I have been thinking why I am even to bother to share my views lately......

Let me be clear on the first part of the disclosure so that the fund manager doesn’t think I am working with others with a hidden agenda. In fact, arguing publicly doesn't help me. Thanks to the uncertainties created by the fund manager initiating lawsuits against COL that allowed me to accumulate a small position. But this small position at the rate of compounding return of 15%, it will be more than 1 million Ringgit, 20 years in the future, exit with a discounted of 24% to NAV. Even he is fall short of 15% from his ideal, I will still be rewarded handsomely. It is working against my interest in fact to argue with the fund manager.

For the records, I will still buy up to RM 2.80 just in case the fund manager think I am done with buying and start to promote it. On flip side, in case he thinks I am one of the sour grapes. Again, for the records, even the share price drops substantially from yesterday closing price, I will still making a small profit.

Why can't I air my views during AGM? I am neither eloquent enough nor have a big horsepower intellectually to present my views. I have a terrible public speaking fright because I can't even write or speak proper English....you know, a local graduate ma. I can't get English tenses right, was were, a , the....and also I heard it is very intimidating during AGM for those who present alternate views during the meeting.

The crux of the issue: if the company has allocated a fixed amount of a fund say RM 15 million per year, a-dollar-for-a-dollar, what is the best way of using this fund, should we distribute it as dividend or should we do a buy back or a combination of both?

The pros and cons of options of each option were not presented to all shareholders, instead they will be sold on a canned presentation. I wish the fund manager would have created a slot for experts in their respective areas to discuss about these options. Let the shareholders to hear it. It is perfectly okay with me at the end the fund manager and shareholders go for dividend after the shareholders are given the cooling off time to think about it. We are not in a rush to decide anything. We can do it in AGM 2024 or 2025. After all, those who attracted to iCAP are patient people, we are not here to make a quick buck. I care about the process and system, not the end result.

It is the democratic process, transparency, intellectual decision-making process and diversity and inclusion that I hope to see improvement. Closed end fund is a public company after all. I wish the fund to do well in next 100, 200 years so that my many generations of great grandchildren will inherit a big fortune with the magic compounding. I wish iCAP will be the greatest wealth creator in Malaysian history - creating many billionaires. iCAP is indeed at the crossroad, a crisis creates an equal opportunity to make it a great institution.

Thank you for hearing me out.

"When the facts change, I change my mind" Winston Churchill/John Maynard Keynes

@Tiga i.... what are the 2 ways of making and 2 ways of losing money.....Guru, can you teach us ?

Yes Sir... Thank you for the advice.. Thank you too for the last few posts... I am enlightened. Many gurus here 🙏🙏🙏

@Tigai...I have decided. 24%, permanent discounts...so hope fund manager to tell all investors.. Don't hope for premium. Also don't blame other for spreading negative news with intention to buy more

Really got too go....getting hooked now with this channel now.....

All the announcements that came out just extinguish the flame when people are getting to be aroused...😂😂

But there are too many uncertainties that preventing them to do so.....the potential lawsuits, dividend policy, etc...

So a rational trader should step in and buy now up to 2.8 and forgeting all the complicated stuffs.

Let's say all the holdings in iCAP hit 52 weeks high, it may translate into NAV of 4.1 as I have posted earlier...I will assume people will pay up to max of 3.3 only......just forget about those dividend stuff

But since like Tigai said, we need to get used to 20% discount as a new normal......share price will always be discounted that way....

There is very little earnings(except interest income and dividends) and almost no capex need for iCAP....DCF will be way out to value iCAP....The best way is still NAV to keep things very simple. Added now with the very innovative dividend policy.....like dumbMoney pointed out it adds uncertainty.

Conventional way of evaluating a company that paying dividend is always looking at discounting its Free Cash Flow...FCF is .cash left after paying operating expenses and capex....sometimes it's kind of difficult to estimate for small investors like us because we don't talk to the management to understand all the parameters. A cheat way is using EBITDA.....these Free Cash Flow has to be predictable in order to do that. That is why it is far easier to estimate a simple business with moats with almost no need to buy high tech stuffs to generate these free cash flow. That is why it is far easier to value Coca Cola than TSMC.

A couple of quite comments

>>>>

Chasing Yield + Paying a Premium
= Better Hope there is Someone more Irrational.

>>>>>

Tiga i - witty 😂😂 Best post of the day.....Great Punch Line.... I laughed till I almost fell of my chair....that's what iCAP innovative dividend is......If I know so easy and understandable by all, I will save all my primary school math skills....

iCAP dividend payout formula = base rate + top up rate

base rate = 1% of NAV

top up rate = 8% *(NAV - iCap share price)

top up rate = 0 if iCAP share price equal or greater than NAV

some comments

The yield is heavily skewed towards the discount between NAV and iCAP's share. It is understandable because it is a lot harder to increase NAV in a short time than riding on negative sentiments.

1% x NAV is guarantee because it's impossible to have zero NAV....anything x ZERO equals to ZERO....So to have higher base rate, NAV will have to keep growing.

2. To get another 3% yield from Top Up rate .... implied discount = 24%

It tells you there will be a permanent 24% discounts to get this 3% dividend yield component.

In a zero discount/parity situation. the NAV will need to almost 3X from current NAV to get 4% dividend yield.

You need NAV at $ 10 x 1% = 0.10/ dividend share. So need 10(Implied NAV)/3.53(current NAV) = 2.83 times

Most people will have a hard time to believe NAV can be triple within 1 year and have a very easy time to believe 24% discounts between NAV and iCAP's price to get 4% dividend yield.

It telegraphing a wrong message.....more discounts, higher yield and it's easy to believe. It will keep reinforcing a negative vicious circle.

In share buy back, you buy 100,000 shares in a day- it will attract many other buyers to keep bidding up. It will help to improve the sentiments and reinforcing a positive message. It has a lever effects....4 ounces lift 1,000 pounds. Confidence begets confidence. This is an offensive strategy(proactive to pinjam from dumbMoney).

The fund manager has chosen a defensive strategy(reactive) and sending a very wrong message to the current and potential investors. It will face an uphill task.

I will be out of pockets for a few days.....will miss you all. Take care.

Just to inform iCAP fans that we will not have a fixed mind or Not Invented Here syndrome, if there an idea coming up, we will examine it and not thrashing for the sake of thrashing. We won't reject the idea of dividend idea to close the discounts gap......it is possible to some extend to sell the story of dividend yield. But then, when newbies on-board become oldbies, what's next then? Just like old shareholders original were full of enthusiasm eventually will start selling(due to many reasons), sending it to such an irrational discounts zone. What's next, offer more sweets asking them stop crying? Don't cry, give you higher dividend ya... 😂😂 This is my long answer to my this morning short answer, I disagree.

**To close the gap to 10% will be even harder

My post was directing to what will be the narrative iCAP will sell to new investors or fans to pay for more to close the irrational discounts from 30% to 20%. To close the gap is even a harder sell. Selling the story from dividend yield + future capital narrative is possible. But between this strategy and sharebuy back, I prefer sharebuy back as it is more flexible and don't have to die die commit to pay fix amount of funds in terms of dividend. Human is a very funny creature, if you receive money year in year out, suddenly you stop or reduce the money, they will throw tantrum and send the share price to irrational zone again. Is there a bullet left to bring up the price. ? Was trying to analyze their earning capacity vs how much they need to realize the gains or even sell off some dogs to pay yearly dividend that they committed.

@dumbMoney - great explanation on why there will always be a discount to NAV/NTA because the investor need some margin of safety for something has not be realized. Who knows tomorrow the portfolio will drop 20% or may appreciate 10%. That is why usually 10% will be quite normal in a normal market situation.

Ladies and Gentlemen, boys and girls, so I would like to welcome more iCap fans. We are not thrashing for the sake of thrashing.....we are all just regular guys working from 9 am - 5 pm...try to earn 2 bowls of rice a day. If you are an iCAP fan, don't have to be offended, just drop by regularly .... here is just another outlet for your to hear alternate views.....we are no Zhu Ge Liang....just regular naughty stooges. Have a nice day & good night. 😎

Yearly, typically iCAP will have about 4 million interest income(sitting on about 120 -140 million cash) and ranges 3-7 millions dividend from the shares it owns.....so earning capacity is about 7-11 million, it just nice to cover the management fees, your AGM party fees, income tax and etc...for most of the time. To pay about 14 millions on its investment about 300 million plus, it needs to realize about 4% gains/yearly.

I guess the selling point for iCAP will be dividend paying fund with long term capital gain to attract people to pay more. How much more, we all know price has inverse relationship with yield. 0.10/share dividend on purchase price of 2.54, dividend yield will be about 4%. If they chase the price up to 2.8/share(then we are narrowing the discount to 20% based on NAV of 3.53 ) but then the dividend yield will drop to 3.5%....will people willing to do that comparing to other alternatives? Ya may be possible from this perspective, if they are hungry enough and have great faith in the fund manager for the future capital gains.

The devil is in the details... Ensure tiny guys/gals sign up... Unfortunately all shareholders have to suffer a bit per i3lurker😂😂

rich gets richer, poor gets poor......pure capitalism and not common prosperity....not because it was unfair but that is how people's will make their choice given how the question being framed to them.....

😂😂Ohh....not really..... only a few hundred of investors +/- 900 of the shareholders(27%) may adopt DRIP, the rest may go for cash and see their ownership diluted(not in absolute but % wise)

Who will stand to lose if they don't go for DRIP with incentive say 10% price discounts?

Here is the data based on 2023 Annual Report Analysis of shareholders

No of shares ** # of holders**%
1-99** 132**4%
100-1000** 1,022**32%
1,001 – 10,000** 1,183**37%
10,001 -100,000**640**20%
100,001 to less than 5% of issued shares**221**7%
Total shareholders**3,198


There are 2,337 or 73% of shareholders hold 10,000 shares and lesser....like i3gambler said, those with small quantity usually will elect cash dividend....those with higher quantity will more likely to adopt DRIP. So it will favor those big holders with increasing ownership over the years while the tiny guys/gals of 2,337 / 73% of the shareholders will see their ownership to reduce.

Take another vote again, do you think this will increase the liquidity of the stock over time? 😂😂

Assuming you are being ask to vote in AGM - Yea or Nay 😂😂

Investors should be aware that issue under discussion is eliminating irrational discounts via dividend policy....the expected result is if after implementing this hypothesis....it will reduce irrational discounts(30-40%) to normal discount 10% or a possibility of premium on iCAP share. By intuitions, what do you think?

I reflected on a question by dumbMoney's post.
>>>>
The bone of contention here is not the portfolio or how it has been managed, but more on the discount, and the fact that shareholders sells on discount prices, but managers get paid on full NAV value. But then, the problem arises when the discount is fixed and COL leaves and look for discounts elsewhere, then what is going to happen to their block of shares?
>>>>

The block of the shares will have to taken by somebody else, could be small inventors and can also be big investors……future investors.

I got it now, it’s a governance system and how do we institutionalize a discounts management system. Shareholders can come and go, there should be a set of EFFECTIVE systems or policies that run forever.

My thoughts/comments:

The fund manager is responding. The answer is instituting a dividend policy, payout policy is 1% base rate+8% discount between NAV and average 4 weeks iCAP’s share price. Give the investor an option: take the cash or reinvest them. Sorry, I disagree.

Share buy back mechanism should be considered. My personal strong view: trigger it when iCap is selling at irrational discounts. Don’t interfere when it’s in the reasonable range like 10%, leave it to the market forces to deal with that. Our aim should NOT be zero discount. Provide liquidity at the time of distress(it’s kind of like a “national team”).

A discounts management system must not be at the expense on the fund growth. The fund manager always has an implied goal of 15% in the way he speaks and writes, but I will be extremely happy with 7-10%. Definition of fund growth = portfolio invested in shares + cash AT 7-10% CAGR. I can agree to that, no qualm about it. We don’t have to argue % of portfolio and cash, but it must be taken as 1 body when measuring the performance. I care only the results not the allocation weightage.

Fund liquidation is the last option. IT SHOULD NOT BE USED unless we are in a HOPELESS situation. What is my definition of hopeless: Indifference management and NAV is persistently underperforming the benchmark index and iCAP share price is selling at irrational discounts for a long time.

We are tough on the issues not on the person. 💗💗

Hi John, Thank you for sharing...I considered myself lucky because upon returning again to iCap with a small position, I was in the 3rd bucket but someone just warned me it could be a mirage. May that warning NOT come true😁, just on the lighter side. There are also many others from the phase 2, may their luck will change soon. Jia Yu. 😉

😨😰😭☹

By the way, please do not shoot the messenger. 😂😂

We should also be aware of a major shift with the recent advanced economies inflation that had driven up much higher interest rates. In return, the higher risk free return is raising the bar for active fund managers with many competing products. Retail investors are getting more and more knowledgeable each day .... My child is a lot smarter than me. They ask difficult questions. I personally hope that we can look into all these inputs in a positive light. We are not instigating shareholders revolution but hope to see iCap is a reflection of progressive Malaysia we all can be proud of, as the fund manager always inspiring his followers.

To be honest, if I'm a dividend investor seeker, there are many competitive stocks out there...so iCap can only be attractive by driving capital gains either via NAV growth a lot faster or narrowing the discounts.

When sentiment is negative and grip with extreme fear, dividend alone cannot help. Let me give you an example, ICBC(1398.HK) listed in HKSE, it's one of the largest banks in the world & well managed, ROE consistently above 10% but it has a bad label with it.....no need for me to elaborate more la.

Year *** Dividend (HKD) ***
2019 ** 0.2953
2020 ** 0.2874
2021 ** 0.3199
2022 ** 0.3432
2023 ** 0.3292

Nice growing dividend trend, right? If you translate that into yield will be almost 9-10%

Price in 2019 was about HKD 6. Last traded was HKD 3.60. Total return was -14%

Price/Book 0.35

If would have bought an ETF that mimics Hang Seng Index 2800.HK, it's a physical ETF with regular dividend payments.

Year ** Dividend HKD
2019 ** 0.93
2020 ** 0.75
2021 ** 0.67
2022** 0.64
2023 ** Not yet declare full dividend...Ist interim 0.10 but let's assume it's same like 2022 0.64

Price in 2019 was roughly HKD 27, last traded HKD 17.84.....Total return = -20%

ICBC may still outperformed the index but the point is dividend alone is insufficient to drive higher price/book value of which is very common measure in evaluating banking stock.

In such a conservative culture embracing shareholder activism is unprecedented. 😂😂

"It was a dramatic change for a company that used to be totally unresponsive to shareholder demands," said Oki Matsumoto, CEO of Monex Group, a leading online broker. Cross-shareholdings are widely seen by activists as contributing to low capital efficiency.

The move sent DNP shares to a 17-year high and up about 50% so far this year. The plan challenges the company to lift its stock price, which has stayed below its book value for the past 10 years.

https://asia.nikkei.com/Spotlight/Market-Spotlight/Japanese-companies-embrace-shareholder-activism-as-never-before

Last comment: we should show restraint in making comments.

For example "While it is the fund manager's responsibility to manage its net asset value(NAV), it is important to note that the share price of a fund is determine by investors, and not a responsibility of the fund manager."

It's not helping. We can spin these sentences and start a war. 😂😂 But we all peace loving people....

Regardless of whatever tools we use, it cannot solve all the problems. Ultimately it's still the stocks that have been picked and will be picked must perform. This is the bottomline.

My second comment is on his quote on Warren Buffett letter to shareholders demographics, that was written in 1985 -- about 38 years ago....a lot things have changed.

Quote " ......This unusual result has been achieved by a shareholder group with unusual demographics: virtually all of our shareholders are individuals, not institutions" Unquote

That was 38 years ago, today if we Google it.....

% of shares held by all insiders : 38.7%
% of Shares Held by Institutions : 19.24%
% of Float Held by Institutions : 31.27%
Number of Institutions Holding Shares : 1,234

Let's have an open mind.....understand the fear of institutional gang up to do bad things.....the fund manager also can use their other funds to increase the stakes until it becomes a major controlling shareholders. The rest of us can sleep soundly at night....

Or the fund manager can attract the likeminded institutions that focus on Value....

We can learn too from Berkshire for example has Tweedy Browne Global Value Fund.

They broke down iCap into 2 distinct phases and kinda acknowledge cash holding was one of issues.

2005 - 2013 NAV compounded at 14.85% and share price 11.67% (Putting a lot of cash to work)
2014 - 2019 NAV compounded at 0.7% and essentially zero return from share price(Average cash level 63.4%)
2020 - Sept 2023 NAV compounded at 5.06% and share price 6.73%(cash has fallen to 26.4%)

Now will have see his stock picking skills already. If 74.6% of the stocks he has picked start to perform, we then can talk about performance and giving a much better catalyst for iCapital share price to run.

I think iCap people is reading quietly our comments judging from what they posted in the newsletter....they wrote an update on iCapital company analysis. I think we should de-escalate and reduce tension as all have a common interest, we are talking about RM 140 million market cap locked as discounts that big or small shareholders should joint hands to unlocked this.

Share buy back did help to do damage control while a major shareholder was exiting a big position as they perceived YTL is gone already especially from its hospitality business. But the ultimate catalyst for the share price recovery was due to strong financial turnaround. If it can go to demonstrate another 3-4 quarters with billions of profits, the share price has more legs to run.

YTL Corp is having a very strong balance sheet, as at 30/6/2023, they have more than 11 billions in Fixed deposits and another 3 billion cash and bank balances. For them to spend about 60 million plus in the past few years were just chicken feet.

Prior to Covid 19 that started around Q4 '2019, profits from the operations were quite stable around 500 mln +/- before it started to rocket in the last 2 quarters 2023 with billions of Ringgit. Profits for the periods were quite volatiles but it was a bit more convincing in the last 2 quarters 2023 due to strong performance mainly from its utilities business.

Not all share buyback created equals. The catalyst for good share recovery ultimately is rooted on financial performance.

Going back to YTL

RM million**Profit from operations**Profits for the period
2019/3** 596** 12
2019/6** 563**87
2019/9** 583**100
2019/12**556**96
2020/3**549**129
2020/6**336**-321
2020/9**437** 49
2020/12**497**86
2021/3** 463**93
2021/6** 400**-555
2021/9** 587**178
2021/12**421**63
2022/3** 1231**828
2022/6** 499**103
2022/9** 597**123
2022/12**727**196
2023/3**1337**659
2023/6** 1935**1071

....................

Will DRP achieve the same effect? I think there are some minor differences - it's done 1 time per year so whether shareholder gets the best price will depend on luck. In share buy back, given the active investing management skill of a fund manager, surely they can time better than a corporate finance manager. 😂😂 You can't provide liquidity when it is needed the most. When you have odd lots, it is quite difficult to sell. 1,000 shares x 0.10 =
$ 100 dividend / 2.54 = 39 shares. but could be same also with share dividend e.g. 1 share : 30 share ordinary share. may get 33 shares.

In the case of distributing it as share dividend and not retiring the treasury shares, I think the concern of losing controlling interest is addressed. But of course if a major shareholder wants to buy more shares, they can always do so after selling the dividend shares, receiving cash dividend or forking out own money.....worries will never end. 😂😂

We don't have to choose share buy back or cash dividend but it can be share buy back AND cash dividend. Don't fall into the trap of choosing OR

P.S YTL also buy back a lot of shares prior to 2019 at the market price....I have not summarized those but if company is disciplined enough - they should not buy back when it is "expensive" during this period, they can actually pay cash dividend.

I want to share a very micro case study on YTL Corp. The company is quite flexible when comes to cash dividend and share dividend. When the company is seeing its share price is under pressure, they will do share buy back...The advantages,

1. Provide liquidity on days there are big sell orders....without them absorbing the sell orders, price can drop a lot faster. I have mentioned before EPF was selling like nobody business from year 2020 till April 2023, they sold something like 100 million shares, if without the company share buy back, the company share price will be way below 0.50.

2. They buy back when the price is low when sentiment was low. I give you this example during period of covid 19 from year 2020 to year 2022 and they stopped buy back after that. They think the sentiment has improved and do not need to do intervention because it can stand on its own and let the market forces govern the demand and supply. During this period they accumulated 74 million shares. average buy back price is about RM 0.82. They put this back into treasury shares and distribute back to shareholders sometime in the future.

3. Like cash dividend, if they distribute as share dividend, share price also will be adjusted downward of equivalent amount. But if the company is buying at rock bottom price and distribute it, when sentiment is turning the corner, the rate of return is fantastic. Point #4 to follow.

4. For argument sake, when they distributed this share at 0.82/share in early 2023 and you can sell it in the market for RM 1.41 as of last Friday, this is a tidy profit of 72%.....the return will be far higher than ROE.

Conclusion: if managed it right, this is one of ways to enhanced shareholders' value.

You may see some of the data that I extracted from Bursa Malaysia website. Some day share buy back can be as low as 1,000 shares when trading volume is very thin but there are small guys want to sell and exaggerated price drop downwards.

YTL
Date *******Average buying price***Qty**** Amount paid
27/6/2022***** 0.61*****1000****** 605
26-Nov-21**** 0.60***** 1000****** 595
1-Jun-21******* 0.68*****1000***** 675
11/1/2021-18/1/2021**** 0.71**** 16,500,000***** 11,701,877
30~31/12/2021***** 0.77*****4,000,000****** 3,087,245
21~23/12/2020***** 0.78*****8,000,000****** 6,233,483
18/12/2020***** 0.80****6,000,000****** 4,793,488
22/12/2020**** 0.77*****3,000,000****** 2,298,808
21/12/2020**** 0.79*****3,000,000****** 2,382,038
18/12/2020**** 0.80*****6,000,000****** 4,793,488
9-11/12/2020******* 0.72*****5,698,100***** 4,110,713
27-Nov-20***** 0.69****1,000****** 694
22-Jun-20***** 0.86***** 1,000***** 859
29-Jan-20***** 0.94***** 100,000******** 94,267
20-23/1/2020******* 0.99*****1,943,200****** 1,922,151
17-Jan-20***** 0.98***** 500,000******** 491,905
16-Jan-20***** 0.98***** 500,000***** 489,397
14-Jan-20***** 0.99***** 500,000**** 496,923
6-10/1/2020**** 0.96****2,000,000****1,924,393
13-Jan-20***** 1.00***** 500,000*** 501,940
30/12/2019~3/1/2020**** 0.96****16,008,100***** 15,435,563

Average buying price*** 0.82*** 74,254,400**** 60,761,104

@dumbMoney - Impressive school - University of Chicago Booth School of business. 😂😂

Chicago is a damn cold place....how many years were you there?