**To close the gap to 10% will be even harder

My post was directing to what will be the narrative iCAP will sell to new investors or fans to pay for more to close the irrational discounts from 30% to 20%. To close the gap is even a harder sell. Selling the story from dividend yield + future capital narrative is possible. But between this strategy and sharebuy back, I prefer sharebuy back as it is more flexible and don't have to die die commit to pay fix amount of funds in terms of dividend. Human is a very funny creature, if you receive money year in year out, suddenly you stop or reduce the money, they will throw tantrum and send the share price to irrational zone again. Is there a bullet left to bring up the price. ? Was trying to analyze their earning capacity vs how much they need to realize the gains or even sell off some dogs to pay yearly dividend that they committed.

@dumbMoney - great explanation on why there will always be a discount to NAV/NTA because the investor need some margin of safety for something has not be realized. Who knows tomorrow the portfolio will drop 20% or may appreciate 10%. That is why usually 10% will be quite normal in a normal market situation.

Ladies and Gentlemen, boys and girls, so I would like to welcome more iCap fans. We are not thrashing for the sake of thrashing.....we are all just regular guys working from 9 am - 5 pm...try to earn 2 bowls of rice a day. If you are an iCAP fan, don't have to be offended, just drop by regularly .... here is just another outlet for your to hear alternate views.....we are no Zhu Ge Liang....just regular naughty stooges. Have a nice day & good night. 😎

Yearly, typically iCAP will have about 4 million interest income(sitting on about 120 -140 million cash) and ranges 3-7 millions dividend from the shares it owns.....so earning capacity is about 7-11 million, it just nice to cover the management fees, your AGM party fees, income tax and etc...for most of the time. To pay about 14 millions on its investment about 300 million plus, it needs to realize about 4% gains/yearly.

I guess the selling point for iCAP will be dividend paying fund with long term capital gain to attract people to pay more. How much more, we all know price has inverse relationship with yield. 0.10/share dividend on purchase price of 2.54, dividend yield will be about 4%. If they chase the price up to 2.8/share(then we are narrowing the discount to 20% based on NAV of 3.53 ) but then the dividend yield will drop to 3.5%....will people willing to do that comparing to other alternatives? Ya may be possible from this perspective, if they are hungry enough and have great faith in the fund manager for the future capital gains.

The devil is in the details... Ensure tiny guys/gals sign up... Unfortunately all shareholders have to suffer a bit per i3lurker😂😂

rich gets richer, poor gets poor......pure capitalism and not common prosperity....not because it was unfair but that is how people's will make their choice given how the question being framed to them.....

😂😂Ohh....not really..... only a few hundred of investors +/- 900 of the shareholders(27%) may adopt DRIP, the rest may go for cash and see their ownership diluted(not in absolute but % wise)

Who will stand to lose if they don't go for DRIP with incentive say 10% price discounts?

Here is the data based on 2023 Annual Report Analysis of shareholders

No of shares ** # of holders**%
1-99** 132**4%
100-1000** 1,022**32%
1,001 – 10,000** 1,183**37%
10,001 -100,000**640**20%
100,001 to less than 5% of issued shares**221**7%
Total shareholders**3,198


There are 2,337 or 73% of shareholders hold 10,000 shares and lesser....like i3gambler said, those with small quantity usually will elect cash dividend....those with higher quantity will more likely to adopt DRIP. So it will favor those big holders with increasing ownership over the years while the tiny guys/gals of 2,337 / 73% of the shareholders will see their ownership to reduce.

Take another vote again, do you think this will increase the liquidity of the stock over time? 😂😂

Assuming you are being ask to vote in AGM - Yea or Nay 😂😂

Investors should be aware that issue under discussion is eliminating irrational discounts via dividend policy....the expected result is if after implementing this hypothesis....it will reduce irrational discounts(30-40%) to normal discount 10% or a possibility of premium on iCAP share. By intuitions, what do you think?

I reflected on a question by dumbMoney's post.
>>>>
The bone of contention here is not the portfolio or how it has been managed, but more on the discount, and the fact that shareholders sells on discount prices, but managers get paid on full NAV value. But then, the problem arises when the discount is fixed and COL leaves and look for discounts elsewhere, then what is going to happen to their block of shares?
>>>>

The block of the shares will have to taken by somebody else, could be small inventors and can also be big investors……future investors.

I got it now, it’s a governance system and how do we institutionalize a discounts management system. Shareholders can come and go, there should be a set of EFFECTIVE systems or policies that run forever.

My thoughts/comments:

The fund manager is responding. The answer is instituting a dividend policy, payout policy is 1% base rate+8% discount between NAV and average 4 weeks iCAP’s share price. Give the investor an option: take the cash or reinvest them. Sorry, I disagree.

Share buy back mechanism should be considered. My personal strong view: trigger it when iCap is selling at irrational discounts. Don’t interfere when it’s in the reasonable range like 10%, leave it to the market forces to deal with that. Our aim should NOT be zero discount. Provide liquidity at the time of distress(it’s kind of like a “national team”).

A discounts management system must not be at the expense on the fund growth. The fund manager always has an implied goal of 15% in the way he speaks and writes, but I will be extremely happy with 7-10%. Definition of fund growth = portfolio invested in shares + cash AT 7-10% CAGR. I can agree to that, no qualm about it. We don’t have to argue % of portfolio and cash, but it must be taken as 1 body when measuring the performance. I care only the results not the allocation weightage.

Fund liquidation is the last option. IT SHOULD NOT BE USED unless we are in a HOPELESS situation. What is my definition of hopeless: Indifference management and NAV is persistently underperforming the benchmark index and iCAP share price is selling at irrational discounts for a long time.

We are tough on the issues not on the person. 💗💗

Hi John, Thank you for sharing...I considered myself lucky because upon returning again to iCap with a small position, I was in the 3rd bucket but someone just warned me it could be a mirage. May that warning NOT come true😁, just on the lighter side. There are also many others from the phase 2, may their luck will change soon. Jia Yu. 😉

😨😰😭☹

By the way, please do not shoot the messenger. 😂😂

We should also be aware of a major shift with the recent advanced economies inflation that had driven up much higher interest rates. In return, the higher risk free return is raising the bar for active fund managers with many competing products. Retail investors are getting more and more knowledgeable each day .... My child is a lot smarter than me. They ask difficult questions. I personally hope that we can look into all these inputs in a positive light. We are not instigating shareholders revolution but hope to see iCap is a reflection of progressive Malaysia we all can be proud of, as the fund manager always inspiring his followers.

To be honest, if I'm a dividend investor seeker, there are many competitive stocks out there...so iCap can only be attractive by driving capital gains either via NAV growth a lot faster or narrowing the discounts.

When sentiment is negative and grip with extreme fear, dividend alone cannot help. Let me give you an example, ICBC(1398.HK) listed in HKSE, it's one of the largest banks in the world & well managed, ROE consistently above 10% but it has a bad label with it.....no need for me to elaborate more la.

Year *** Dividend (HKD) ***
2019 ** 0.2953
2020 ** 0.2874
2021 ** 0.3199
2022 ** 0.3432
2023 ** 0.3292

Nice growing dividend trend, right? If you translate that into yield will be almost 9-10%

Price in 2019 was about HKD 6. Last traded was HKD 3.60. Total return was -14%

Price/Book 0.35

If would have bought an ETF that mimics Hang Seng Index 2800.HK, it's a physical ETF with regular dividend payments.

Year ** Dividend HKD
2019 ** 0.93
2020 ** 0.75
2021 ** 0.67
2022** 0.64
2023 ** Not yet declare full dividend...Ist interim 0.10 but let's assume it's same like 2022 0.64

Price in 2019 was roughly HKD 27, last traded HKD 17.84.....Total return = -20%

ICBC may still outperformed the index but the point is dividend alone is insufficient to drive higher price/book value of which is very common measure in evaluating banking stock.

In such a conservative culture embracing shareholder activism is unprecedented. 😂😂

"It was a dramatic change for a company that used to be totally unresponsive to shareholder demands," said Oki Matsumoto, CEO of Monex Group, a leading online broker. Cross-shareholdings are widely seen by activists as contributing to low capital efficiency.

The move sent DNP shares to a 17-year high and up about 50% so far this year. The plan challenges the company to lift its stock price, which has stayed below its book value for the past 10 years.

https://asia.nikkei.com/Spotlight/Market-Spotlight/Japanese-companies-embrace-shareholder-activism-as-never-before

Last comment: we should show restraint in making comments.

For example "While it is the fund manager's responsibility to manage its net asset value(NAV), it is important to note that the share price of a fund is determine by investors, and not a responsibility of the fund manager."

It's not helping. We can spin these sentences and start a war. 😂😂 But we all peace loving people....

Regardless of whatever tools we use, it cannot solve all the problems. Ultimately it's still the stocks that have been picked and will be picked must perform. This is the bottomline.

My second comment is on his quote on Warren Buffett letter to shareholders demographics, that was written in 1985 -- about 38 years ago....a lot things have changed.

Quote " ......This unusual result has been achieved by a shareholder group with unusual demographics: virtually all of our shareholders are individuals, not institutions" Unquote

That was 38 years ago, today if we Google it.....

% of shares held by all insiders : 38.7%
% of Shares Held by Institutions : 19.24%
% of Float Held by Institutions : 31.27%
Number of Institutions Holding Shares : 1,234

Let's have an open mind.....understand the fear of institutional gang up to do bad things.....the fund manager also can use their other funds to increase the stakes until it becomes a major controlling shareholders. The rest of us can sleep soundly at night....

Or the fund manager can attract the likeminded institutions that focus on Value....

We can learn too from Berkshire for example has Tweedy Browne Global Value Fund.

They broke down iCap into 2 distinct phases and kinda acknowledge cash holding was one of issues.

2005 - 2013 NAV compounded at 14.85% and share price 11.67% (Putting a lot of cash to work)
2014 - 2019 NAV compounded at 0.7% and essentially zero return from share price(Average cash level 63.4%)
2020 - Sept 2023 NAV compounded at 5.06% and share price 6.73%(cash has fallen to 26.4%)

Now will have see his stock picking skills already. If 74.6% of the stocks he has picked start to perform, we then can talk about performance and giving a much better catalyst for iCapital share price to run.

I think iCap people is reading quietly our comments judging from what they posted in the newsletter....they wrote an update on iCapital company analysis. I think we should de-escalate and reduce tension as all have a common interest, we are talking about RM 140 million market cap locked as discounts that big or small shareholders should joint hands to unlocked this.

Share buy back did help to do damage control while a major shareholder was exiting a big position as they perceived YTL is gone already especially from its hospitality business. But the ultimate catalyst for the share price recovery was due to strong financial turnaround. If it can go to demonstrate another 3-4 quarters with billions of profits, the share price has more legs to run.

YTL Corp is having a very strong balance sheet, as at 30/6/2023, they have more than 11 billions in Fixed deposits and another 3 billion cash and bank balances. For them to spend about 60 million plus in the past few years were just chicken feet.

Prior to Covid 19 that started around Q4 '2019, profits from the operations were quite stable around 500 mln +/- before it started to rocket in the last 2 quarters 2023 with billions of Ringgit. Profits for the periods were quite volatiles but it was a bit more convincing in the last 2 quarters 2023 due to strong performance mainly from its utilities business.

Not all share buyback created equals. The catalyst for good share recovery ultimately is rooted on financial performance.

Going back to YTL

RM million**Profit from operations**Profits for the period
2019/3** 596** 12
2019/6** 563**87
2019/9** 583**100
2019/12**556**96
2020/3**549**129
2020/6**336**-321
2020/9**437** 49
2020/12**497**86
2021/3** 463**93
2021/6** 400**-555
2021/9** 587**178
2021/12**421**63
2022/3** 1231**828
2022/6** 499**103
2022/9** 597**123
2022/12**727**196
2023/3**1337**659
2023/6** 1935**1071

....................

Will DRP achieve the same effect? I think there are some minor differences - it's done 1 time per year so whether shareholder gets the best price will depend on luck. In share buy back, given the active investing management skill of a fund manager, surely they can time better than a corporate finance manager. 😂😂 You can't provide liquidity when it is needed the most. When you have odd lots, it is quite difficult to sell. 1,000 shares x 0.10 =
$ 100 dividend / 2.54 = 39 shares. but could be same also with share dividend e.g. 1 share : 30 share ordinary share. may get 33 shares.

In the case of distributing it as share dividend and not retiring the treasury shares, I think the concern of losing controlling interest is addressed. But of course if a major shareholder wants to buy more shares, they can always do so after selling the dividend shares, receiving cash dividend or forking out own money.....worries will never end. 😂😂

We don't have to choose share buy back or cash dividend but it can be share buy back AND cash dividend. Don't fall into the trap of choosing OR

P.S YTL also buy back a lot of shares prior to 2019 at the market price....I have not summarized those but if company is disciplined enough - they should not buy back when it is "expensive" during this period, they can actually pay cash dividend.

I want to share a very micro case study on YTL Corp. The company is quite flexible when comes to cash dividend and share dividend. When the company is seeing its share price is under pressure, they will do share buy back...The advantages,

1. Provide liquidity on days there are big sell orders....without them absorbing the sell orders, price can drop a lot faster. I have mentioned before EPF was selling like nobody business from year 2020 till April 2023, they sold something like 100 million shares, if without the company share buy back, the company share price will be way below 0.50.

2. They buy back when the price is low when sentiment was low. I give you this example during period of covid 19 from year 2020 to year 2022 and they stopped buy back after that. They think the sentiment has improved and do not need to do intervention because it can stand on its own and let the market forces govern the demand and supply. During this period they accumulated 74 million shares. average buy back price is about RM 0.82. They put this back into treasury shares and distribute back to shareholders sometime in the future.

3. Like cash dividend, if they distribute as share dividend, share price also will be adjusted downward of equivalent amount. But if the company is buying at rock bottom price and distribute it, when sentiment is turning the corner, the rate of return is fantastic. Point #4 to follow.

4. For argument sake, when they distributed this share at 0.82/share in early 2023 and you can sell it in the market for RM 1.41 as of last Friday, this is a tidy profit of 72%.....the return will be far higher than ROE.

Conclusion: if managed it right, this is one of ways to enhanced shareholders' value.

You may see some of the data that I extracted from Bursa Malaysia website. Some day share buy back can be as low as 1,000 shares when trading volume is very thin but there are small guys want to sell and exaggerated price drop downwards.

YTL
Date *******Average buying price***Qty**** Amount paid
27/6/2022***** 0.61*****1000****** 605
26-Nov-21**** 0.60***** 1000****** 595
1-Jun-21******* 0.68*****1000***** 675
11/1/2021-18/1/2021**** 0.71**** 16,500,000***** 11,701,877
30~31/12/2021***** 0.77*****4,000,000****** 3,087,245
21~23/12/2020***** 0.78*****8,000,000****** 6,233,483
18/12/2020***** 0.80****6,000,000****** 4,793,488
22/12/2020**** 0.77*****3,000,000****** 2,298,808
21/12/2020**** 0.79*****3,000,000****** 2,382,038
18/12/2020**** 0.80*****6,000,000****** 4,793,488
9-11/12/2020******* 0.72*****5,698,100***** 4,110,713
27-Nov-20***** 0.69****1,000****** 694
22-Jun-20***** 0.86***** 1,000***** 859
29-Jan-20***** 0.94***** 100,000******** 94,267
20-23/1/2020******* 0.99*****1,943,200****** 1,922,151
17-Jan-20***** 0.98***** 500,000******** 491,905
16-Jan-20***** 0.98***** 500,000***** 489,397
14-Jan-20***** 0.99***** 500,000**** 496,923
6-10/1/2020**** 0.96****2,000,000****1,924,393
13-Jan-20***** 1.00***** 500,000*** 501,940
30/12/2019~3/1/2020**** 0.96****16,008,100***** 15,435,563

Average buying price*** 0.82*** 74,254,400**** 60,761,104

@dumbMoney - Impressive school - University of Chicago Booth School of business. 😂😂

Chicago is a damn cold place....how many years were you there?

Yup - probably the findings that these experts have considered should be communicated to shareholders. 101 Stakeholders engagement. If they have presented the alternatives considered such as cash dividend, share dividend, share buy back, etc... Better informed shareholders will have better buy in and hold on to their investment not quit silently.... Beside selection bias, confirmation bias also should be eliminated.

The fund manager is probably feel if it is coming from his mouth, it's not partial or not-independent.....trying to get an expert to say it. The crux of the issue I feel is his credibility is chipping away....and he should return to his root as a stock picker. He has been setting up too many funds for his business expansion. And not to mention wasted all the time chasing a ghost that doesn't exist, discussing lawsuits.

@dumbMoney - I was not trying to mock Morgan Stanley or Goldman Sachs....but the point was they are expensive....why go through all the troubles to do MRI scanning, full blood test, ECG test running around the town trying to get the best doctor, when the symptom is only a small flu....take 2 Panadols and have a good sleep.

This is my personal experience about how my expectations translate into what I am willing to pay when there are discounts or premiums....I have been there for both periods.😂😂

I emerged buy some small quantities when I see the discounts is getting ridiculous at 40% but dare not swing as big as in the past as my confidence is not that great....it's okay to play small small la

The lost decade for iCapital

At hindsight, I feel it was pure luck that I didn't continue to hang on to it for the past many years.

His NAV at highlight continued to climb impressively but share price was bad....and discounts are getting worst

I finally sold my investments in year 2011...during PIIGS time frame....also that was the time the rate of NAV growth has slowed down and I started to feel it's time to move on to other investments

Then shits hit the fan.....we had financial Pearl Habour...I didn't bailed out...but stopped buying till mid 2008....and double down and keep buying till 2010

I made my first investment on 3/3/2006 around $ 1.17 and keep topping up regularly till year 2007.

I was willing to pay for premiums...you know, at time, many of self taught investors like me baptized with Buffett investment philosophy....it's okay to pay for a premium for a good company or fund manager

Based on his track records of low risk high return of which I truly believed at that time...

Like many other small investors......I was thrilled that he finally made his fund to the rest of us....

At least he survived Asian Financial Crisis and Dot.Com bubble