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Jaks - Green Light Now?
On 8 December 2018, Mr. Koon Yew Yin wrote that he had fully exit Jaks.
KYY’s exit from Jaks is like dark clouds in the sky being cleared. His presence in Jaks was a time bomb ticking away with Jaks’ owner and minority shareholders living at his mercy. With his financial might, more share acquisitions would push share prices up but share disposals by KYY (for profit taking or realisation of liquid cash for other investments or even margin call) would see share prices falling rapidly or even collapsing. Both scenarios have been evident in Jaks repeatedly during KYY's tenure.
No company owner enjoys the presence of an uninvited largest shareholder. KYY had bought his way into Jaks and it was no secret that he and CEO-cum-previously-largest-owner Andy Ang did not see eye to eye for a long time prior to KYY's exit. KYY had many times requested for a Board seat at Jaks but was never entertained by Andy Ang. In fact, were they even ever at good terms?
With KYY breathing closely down Andy Ang's neck, I believe he had been planning to rid KYY off Jaks for a long time but the financial might of KYY was a hindrance not easy to break. Andy Ang may not be the best CEO anyone could ask for but he is certainly not stupid. Credit where credit is due; it takes a lot of brains to drive the major shareholder of your company out, especially one with the financial clout and stature such as KYY. But succeed did he.
KYY’s mistake was not buying Jaks using share margin financing. His mistake was to have acquired a stake larger than the owner uninvited. It is certainly foolish to invest a huge sum of money, make yourself the largest shareholder, and yet have no control over the company. I believe KYY was confident that he had a larger financial backing than Andy Ang and he never seriously considered that Andy Ang would have taken a kamikaze route driving the share price down to bleed KYY out of Jaks.
Andy Ang had previously tried to dilute KYY's shareholding via issuance of private placement shares but that was a futile exercise as only 10% of the company's existing number of shares can be placed out every 12 months. The Star Media Group's RM50 million bank guarantee fiasco may actually be Andy Ang's saviour. Andy Ang must have had a light bulb moment to ride the negative sentiment of this bank guarantee lawsuit and start driving Jaks' share price down.
While the RM50 million lawsuit continued to be dragged unresolved, Andy Ang proposed a shareholding dilutive issue of warrants. This was a gamble but maybe a calculated gamble. With falling share price continuously triggering rounds of margin call forced selling by KYY it looked like KYY may have been finally shaken. Fear had started to creep into KYY that Andy Ang was on to a previously unthinkable mission. KYY had stopped trying to push the share price up to comfortable levels. He had stopped committing new funds into his Jaks portfolio. Will he then commit new funds to acquire the warrants? The conundrum facing KYY was simple. If KYY wants to maintain his largest shareholder position, he must commit new funds to acquire his allocation of warrants. If he doesn't want to commit new funds, he will see his stake diluted (assuming conversion of warrants in the future). Decision making time.
And then came quarterly reporting period. The recent quarterly report issued by Jaks for the quarter ended 30 September 2018 was odd. There were a few income statement items which look out of place but none more glaring than the sudden drop in revenue recognised from the Vietnam EPC construction billings. It is my personal opinion that the income statement was massaged to show a loss for the quarter. This must have been the straw that broke the camel's back. Andy Ang will continue to drive the share price down as long as KYY remains. It was clear to KYY that his time in Jaks was up.
Maybe negotiations between KYY and Andy Ang took place at the back in the recent past. It must be pointed out that it was very difficult for KYY to dispose off his large stake in the open market. Did Andy Ang manage to find new investors to absorb KYY's disposals? Did Andy Ang manage to arrange for new financing lines to acquire the shares? I don't know. But most of KYY's shares are now in hands that no longer pose a threat to Andy Ang.
What about victor Andy Ang now? He has driven his personal wealth significantly down. The share price of Jaks is now worth about a quarter from a high of RM1.84 a year ago. Seeing how he has timed his move to force a KYY retreat, wouldn't it be in him to also have timed a strong rebound. Immediately ahead is the listing of Jaks' warrants. It doesn't look like KYY had subscribed to the warrants. Based on the depressed share price of Jaks, the subscription price and exercise price of Jaks make the warrants unattractive. Hence many shareholders may not have subscribed for the warrants. The warrants are not underwritten; hence any unsubscribed warrants will go unissued. Andy Ang is said to be subscribing to his portion. After all, he is the promoter. And based on this described scenario, it will serve to increase his shareholding percentage in Jaks. But at current Jaks share price, the warrant subscription will lead to an immediate paper loss. Will Andy Ang push himself into further financial problem or has he any good news in his pockets waiting to form a rounding bottom?
Is KYY’s exit the pivot point for Jaks?
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Be the first to like this. Showing 32 of 32 comments
3iii,
Not much difference even if elephant make love.
You're affected either way.
2018-12-10 16:39
No matter what KYY did, this Jaks is just a joke, nothing to be proud of.
Rubbish is still rubbish, no matter it is in KYY’s hands or not.
Now see if Icon8888 still want to sailang at Jaks warrant as what he declared last night.
His MASTER already surrendered Jaks was a mistake. Let’s see.
2018-12-10 16:51
at the moment market looks horrible......waiting for wallen bufalo students to surface...where are u all value investors?
this jaks not as bad as other fallen angels actually......company raised more than $ 200 m from asset sales and private placements....got bullet to flex one...just waiting for the right time......got to ask Andy....why he report drastic drop in quarterly Vietnam revenue from $ 90 million to $ 60 million to $ 30 million.....manipulation of accounts or what? Steven Ang is quoted by the press that Vietnam 41% completed but they choose to account for 30% only why?
got people manipulate accounts down ah? only hear of people manipulating accounts up.....but some times drastic times needs drastic action......to get cheapest price possible for warrants conversions.....and as above.....
2018-12-10 16:54
When you say green then green lor. If you say red then red lor. Everybody is entitled their own opinion ma. i3 promotes free speech
2018-12-10 16:57
or will this thing drop off the screen like Bumi Armada and other fallen angels?
people scared scared of fallen angels......in these market conditions.
2018-12-10 16:59
I see no trading opportunity....but 3 months money, I am bullish....told KYY my opinion, he wish me luck. how?
2018-12-10 19:04
When KYY ask buy,you better sell.
When KYY ask sell, you better Buy.
Who know he start accumulate.
2018-12-10 22:49
all shareholders lost...KYY, Ang, minorities....
but Company won....
2 private placement about 100 million shares $ 130 million and 1 ongoing warrants placement $ 70 million
sale of assets $ 140 million
total received $ 270 million........ potentially another $ 70 million from warrants
company much stronger than it was in early 2017.
2018-12-11 08:56
seems the local stupid wild uneducated "sakai" indigenous Vietnamese people are smart and intelligent enough to complain that:- Quote "project is moving too slow and company appears to have financial problems" unquote.
////company much stronger than it was in early 2017.///
2018-12-11 09:01
qqq3... creative accounting go both way... lol
when needed, you take some from cookie jar...
when you can spare, you put some into cookie jar for future...
--------------------------------------------------------------------------------
qqq3
got people manipulate accounts down ah? only hear of people manipulating accounts up.....but some times drastic times needs drastic action......to get cheapest price possible for warrants conversions.....and as above.....
2018-12-11 09:17
raja...this jaks, the more u think about it...the better it looks for 3 months money......just have to buy and sit through current sentiments.
2018-12-11 09:20
qqq3...you might be right that Ang might bring Jaks back to 'normal' again next quarter since now he can peacefully focusing on running the company and licking his wound, not to worry losing his company...
But... no one know the future... so I will buy when the trend is favorable...
2018-12-11 09:55
times like this I put on some bufalo cap.
other times, trader caps will do......
this thing need to transfer from trading portfolio to Bufalo portfolio.
from trading perspective, this thing has gone from strong hands to weak hands....
from bufalo perspective, not relevant.
2018-12-11 13:12
Did anyone notice that in his latest article KYY did not once criticise the Vietnam power plant. That means his belief in the capability of the power plant to generate profits is still the same today as it was when he started buying Jaks.
The ultimate factor that drove KYY into investing > RM100 million into Jaks has not changed even at today's depressed share price.
Point to ponder.
2018-12-11 17:45
i3lurker,
If you write about Sslee helping qqq3 a few more times, Sslee may post a blog article to feature you about this.
Also, don't call Sslee weird. He doesnt like it. Hahaha
2018-12-11 18:05
I have verified Icon’s numbers to Jaks quarterly report. His calculated total revenue is also similar to The Edge’s new report. See below.
Extracted from The Edge (5 Dec 2018): As at October, the power plant was 41% completed. The overall construction works for the power plant remain on schedule for completion by the second half of 2020, Ang told The Edge Financial Daily in an interview here. The group has recognised a total revenue of RM590.6 million from the plant’s EPC Contract 2 since 2016.
Depending on exchange rate, the EPC contract has a value of approx RM1.85 billion. As at 30 Sept 2018, RM590.6 million work done is about 32% completed. Meaning 32% completion in 2.5 years.
I repeat. As at 30 Sept 2018, 32% completion in 2.5 years.
CFO Steven Ang said as at October (no exact date mentioned but let us just assume 31 Oct 2018) the construction has been 41% completed. That is 9% completion rate in 1 month. Earlier it took 2.5 years (30 months) to complete 32%. 9% progress work in 1 month is very unlikely. It is therefore very possible that revenue from Q3 2018 has been under-recognised. Significantly.
Will the said revenue be recognised in Q4 2018 then? This 9% revenue amount to RM166 million. At 25% profit margin, that works out to RM42 million profit.
Of course do discount that a portion of this 9% work done was actual work done in Oct 2018.
————-
Posted by Icon8888 > Dec 11, 2018 08:50 PM | Report Abuse
Vietnam project started in 2016
Vietnam 2016 revenue 150 mil, net profit 36 mil. Net margin 24%
Vietnam 2017 revenue 251 mil, net profit 55 mil. Net margin 22%
Vietnam 9 months of 2018 revenue 189 mil, net profit 49 mil. Net margin 26%
Total revenue so far 590 mil, total net profit so far 140 mil, net margin 23.7%
2018-12-11 22:18
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3iii
"When elephants fight ... "
2018-12-10 16:17