Both must have amazing NAV to show.
08/10/2021 7:31 PM
observatory Welcome to i3 @BeatySwalls.

I don’t know anything about the Apollo’s Claire Barnes beyond her blog so will refrain from making comment on her personality.

Unfortunately the manager at Samarang doesn't seem to blog as there is limited info on their website. Otherwise I'll share their view too.

I can imagine Claire's words could have irritated Scientex. I also wonder if Scientex is negotiating with those funds now. Perhaps not going well? As a small little minority shareholder of Daibochi, my interest is aligned with Apollo, Samarang and other funds. If they drive a good bargain, I can take a free ride on them. So have to pardon me for any perceived bias.

(P/S: Datuk David Goh is on the news again on last Sat)
08/10/2021 8:40 PM
observatory I track the daily changes on Daiboshi share and warrant ownership. The status as of 8-Oct:

Total shares: 327.372m
Scientex: 218.871m or 66.86% (before 61:88%)
Apollo: 32.233m or 9.54% (before 9.38%)
Samarang: 17.206m or 5.26% (before 5.06%)
Open market purchased by others since 14-Sep: 4.816m or 1.47%


Total warrant: 27.297m
Scientex: 3.163m or 11.59% (before 4.25%)
Apollo: 4.894m or 17.93% (before 9.37%)
Samarang: 1.608m or 5.89% (before 5.89%)
Open market purchased by others since 14-Sep: 15.643m or 4.78%


Total share + warrant: 354.669m
Scientex: 222.034m or 62.60% (before 57.45%)
Apollo: 36.127m or 10.19% (before 9.38%)
Samarang: 18.814m or 5.30% (before 5.12%)
08/10/2021 8:41 PM
BeatySwalls Not at all a comment on her personality. The countries she has invested in can use her brand of vocal activism. Puts her money where her mouth is. In another example of her outspoken nature, she has called on fellow-investors to cut down on use of plastic on 4 October 2021. A persistent mess that afflicts the countries she has invested in. Not surprising given her zeal for diving and maritime archaeology https://www.apolloinvestment.com/cbarnes.htm

observatory > Oct 8, 2021 8:40 PM
Welcome to i3 @BeatySwalls.
I don’t know anything about the Apollo’s Claire Barnes beyond her blog so will refrain from making comment on her personality.
10/10/2021 9:11 PM
observatory As a minority shareholder of Daibochi, the only activism I care about is for fund managers like Claire to stop Scientex from buying up the company for a song at the moment when the economy is picking up and the RM100 million capex is about to bear fruit.

Over the last four weeks Scientex managed to acquire not more than 5% shares. At current rate it either has to pay up, or perhaps even better for long term shareholders, to abandon the privatization altogether so that minorities can share in Daibochi’s growth.
10/10/2021 10:43 PM
iknownuts https://www.bursamalaysia.com/market_information/announcements/company_announcement/announcement_details?ann_id=3200695

Independent Adviser deems offer FAIR and REASONABLE

Using DCF method only values diabochi at RM2.04 to RM2.17. Talks about counter being illiquid.

Good luck guys, i have already submitted my acceptance to scientex. I will consider revisiting this counter again once price goes nearer to the vwap/IA valuations.
14/10/2021 11:39 AM
dragon328 There is nothing much to analyse in the Independent Adviser report. There is a vaccuum of information in how they derived the fair value.

The only info stated is the assumed cost of equity of 9.13% and perpetuity growth rate of 2.0%-2.5%, both are within ballpark estimates. However, there was nothing mentioned on assumptions made in the projected free cash flows of the company and how many years of FCFE was taken into account in the calculation of the present value.

It is totally unclear as to whether the Independent Advisor has taken into account the planned expansion in their projected free cash flows. If they had just taken the free cash flows of the company in the past 2 years to project a nominal growth of 2.0%-2.5% for the next few years, then it will understate the expansion growth effort of the company.
14/10/2021 1:06 PM
dragon328 I just reworked out the fair value using the assumed cost of equity Ke of 9.13% and perpetuity growth rate, g of 2.0% and the stated formulae in the Independent Advisor report. To get the stated fair value of RM668m, they have assumed annual free cash flows of less than RM50m:

FCFE FY2022 2023 2024 2025 2026
RM m 47.3 48.3 49.2 50.2 51.2

Present Value of projected FCFE = FCFE / (1 + Ke)5 = RM190.2m
Present Value of Terminal Value = FCFE for FY2026 * (1 + g) / (Ke - g) * 1 / (1 + Ke)4.9 = RM477.4m

Fair Value = RM190.2m + 477.4m = RM667.6m

As I pointed out earlier, Daibochi's free cash flows for FY2021 already amounted to RM70m based on its Q4FY2021 quarterly results.

It is hence totally unreasonable to assume annual free cashflows of below RM50m for FY2022 - 2026, even lower than actual FY2021 FCF. The Independent Advisor has also clearly ignored the ongoing expansion plan and the potential earnings growth in next few years.

If I rework the fair value with assumed FCFE of RM70m for FY2022 then increasing 2% p.a. to FY2026, the fair value will be RM987.9m or RM3.01 per share.

If I assume the current expansion will result in 25% higher FCF for FY2022 and 50% higher FCF for FY2023 then increasing at 2.0% p.a. to FY2026, then the fair value would be RM1,439m or RM4.39 per share.

Investors pls beware of the huge disparity in valuation by tweaking the assumptions and do not take the face value given by Indenpendent Advisor as granted.
14/10/2021 1:43 PM
dragon328 It appears to me that the Independent Advisor might have taken some of the expansion capex in reducing the free cash flows of the company in the calculation of the fair value.

My estimate is a capex amount of RM20-23m that has been used in suppressing the annual free cash flows of the company. This basis is totally fraud. The reason of embarking on an expansion plan is naturally to grow the company earnings and cash flows in future years, but the expansion capex incurred in FY2020-2021 has been used to its advantage of reducing the projected annual free cash flows for FY2022-2026 in the fair value calculations.

So cheeky yet clumsy!!
14/10/2021 2:24 PM
observatory The IA report is out. Instead of just swallowing the report output without thinking, it's worthwhile to examine its method and assumptions behind.

The first thing I note is the IA report uses discounted cashflow (DCF) method based on free cashflow to equity (FCFE).

Anyone with a basic understanding of DCF will know that, given this method projects cashflow into the infinity, any result can be produced with slight tweaks of the input values. A good example is RHB reports for glove stocks that are DCF based. Last year using the DCF method their reports chased the glove stock price up. This year using the same DCF method the reports are chasing the price down (albeit with a new analyst now).

DCF is highly sensitive to three variables -- the cost of equity; the terminal or perpetual growth rate; and the starting cashflow assumption.

The first variable, the cost of equity is found on page 14 of the IA report. The COE of 9.13% derived from CAPM method come across as reasonable to me. So no issue there.

Next the terminal or perpetual growth rate. At page 16 it’s set as 2% to 2.5%. This values are not unusual. But note it’s applied for the period FYE 31 July 2026 onwards. In other words, the “high” growth phase of Daibochi will end in 5 years. Daibochi annual growth will settle to 2% to 2.5% from Year 6 onwards, perpetually.

Given valuation is performed in nominal term, and given the average inflation rate is about 2%, the assumption is Diadochi perpetual growth rate in real term is only 0% to 0.5%. In other words, this report assumes Daibochi become stagnant after 5 years!

This is in the context of Daibochi business selling to F&B MNCs which correlates with growth of population and prosperity. Malaysia is an emerging market with young population. Despite declining GDP growth rate over the decades, I believe Malaysia could still achieve GDP growth rate of around 3% for many years. And that 3% GDP growth rate is in real term. Translating to nominal term it’s about 5%. Furthermore Daibochi is now tapping into the even faster growing neighboring ASEAN countries.

While I won’t say the assumption of near stagnant growth just after 5 years in a fast-growing region is wrong, but is the assumption overly pessimistic?

The final factor is the initial conditions of free cash flow. By assigning too low/ high a starting point, the subsequent year FCFs, which is projected into infinity, could be grossly under/ over-estimated. So I want to see how the report treat Daibochi's >RM100m investment in the last two years. Rightfully these investments should translate into high FCF in subsequent years, where operating cashflow grows but investment is back to the low maintenance capex level.

To my disappointment I don’t find any details! I have expected the report to provide a table to lay down the 5-year calculation, outlying the annual projected earning, net capex and working capital. But none is given! Quite surprise indeed for a long report like this. (To RHB credit it always provide its DCF working for readers)

I notice @dragon328 has done a reverse engineering of the annual FCF assumptions.

Given I've done a FCFE for Daibochi quite some time back, later I'll bring up my old spreadsheet and do a smilar exercise too.

In short, I find the IA report does not provide sufficient transparency in its calculation. Until I can convinced myself otherwise with my reverse calculation, I will still stick to my PE calculation method shared earlier which assumes a fair value of 18.6 times (past 10 year mean PE) * post pandemic forward EPS of close to 20sen.
14/10/2021 2:50 PM
observatory The IA report withholds the cashflow details from us. But luckily a few numbers are there to help working it backward to crack open this black box.

The first equation is shown in page 16, where terminal value (in present term)
= [ FCFE_2026 * (1+g) / (Ke-g) ] * ( 1 / (1 + Ke)^4.9 )

where
FCFE_2026 is the free cash flow (FCF) for FY2026 before discount
Ke = cost of equity = 9.13% or 0.0913
g = perpetual growth rate, where two scenarios are provided, which are 2% (0.02) or 2.5% (0.025)

As mentioned in Page 16, when g = 0.02 and 0.025, terminal value (in present term) is RM539.68 million and RM583.23 million respectively.

Substituting the number into first equation, it’s found that FCFE_2026 = RM57.883 million. (Note: this value has not been discounted to present value).


~~~~~~~~~~~~~~~~~~~~~~~~~


There is also a second equation in Page 17, where

Value of the Daibochi Group’s business
= Present value of projected FCFE based on the Future Financials
+ terminal value (in present term)

A simple explanation of this second equation is Daibochi value = first 5 years value + value from Year 6 to infinity.

Page 17 also informs that when terminal value (in present term) = RM539.68m and RM583.23m respectively, the corresponding values for Daibochi business is RM668.25 million and RM711.80 million respectively.

Again, assigning those values to the second equation, we find that present value for the first five years is RM128.57 million.


~~~~~~~~~~~~~~~~~~~~~~~~~



Now take a moment to think about this figure. A total free cash flow of just RM128.57 million (at PV) from FY22 to FY26. On average, the FCF per year is less than RM26 million!

Basically, the report expects little to come from the more than RM100 million capex spent over the past two years.

That presents two possibilities. First, the report is right. It also means the board has destroyed shareholder value with >RM100m capex since the adviser projects to yield miserable future return. It's ironic that the board accepts the findings.

The other possibility is, as I firmly believe, the report has made fundamental mistakes in its cash flow projection. But the board endorsed it as one may say. Of course the board endorsed it. I just don't want to dwell into that. Just wish this privatization saga is over soon and the board and management get back to their business of delivering value for shareholders!
14/10/2021 11:41 PM
observatory I’m not going to stop yet. I want to work out the free cash flow assumed in each and every year from FY22 up to FY26.

It’s incredible that this report, which is paid by Daibochi shareholders, doesn’t reveal how they arrive at their numbers. Wonder why? Blame it on commercial secrecy, perhaps?

Nonetheless I’ve managed to reconstruct based on some trial and error on spreadsheet.

There are two pieces of information which we have worked out earlier:
(1) The undiscounted FCFE in FY2026 is RM57.883 million
(2) The total FCFE from FY22 to FY26, discounted to present value, is RM128.57 million.

I observe that the FCFE in the last year FY2026 is quite large, yet the total over 5 years (in PV term) is rather small. This could only mean the adviser starts with a very small number, and then inflate the number with high growth rate towards the end of the 5 year period.
(Note: It cannot start with a large FCFE like RM40 million in the first year, because the 5th year FCFE has to be RM58m and the 5 year total is constrained at RM129m)

This is another crazy assumption. Recall on Year 6 onwards they assume Daibochi growth rate will collapse to 2% to 2.5% forever, which is practically stagnant after adjusted for inflation!

I put forward two scenarios on how they could have grown the numbers. In the first scenario, the FCFE is assumed to grow from RM17.45 million at a constant rate of 35% annually (I know this is crazy)!

(In million RM)
Year FCFE FCFE @PV
FY22 17.450 16.130
FY23 23.558 19.954
FY24 31.803 24.685
FY25 42.934 30.536
FY26 57.960 37.775
Total N/A 129.080


~~~~~~~~~~~~~~~~~~~~~~~~~


Of course, free cashflow does not grow linearly. It depends on the different growth rates in earning, net capex, working capital and how long the capacity expansion still has to run. But all these assumptions are kept away from us.

So for illustration purpose, I massage the numbers to assume major capex spending for three more years (!), and after that, with magic, there is a 180% jump in FCF in Year 4. This is what I get:

(In million RM)
Year FCFE FCFE @PV
FY22 20.000 18.488
FY23 20.000 16.941
FY24 20.000 15.524
FY25 56.000 39.830
FY26 57.883 37.725
Total N/A 128.506


~~~~~~~~~~~~~~~~~~~~~~~~~


In both scenarios, the numbers and assumptions look suspect. It doesn’t match my understanding based on Daibochi past financial info.

But I’ll leave this cracked open black box here for time being. I’ll come back with more comments later.
14/10/2021 11:49 PM
dragon328 @observatory, many thanks for the relentless effort to analyse the numbers behind the IA fair value.

I missed out on the terminal value of RM539.68 in my rushed calculations yesterday. I agree with your derived number of RM57.883m for FY2026 FCFE.

My guess of the numbers for FCFE in FY2022-2026 may come out more or less like what you had below. The common trick that might have been used was to deduct the operational cashflows of the company in FY2022-2023/2024 by the announced capex figure of RM100m to get a depressed set of free cashflows for the front years.

Again, to me any such basis is wrong for a number of reasons:
1) a majority part of the RM100m capex has been spent in FY2020-FY2021 before the takeover offer was made by Scientex, i.e. RM25.7m in FY2020 and RM64.0m in FY2021 ended July. There should not be much major capex left for FY2022-2024

2) In the DCF calculation, it is fair to deduct the operational cashflows by capex spent to derive the free cashflows. However, it does not appear to me that any benefit of the expansion capex has been reflected in the IA's cashflow projections. The implied FCFE of RM57.883m in FY2026 is even lower than the actual operational cashflows of RM70m in FY2021A. This is totally unreasonable as it suggests that the planned expansion plan by the management of Daibochi would be simply punitive in wasting shareholders' money without generating any higher returns in future.

3) If the intention of the IA was to derive the fair value of the company at current state (without any major expansion), they should have just used the normal maintenance capex of the company which averaged less than RM10m every year. It has somewhat become highly punitive to include the major capex of RM100m but not any benefit (increased earnings) of the capex in the calculations of the fair value.


______________________________________________________________________
So for illustration purpose, I massage the numbers to assume major capex spending for three more years (!), and after that, with magic, there is a 180% jump in FCF in Year 4. This is what I get:

(In million RM)
Year FCFE FCFE @PV
FY22 20.000 18.488
FY23 20.000 16.941
FY24 20.000 15.524
FY25 56.000 39.830
FY26 57.883 37.725
Total N/A 128.506
15/10/2021 9:40 AM
Syndicates this boss is stingy. if there's revision of offer, he might wait till another 6 months to do it so that he will be free from obligation to pay additional price to those who have accepted the offer in this round.
15/10/2021 10:37 AM
dragon328 Somehow my previous posts got all blocked.
15/10/2021 11:57 AM
dragon328 I have the same feeling. Looking at the desperate moves and pathetic valuation by the IA, I doubt there will be any revised offer at all.


Posted by Syndicates > Oct 15, 2021 10:37 AM | Report Abuse

this boss is stingy. if there's revision of offer, he might wait till another 6 months to do it so that he will be free from obligation to pay additional price to those who have accepted the offer in this round.
15/10/2021 12:07 PM
dragon328 this is frustrating. Posting many times still not successful.
15/10/2021 12:24 PM
dragon328 can only post one sentence by sentence
15/10/2021 12:25 PM
dragon328 In trying to impress the top boss, the management of Daibochi has overdone it in suppressing the fair value of the company.
15/10/2021 12:26 PM
dragon328 It has come to an impression that the management of Daibochi thinks that the RM100m capex expansion is a complete waste of shareholders' money and will not bring any good to the company in future,
15/10/2021 12:30 PM
dragon328 or they think the fair value of the company should be just at RM2.10 level and Scientxx is really dumb in offering RM2.70.
15/10/2021 12:40 PM
dragon328 The privatisation saga is not bringing any good to Daibochi shareholders but indirectly revealed the narrow-minded corporate mindset and compromised integrity of the management.
15/10/2021 12:42 PM
dragon328 It somehow shows similar corporate culture in the parent itself, trying to win it all and not creating any win-win situation for stakeholders. I reckon that companies with such corporate mindset will not prevail in long run.
15/10/2021 12:43 PM
dragon328 One would imagine what sort of affordable houses one would get from a developer who always want to win it all. And how would Daibochi continue to win the trust and maintain good relationship with its long term MNCs if it tries to win it all?
15/10/2021 12:45 PM
dragon328 I am really disgruntled by the privatisation manaeuvres of Scientex and despise the cooperation by Daibochi management to only fulfill the agenda of its parent company, failing to protect the value of its other shareholders.
15/10/2021 12:47 PM
dragon328 I am afraid such a company management will not be generating good values for the company shareholders in long run, with such corporate mentality and such a parent company tying its hands in managing the company.
15/10/2021 12:49 PM
dragon328 I choose to sell off all my Daibochi holdings at RM2.71 in the open market rather than accepting the offer from Scientex.

I switch to other companies with better management.
15/10/2021 12:50 PM
observatory @dragon328,
I have similar experience with i3 forum before where long comments don’t get posted. The problem usually resolves by itself after some short comments are posted or after a day. This crankiness reminds me of the early incident here where a new forumer with opposing view claimed a conspiracy to censor him!

Understand your frustration. More about it in my next comment. But first congratulatie again for realizing profit!
15/10/2021 5:15 PM
dragon328 Not being able to post long comments here is just a small frustration. A much bigger frustration is to see a great company that I have been following for years going nowhere with its management not creating values for its shareholders anymore but focusing on short term gains for themselves and parent company.
15/10/2021 5:26 PM
observatory Daibochi board (minus the Scientex representative who abstained) seems to deny their own good efforts when they endorsed a report that downplays the contribution of the RM100m investment which expands company capacity by 60%.

However this is not entirely unexpected. Valuation involves judgement. There is no strictly right or wrong answer. Probably some unspoken norms are involved. Besides, few in the corporate world would like to be the heroes insisting they will deliver even better results than needed, especially when the boss is not asking for that answer!

Below is how I imagine it could possibly happen. Not saying that it did. Just a probable scenario based on my own observation in the corporate world.

First when the outside adviser won the job they already got the picture. As part of their methodology, the adviser then asked the board and management for their inputs involving forecasts and targets. Typical management will rather err on the side of being conservative, especially if the boss is not demanding! The advisers then fed those conservative input into their own DCF black box and out came the result. After some beautification next they presented to the board and sought endorsement. How could the board dispute the validity of experts' output that are produced by following the best-in-class methodology? Little by little, this is probably how the adviser report get produced with the good and genuine effort of everybody.

Of course, as shareholder then it becomes my job to examine their output and comment on it, criticizing it where it deserves. Not that it will make a difference as probably everyone of us have also made up our mind, with or without this report. This is just for the fun of it!

And to be fair, I also want to recognize Daibochi board for not engaging in any kitchen sinking with last quarterly results. A big impairment could have put fears to some minority shareholders.

While they may have given the appearance of siding with the majority shareholder in the IA report, moving forward I believe the interests of Scientex and other shareholders are aligned. The board and management have to deliver the fruits of the RM100 million investment regardless of the forecast given to the adviser. Scientex which owns 2/3 interests will be more anxious than any other shareholders that Daibochi delivers!

Besides the value of Daibochi, as discuss before, lies in its strong portfolio of MNC clientele which cannot be easily replaced or replicated. For that I will overlook any perceived lack of impartiality which hopefully is just one-off.
15/10/2021 5:28 PM
observatory Now I want to take a look from the interests of Scientex.

It’s probably clear by now that, in its current form, the privatization will not happen. However, it's unclear whether Scientex will revise its offer within the 45 days period; and if not, will it return 6 months later.

But from a more strategic perspective, I note there is little synergy between Scientex's affordable housing business and its packaging businesses (other than some capital reallocation). If one part of the business starts to slow down, the whole group could suffer a conglomerate discount. Separate listings could fetch higher valuation and offer greater flexibility.

In fact several weeks ago The Edge has asked Scientex that after privatizing Daibochi would it consider listing the packaging business.

If Scientex wants to pursue this option, then it will have strong desire to privatize Daiboch first; consolidate it; and finally spin off the whole packaging division for a much better price in the future.

If my assumed rationale is right, Scientex will be likely to offer a fair price eventually. The remaining 1/3 shares in Daibochi is a mere fraction of the entire plastic division. Bargaining and squeezing minorities over that 1/3 shares risks missing a bigger goal.

Timing wise, a revised offer may not be immediate. However it probably have to act before Daibochi expansion starts bearing fruits and share price moving up.

Of course, different shareholders have different objectives, risk profile and investment horizons. Just take the action best suited to own interest. Personally I will continue to hold, with or without a revised offer, and plan to top up again should price weakens in the future.

In fact Daibochi is just a small part of my diversified portfolio. Any revised offer won’t make me rich, and any decline in price won’t make me poor either. Somehow the asymmetry in information and power that I see just fires up my interest to learn more about this privatization game and share my view here. The knowledge gained in the process will be my biggest reward.
15/10/2021 5:47 PM
observatory Today filing with Bursa shows that Scientex Chief Operating Officer for Packaging Business, Mr. Choo Seng Hong, has accepted his company offer totaling 186,800 shares.

Past filings under the category “General Announcement”, sub category “Dealings in Listed Securities” show that Mr. Choo has accumulated his Daibochi shares in April 2020, the time of market panic, at slightly under RM2 per share. Mr. Choo didn’t sell a single share even in July 2020 when share price touched RM3.

Mr. Choo is another example of Scientex insider bullish on Daibochi prospect (although he accepts the offer now, which is understandable)

Congratulate Mr. Choo for his handsome profit even after netting off a small loss in warrants.
15/10/2021 9:45 PM
Multibagger @observatory - "The knowledge gained in the process will be my biggest reward."

Totally agree with you, that is valuable in investing journey as it will sharpen our skills and thought process in evaluating the merits of corporate decision by management.
16/10/2021 5:42 AM
EVEBITDA will scientex be prepared to hostile minorities to approve future RPT at next AGM. or sacrifice good business decision for EGO purpose to fight minorities?
17/10/2021 10:51 AM
EVEBITDA if apollo and samarang rejects RPT resolutions, Scientex cant capitalise their holding in Daibochi. no added value.
17/10/2021 10:53 AM
EVEBITDA also why did Scientex offer a premium to warrant holders? another long term fund public mutual funds hold abt 8%.. lets see their position on this saga.
17/10/2021 10:58 AM
iknownuts If apollo/samarang rejects the rpt resos, this will show that its samarang/apollo’s ego talking. i see themselves shooting their own feet if they choose this route.

Premium to warrant was most likely cos a pac bought the warrants at 31.5c earlier so they are bound to offer to buy at that floor price. Can see from the daily queue that scientex does not even bother to buy any warrants at 32c, which sort of tells you which direction they are heading in terms of “revision of offer”

Posted by EVEBITDA > Oct 17, 2021 10:53 AM | Report Abuse

if apollo and samarang rejects RPT resolutions, Scientex cant capitalise their holding in Daibochi. no added value.
17/10/2021 11:50 AM
observatory @EVEBITDA, welcome to i3.

PJ Lim and the fund managers are veterans. If they can’t strike a deal now, they will move on and focus on their common interest which is to make Daibochi successful. Scientex can revisit the privatization in future if it sees a strategic need to consolidate Daibochi before listing its plastic division.

Unless one side tries to take unfair advantage, I don’t see why the fund managers should vote against RPTs. Not to mention it takes at least two of out of three (Apollo, Samarang and Public Mutual) to block the resolution. The current shareholding structure will provide the necessary safeguard.
17/10/2021 12:31 PM
observatory Scientex doesn’t purchase warrants now probably because any volume it can get doesn't make much difference. Even mother share acquisition appears to go nowhere and is stuck at 67%. Whatever small volume sold in the open market recently has been mopped up by someone else at RM2.71.

Looking back past filings, Scientex did buy warrants aggressively at the beginning. It acquired 1.20m, 0.76m and 0.04m on 9/14, 9/15 and 9/20. It stopped after Apollo acquired the necessary 10% blocking shares through warrant purchase.
17/10/2021 12:50 PM
EVEBITDA thank you @ observatory and iknownuts for your inputs. under good governance i agree with both your comments. hope sceintex plays fair with minorities of daibochi..esp with RPTs in future.
17/10/2021 3:41 PM
EVEBITDA though we know the independence of the reports were not independent after all based on all your comments and workings. good governence and independence is always impotant to achieve the desired results or else the saga may just continue.
17/10/2021 3:43 PM
EVEBITDA @iknownuts.. thank you for highliting thats one Mr.Chua bought the warrants at 31.5 sen within 6 mths prior to the offer.
17/10/2021 3:49 PM
observatory @EVEBITDA, to be fair, although Scientex has tried to snap up Daibochi on the cheap while the business is depressed by the pandemic, and before the major capex has started bearing fruits, I don’t see any major governance issue here.

Scientex just behaves opportunistically, especially with its implicit threat of delisting which has failed miserably. Ultimately Scientex is bound by the listing rules. Other major minority shareholders consisting of professional fund managers will provide the necessary check and balance.

We don’t need to hope Scientex to play fair on future RPTs. Now everyone will scrutinize future RPTs and closely monitor the gross margin. As you’ve suggested, any abuse in RPT could lead to these fund managers blocking future resolutions.

From self interest stand point, Scientex owns 2/3 interest in Daibochi. Any unfair gain by Scientex will be offset by a 2/3 loss at the other end of the transaction. A successful RM7 billion enterprise like Scientex will be smart enough not to risk reputation damage by abusing the remaining 1/3 of a small RM900 million subsidiary.

Even if current privatization fails, a successful Daibochi is still in the interest of everyone particularly Scientex, especially if it needs to integrate Daibochi eventually for any strategic reason.
17/10/2021 4:48 PM
EVEBITDA just wondering did Scientex launch a 350M GO to just achieve 68%? or even if public mutal sells its 75%?.. quite sad isnt it? a scientex shareholder will surely wonder why?
18/10/2021 9:33 PM
EVEBITDA at 75% daibochi will be suspended but still listed as they dont meet 10% spread. is that the game plan?.. will that go well with the funds?
18/10/2021 9:36 PM
EVEBITDA is there something else we r missing?.. who is appolo and samarang holding the share for?... just a thought.. hope some one can help.
18/10/2021 9:38 PM
EVEBITDA beside valuation ect.. we also got to think will scientex launch a 350M GO without much thoughts?
18/10/2021 9:39 PM
observatory @EVEBITDA, don’t really understand your questions.

If the concern is about Daibochi stops trading should Scientex acquire >75%, you may check out this list of companies that have failed to meet the public shareholding spread, but continue to be traded for years.

https://www.bursamalaysia.com/market_information/announcements/company_announcement?keyword=PUBLIC%20SHAREHOLDINGS%20SPREAD&cat=&sub_type=&company=&mkt=&alph=&sec=&subsec=&dt_ht=&dt_lt=&per_page=50&page=1

Guess which year was the last company that got delisted for not meeting the spread?

May I know your interest in this matter?

If you’re Daibochi minority shareholder like me, my sincere advice is to take profit now by selling in the open market or taking up Scientex offer.

Holding on to your Daibochi shares is not without risk. Why not move to safer investment for the peace of mind instead of worrying about all the possible scenarios and second guessing other players’ motives?

Or are you just a disinterested observer? Again?
19/10/2021 12:23 AM