Posted by speakup > 2023-02-16 22:35 | Report Abuse

What is the average CEF discount?

-9.8%
*Source: Morningstar as of 9/30/2022. Third Quarter 2022 | Closed-end fund market review CEF discounts widened in the third quarter by 160 basis points. The median CEF industry discount is now -9.8%, wider than the 10-year median of -7.2%.

Posted by speakup > 2023-02-16 22:37 | Report Abuse

global average CEF discount is only 10%!

Posted by speakup > 2023-02-16 22:38 | Report Abuse

that got me to think, is the published NAV 3.47 correct?

Posted by speakup > 2023-02-16 22:38 | Report Abuse

On behalf of the Board of Directors of icapital.biz Berhad, we wish to announce that the Net Asset Value per share of icapital.biz Berhad as at 15 February 2023 is 3.47.

Posted by speakup > 2023-02-16 22:48 | Report Abuse

sorry calculate wrongly, discount is 43% (not 75%)

Posted by dumbMoney > 2023-02-16 22:50 | Report Abuse

Another way is to less out the cash portion, because cash is 100% of face value if distributed, and compute the discount on the remaining net assets. So theoretically, if the price of a share is less than the cash backing, then the rest of the company's assets are discounted to zero.

Posted by speakup > 2023-02-16 22:50 | Report Abuse

even then, 43% is very large considering that the global average CEF discount is only 10%
no wonder got court battle against COL

Posted by speakup > 2023-02-16 22:52 | Report Abuse

net cash is rm1/share
means everything else is rm1/share

Posted by dumbMoney > 2023-02-16 22:53 | Report Abuse

Once, the company used the argument that if the cash portion is taken out, then the performance of the share portfolio would have been much higher, because cash don't appreciate other than earning interest. So the same logic can be used to calculate the price discount, haha.

Posted by speakup > 2023-02-16 22:54 | Report Abuse

if minus off the cash, the discount is higher than 43%

Posted by speakup > 2023-02-16 22:55 | Report Abuse

@dumbMoney, do you think "now" is the time to enter Icap?

Posted by dumbMoney > 2023-02-16 23:01 | Report Abuse

@speakup, your earlier calculation is the upside gain if iCap gets liquidated, 3.47/1.97=1.76, so a 76% upside. This is what attracts risk arbitrageurs, but these are undesirable fellows to the company, according to the board.

Posted by dumbMoney > 2023-02-16 23:03 | Report Abuse

So @speakup, what is your risk appetite? That you can pull this off?

Posted by dumbMoney > 2023-02-16 23:13 | Report Abuse

@speakup, I cannot be seen to be giving financial advice or trying to influence the share price here, very serious legal implications. I can only try to explain things according to orthodox financial and portfolio management theories and principles taught in business school and from years of experience on both the buy side and sell side of the business.

Posted by dumbMoney > 2023-02-17 00:23 | Report Abuse

speakup, you posted "even then, 43% is very large considering that the global average CEF discount is only 10%
no wonder got court battle against COL" What is the connection between the COL court case and the discount? Did COL cause the discount and hurt the shareholders?

Posted by dumbMoney > 2023-02-17 04:30 | Report Abuse

Since the recent hottest pieces of news are the Chinese spy balloon and the AI chatbot CHATGPT, I teased the latter with a simple test question:
Is it fair to compare an investment fund's total returns against a price index that is not adjusted for dividends, i.e. not a total returns index?
The answer: "If an investment fund is compared against a price index that is not adjusted for dividends, the resulting comparison may not be entirely fair or accurate. This is because the price index would only reflect the capital appreciation of the stocks in the index, and would not take into account any dividend income received by the investors.


In order to get a more complete picture of an investment fund's total returns, it is generally more appropriate to compare it against a total returns index, which includes both the capital appreciation of the stocks in the index as well as any dividends paid out by those stocks. This will provide a more accurate representation of the returns that an investor would have earned by holding a portfolio of stocks represented by the index.


Comparing an investment fund's returns against a price index that is not adjusted for dividends could potentially give a misleading impression of the fund's performance, as it would not reflect the full return that an investor would have received. It is therefore generally recommended that investors use a total returns index when comparing the performance of investment funds or other investment vehicles."
So this is in line with what I have been suggesting here all along.

Posted by speakup > 2023-02-17 07:42 | Report Abuse

ok so it seems this is like a KSeng. Buy a bit, hold until potential jackpot (when ever that may be).

Posted by stockraider > 2023-02-17 08:39 | Report Abuse

Icap lost in the court appeal....a correct rightful judgement loh!

How can u prevent people from buying & exercising their rights leh ??

Posted by Just88 > 2023-02-17 10:15 | Report Abuse

TTB should do share buy back or declare dividend to narrow the discount. Otherwise, the large discount will only attract more arbitragers trying to dissolve the CEF for quick gains.

Posted by speakup > 2023-02-17 10:26 | Report Abuse

Up a bit. Tot can buy cheap

Posted by dumbMoney > 2023-02-17 10:58 | Report Abuse

The minority judgement is talking about a scenario in which the same controlling shareholders use different nominee names to bypass the 20% individual shareholding limit, which is not the case here. There is no evidence of common shareholdings among the funds managed by COL. The only common factor is management by COL, not ownership control. The next milestone is the parties in concert trigger for a GO at 33%.

Posted by Nepo > 2023-02-17 11:13 | Report Abuse

@dumb
Could you elaborate on "GO at 33%"?

Posted by zhangwin > 2023-02-17 12:31 | Report Abuse

I have been a icap share owner since 2005. Over the years I added more shares. My average price is 1.21 since 2010. I have 100,000 shares. Present price of icap is 2.00. Here are my returns in the following scenerios.

*Present Scenerio 1 - ROI (Return On Investment) Annualised:
Total Investment = 100,000 X 1.21 = RM121,000
Total Return % = (2.00+ Div 0.095+0.20)= 2.295-1.21 = 1.085x100,000 = 108500/121000*100 = 89%
Annualised return % = 89/17 yrs = 5.2%

Compared to FD at 3% Compounded over 17 years = 200000/210000*100
= 165%
Annualised return % = 165/17 = 9.7%

*Future scenerio 2 - Based on 3.47 NAV Liquidation:

Total Return % = 3.47-1.21 = 2.26 X 100,000 = 226,000/121000*100
= 186%
Annualised return % = 186/17 = 10.9%

Conclusion: 1. Holding icap at 1.21 average price for 17 years is only 1% better than FD compounded at 3%.
2. For risk averse investors, FD is best.
3. for those who buy at icap at 2.00 now, you are taking an arbitrage
risk.

Disclaimer: The above is for sharing purpose only, not an advice to buy or sell.

Posted by speakup > 2023-02-17 13:13 | Report Abuse

speakup want buy a bit only, not 100,000 shares.

Posted by Noni > 2023-02-17 13:44 | Report Abuse

TTB enjoying this

Posted by dumbMoney > 2023-02-17 15:29 | Report Abuse

@Nepo Under the Malaysian Takeover Code, whenever there is a change in control of a listed company, the new owners are required to make a mandatory general offer to buy out the minority shareholders at the same price paid to the selling shareholders. The trigger point for the change of control is set at 33%, including those owned by parties acting in concert. So even though the main party may officially only own 20%, but if friends and relatives also own shares and together exceed 33%, then all of them together are deemed to be parties in concert. So funds managed by COL are parties in concert because COL have voting control over them, even though not the beneficial owner of those shares.

Posted by thetruthseeker > 2023-02-17 15:49 | Report Abuse

Assuming a GO is made, the price offered will still be a significant discount from NAV as it is not commercially viable for COL to do otherwise. What is the upside of this?

Posted by dumbMoney > 2023-02-17 16:10 | Report Abuse

For those risk arbitrageurs wannabes these are the possible future scenarios. Come the 2023 AGM, the company is obligated to propose to shareholders an ordinary resolution (simple majority vote required) for the fund to be continued for another 5 years under its constitution. If such a resolution is not passed, then the company will hold an EGM to pass a special resolution (minimum 75% votes required) to wind up the fund. So there are two hurdles here, 50% to discontinue the fund, and 75% for liquidation. There is a no-man's land here under this scenario, the ordinary resolution to continue is not passed, i.e. the fund is to be discontinued, but the special resolution to wind up is also not passed, then what? Alternatively, shareholders holding more than 10% of the votes may call for an EGM any time to pass a special resolution to wind up the fund. So this is not called risk arbitrage for nothing.

Posted by speakup > 2023-02-17 16:16 | Report Abuse

Those who like Icap can try Kseng too. Kseng we all waiting for privatization offer

Posted by tantengbear > 2023-02-17 16:23 | Report Abuse

@dumbMoney 75% votes for liquidation is unthinkable, guess the fund will unlikely liquidate in the foreseeable future. Just hold the stock and pass it on to your great grandchildren since this is an ultra-long term fund. The share price should double in 100 years haha

Posted by dumbMoney > 2023-02-17 16:24 | Report Abuse

@thetruthseeker, the GO price cannot be lower than the highest price paid by the offeror, but nothing to stop them from offering a higher price or some other arrangements. One scheme that has ben tried overseas is the 1 cent bid, before reaching the MGO 33% trigger, make a condition offer for all the outside shares with a 2 step payment arrangement. 1 cent for all the outside shares to be deposited into a trust account initially, and all the liquidation proceeds if successful, less a reasonable service charge for doing all the heavy lifting for the rest of the shareholders. If not successful, all shares are to be returned to the offeree forthwith. So for the offerer, there is no risk of landed up with all the shares, but failed to liquidate, other than the 1 cent paid, plus expenses. If successful, realise full value for its own holdings, plus earn a fair fee for helping the others to do the same. For the outside shareholders, the upside is realise full value less a service charge. Downside is return to status quo if attempt fails, what's not to like?

Posted by speakup > 2023-02-17 17:45 | Report Abuse

Many uncles aunties pakcik makcik bought icap today

Posted by speakup > 2023-02-17 17:47 | Report Abuse

Grab only. No chance buy cheap.

Posted by observatory > 2023-02-17 23:41 | Report Abuse

@dumbmoney, in the last AGM, TTB supporters had 30% vote. CoL and shareholders at the other side had about 24%. Close to half of the shareholders never bothered to vote. It will be difficult to muster 50%, not to mention 75% necessary to liquidate the fund.

As an alternative, will it be easier that once CoL gets just below 33%, and with support of a few percents of other shareholders, they just replace the current yes-men board of directors with new faces?

Once the new board takeovers, how easy can they replace the current manager? Replace him with one of the more reputable fund houses. Given ICAP has several hunderd million assets, they should be able to negotiate a management fee far lower than the 1.5% p.a. charged by TTB.

When a new, honest fund manager is in place, through either buy back, special dividends or other means, the NAV discount could be shrunk to 10% or less, pushing the share price to above RM3. Liquidation could wait when the condition is right.

In fact, if CoL is cleared by the court to accumulate more shares, might TTB even reach out for a compromise?

Posted by dumbMoney > 2023-02-18 10:50 | Report Abuse

@observatory This is why it is called Risk arbitrage, with capital R. Not a low risk high returns investment as claimed by some, haha.

Posted by speakup > 2023-02-18 10:53 | Report Abuse

For "privatisation theme", here are a few counters to look at: MPHBCAP, INSAS, ICAP, KSENG
all cash rich and very deep in value, all waiting for major shareholders to give go ahead

Posted by speakup > 2023-02-18 10:55 | Report Abuse

LITRAK already privatised. JACKPOT! speakup made rm1/share in LITRAK

Posted by dumbMoney > 2023-02-18 13:41 | Report Abuse

@speakup Unfortunately, most privatisation are actually piratisation, majority owners trying to steal from the minority with not fair and not reasonable offers, hoping for acceptance because of TINA, there is no alternative!

Posted by observatory > 2023-02-18 13:43 | Report Abuse

@speakup, Litrak was ripe for privatization, despite the failed attempt in 2019. Main shareholder Gamuda wanted the cash to fund other projects. Regardsless of whom in power, the government of the day wanted to stop paying toll compensation and winning votes through toll freeze/ elimination.

When the interest of insiders and major stakeholders were aligned, it happened. Even if not, the predictable cash flow from toll collection still went to shareholders' pockets as dividend. Starting at 6% yield and rising to 10% as debt was fully paid down. Litrak was a defensive play.

What are the privatization catalysts in the other cases? If they take years/ never work out, what are the compensation for the opportunity cost?

Posted by dumbMoney > 2023-02-18 13:49 | Report Abuse

Some Selective Capital Reduction schemes are actually self financing, using the cash sitting in the company to pay for the buyouts. The failed MAA SCR offer is a very good example of a bad deal that ended badly for all parties. I took a small loss because I bailed at the first sign of it not going through, otherwise would have gone down with the sinking ship.

Posted by speakup > 2023-02-18 18:15 | Report Abuse

When play Privatisation Theme, mesti sabar

Posted by i3gambler > 2023-02-19 08:38 | Report Abuse

https://klse.i3investor.com/web/blog/detail/savemalaysia/2023-01-04-story-h-301980358-Undervalued_small_and_medium_cap_plantation_firms_potential_M_A_targets

Privatisation, let see ICAP or HSPLANT go private / take-over first.

In the above article, Maybank IB said a notable privatisation candidate is Hap Seng Plantations Holdings Bhd, as it trades at an attractive EV of RM33,255 per planted hectare, a P/BV of 0.81 times, and with net cash of 54 sen per share.

In investing we must 以小人之心度君子之腹，meaning we must use bad mindset to judge good person.

HAPSENG boss is too far richer, less chance to swindle money from HSPLANT.

Posted by dumbMoney > 2023-02-19 12:05 | Report Abuse

@i3gambler Unfortunately, the majority of privatisation deals by majority owners were at not fair and not reasonable prices. No doubt at a premium to market, but still big discounts from NAV. Would you accept a $2.50 offer for iCap, for example?

Posted by speakup > 2023-02-19 12:10 | Report Abuse

Yes, 2.50 is ok. Provided this year.
If next year, up another 10%
If 2025, up another additional 10%

Posted by speakup > 2023-02-19 12:12 | Report Abuse

ICAP, KSENG, INSAS, MPHBCAP, FACBIND.....let's see which one first to the privatisation goal post

Posted by i3gambler > 2023-02-19 13:04 | Report Abuse

@dumpMoney
I also think 2.50 is acceptable for ICAP.

Posted by observatory > 2023-02-19 13:19 | Report Abuse

In the case of ICAP, which party will offer to privatize at RM2.50?
How likely for it to reach the >90% threshold necessary for privatization?

Posted by stockraider > 2023-02-19 13:44 | Report Abuse

If offer Rm 2.50.....win win to all loh!

Posted by speakup > 2023-02-19 15:42 | Report Abuse

The longer ttb keeps this listed at a Hugh 40+ percentage discount, the longer abd more ppl hate him.
Ttb just take it private and become everybody hero.

Posted by JohnD0ugh > 2023-02-19 17:55 | Report Abuse

Scottish Mortgage Investment Trust (SMT)
In icapital.biz Berhad's (ICAP) 2021 annual report, I wrote about Scottish Mortgage Investment Trust, an investment trust or closed-end fund listed on the London Stock Exchange. For some investors who worry about ICAP's NAV discount and whether it has an expiry date, SMT provides a wealth of valuable lessons to learn from.

SMT was launched in 1909, 113 years ago, and is still going strong with assets of US$11.36 bln. ICAP is only 16 years young.

SMT traded at a discount to its NAV for a very long time despite regular share buyback and dividend payments (City of London has stubbornly said that ICAP should follow SMT by buying back its own shares when the facts do not support such a move). However, SMT's NAV discount disappeared in 2013.

- Was the discount narrowing of SMT due to its persistent and hefty share buyback and/or regular dividend payment? The simple answer is no. What then caused such an outcome?
- The move from discount to premium for SMT was driven by increased demand from retail investors and an evolving ownership of SMT. For decades, a significant portion of SMT was owned by institutional investors, mainly UK pension schemes. They were persistent sellers, which drove the share price of SMT to a discount to its NAV.
- From 2010, SMT actively marketed itself to retail investors, who in the UK had begun taking greater control over their own finances via savings platforms. Consequently, the SMT shares owned by institutions plunged, from 54% in 1994 to only 17% in 2021.
- At the same time, share ownership by individuals jumped. It was a massive increase in ownership by individual investors that removed the NAV discount of SMT.
- Shareholders, or shareowners, existing and future ones, bear FULL responsibility for determining the share price of a listed company. So, whether the share price trades at a rational or irrational level, the type and quality of shareholders or shareowners of a listed company matters.

i Capital Newsletter Volume 34 Issue 18 (www.icapital.biz)