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.

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