Monday, March 20, 2006

Strategic Stakes Taken By International Funds


Malaysian Companies To Watch

The following are significant stakes taken up by some international funds with a decent investing record in Malaysia. I will also rate the attractiveness of their investment out of ten. Bears watching.

Newton Investment Management Ltd is a big UK based fund. The fund has bought 42 million shares, a stake of 8.2% in Bursa Malaysia (the exchange). Its last reported purchase was for 305,000 shares on March 3. The fund's buying could a be a momentum play following the takeover bid by Macquarie for London Stock Exchange last year. That was rebuffed and was topped by Nasdaq by offering nearly a bid nearly 80% higher than Macquarie's a few weeks back. Bursa is making good money despite being so-so managed currently, so the potential for higher returns are good. Readers of this blog know how I feel about Bursa's management - probably ruling myself out for a job offer from Bursa. Good medium term investment by Newton Investment Management Ltd. (Rating 7.5/10)

The Capital Group, one of the largest mutual funds in the US, has been buying shares in IJM Corp Bhd. It last reported buying 403,100 IJM shares last week, which raised its stake to 9.9% in IJM. Capital Group owns many stocks in this country, including a substantial stake in property developer SP Setia Bhd. The move by The Capital Group to load up on construction and property probably has a lot to do with the broad view that these are main beneficiaries of the 9th Malaysia Plan, especially IJM, I think SP Setia's favoured more due to their township in the offering and their clever buildup of strategic landbanks. SP Setia's offering of Setia Pearl Island in Penang is a very much sought after project. (Rating 6.5/10)

Fidelity, billed as the largest mutual fund in the US, has been active in buying Mah Sing shares this year. Firstly, Mah Sing almost has to come back from the dead a few years ago. The company still suffers an image problem in Malaysia among investors. However, kudos to management for really rebranding the company. Its recent launches of Damansara Perdana and Aman Perdana in the Klang Valley were good value and attractive. Even bigger kudos for Fidelity to have the guts to look past reputation and on fundamentals alone. (Rating 8/10)


Pelikan International Corp Bhd has the Arisaig Asean Fund Ltd as a substantial shareholder, which bought Pelikan shares right up to last week. Arisaig Asean Fund, listed on the Irish Stock Exchange, is also a large shareholder of Uchi Technologies Bhd. Now, Uchi is a firm favourite among many analysts for the past few years, and Arisaig would have made a lot of money from their stake in Uchi. I expect similar results from Pelikan, albeit taking a bit longer than Uchi. Pelikan is the result of a LBO. Strange because 95% of revenues come from outside of Malaysia, main factory is in Voehrum, Germany, and the company is now Malaysian owned. The CEO and management is still saddled with a huge debt and is working hard to penetrate markets to payoff the funding. Europe accounts for the bulk of their stationery product market, but has made in-roads into Asia, Latin America and Eastern Europe. The brand is sound, currently trades at low PERs, good yield, more and more long term funds are buying long terms stakes in the company. A deal with Parkson Retail in China brought immediate exposure for Pelikan in 37 outlets in China. (Rating 6/10)

Hedge fund Level Global Investors L.P. bought 10.4 million shares, a stake of 5.2%, in Jobstreet Corp Bhd last month. Global Investors' interest could have been attracted by Jobstreet's mid-teens' PE whereas its counterparts in the US, Australia and China are traded at PEs of over 30 times. A consolidation will come soon in Asia. Better funded job sites such as Monster.com could so easily swallow up the company, or a company like Google would not be averse to latch onto Jobstreet for its market visibility in Asia-Pacific. Still, Jobstreet remains a "only-if" play, i.e. price will shoot up only-if someone buys the company. (Rating 6/10)

Aberdeen Asset Management has bought a 5.92% stake in one of my favoured Imaginative Investing picks, Pos Malaysia. The bulk of the shares was only acquired in the first 2 months this year. Mail and courier revenue are still on an uptrend, we expect courier services to be a major jewel that is still not yet recognised by investors. Once you have wired the hotspots and delivery points, you cost per courier delivery is close to nil but these are premium services you can charge for. No one can match Pos Malaysia's breadth and width in delivery points, others can only replicate a small part of it. You have the platform, now the kicker is Pos Malaysia's 20.3% stake in Transmile Holdings. Transmile now acts like a feeder to international courier and cargo services for Pos, in and out of Malaysia. Since Robert Kuok has taken over Transmile, its performance has been spectacular, thanks to Kuok's way of doing business. Hence both companies I like very much. A brilliant move by Aberdeen's Hugh Young. (Rating 9.5/10)

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