Stocks: Boustead Holdings Market News and Rumours Compilation

There are many market rumours about Boustead Holdings Berhad 'potential' cooperate exercise. Below are the compilation of the news and we will do a quick analysis on those news and market 'speculations'

1. Boustead Holdings is looking to sell its shares in unlisted "The University of Nottingham in Malaysia Sdn Bhd". 

The University of Nottingham in Malaysia Sdn Bhd's sale (66% ownership) is probably one of the few options that Boustead Holdings is looking at with the target to reduce their debt, increase cash flow and most importantly simplify the company to generate profit.
https://www.theedgemarkets.com/article/university-nottingham-malaysia-owners-weigh-exit-%E2%80%94-sources

2. Boustead Holdings has named Shazalli Ramly as the new Group MD. 
https://www.theedgemarkets.com/article/boustead-names-shazalli-ramly-group-md-confirms-edge-report
The incoming MD is said to be tasked to continue with the journey to rationalized the company's effort to streamline their holdings and assist it to return to profit.

3. Boustead voice support for BHIC reporting irregularities involving the RM9bil combat ship project
https://www.theedgemarkets.com/article/boustead-voices-support-bhic-reporting-irregularities-involving-rm9-bil-combat-ship-project
While the news is definitely not welcomed and RM9bil contract (with potential mismanagement etc) is a lot of money (few times above Boustead Holdings Berhad's market cap), it is likely to be limited to BHIC as the subsidiary is the ones given the contract. The key risk remains the reputation damage as it's associated with Boustead's name.

4. Boustead Holdings expected to embark on major debt restructuring
https://www.theedgemarkets.com/article/newsbreak-boustead-holdings-expected-embark-major-debt-restructuring
From the below article, you can see that The Curve and its surrounding land (which Boustead Holdings owns) has only a book value of RM579mil. 

Quote from the article:

"Non-core assets that are likely to go

All eyes are on which non-core, low-yielding assets Boustead Holdings may sell. The group is asset-rich, with landbank, investment properties and hotels, among others. Observers say it is unlikely that it will sell its shareholding in Affin Bank.

“Affin Bank is not only profitable, but of value to the group, so I doubt it. I expect they would sell some of its property assets such as land and/or property management and some of the Royale Chulan hotels. They also have a stake in the MyTown mall, which is low-yielding,” says one who tracks developments at the group. Boustead Holdings has a 50% interest in MyTown Shopping Centre in Kuala Lumpur.

While there is concern that Boustead Holdings’ assets may not be able to fetch a good price amid the current economic downturn, it is understood that the group does not plan to sell them in haste.

In its 2019 annual report, topping the list of the group’s most valuable properties is five hectares of commercial freehold land on which The Curve mall sits and the building, which have a total book value of RM579 million.

Boustead Holdings, which has been reporting losses since the financial year ended Dec 31 2018 (FY2018), saw its net loss widen to RM1.28 billion in FY2019 from RM554.3 million the previous year, after taking an impairment charge of RM1.33 billion for assets from the heavy industries and plantation segments. Revenue for FY2019 rose a marginal 1.4% to RM10.33 billion.

It had a debt-laden balance sheet, with total borrowings amounting to RM7.91 billion as at end-2019 compared with its shareholders’ equity of RM3.74 billion. Cash and cash equivalents stood at RM893.8 million"

5. Potential Privitisation
a. Comments in i3Investor's forum/comment section
There were plenty of comments in i3 portal claiming privatization of Boustead will happen before Feb 2021 at a price of RM 1.10. This is below the NTA but way above the current depressed prices. Whether or not the offer will come, when is it and will it get the the buy in of smaller shareholders (majority shareholder is LTAT), only time will tell.

b. Previous news on potential privitisation (in June 2020)
There are several announcements made on LTAT's intention to privatise Boustead Holdings and restructure it. This excercise will help in effort to pare down debts, rationalize non-core, non-performing assets (i.e. hotels, lands, shopping malls) and at the end make Boustead Holdings a leaner company with better profit prospects.

https://www.theedgemarkets.com/article/hurdles-mount-ltats-potential-privatisation-boustead

https://www.theedgemarkets.com/article/rm660m-deal-privatise-boustead-holdings

*The above comments are just research done by one of our contributors. All investors are advised to study and make their own recommendations before making any purchase of the stock.

How can Young Investors start Investing in Stock Market?

We were requested by some friends to share strategies on how they can start their investment journey. Understand that many are interested but have no or little clue on where and how to start. One of our authors has >13 years experience in investing in the equities market, he started young and is now investing and also trading various financial instruments. We have also shared in our previous article on where you can invest your money (legally)?

The aim of this article is to provide a simple step by step methodology to all our readers. If the way we approach investments does not align with what you have in mind, we seek your understanding as in the market no one is always right and we all learn with positive mindset and spirit. We also assume that the young investors would like to learn some fundamentals and invest in Malaysian stock market (i.e. Bursa Malaysia).

Step 1: Open a Trading Account 
There are a handful of trading platform providers including CGS-CIMB iTrade, HLeBroking, Rakutentrade. I3Investor does offer a list of trading platform providers that you can go through and select what is suitable for your trading needs.

Step 2: Learn Fundamental Analysis
There are a lot of things to learn in Fundamental Analysis. What you can do is to start with understanding of the terms below.
a. Price to Earnings ratio (P/E)
b. Net Tangible Asset (NTA)
c. Current Ratio
d. Return on Equity (ROE)
e. Earning Per Share (EPS)
f. Dividend Yield
g. Price/Earning to Growth ratio (PEG)
h. Price to Book ratio (P/B)

Learning Fundamental analysis is almost a lifelong process as we learn the various valuation methods of the companies (i.e. P/E, P/B or P/NTA, PEG, ROE, Discounted Cash Flow, Sum of Parts, Premium or Discount to peers and/or Book Value). There is no one fixed valuation method and it's often market driven and changes over time when there is new development to the business. P/E is the most used methodology and you will see that Analysts used various combination of methodology to value a company.

Step 3: Practice with a Dummy Account and familiarize yourself
Most of the trading platform providers has dummy account facilities so that newbies can practice trading or familiarize themselves with the system. Take advantage of this while you're learning the Fundamental Analysis

Step 4: Repeat Step 2 and 3 until comfortable with investing
You will need a certain amount of courage to use your own money in trading. So practice until you feel comfortable. You should also read books like 'The Intelligent Investor' and books associated with Warren Buffett. Look for books that are easy to read and understand. 

Step 5: Select a Stock and Start Investing
Step 5 may sound too easy to read than do - yes it is not easy for first timer. Which stock should you select and is the price right to buy now? Remember, "money is what you pay, value is what you get" - this is a famous quote in Value Investing Model. As this article does not intend to make anyone a value investor or momentum investor/trader, we assume that the first time investor will want to keep a stock for some time (i.e. a few months or years). 

Stock picking is difficult hence to ease that burden, do select companies that you know (i.e. Maybank, Genting, Boustead, SP Setia), you are comfortable with and that you believe have a good future (and business is either growing consistently or recovering from a temporary decline).

Step 6: Sharpen your skillsets and understand your personality vs investment
You will need to continue to learn new things and sharpen your skillsets. You may have know Fundamental Analysis and connect the dots on how they tie-in to the stock prices. However, you should continue to learn Technical Analysis where charts will 'hint' you on where is the 'entry' and 'exit' prices. 

You should also ask yourself what is suitable for you - are you going to be a longer term investor or day trading (not investment) is a better choice? It's a very personal question to answer hence I have no answer here for our fellow young investors. For me, I used a hybrid model where I have positions which I hold for a longer term (i.e. using Value Investing and Growth stocks methodology) and I trade some shares over few weeks cycle (i.e. using a combo of Technical Analysis and Fundamental Analysis). To add some thrill to my mundane day, I trade some derivatives like Futures (FCPO, FKLI, Mini-HangSeng Futures) as well. 

Bottom line is you will need to find out what is your "investment personality". However, a word of caution is the most successful investors "hold their position over a longer period of time". Those who got rich like Warren Buffet, Elon Musk, Jeff Bezos, Bill Gates have big positions (a lot of shares) in their companies and they didn't trade it (frequent buy-sell) like traders. Investing in a growing company will certainly yield you a lot of good returns but you will need to select the right stock (going back to Step 5). 

So, who says Investing is easy? No, it's not difficult but to manage an investment portfolio which consistently earns a good returns and beating the market is very very difficult. Even the professional managers have difficulty doing that. But as an encouragement, you will have to start somewhere if you are keen, else it will never happen. Good luck and take action today.

Stocks: Bonus Share vs Dividend - are they the same?

 Recently, we have a lot of market activities and a lot of companies start to 'dish out' bonus shares. One of the latest companies who is proposing a bonus issuance is Public Bank Berhad, our Malaysian home grown bank which has the lower CTI (Cost to Income) and NPL (Non-Performing Loan) in the industry regionally. Others include G3 Global, Amtel, UWC etc.

Public Bank Berhad intend to give out 15.53bil shares to the existing shareholders and the most important question is should you buy Public Bank due to the bonus issuance? The answer to this question is to answer what is a bonus share? 

What is Bonus Share?
Bonus shares are additional shares given to the current shareholders without any additional cost, based upon the number of shares that a shareholder owns. This will increase the issued share capital of the company. However, by increasing the number of outstanding shares, it decreases the stock prices. Bonus share issuance is a 'zero sum game' exercise as the market capitalization technically does not change and investor don't actually gain more vs dividend (although they might if the share price was manipulated upwards later on). There is no tangible payment out from the company's account to the share holders

I would lay down some tangible examples of the benefits of Bonus Shares:
1. Enlarged share base will means that there are more shares to go around for transactions. Hence, for smaller companies it will increase the liquidity.
2. The stock price will be lower and hence perceived as 'cheaper' for retail investors (please take note that in investing, we normally define 'cheap' as low P/E ratio, low P/B ratio, EV etc, not with reference to the price of the share - however, a lot of non-financially savvy and strong retail investors will still assume that 'cheap' means 'low price'). 

How about Stock Split? Stock split is the action taken in which a company divides its existing shares into multiple shares to boost the liquidity of shares. Both Stock Split and Bonus issue is almost similar except that Stock Split will reduce the Par Value of the share. This is merely accounting issue where small and retail investors don't see any tangible difference between these two exercise.

What is Dividend?
A dividend is the distribution of some of a company's earnings to a class of its shareholders. In layman's term, the company made a profit and it channel part of it to its shareholders. It's being paid out from the company's accounts to the bank accounts of the shareholders. It normally has a ex-date where shareholders who owns the share by the 'ex-date' will be entitled for the dividend. We have a lot of companies like Maxis, KLCCP, REITS, Banking who are consistent dividend payers. And these days, the dividends received from Bursa Malaysia listed companies are tax-exempted as tax has been paid at company level prior to distribution.

Is Bonus and Dividend the Same and Should you buy in?
The biggest question in the room will be how should you react to news like Company A is declaring a dividend while Company B is giving out bonus shares. We will explain with scenarios below:

If you buy into Company A (which declared a RM0.50/share, assuming you own 1,000 shares), you will receive a dividend of RM500 (RM0.50 x 1,000) before costs of processing. Your share price will not be adjusted. However, sometimes post dividend the share price will drop a little as investors will have to wait 3 or 6 or even 12 months for the next dividend. 

If you buy into Company B (which declared a 1-for-1 bonus), you will not get any cash in your bank account. Assuming that the share price is RM1.00 and you have 1,000 shares. The share price will be adjusted to RM0.50 and you will have 2,000 shares post Bonus Exercise. The outcome from the result is it will be the same (RM1.00 x 1,000 = RM0.50 x 2,000). However, there will be some advantage as I mentioned above especially if you are holding a small cap stock with limited liquidity. There will be more shares to go around for investors to trade. 

I hope the explanation above will provide some insight to investors to learn and distinguish the difference between bonus and dividend. All of us (myself included) will start as a piece of white paper and we fill ourselves with knowledge as we grow in our investing journey.