Friday, 20 June 2014

TA Global AGM

I had the opportunity to attend the TA Global AGM today at Menara TA One this morning, I have to admit this is my first AGM as an investor.

What I found interesting is the quality of the questions being asked by the minority shareholder watchdog group. I have had prior experience dealing with them in my past role, and I can say that they have came a long way in the past 10 years.

Questions asked by them were of a relative high quality, based on their question I was able to glean the following:
- oversea hotel occupancy rate have increased over the last year, but overall contribution decreased due to unfavourable exchange movement. Predominantly I presume is due to the depreciation of AUD vs MYR.
- Gearing of the company will increase to over 0.8 from about 0.51 currently, but the management expect it to be manageable from ongoing sale of their project.
- There's an impairment of over MYR40million related to Australia... there was no detail on this particular impairment but I believe it is due to certain advance made to associate.

The discussion between shareholders and the directors was rather jovial. The directors was extremely polite and patient, answering various sort of questions from the floor.. they were happy to answer the questions from the floor and I felt that they were very transparent in the running of the company.

The highlight from the management that I gleaned was the following:
- The Serdang land recently purchased was from a borrower, obtained at a really good price. The management believe its location near the Tesco distribution hub with trunk road frontage is ready for development and the management is extremely confident at developing and selling this project with a good return to the company.
- Numerous shareholders question the board on their plan for various parcel of land in KL: To this Datuk Tiah made a quotable quote "All our land are fantastic and irreplaceable, once you develop it it will be gone forever.... they are like gold... the longer we wait the more gold we will get".. this statement was given to applause from the floor.
- Plans at Damansara Avenue is progressing and should be completed within the 10 years as mentioned in the chairman's statement. There might be some alteration to the Ativo SOFO plan leading to delay in launch to Q1 2015; this is to adjust the product offering to be more in line with market demand.
- Plot B and C previously slated for residential project will be converted to a mixture of residential and retail. This is expected to be launched sometime in 2016.
- According to Datuk Tiah, the management have been focusing on TA Securities in the past but going forward, they are going to be giving the property division more attention. As such they will strive to achieve a profit of RM500 million per annum in the next 10 years.
- The creation of a construction arm is expected to support this profit goal, and they hope to build this arm to a scale that will enable them to bid for construction project at the level such as Sunway Bhd.
- The management is unlikely to look at listing of a REIT in the near future as they view the structure as a borrowing that will increase their cost of capital.
- Trump tower in Vancouver is selling well and is located in the "Orchard Road" equivalent of Vancouver. Based on the profit obtained from the sale of the residential unit, the group will be able to get the hotel "for free".

The management came across as transparent, and in particular Datin Tiah, although as a non-executive director appear to be hands on and know their product offering in detail. They appear to be building a strong stable of investment (with focus on hotel) that aim to provide the shareholders with a stable pool of recurring income.

I am concern about their level of borrowing and also the foreign currency exposure. From what I gather, I believe the management is likely to hasten their pace of launch in the future which will further improve the profitability of the company.

However even without contribution from the development arm, its hotel segment contributed about RM90M per annum to the group.

With a current market capitalisation of about RM1.8B, I believe this company is worthy of a place in my portfolio due to the quality of its landbank as well as the growth in the recurring income stream.

Friday, 6 June 2014

EPF - acquiring YTLP at this price

EPF have been selling YTLP's share for the last few years given its lack of dividend.

However, I have noted net purchase by EPF in the last 2 day. Acquiring 500,000 and 1,500,000 shares on 2/6/2014 and 30/5/2014 respectively.

Could this be a change in "thinking" by our EPF fund? If it's so, it could be interesting.

YTLP - last done @ 1.53

1) Francis Yeoh apologised for comment on cronyism. 2) YTL - Growth At Reasonable Price!

1) FY apologised for comment on cronyism
Apparently he was quoted out of context.. but despite his lack of conviction, I believed he touched on some important point in his original talk but I guess he must be a realist since YTL is pivoting their focus from offshore to onshore in the coming 2-4 years given the global asset bubble and the local ETP.

I still have much respect for him and his management team and I believe the valuation ascribed to the YTL group of company is very undemanding.

YTL - Growth At Reasonable Price
Company in the utility industry (my focus on YTLP) is usually given a premium valuation relative to the overall market given its secured long term cashflow with an implied inflation hedge.

An example of the valuation would be the Utility Select Sector SPDR ETF, this ETF of the S&P utilities sector have a PE of 16.53 and PB of 1.65x.

I do feel strongly about the quality of asset held under the YTL group. They are world class company capable of competing internationally and they are also strong cashflow generator for its shareholder.

Somehow in the last few years they have reduced their dividend payout policy to conserve its cashflow. This caused investor with a dividend bias to flee the counter resulting in a severe drop in market value over the last three years.

However if you are like me, a longer term investor, I believe they are conserving the cashflow for growth. And YTL in the last few years have transformed into a company worthy of a place in one's long term portfolio because they offer "Growth At Reasonable Price".

Tuesday, 3 June 2014

3 things you should know about YTLP

Interesting article on YTLP

Francis Yeoh: Crony capitalism has to go

Francis Yeoh have been making news today.

1) Crony capitalism in Malaysia has to go
He pointed out 85% of YTL's business is oversea. They got the Initial IPP because of their innovation and they were priced below those being touted by the like of Enron back then.

2) Economic bubble bursting?
He warned that current low interest environment backed by QE is leading to asset bubble that will likely burst in the next 2-4 years. I would have to disagree, as I believe that a bigger risk would be the debasement of currency hence it will be better to be in real asset rather than paper money.

Track 4A awarded to YTLP consortium

CIMB have a target price of RM2.39 for YTLP

Track 4A was awarded to a consortium consisting of YTL Power, Tenaga and SIPP Energy (Johor Sultan's vehicle).

Little details is available for the moment but analyst are positive that YTLP is part of the consortium and will remain a Malaysian power player, albeit on a smaller scale.

CIMB have estimated an earning boost of approximately 10-11% in 2018, assuming a 33% stake in the consortium.

CIMB report - 2 June 2014