2022 - Investment Review

Review for 2022 investment is as follow:

PLANTATION

The best performing sector will be plantation. INNOPRISE is the best stock on both dividen and capital appreciation. United Plantation is purely on dividen which is at 8% per annum. Coming Q1 of 2023 will expect RM1 dividen payment from United Plantation.

FINANCE

RCE Capital was a surprise when dividen of 23 cents was declared.  ELK Desa was a miss. Sold too early. Takaful was an under achiever. Share price was flat and only 12 cents dividen for the whole year.

PLASTIC

Poor performance. Sold Thong Guan even though the sales revenue was increasing every quarter. The share price is lackluste and dividen is not attractive at all. Still keeping BPPLAS for it dividen and growth prospect.

FURNITURE

Worst performance sector. HEVEA was the worst with capital depreciation of almost 30%. LIIHEN was at 15% and Pohuat at 3.85%. LIIHEN and Pohuat are giving dividen except Hevea.

OTHERS

Magni, Tongher and Samchem are still paper loss but dividen are OK.  KAWAN was a surprise winner appreciate about 35%.

GREAT MISS

There are always some great miss in investment. They are LITRAK and FAVCO. ULICORP and ELK-DESA also but at smaller scale.

Total dividen received in 2022 is approx MYR40k. Unrealized lost is approx MYR 38k against unrealized gain of MYR 35k.   

Overall investment performance is OK if compared to KLCI benchmark. At least the dividen is attractive in current bad market sentiment. 2023 investment will be defensive and to consolidate the portfolio.

BPPLAS - Next Wave of Rise

 Ah Pek company is on the rise again!!

I am checking on BPPLAS again after their latest Q2 result and the recent chart pattern. I won’t go into company fundamentals but below are the bullet points for easy reference.

• Net cash company
• Dividen every quarter
• Expansion on production
• Low resin price (low crude oil price)
• Benefit from USD appreciation (export)
• Chart Indicator (uptrend signal)

All are conducive for next phases of growth. Come on Ah Pek !

HEVEA UPDATE - 12 AUGUST

I have been holding Hevea for more than a year. Apart from dividen received, the share price is not exciting. In fact, dropping due to interest rate hike, rising resin price and inflation pressure.

However, it is not all that bad if we look into the fundamental. Company is cash rich and no issue with interest rate hike. Strong USD only benefit HEVEA as they are exporter. The input costs such as rubber wood and resin (glue) are in MYR.

Bulk of the business is from East Asia (Japan) and very small portion from USA. Hence, the impact on Hevea is very small.   

The Jan- May 2022 fibreboard export is increasing.

Source from MTC

I anticipate good 2^nd quarter result from Hevea. Let’s see.

Down side risk seems limited.

At time of writing I own some Hevea shares. Buy at your own risk.

June 2022 - Performance

Date :	5-Jul-22
PACKAGING	Avg buying price	Last closed price	% Gain/Loss
THONG GUAN	2.540	2.270	-11%
BPPLAS	1.456	1.250	-14%
FURNITURE
POH HUAT	1.410	1.360	-4%
LIIHEN	0.981	0.900	-8%
HEVEA	0.499	0.435	-13%
PLANTATION
INNOPRISE	1.234	1.310	6%
UNITED PLANTATION	14.697	14.000	-5%
OTHERS
SAMCHEM	0.837	0.735	-12%
MAGNI	1.954	1.910	-2%
KAWAN	1.658	1.640	-1%
WELLCAL	1.108	1.150	4%
FINANCIAL
RCE CAPITAL *	1.022	1.670	63%
ELK-DESA	1.350	1.300	-4%
TAKAFUL	3.645	3.150	-14%

SHARES ADDED

• INNOPRISE @ RM1.35

PACKAGING

Share price already reflected. Currrent high crude oil result in high resin price. Earning is affected. 

 

FURNITURE

Pohuat earning beated forecast. However, overall sector is done due inflation that will dampen the sales. Liihen has bonus issue which make the price lower. 

PLANTATION

This sector is down because of lower CPO price. I am still optimistic about INNOPRISE and UTDPLT. Both having free cash flow. It is time accumulate both stocks.

OTHER

Dispose CSC Steel and make some good profits. Dispose FAVCO as well but lower proft. KAWAN and SAMCHEM are on down trend because of bad market sentiment.

FINANCE

ELK-DESA and TAKAFUL are poor performers. Very disappointed especially Takaful.  It is bad investment fo TAKAFUL.

INNOPRISE - Can We Still Invest?

Fundamental :

Company has no bank borrowing as at 31^st December 2020. They have adopted a dividen policy of distributing 80% of the profit after tax. Revenue is cyclic as palm oil is commodity.

 

Q1 Result

 

Two major factors are CPO price and Production. I take the conservative 80% production output from the average of 2020 & 2021. Based on this production rate, let’s see how the CPO price will affect the earning per share and the dividen yield.

The EPS is generated using the formula that developed. It is not 100% but give very good indication.

 

 

 

CPO on Downtrend

 

 

The CPO down trend will continue as Indonesia cutting the export duty and putting more CPO supply to the market. Coming good harvest of Soybean in Latin America will also help to ease the supply shortage. Hence, I estimate that CPO will probably drop in between 3000-4000 level.

Based on this CPO level and dividen yield return, the price to enter is around RM1.36-RM1.50.

 

Stock Price on Down trend

 

Price already drops below the support level and will continue to drop. The bearish continue trend has shown.

 

At time of writing, I own some INNOPRISE shares @ low price. Waiting for opportunity to buy more.

 

FAVCO - Lesson Learn

FAVCO announced a whopping 85 cents per share on 6 May 2022. Price shot up to RM3.25 immediately.

Many investors trapped or lose money when buying at high sides @ RM3.25. Here is my view on what we can learn from the this incident. The selling time is important to avoid being trapped.

Motive of Huge Dividen

The motive of such high dividen was very clear. Muhibbah is the biggest shareholder of FAVCO and they are in cash flow problem. FAVCO has huge cash file. So naturally Muhibbah would want to utilize the cash pile from FAVCO. So the huge dividen is to save Muhibbah and not for rewarding shareholders because of good business.

In some cases, huge dividen also can happen if the company sold their core business. For example : SCGM who sold their plastic business to Mitsui Japan. 

Share Price

Share price will naturally adjust after ex-date. A lot people do not aware of such incident.  Share price also under huge selling pressure after ex-date. In many cases, prices go down FAR MORE THAN DIVIDEN itself. Unless your entry price is supper low or the company businsess will continue to be good, there is not point of holding the shares.

Strategy 

I have FAVCO share before the announcement of huge dividen which I could make appox 30% profit. However, I made a mistake of not selling it as I thought it had not reached the profit that I wanted. I also anticipated that business will continue to be good as oil price has recovered to USD100 per barrel. However, the QR was a disappointment. I ended up selling after dividen ex-date and made only small profit overall.

So the lesson is to sell before ex-date or sell half the shares if you anticipated good result or business will be good.

  

Company Setup in Malaysia

Due to reasons that cannot be avoided, I have to setup an entity or company in Malaysia to receive my remuneration. It is a lot of work but same time gives me an opportunity to learn various matters related to business such as account, tax planning, payrolls etc. I would to share the findings here for knowledge purpose. 

There are 3 types of setup in Malaysia. They are as follows:

• Sole Proprietor / Pemilik Tunggal 
• Limited Liability Partnership (LLP) /  Perkongsian Liabiliti Terhad (PLT) 
• Private Limited / Sendirian Berhad.  

The differences of these 3 setups can be listed as follows:

• Registration Setup
• Liability
• Tax planning 
• Compliance
• Cost
• Strike off / winding up

Table below is a simple summary of different setup. 

SSM website provide a good comparison of the setup. You may visit their website below:

https://www.ssm.com.my/Pages/Register_Business_Company_LLP/Business/Before-Starting-Business.aspx

Depending on your business size, you may choose the setup that suits you. For example, if a small trader may opt for Sole Proprietorship at the beginning. If the bussines is doing well and consistent, it is best to switch to the private limited. The reasons are as follow:

• Lower tax rate
• Limited liability 
• Better compliance to authority

Although the maintenance cost of a private limited is much higher than sole proprieter, the lower tax rate for private limited will balance out. We can look intot the tax rate of each setup in my next article for better understanding.

PLT is more for professional services such accountants, lawyer, auditors, company secretary and etc. This is purely my personal opinion as services does not required stock/product. 

Although PLT seems attractive in terms of tax rates, the complicate procedures to register and strike off is a hindrance. Besides most banks are still not favourable to PLT in terms of providing loan.

Another point to consider here is the tax compliance. Since the account of sole proprietor and PLT does not required audit, many mistakes will occur if the owners are not knowledagble on tax compliance. There will be heavy penalty to pay if mistakes are made.

Note : A private limited company now can have single director.