JAKS just announced a set of poor result for 2nd quarter. As a result, its share price plunged yesterday and many people asked me for my opinion. My advice are as follows: -

The poor result is due to its property development business. It has difficulty in selling its mall and being penalised for late completion of some condominiums.

As recently announced, it has sold some land for Rm 165 million and its profit is Rm 140 million which will be reported in the next quarter.

Why I Bought into JAKS

I did not buy JAKS for its property development business. I selected JAKS because it has an independent power producer (IPP) contract to construct a 2 X 600 MW coal power fired power plant and to sell electricity to the Vietnamese Government for 25 years. The whole project cost more than Rm 7 billion. JAKS with such a small market capitalisation has been looking for a suitable JV partner for 4 years. Finally JAKS formed a JV with a Chinese party which has been producing 90% of the electricity for China.

The Chinese Bankers must have studied the IPP contract very carefully to make sure the project is profitable which should be reassuring to all owner of JAKS shares.

The Chinese partner undertook the whole contract and agreed to give Rm 400 million and 40% interest in the company that will be selling electricity to the Vietnamese Government for 25 years.

My wife and I have bought so much shares that we have more shares than Andy Ang the CEO. We are long term investors and from our track record, we found out that long term investing would give better return.  

To be a successful investor, one must look at the company’s long term business and be willing to wait patiently.

If you are easily frightened when you see one poor quarter result, you should sell all your holdings, keep your money in fix deposit and sleep in a police station where you can get free bed and makan.  

I expect its next quarter result to be better. I expect it will report  more money from the Chinese Partner and also the Rm 140 million profit from the land sale.

For your information one MW can light up 1,000 homes. JAKS’ power plant of 1,200 MW can light up 1,200 X 1,000 = 1,200,000 homes. It is normal to assume an average of 5 persons in one home, the 1,200 MW can give electricity to 6 million people.  

I recommend readers to read my article 'Why I bought into JAKS' which can be found here.