There are always some type of companies that we shall avoid. I am not saying the following companies is not good, but it is just not suitable for me. 

1. Too diversify in term of business

Insas Berhad

Core business:

• Stock broking
•  Property
• Technology
• Car Rental
• Fashion Retail
• Food & Beverage
• Project Financing

Based on Annual report 2014, Insas has 56 subsidiary companies, 42 associate companies and 2 joint venture companies! FYI, Insas has 33.1% equity interest of Inari Amertron Berhad and 12.0% equity interest of Omesti Berhad. Furthermore, they also have a substantial investment of 27.9% in Ho Hup Construction Company Berhad through Omesti.

In an age of corporate takeovers, it's quite common to see a company expand into a field that's totally unrelated to its original operations. However, too diversify is not good for a company. The below is the few reasons why too diversify is not good.

1. Overextension
2. Lack of expertise and experience
3. Cost
4. Less focus

Of course, this is just theoretically. The main reason I will avoid this type of company is because I don’t even know which segment of the company I should focus on. In addition, I will not be able to estimate the future earnings of this type of company too. There are too many revenue contributions from different business. Besides that, there are also many shares subscriptions activities by INSAS.

Indifferent with companies such as Inari, Latitude and LCTH, they mainly focus on one business only. As an investor, I can easily understand the company business and performance. 

Refer to INSAS quarter report history, the difference among INSAS quarter revenue is quite huge. For the past 1 year, the largest revenue is MYR140m while smallest is only MYR71m, it was almost double! That's why it is quite volatile and unpredictable.

During the recovery period in the first half of 2015, INSAS price is still moving down.  FYI, the bull trend from year 2013 to 2014 is stimulated by robust growth of INARI.

2. Too much issuance of shares

I-City which located at Shah Alam is developed and belongs to I-Berhad.

Year 2014

• Share splits 1 into 2
• Issued Redeemable Convertible Unsecured Loan Stocks (“RCUL”) of total MYR201m (201m shares) as settlement for acquisition of land
• Issued Irredeemable Convertible Unsecured Loan Stocks  (“ICUL”) of total MYR301m (301m shares) as part of settlement for acquisition of land
• Rights issue 5:4 with free warrants 1:5, raised fund MYR197.5m
• Rights issues – 286m shares
• Warrants – 57m shares

There are 30 additional listing announcements from Apr to Sep (approximately 6 months)!

On Jan 2015, I-Berhad latest issued and paid up share capital was 730m.

However, 9 months later, its latest issued and paid up share capital had increased up to 989m. It had listed another 259m shares, which was equivalent to 35.5%!

FYI, there are no rights issues, bonus issues and private placement on year 2015. That’s mean if you bought I-BERHAD at the beginning of this year, your shares had been diluted by 35.5%!

Have a look at I-BERHAD price chart; same as INSAS, during the recovery period in the first half of 2015, its price was still moving down.

With so much fund raising activities on last year, IBHD net profit doesn’t seem to increase yet in short time and the worse is it is going down from quarter to quarter.

IBHD earnings per share (“EPS”) are getting lesser and lesser. Don’t forget EPS is attributable to owners of the company and it will directly affect the dividend payout. The same theory applies to its share price. For example, last time a cake is only shared among 5 persons, but now the number of people had increased to 8 persons. Automatically, the distributed cake will be getting smaller in size. Even though the cake size might increases, but the distributed cake to each person will not increase also as long as there are getting more people to share.

Let’s take ICUL, RCUL and warrants into account. The potential additional listing shares are up to 559m! But up to date, it had only listed around 260m shares. So, that’s mean it  theoretically had another half more way to go!

For all the reason above, I believe I-BERHAD share price will not have too much movement.

The above sharing is just part of my opinion. You may disagree with me as there is no right or wrong.

Just for sharing.