hng33, are you saying the purchase price is not based on RM 18,500/acre of planted/prepared land and RM3,500/acre of unplanted land?

hng33, do you agree the SPA also said RM 18,500/acre of planted/prepared land, and RM 3,500/acre of unplanted land? If so, do you math and let me know where goes wrong?

hng33,

I'm not trying to mislead. I have also noticed the RM 267.9 million. The deal is assuming RM 18,500 per acre of planted/prepared land and RM 3,500 per acre of unplanted land. The number I have only been able to arrive is RM 441 million for a 60% stake. I also can't figure out where's the RM 267.9 million figure comes from.

My position is Puncak is the highest ever in my history of investment. Quite frankly, really upset with how Puncak announced the deal, 18 months and above's tree considered matured?

Would appreciate if you could do a comparison and let me know if there's any error in my derivation. Thanks!

roger, I never said Rozali is cheating shareholders! I merely stated that the deal is way TOO pricey.

To evaluate Puncak Niaga’s plantation deal, I have compared it with the recent deal by Sarawak Oil Palm Berhad’s. The followings are what I have found:

1. Sarawak Oil Palm Berhad
Seller: Shin Yang Oil Palm (Sarawak) Sdn. Bhd. (Shareholders include Tan Sri Datuk Ling Chiong Ho)
Acquisition price: RM 873,005,875.00
Date of announcement: July 04, 2016
Palm Oil price during the month: Should be about RM 2,300
Land (location): Between Batang Belaga and Sungai Murum, Belaga District, Kapit Division, Sarawak. (Lot 30-42 Murum Land District, Lot 40-64 Punan Land District)
Land (size): 47,000 hectares (planted: 23,798 hectares, unplanted: 6,772 hectares)
Palm age: Less than 4 years: 6,716 hectares
4 years – 10 years: 12, 388 hectares
11 – 16 years: 4,694 hectares

2. Puncak Niaga Holdings Berhad
Seller: Shin Yang Holding Sdn. Bhd. (shareholders include Tan Sri Datuk Ling Chiong Ho)
Acquisition price: RM 446,505,690.45 (I can’t really justify this figure, it’s said to purchase 9766.9hectares at RM 18,500/acre and 33,372.60 hectares at RM 3,500/acre. Thus, total should be RM 735,116,988 while 60% ownership should be RM 441,070,193.30)
Date of announcement: Oct 17, 2016
Palm Oil price during the month: Should be about RM 2,600
Land (location): Murum District and Silat District, Sarawak (Lot 13-15, 18, 20-23, Murum District, Lot 1, Silat District).
Land (size): 43,139.5 hectares (planted: 9,766.9 hectares, unplanted: 33,372.6 hectares)
Palm age: Less than 18 months 7,258.10 hectares
More than 18 months 2,508.80 hectares

Why is the deal unfair?

1. The land in both deal should be in similar location, given its Murum District’s land that’s mentioned in the deal. The seller has a common shareholder, Tan Sri Datuk Ling Chiong Ho with the announcement date around the same time, one in July 04, 2016 and the other Oct 17, 2016. I would expect the deal to be completed at a similar valuation.
Assuming unplanted land is valued at RM3,500 per acre in both deal (I can’t find the valuation in Sarawak Oil Palm’s deal), the unplanted land value of Sarawak Oil Palm shall be RM 58,568,827.10 (=6,772hectare*2.47105acre/hectare*RM3500/acre). Thus, the value of the planted land in Sarawak Oil Palm’s deal should be RM 814,437,047.90 (RM 873,005,875.00 – RM 58,568,827.10), or RM 13,849.55/acre (RM 814,437,047.90/(2.47105x23798)).
That is to say, Puncak Niaga is paying RM 18,500/acre for planted land while Sarawak Oil Palm is paying RM 13,849.55/acre. What’s more, in Puncak Niaga’s land deal, most planted land, 7,258.10 hectares, has plant age less than 18 months! Meanwhile, Sarawak Oil Palm’s deal has most plants age above 4 years!

Per hectare, the planted land in Puncak Niaga’s deal is RM 45,714/hectare while the planted land in Sarawak Oil Palm’s deal is RM 34,222/hectare, a huge difference of RM 11,492/hectare. Why should Puncak Niaga paying such a huge premium for a much younger trees?

2. What’s more worrisome? Puncak Niaga is only buying a 60% stake. Question is if Puncak Niaga intends to acquire the rest of 40%. If yes, what would be the price? If the rest of 40% is acquired only after the planting is completed, does that mean Puncak Niaga’s minority shareholders have to shoulder another overpriced planting cost of RM 11,492/hectare? There are 33,372.6 hectares unplanted in Puncak Niaga’s deal, that would mean Puncak Niaga is on hook to at least overpay another RM 154,407,167.68 (RM 11,492/hectare*33,372,6hectare*60%.)

The above is work-in-progress, please do let me know if you have found any error. Thanks!

My apology, was not feeling well yesterday and not able to finalize my work. Will work on the 2nd piece on the plantation deal as soon as I can.

Puncak Niaga's quarter report analysis:

Q1 2016 quarter report offers the following information:
Revenue: RM 13.2 million
Cash & bank balances RM 334.942 million
Short-term investments RM 927.177 million
Total assets: RM 1,809.468 million

Based on the above, the cash & equivalent + short-term investment as a percentage of total assets is: (334.942 + 927.177)/(1,809.468) = 69.75%, a number which is very close to 70% to be classified as PN 16 company that will require Puncak to submit proposal on its business plan.

Q2 2016 quarter report offers the following information:
Revenue: RM 10.573 million
Cash & bank balances RM 280.358 million
Short-term investments RM 906.065 million
Total assets: RM 1,754.250 million

Based on the above, the cash & equivalent + short-term investment as a percentage of total assets is: (280.358 + 906.065)/(1,754.250) = 67.63%. Some might have thought the drop in short-term investments has resulted in the drop. However, if one look at another item on its long term asset, there’s a other investments of RM 63,713 million, a level 3 investment. I have strong suspicion the purchase of the L3 asset is nothing BUT to avoid being classified as PN 16 company. How so?

By adding this L3 investment into the cash & equivalent + short-term investment as a percentage of total becomes (63.713+280.358+906.065)/(1,754.250) = 71.26%, an important criteria for Puncak to be classified as PN 16 company. If the purchase of L3 asset not to avoid PN 16, I would wonder why just an amount sufficient to avoid breaching the 70% cash company criteria.

I was wondering if Securities Commission will act on this on behalf of minority shareholders?

hng33, its one thing uncles aunties talking economy collapsing in the coffee house, and its another thing bank governor saying economy collapsing in a parliament hearing... Stock analysts' reports are somewhere in between. Also, its one thing making a forecast based on right numbers and another thing making a forecast based on wrong numbers yet pretending nothing is wrong!

trying to finalize my finding, will post together with balance sheet analysis sometime tomorrow...

Having compared the Sarawak Oil Palm's plantation deal, I just realize that Puncak's deal, both in similar location with Puncak's landing on much younger tree profile but at a premium, is a rip off on minority shareholders! Still trying to double confirm the numbers. Any of you good at the numbers, please read both deal carefully and voice your concern...

I have to email this to CIMB first, but need shareholders' support such that CIMB knows they are not dealing with one shareholder only. So, if you are a shareholder and have deep concern reading the CIMB report while agreeing with what I have said, please email them to show them you have deep concern over the analysis too.

think will need at least until March 2017 before showing anything good on balance sheet of income statement now. Thought could see some differences before Sep 2016 earlier, sigh!

cfoong, our government wants money money money.... you may be right if you were to say our government dare not roll out sports betting license to make peace with the religious people, but to assume losing betting license? Why? So somebody can make more from the underground market? LOL

Dear Mr. Rosely,

Having compared your three research articles on Puncak Niaga Holding Bhd. dated Aug 25, 2015, Feb 25, 2016, and Oct 18, 2016 (attached), I have noticed (1) a sudden change of view on Puncak Niaga post disposal of water asset on article dated Feb 25, 2016 and (2) an error in your analysis that has wrongly increased Puncak Niaga Holding’s FD shares with a detrimental impact on your analysis.

(1) On your article dated Feb 25, 2016, you have used the FD number of shares at 532.5 million, assuming a full conversion of convertible sukuk. However, on Dec 03, 2015, Puncak Niaga has, through Bursa Malaysia, announced the repurchase of sukuk at a cost of RM 200 million (http://www.bursamalaysia.com/market/listed-companies/company-announcements/4941665 ). The repurchase has in effect made the FD number of shares at 452.5 million (5.27 million warrants + 449.3 million shares outstanding – 2.04 million treasury shares). This would have affected your valuation of SOP value per share by a great margin. Your reported SOP value per share of 2.20 would have increased to RM 2.59 per share assuming your SOP figure in Feb 25, 2016 article is ‘correct’. This mistake has been extended to your article dated Oct 18, 2016 that has still assumed the sukuk conversion. I was wondering how it is possible for you to commit such an obvious mistake. This is especially so given that in your earlier article dated Aug 25, 2015, you have come up with a SOP value per share of RM 4.25. Hasn’t the sharp drop in SOP number alarmed you to at least double check the numbers before finalizing your report with report disseminated to readers and published in newspapers?

In addition, based on Puncak Niaga Bhd’s 2nd quarter report (http://www.bursamalaysia.com/market/listed-companies/company-announcements/5186601 with file attached), its balance sheet is sitting on net asset of 3.62 per share after heavy impairment in FY 2015 while you are stating a SOP of 2.20 (2.59 assuming you have had the sukuk mistake corrected). Of which, the cash and cash equivalent is at RM 1.25 billion (of which, 63.713 million as other investment, 906,065 million as short-term investment, and 280.358 million as cash and bank balances.) Even after deducting short-term and long-term liabilities of 138.377 million, its net cash will still at 1.117 billion, i.e., RM 2.47 per share. Before accounting for your error, your SOP is less than net cash per share by RM 0.27 per share. Even accounting for your mistake stated in the above paragraph, you are leaving only RM 0.12 per share or RM 31.7 million for the rest of Puncak Niaga Bhd’s asset. Your professionalism is in serious doubt!

(2) On your article dated Feb 25, 2016, you have taken a 50% discount to SOP value. Meanwhile, in your article dated Oct 18, 2016 on the purchase of palm oil estate in Sarawak, you have deemed the deal reasonable and upgraded the target price by RM 0.03 per share, an increase of valuation of the firm by less than RM 16 million (RM 0.03 multiplied by 532.5 FD shares) even the purchase is valued at RM 446 million. I was wondering how you come up with the upgrade of RM 0.03. By throwing a dart on a board full of numbers? Or, despite finding the deal reasonable, the addition of the plantation to Puncak Niaga should still take another 50% discount (well maybe slightly less given your ‘upgrade’ of RM 0.03)?

(3) In your article dated Aug 25, 2015, the Selangor water deal is yet to be completed with cash held by the Selangor state government. However, in your article dated Feb 25, 2016, the Selangor water deal has been completed with cash fully disbursed to Puncak Niaga Holding Bhd. In your discount to SOP value, you have adopted 40% in Aug 25, 2015 report but 50% in Feb 25, 2016 report. It’s as if, to your professional logic, the cash yet to be received has a higher value than cash in the company’s hand. If you have doubted the credibility of Puncak Niaga’s management to deserve a higher discount on cash in hand, shouldn’t that you have to warn your readers in your Aug 25, 2015 report and applied a similar discount to Aug 25, 2015 report? Or, you have only realized the management of Puncak Niaga is questionable only after Selangor state government has disbursed the fund? Or, could it be the dismal outlook on oil and gas industry has a ripple effect on the cash held by Puncak Niaga? However, from what I know, the crude oil price has been pretty much the same on around the dates of your three articles. Your ethics is questionable!

I am looking forward to you relooking at your analysis and addressed the abovementioned doubts that I have mentioned. Given that your earlier articles on Puncak Niaga Holding Bhd. has been disseminated to other readers as well as newspapers, I am expecting your new work to be similarly disseminated to other readers and newspapers with clear comparison on how your earlier analysis differed from the new one.

Any of you know how to post blog here? I have written an email to CIMB's analyst on his questionable articles on Puncak Niaga. If you are shareholder, and agree with me after seeing my article, please email him, together with the research team heads as follow:

Regional Michael William, GREENALL
michael.greenall@cimb.com

Malaysia
Ivy, NG (CFA)
ivy.ng@cimb.com

Puncak Niaga's analyst
Sharizan Rosely
sharizan.rosely@cimb.com

My email is in the next posting

think somebody makes money from the plantation deal, just don't know who. Fishy!

Holding up quite well, hopefully Vietnam Toto's business impact will begin to kick in after New Year or Chinese New Year...

Think its best to assume BJCorp shareholders have to hold at least 1 year before seeing any light, that's assuming Vietnam Toto is growing well and the asset disposals are close to an end...

eddysurge, quite frankly, don't really like bjland, and I bought BJCorp only because are getting better with its going nowhere property projects and the potential of Vietnam Toto (Been wrong so far with this counter, well many others.) Money tied already, but will read Vivocom annual and quarter reports. Thanks.

eddysurge, the key is those issues are not addressed in public yet and reflected on balance sheet...

there is no hope until either (1) the Vietnam toto sales are showing in the quarter report (2) Jeju court case big win or (3) sale of China property project completed with cash received to lower interest cost + Ritz Carlton Residences completed with high sales %

look at triplc quarter report and you still want to buy?

i will oppose the deal unless a cash opt-out for shareholders not trusting the management is offered!

the more I read into the plantation deal, the more I don't like about the deal...

Berjaya, yes, nobody is saying its easy to run conglomerate or big businesses, but those running are well paid and EXPECTED to be fired if businesses run south!

Berjaya, BJCorp share price going down has begun years ago, economic uncertainty and local issues clearly are only a small force behind it.... Failed property projects, from China, Jeju Island to Vietnam are the key reasons, delayed property projects in Malaysia (Menara Bangkok Bank/Ritz-Carlton Residences) and Japan (Four Season Hotel) are helping to squeeze the company cash flow, and high leveraging is not much help. Of course, the way BJCorp treats its shareholders exacerbate the situation...

bullwinds, thanks for the update... Guess will have to hold at least another year to two before seeing any improvement in BJCorp's performance, earning-wise and share price-wise.

CIMB's report can't even get the fact right, and you are citing his conclusion? LOL...

VT not good cook, what a joke! Anyway, based on share price after AGM, sincerely doubt anything good revealed by them...

awaiting someone to share the details of the AGM...

don't worry, our BODs value those shares at 0.72 per share, we just need them to 'buy' from us....

Hahaha... wonder if anyone could raise this to the board during the AGM - can we sell our dividend shares to the board at 0.72 per share?

roger, jay, yes, you are right, but don't worry, I won't sell my shares so long that the plantation is bought at this price and Puncak is committed to developing them. Would be great if Puncak is a pure plantation stock in a year or two.

And Jay, please go and read the quarter report, for the 6 months in operation, Puncak operation cash flow is a negative RM 45 million, rather than your said RM 100m.

I would rather Puncak dump all money this fashion... At least I know that land is not overpriced and value will emerge when the trees are matured. At least I know the business deal is real and requires only a performing management team. Of course, hope Puncak can make it.

Xinquan, at current price, I will hold. Above 2.50, most likely I will sell unless better news revealed. Between 2.30 and 2.50, depending on if I can find a better alternatives. This is assuming I have priced in additional 0.30 NTA losses and share price will at a discount to its NTA

the purchase is not bad, with plantation revenue expected to triple within the next 2 years (assuming palm oil price being constant and fruit yield being norm, immature plantation acreage is currently approximately 3 times matured acreage - below 18 months and above 18 months)

roger, Puncak is proposing to buy Sarawak plantation land at RM3,500 per acre of unplanted land (i.e., approximately 8,650 per hectare) and RM18,500 per acre of plnated land (i.e, approximately RM 45,700 per hectare). Is this price fair? Frankly, I am not an expert in oil palm business, but based on past transaction, its not expensive. At least better than the yet to be known TRIPLC deal that he himself has a part in it...

The said plantation has a total land bank of 46,674 hectare (43,100 hectares given that 3,534 hectares are flood zone - given free!) Out of 43,100 hectares, ONLY 9,766 hectares are planted and 2,508 hectares are MATURE and yielding fruit bunches in meaningful way. Surely, the plantation is not going to be offering much currently!

Quite frankly, I haven't gone through in details the deal yet, but its surely a relief compared to the TRIPLC deal that has yet to be known...

roger, haven't you figured out why I didn't reply any post lately? Many of you just blah blah blah here and nothing informative or analytical...

finally, Puncak announced the purchase of palm oil estate in Sarawak from Shin Yang Group

http://www.bursamalaysia.com/market/listed-companies/company-announcements/5233369

Yes, Tan Si is 'very' charitable, indeed, so generous, he has, through his son and BJC's directors, made sure that we are a special class of philanthropist, 'forced philanthropist shareholders', by making sure that we are getting 3 shares per 1000 that's worth 0.0216 per share. Wonder when will the directors and his son(s)/daughter(s) be another class of philanthropist, 'forced philanthropist directors' by making sure they are paid with BJC's shares that's worth at least twice its market value and claimed that they are well paid?

Sigh! Probably this won't happen, but no harm shaming him here, and can only hope he or anyone related to him see this post, haha...

shame VT in the AGM, wahahaha...

Ricky Kiat, the SPV is formed to complete the transfer only after April, which the annual report is reporting for FY 2016...

Between May and July, bjcorp went through the completion of 2 property projects, namely Menara Bangkok Bank and Kyoto Four Season. Hopefully the two will either help with the cash flow or the bottom line profit figures... Awaiting end of September

hopefully, it will at least show .47 before AGM, real pity seeing such a low price despite good progress in selling non-performing assets and equity investments while grabbing a gaming license in Vietnam...

if Vietnam Toto so good, why's so many selling at .33 and below, sigh!

tt101, if there's no system of accountability, even the most talented people can become the lousiest person...

hope will reach .47 before quarter report... kind of hope the profit to be good, given the sale of Menara Bangkok Bank. Unfortunately, the annual report that pointed to handover of Menara Bangkok Bank to buyers in June didn't mention its profitability, except for the reaching a sale of over 500 million, sigh!

tt101, err... it has nothing to do if Robin is talented or not, the issue is if BJCorp has a system of taking responsibility...

Menara Bangkok Bank was handed over to owners in June, so there will be proceed coming in around 500million, just don't know if the project is profitable or not