There are “real” (non rent-seeking) corporate heroes
Pretenders to the throne, please be seated.
Last week, I wrote about some of our public and private sector successes in embracing technology and delivering quality services efficiently and effectively. This proves that Malaysians have the capability, given the right environment.
I truly hope that going forward, we will see greater concerted efforts by the government to cultivate entrepreneurship amongst young Malaysians – by ensuring equal opportunity through regulatory frameworks that will dismantle monopolies and rent-seeking proclivities while promoting a level playing field and fair competition.
Malaysian companies can succeed and not just at home. We can compete effectively against regional and global peers. A good example would be QL Resources, a homegrown company that has done very well and in industries that are extremely competitive, no less. Incidentally, QL was chosen as The Edge Billion Ringgit Club Company of the Year in 2011.
The company was listed on the Bursa in March 2000 with a market capitalisation of RM100 million. Today it is worth more than RM11 billion. That is equivalent to a compounded annual growth rate of nearly 30% in the 18-year period.
QL truly is a rags to riches story and should be an inspiration to all budding entrepreneurs. It is living proof that success can be had with imagination and innovation, determination and hard work.
The business started as a small family endeavour, collecting seashells from nearby beaches – founder, Chia Song Kun, is from a family of fishermen – and selling them to poultry feed millers (for their calcium). From there the business expanded, brick by brick, vertically (upstream and downstream) and horizontally as well as geographically.
For instance, the marine products division went from collecting and selling seashells and later, fish and prawn (aquaculture farming and deep sea fishing) to value added products like fishmeal and surimi (fish paste) and further processing into chilled and frozen consumer food (fish balls, fish cakes, crab rolls/chunk, seafood tofu, etc.) as well as seafood snacks.
The latter are sold under house brandnames such as Mushroom, Suria, OceanRia and Ika’s, available wholesale and retail in hypermarkets. Its most recent venture, the FamilyMart chain of convenience stores, fits right in with its foray into front-facing consumer food business. Many of the products sold in the stores are sourced from its own businesses.
From the trading and distribution of animal feed, the company diversified into poultry farming, with broilers, breeder and layer operations. The palm oil business expanded from crude palm oil milling to oil palm plantation in Sabah and East Kalimantan, Indonesia.
Today, QL is amongst the largest fishmeal, surimi and egg producers in ASEAN, with marine and poultry operations in Malaysia, Indonesia, Vietnam and China. Its wide range of consumer foods is exported worldwide, across Asia, Europe and North America.
All of QL’s businesses operate under extremely challenging business environments with segments of the industries having relatively low barriers to entry. But its success and track record is evidence that QL has managed to extract maximum returns through ingenuity, integration, scale, productivity and strong execution.
Another homegrown success story, one that is absent of patronage and economic rent seeking, is Muhibbah Engineering. The company has competed successfully against larger global peers in securing high profile projects all over the world.
For instance, it completed the RM2.2 billion catering facilities contract at Doha International Airport, and is working on 3 other contracts to construct economic zones for the Qatar government at a total value of RM708 million.
Muhibbah’s construction and cranes divisions currently have a combined orderbook of RM1.85 billion, of which 66.4% are from Malaysia, 16.6% from the Middle East (mainly Qatar) and 14.8% from other Asian-Pacific countries.
Founded in 1972, Muhibbah has evolved from being a small local contractor to a global player, a leading crane manufacturing arm that has supplied some of the world’s tallest and most iconic buildings and a stake in Cambodia’s airport operations that provides steady income.
InsiderAsia was the first research house to extensively cover the stock and recommended a BUY in Sept 2005 when its market cap was only RM100 million. Today, its market cap is RM1.34 billion, representing a compounded annual growth of 22% over the last 13 years.
From 2004 to 2017, net profit has grown from just RM8 million to RM132 million. Muhibbah also won 3 awards at the recent The Edge Billion Ringgit Club Awards 2018.
Over the years, it has restrategised itself from being a general contractor to a specialist in 3 main areas: marine, oil & gas, and airport, buildings and infrastructure.
In 2013, Muhibbah was awarded a Petronas licence to bid for projects, and has since successfully won a number of jobs, including for the RAPID project in Johor.
Muhibbah’s crane manufacturing arm, Favelle Favco, derives 72% of sales overseas and has 5 manufacturing plants in 4 continents. The cranes complement the group’s construction activities. They are used in oil & gas installations as well as many of the world’s most iconic buildings such as the Burj Khalifa, KL 118 Tower, Shanghai Tower, 1 World Trade Centre and Taipei 101.
A jewel in Muhibbah’s crown is its 21% stake in the concession for the operation of 3 international airports in Cambodia, in partnership with French conglomerate Vinci SA. The airport concessions, in Phnom Penh, Siem Reap and Sihanoukville, will run till 2040 and provides strong steady incomes. The airports enjoy double-digit annual passenger arrival growth, with 8.8 million passengers in 2017. Passenger arrivals for the nine months to Sept 2018 rose 21% to 7.6 million.
I believe the lesson is that Malaysian private enterprises are more than capable, provided it is allowed to operate in a fair and conducive environment, absent of vested interest intervention through the government.
I say this again, there are opportunities even in the most cutthroat of businesses and with vision, creativity, perseverance and hard work, success is achievable. I have highlighted two living proofs here. I do not doubt that there are many similar success stories, and yet others perhaps in the early stages as QL and Muhibbah were 15-20 years ago.
Stocks in my Global Portfolio ended flattish for the week. Total returns now stand at –13.3% since inception. This portfolio is under-performing the MSCI World Net Return Index, which is down by a lesser -4% over the same period.
There were continued signs of selective bargain hunting on the local bourse. Stocks in my Malaysian Portfolio ended mostly higher. Nevertheless, the buying was visibly less broad-based. Both the FBM Emas and FBM Small Cap index closed flattish for the week but continue to outperform the FBM KLCI for the year-to-date.
Last week’s gains lifted total portfolio returns to 50.9% since inception. This portfolio continues to outperform the benchmark index, FBM KLCI, which is still down 7.4%, by a long way.
Performance Comparison Since Inception (%)
- Tong's Value Investing Portfolio
- FBM KLCI
| SHARES HELD | QUANTITY | AVERAGE COST | COST OF INVESTMENT | CURRENT PRICE | CURRENT VALUE | GAIN / (LOSS) | GAIN / (LOSS) |
|---|---|---|---|---|---|---|---|
| SCGM BHD | 11,066 | 1.732 | 19,218.4 | 1.230 | 13,611.2 | (5,607.2) | (29.2%) |
| AJINOMOTO (M) BHD | 1,500 | 11.813 | 17,720.0 | 18.640 | 27,960.0 | 10,240.0 | 57.8% |
| PANASONIC MANUFACTURING MSIA | 600 | 26.157 | 17,182.0 | 38.100 | 22,860.0 | 5,678.0 | 33.0% |
| Y.S.P.SOUTHEAST ASIA HOLDING | 10,500 | 2.413 | 25,340.0 | 2.710 | 28,455.0 | 3,115.0 | 12.3% |
| FORMOSA PROSONIC INDUSTRIES | 18,000 | 1.540 | 27,720.0 | 1.800 | 32,400.0 | 4,680.0 | 16.9% |
| HONG LEONG INDUSTRIES BHD | 2,000 | 9.126 | 18,251.0 | 9.250 | 18,500.0 | 249.0 | 1.4% |
| WILLOWGLEN MSC BHD | 19,900 | 0.500 | 9,950.0 | 0.470 | 9,353.0 | (597.0) | (6.0%) |
| MALAYAN BANKING BHD | 3,000 | 10.250 | 30,750.0 | 9.620 | 28,860.0 | (1,890.0) | (6.1%) |
| ECO WORLD DEVELOPMENT GROUP BERHAD | 15,200 | 1.235 | 18,772.0 | 0.960 | 14,592.0 | (4,180.0) | (22.3%) |
| DIALOG GROUP BHD | 5,700 | 3.452 | 19,676.4 | 3.050 | 17,385.0 | (2,291.4) | (11.6%) |
| SAM ENGINEERING & EQUIPMENT | 3,000 | 7.380 | 22,140.0 | 7.330 | 21,990.0 | (150.0) | (0.7%) |
| POH HUAT RESOURCES HOLDINGS | 13,000 | 1.490 | 19,370.0 | 1.530 | 19,890.0 | 520.0 | 2.7% |
| Total | 246,089.8 | 255,856.2 | 9,766.4 | 4.0% | |||
| Shares bought | |||||||
| No transaction. | |||||||
| Total shares held | 246,089.8 | 255,856.2 | 9,766.4 | 4.0% | |||
| Shares sold | |||||||
| No transaction. | |||||||
| Cash Balance | 45,954.3 | ||||||
| Realised Profits / (Losses) | 92,044.0 | ||||||
| Change since last update Jan 17, 2019 | |||||||
| Portfolio | 0.9% | ||||||
| FBMKLCI | 0.6% | ||||||
| Portfolio Returns Since Inception | 200,000.00 | 301,810.4 | 101,810.4 | 50.9% | |||
| Portfolio Returns (Annualised) | 11.9% | ||||||
| Portfolio Beta | 0.625 | ||||||
| Risk Adjusted Returns Since Inception | 81.4% | ||||||
| Performance Comparison | At Portfolio Start | Current | Change | Relative Portfolio Outperformance | |||
| FBM KLCI | 1,829.7 | 1,693.6 | (7.4%) | 58.3% | |||
| FBM Emas | 12,700.4 | 11,719.8 | (7.7%) | 58.6% | |||
Footnote:
*Current price is as at January 24, 2019.
*Portfolio started on Oct 10, 2014 with MYR200,000.
*This is a personal portfolio for information purposes only and does not constitute a recommendation or solicitation or expression of views to influence readers to buy/sell stocks.
*Current price is as at January 24, 2019.
*Portfolio started on Oct 10, 2014 with MYR200,000.
*This is a personal portfolio for information purposes only and does not constitute a recommendation or solicitation or expression of views to influence readers to buy/sell stocks.
STOCKS SOLD IN THE LAST 12 MONTHS (Currency: MYR)
| SHARES SOLD | DATE BOUGHT | DATE SOLD | QUANTITY | AVERAGE COST | COST OF INVESTMENT | PRICE SOLD | SALES PROCEEDS | GAIN / (LOSS) | GAIN / (LOSS) |
|---|---|---|---|---|---|---|---|---|---|
| CLASSIC SCENIC BHD | 01-Dec-16 | 27-Jul-17 | 4,000 | 1.413 | 5,651.3 | 1.790 | 7,160.0 | 1,508.8 | 26.7% |
| PANASONIC MANUFACTURING MSIA | 21-Jan-16 | 27-Jul-17 | 400 | 26.125 | 10,450.0 | 37.100 | 14,840.0 | 4,390.0 | 42.0% |
| ELSOFT RESEARCH BHD | 30-Mar-17 | 24-Aug-17 | 8,000 | 1.844 | 14,750.0 | 2.650 | 21,200.0 | 6,450.0 | 43.7% |
| JOHORE TIN BERHAD - WA 12/17 | 04-May-17 | 24-Aug-17 | 17,000 | 0.655 | 11,135.0 | 0.680 | 11,560.0 | 425.0 | 3.8% |
| FOCUS LUMBER BERHAD | 03-May-17 | 30-Aug-17 | 6,000 | 1.660 | 9,960.0 | 1.530 | 9,180.0 | (780.0) | (7.8%) |
| WILLOWGLEN MSC BHD | 23-Nov-16 | 30-Aug-17 | 7,000 | 0.768 | 5,377.0 | 1.430 | 10,010.0 | 4,633.0 | 86.2% |
| WILLOWGLEN MSC BHD | 23-Nov-16 | 28-Sep-17 | 7,000 | 0.770 | 5,377.0 | 1.180 | 8,260.0 | 2,883.0 | 53.6% |
| LII HEN INDUSTRIES BHD | 14-Dec-16 | 28-Sep-17 | 5,000 | 2.820 | 14,100.0 | 3.720 | 18,600.0 | 4,500.0 | 31.9% |
| COMFORT GLOVES BERHAD | 28-Aug-17 | 08-Dec-17 | 25,000 | 0.960 | 24,000.0 | 0.930 | 23,250.0 | (750.0) | (3.1%) |
| JOHORE TIN BHD | 08-May-17 | 08-Dec-17 | 9,000 | 1.600 | 14,400.0 | 1.180 | 10,620.0 | (3,780.0) | (26.3%) |
| THONG GUAN INDUSTRIES BHD | 12-Dec-16 | 08-Dec-17 | 5,000 | 4.243 | 21,215.0 | 4.100 | 20,500.0 | (715.0) | (3.4%) |
| KERJAYA PROSPEK GROUP BERHAD | 12-Jan-17 | 15-Mar-18 | 11,000 | 1.025 | 11,280.0 | 1.540 | 16,940.0 | 5,660.0 | 50.2% |
| KERJAYA PROSPEK GROUP BERHAD - WARRANTS B 2018/2023 | 08-Mar-18 | 15-Mar-18 | 3,000 | 0.000 | 0.0 | 0.330 | 990.0 | 990.0 | - |
| LUXCHEM CORPORATION BHD | 30-Aug-17 | 15-Mar-18 | 16,500 | 0.732 | 12,072.5 | 0.720 | 11,880.0 | (192.5) | (1.6%) |
| WILLOWGLEN MSC BHD | 14-Dec-17 | 22-Mar-18 | 20,000 | 1.010 | 20,200.0 | 1.260 | 25,200.0 | 5,000.0 | 24.8% |
| MUAR BAN LEE GROUP BERHAD | 26-Oct-17 | 22-Mar-18 | 13,500 | 1.240 | 16,740.0 | 1.170 | 15,795.0 | (945.0) | (5.6%) |
| CHOO BEE METAL INDUSTRIES BHD | 07-Sep-17 | 16-May-18 | 8,000 | 2.190 | 17,520.0 | 2.440 | 19,520.0 | 2,000.0 | 11.4% |
| CHOO BEE METAL INDUSTRIES BHD | 07-Sep-17 | 21-May-18 | 8,000 | 2.190 | 17,520.0 | 2.300 | 18,400.0 | 880.0 | 5.0% |
| SUPERLON HOLDINGS BHD | 01-Dec-17 | 21-May-18 | 6,000 | 1.175 | 7,050.0 | 1.550 | 9,300.0 | 2,250.0 | 31.9% |
| OKA CORPORATION BHD | 14-Dec-17 | 28-Jun-18 | 12,000 | 1.541 | 18,488.0 | 1.270 | 15,240.0 | (3,248.0) | (17.6%) |
| SUPERLON HOLDINGS BHD | 01-Dec-17 | 28-Jun-18 | 6,000 | 1.175 | 7,050.0 | 1.210 | 7,260.0 | 210.0 | 3.0% |
| WILLOWGLEN MSC BHD | 14-Dec-17 | 28-Jun-18 | 100 | 0.500 | 50.0 | 0.540 | 54.0 | 4.0 | 8.0% |
| PANTECH GROUP HOLDINGS BHD | 17-May-18 | 02-Aug-18 | 43,000 | 0.580 | 24,940.0 | 0.560 | 24,080.0 | (860.0) | (3.4%) |
| KERJAYA PROSPEK GROUP BERHAD | 10-Jan-17 | 06-Sep-18 | 11,000 | 1.020 | 11,225.0 | 1.400 | 15,400.0 | 4,175.0 | 37.2% |
| LUXCHEM CORPORATION BHD | 25-Aug-17 | 06-Sep-18 | 16,500 | 0.717 | 11,825.0 | 0.655 | 10,807.5 | (1,017.5) | (8.6%) |
| HOCK SENG LEE BHD | 19-Apr-18 | 06-Sep-18 | 14,500 | 1.520 | 22,033.0 | 1.370 | 19,865.0 | (2,168.0) | (9.8%) |
| GENTING MALAYSIA BERHAD | 06-Sep-18 | 28-Nov-18 | 3,800 | 5.070 | 19,266.0 | 3.060 | 11,628.0 | (7,638.0) | (39.6%) |
| TOP GLOVE CORPORATION BHD | 06-Sep-18 | 06-Dec-18 | 3,600 | 5.500 | 19,800.0 | 6.030 | 21,708.0 | 1,908.0 | 9.6% |
| MAH SING GROUP BHD | 28-Jun-18 | 14-Jan-19 | 19,000 | 1.005 | 19,095.0 | 0.930 | 17,670.0 | (1,425.0) | (7.5%) |
A Note to Readers
It is my pleasure to share with you my Value Investing Portfolio. However, I must emphasize that it is by no means a recommendation or a solicitation or expression of views to influence you to buy or sell any stocks. I am just sharing openly on what I am doing with my stock portfolio.
Further, I like to remind all investors that investing is not just about the profits or returns. You will inevitably suffer stock losses too. You need to understand your own investment objective, risk appetite and the amount of loss you can afford to bear. So, while many investors talk only about absolute returns, I am also sharing the computed risk-weighted returns of my portfolio.
Tong Kooi Ong
