Give Me A Break PB Fund Fanatics

Spoilers: PB fund agents or those who own PB funds might get insulted so I will apologize beforehand. I have no intention in what so ever to discredit such a big financial firm managing a lot of people's money. They are good in what they do BUT the question I have is "Are they that great to deserve widespread attention?"

One of my earliest blog post regarding the ugly truth of unit trusts and mutual funds specified 4 main rules that you could apply when choosing a fund to invest your hard earned money.

Rule 1: Avoid choosing big sized popular funds.

Rule 2: Compare fund expenses.

Rule 3: Information on the fund manager.

Rule 4: Good funds don't advertise.

Rule no.1 and no.4 are the easiest to spot as such I am going to use that as examples. I use those as filters before I move on to rule no.2 and rule no.3. The picture size might be too small but you can click it open in a separate tab in your browser. Fund size is in the millions and the source is from Lipper.

Equity MYR Class Funds: Notice the five biggest funds are from PB and they deliver mediocre returns ~15% p.a. if compared to the top 5.

Bond MYR Class Funds: Again the humongous PB funds lags in returns if compared to the top 5. With such a big fund size, I reckon CIMB is going to perform poorly as well, just look at their 1st year record & you can tell it.

Money Market MYR Class Funds: We see the same trend again, bigger funds never outperform the smaller ones.

Come on people, it is pretty obvious isn't it. Big sized funds are tantamount to popular funds, this is why they are big. If you have RM1bil to manage, you cannot dump them into 30 different stocks as they will be too overvalued. What they do is they spread it out vastly on more companies like 300 which make them look like their are the stock market itself - and probably end up spreading the fund manager's attention too thin.

PB likes to advertise its funds, from walking agents to newspaper printouts to shopping malls and public events, I can see them basically anywhere I go. If you are so good why do you need to advertise le?? Advertising need money le, and guess whose money that is? The very people who invested in your fund laaa.

What other funds don't work and are hyped?
Equity Greater China class funds: I'm sorry man if you are in it, your agent missed out one thing, the stock market in China does not correlate with its economic growth.
Equity Global class funds: Our local managers don't seemed to have the expertise to tackle overseas market. This applies to all funds names.
Others: There are other small ones that don't really work like commodities, utilities, and real estate global.

There is one exception and I know this has been quite good for PB. Their small and mid cap class fund. It looks like they are very good at picking up hidden gems but until I go into details of the fund I cannot tell yet. As for the conservative funds, it was difficult for me to go which for the top 3. From the time of investing in it until now they have remained top 3. Even though HwangDBS SIF is the biggest in its class, it has one big advantage: no defaults on its bond investment and it has the lowest volatility of the 3. Just perfect for my conservative portfolio. Look at PB which is the 2nd biggest but severely lacking behind in performance.

Mutual funds and unit trusts will always be there, it is just my take that I do not wish someone else to handle my riskier ventures like equities. If you could get 20% or more from your own hands you do not need them. Some of you might not like the idea of handling it yourself or may not find the time which is fine. Think wisely and put your money to good use into the correct fund. PB funds can generate money, they really do; BUT they do not generate the best returns, this is my point so pleaseee laa give me a break.

Please Don't Go Away Blue Monster

KUALA LUMPUR: Datuk Pang Chin Hin and his sons are proposing to take Mamee-Double Decker (M) Bhd to go private. Pang, the executive chairman of Mamee, and his sons Datuk Pang Tee Chew and Datuk Pang Tee Nam collectively own more than 45 per cent of the company. The trio, and other shareholders who in total own 71.9 per cent of Mamee collectively are offering the remaining stakeholders in the company RM4.39 a share.

Last Friday, the major shareholders of Mamee-Double Decker, who own 72% of the company, proposed a privatisation of the company via Section 64 of the Companies Act, 1965, which entails a capital reduction and repayment. Such a proposal will require the approval of 75% of the minority shareholders of Mamee-Double Decker. In other words, the Pang family, which controls 72% of Mamee-Double Decker, will not be able to vote on this proposal.

All analysts have placed their views that the capital repayment offer of RM4.39 is indeed a fair deal. The fair value put by other research houses including mine:

Aboi's House: RM3.45 http://aboiwealthpot.blogspot.com/2010/11/time-4-revaluation.html
Kenanga Research: RM3.65
OSK Research: RM3.44
The Others: RM3.30 to RM3.70 range http://mamee.investor.net.my/analyst-reports

The company also noted that its shares had been thinly traded. In its announcement on Friday, Mamee-Double Decker pointed out that the daily average trading volume of its shares over the past one year was approximately a mere 0.22% of its total free float.

It said that given the “challenging environment and low trading liquidity” of its shares, the selective capital repayment represents “an opportunity for entitled shareholders to realise their investments in Mamee-Double Decker at an attractive premium above the historical trading prices.”

 
In Malaysia, most of the time many good companies choose to go private because of illiquid trading, for the case of Maxis and also Astro. The market does not really reflect the value of the company. BUT for Mamee's case it does not seemed to be it, the market value is properly putting a value on it in my opinion (based on DCF computation). Then why? Is the Pang family trying to make a profit by realizing premiums from a take-private transaction? Maybe that is half the reason. Nothing wrong but it is not good for the overall market if this trend continues on for good listed companies in Bursa, making our market look unattractive to investors.

An offer of RM4.39 is a very good deal and I would gladly take it too as a minority shareholder. If the deals go through it looks like we are missing another good company from the market, a company who just got their profit rolling in nicely. Sad to say there is no hard line in predicting when a company will go private BUT a good filter might be looking at companies who are owned by family or individuals with big stake holding share. A few examples would be like FREIGHT, ZHULIAN, Ananda's & Vincent's related companies.

Anyway the main point of this post is to show you once again that one of the good ways to calculate the fair value of a company is thru DCF modelling. It is relatively simple once you get the hang on it. If you need the spreadsheet please email me and I will send mine as reference for your own investment use. If you had bought it at the time of my previous writing you would have pocketed a handsome gain of RM0.74 or 21.26% returns at sell price of RM4.22! Call it lucky since my initial plan was to invest in Mamee in the long run, as such my fair value for MAMEE still remains the same at RM3.45, the RM4.39 price is just an offer and is not reflective of the fair value by the major shareholders.

VirtualPot Folio As At 8th April 2011

After a month of chaos due to the spillover panic effects in Libya and Japan tsunami disaster, things are again moving in a healthy direction. No matter how much sense there is to hold your holdings, some people will succumb to the pressure and sell, hence widely known as profit taking or cut stop loss measure. Nevertheless, I chose to hold on foreseeing no major incident that could have a big enough huge impact in derailing the global economy. 

Contrary to the believes of others, I did not pick up any shares over the last month. Some portion of my reserves are going into house improvements and into a new endowment plan to complete my conservative portfolio over the next 5-10 years time frame. Anyway portfolio gains are up from 12.4% to 17.9% boosted by the holdings of FREIGHT and GENTING. Both remains my top two favourites for long term investment horizon. Because the current holdings in the portfolio are not even 1 year old, the gain is the total return for a given year. Once they move ahead of the 1 year time frame, I will adjust to use the compounded annual growth rate.

There were some verbal comments regarding my P&L history like the timing and astounding profit figures. First the timing: it was crisis time and the best time to load up if you hold cash, note that I use cost averaging method for TopGlov. Second, profit figures: Simply said I sold TopGlov too early thinking it would sink under the overvalued pressure while for DLady I decided to hold on much longer learning from my previous mistake in TopGlov. To further add on, the reason I chose these two is simply because I started off with them and there were names that are synonymous with quality and good reputation, during a crisis almost everything will look cheap to buy. I hope this clears the air of everything :)

Disclaimer: The reports, analysis and recommendations in this blog are solely my personal views. I do not link to any investment body or company. As such, I will not be responsible of any of your investment decision. Consult your investment adviser or come to your own conclusions before making any investment decision.

A Probe Into The Opposition's "Orange Book"

I've spent my Sat morning reading the "Orange Book" while having breakfast and watching CNBC, talk about multi-tasking haha. Why orange book? For those who are not familiar in the realm of PC games, game developer Valve came out with the Orange Box. It was called this way for a couple of reasons and mainly to create curiosity. It did work very well for the gaming company as it rises very high on the google search engine list.

1. It's not something which is similar to a past or present.
2. People who have a preconceived notion of what it is by the name of it.

Unfortunately Malaysia's Orange Book was written in the Malay language only..sigh. Fortunately I'm writing in English for you :) The theme for the book is "Change Now, Save Malaysia" and was drafted by the opposition Pakatan Rakyat or People's Coalition. I shall highlight a few main but important points as well as my point of view:

Country In Crisis

1. For 12 years in a row we have been running a deficit budget.
2. For 10 years in a row we have missed our target of economic growth.
3. In the last 4 years, PETRONAS has been dishing out RM325 billion, RM81.25 billion per year.
4. 2.6% average wage rise in the last decade compared to 3.2% in the world (including poor countries)
5. 40% of Malaysian household earns less than RM1500 per month and 75% of them are Bumis.
6. 4 million or 34% of workers earn less than RM700 per month.
7. 62% of the RM40 billion used for subsidies are for the corporate sector!
8. RM466 billion of personal debts owed by Malaysian to banks is the highest in Asia.
9. RM28 billion loss due to corruption and leakages which is 3x the amount of oil subsidy.
10. Only 68.7% of Malaysians finish high school education, even Brunei is higher at 88.2%.

PR is Poised To Fix This Shit

1. Establishing several council of experts in main national issues such as economy, political and social. 
2. Maintaining a more balanced subsidy structure for the "rakyat" by revising the subsidy structure to the corporate sector.
3. Setting a target to push those with household income level from RM1500 to the minimum RM4000 in the first 5 years. Certain tasks include implementation of min wage level, work from home laws to women and training schemes.
4. Restructure four infrastructure and public utilities that is being monopolized or have great concessionaire advantages: water, electricity, tolls and the internet.
5. Resolve outstanding PTPTN loans currently at RM46 billion by reduction of interest rates and allowing auto deduction of installment after 6 months of full employment. 
6. Open tender policy.
7. National integration of Sabah, Sarawak with Peninsular Malaysia to ensure fair power sharing.

Separation of powers whereby too much power in the executive during Mahathir tenure, back to legislature and judicial. More press freedom. Malaysia needs to have a clean and fair elections and one way is to have automatic enrollment of citizen into the electoral system for 18 years and above. GST to wait until the rakyat is ready for such a tax system, minimum wage system to all workers. Social protection in the form of a pension system to all workers in the private sector, unemployment work fund for those unemployed and retraining of workers. Housing goal as One family, One house, more low cost or medium cost housing development. Transportation: Abolish toll system within 7 years, 1/2 price for young and old citizens for all public transportation mode. Environment: Recycling culture and ensure controlled activity for lumbering, move towards alternative energy source. Social justice: Increase social welfare to the natives and minorities. Education: Fair enrollment to higher national eduction institutions to all races. Women: 30% allocation for women in all political position and government posts. Security: Community policing. Health: To ensure that our national health policy remains and health privatization is shelved.  


What I like to know more is their stand on NEP's 30% equity target, how they plan to attract overseas Malaysians back to our country, certain protectionism policies like our automobile sector and how to fix the race disparity in civil service. BUT it is good to know they have thought that much already, it has to get the ball rolling first.

100-Day Manifesto
Reformation of SPR (election commission), SPRM (anti corruption agency), attorney general's chamber (law & justice) and PDRM (the police).
I don't know how PR is going to reform this in details but I just know something needs to be done and the process of reforming this is going to be long and tedious. Definitely not within the reach in the first 100 days.

Abolishment of ISA (internal security act).
For the love of god, please abolish this GESTAPO crap. Would you like to have the SWAT team banging your door down without needing any reason when you making love with your wife at home?

Asking Khazanah, KWSP (epf) and other govt bodies to take over tolls with the sole purpose of abolishing toll.
Actually EPF is not as transparent as it should be with meager returns like 5.8%, even I can earn 3x that returns given the chance not to put my money into EPF. I also think it will not be abolish but like Singapore MRT it will be run by a company that charges reasonable price. With 19 concessionaires it will cost a lot of money like RM50-60 bil to take them over. Will see how it goes.

Restructure national subsidy to reduce subsidies given to the private sector.
This is actually a double edge sword, you have a problem of balancing socialism and capitalism but I will agree that the current subsidy structure is heavily skewed to corporate sector and must be restructured by all means as the first and right step.

Immediate pay rise of RM500 to teachers and gradual revision of other civil servant salary.
I do not agree on the first portion, you don't fix our education system simply by giving more money. It should be done on merit basis, in China they fixed the exams to be difficult and give incentives via bonuses to teachers who made sure students get good grades.

Nationalize water management in the country.
Fully behind this. It is better to rely on a system that has greater direct accountability.

Free WIFI service to all citizens in major cities and semi-urban areas.
Unless you can get public-private partnerships, getting this done within the first 100 days is difficult and not to say prohibitively expensive. This should be your first 1-3 years goal.

Cancellation of FELDA plantations and open current fields to 2nd and 3rd generation Felda settlers.
FELDA was meant to benefit the people more than the company but it seems that the administration treats them more like cheap labour and slaves. Cancellations of the plantations is the right direction to move from profit optimization to poverty alleviation.

Increase oil royalty by 20% to Sabah, Sarawak, Terengganu and Kelantan.
Agree. These states should enjoy some share of the profit of their natural resources. The current 5% is too low. Heck even the 6% govt tax is higher.

Establishing a RCI (royal commission inquiry) to solve the influx of illegal immigrants and citizenship in East Malaysia. 
This is real and a serious problem. Why?

If you cross the North Korean border illegally                           
You get 12 years hard labour.                                             
                                                                           
If you cross the Iranian border illegally                                 
You are detained indefinitely.                                           
                                                                           
If you cross the Afghan border illegally                                 
You get shot.                                          
                  
If you cross the Saudi Arabian border illegally                           
You will be jailed.                              
                        
If you cross the Chinese border illegally                                 
You may never be heard again.              
                              
If you cross the Venezuelan border illegally                             
You will be branded a spy and your fate will be sealed.      
            
If you cross the Cuban border illegally                                   
You will be thrown into political prison to rot.               
         
If you cross the British border illegally                                 
You will be arrested, prosecuted and sent to prison and deported         

If you are an Indonesian and cross the Malaysian border illegally         
You will get:                                                             
  -  PR (Permanent Residence)                                             
  -  A driving license                                                   
  -  Voting rights                                                       
  -  Job reservation                                                     
  -  Special privilege to be consider as a bumiputera                     
  -  Credit cards                                                         
  -  Subsidized rent or a loan to buy a house                             
  -  Free education                                                       
  -  Free healthcare                                                     
Oh Malaysia ! What a great country!

Conclusion

There is a great amount of work to be done or rather fix in our country and I am extremely glad that most of them have been pinpointed by the opposition. It is not surprising those most of the items in the manifesto are socialist in nature rather than capitalism. Both DAP and PAS are very socialist and I am 100% sure that they will uphold "Rakyat Didahulukan, Pencapaian Diutamakan". This spell good news for the "rakyat" but I am willing to bet some corporate players will surely make some noise particular those GLCs. The purported cost for these implementation is RM19 billion as estimated by the coalition. Frankly if you ask me I do not think it is going to cost that little but the cost for such fixes in our country's damaged structure is worth more than our poor GTP.