https://evbn.org/vietnam-electric-motorbike-market-makes-waves-1677801083/

The government will promote e-bikes not by restricting or penalizing traditional motorbike sales, but rather through subsidy, tariff exemption and other incentives for e-bikes. So it won't be a vote loser. However, it will take a while for the infrastructure and regulations to be in place, buying time for Yamaha.

Given Yamaha's dominance in Malaysian market, anything less than market leading position in e-bikes will not augur well. Vietnam offers good lesson.

Vietnam market leader Honda and Yamaha in were leapfrogged by multiple e-bike competitors. The current e-bike leader is VinFast under the Vingroup.

When the market shifted to electric, newcomers will disrupt existing order. I'm sure HLI is watching closely. But it is also dependent on Yamaha.

Extracted from CIMB report on YTL
" it could unlock value over the next few years by paring down stakes in assets such as Power Seraya and Wessex Water via a possible listing as investors continue to discount its RM72bn asset base (as at FY22)."

This is the suggestion by dragon328!
Are you their banker !!?

E bikes are not popular now. But great forces are pushing the market towards electric.
Government may offer incentives/ restriction in line with its climate change pledge. Malaysia has pledged to reduce carbon intensity against GDP by 45% by 2030 as compared to 2005 level.
ESG pressure could also force Grab and Foodpanda to promote e-bike riders through differentiated rates. So are ESG funds if HLI were to attract institution money.

Gaining a foothole in this future market is important. The first electric cars from BYD in 2010 looked ugly too.
http://www.electric-vehiclenews.com/2010/05/byd-e6-electric-taxis-hit-roads-in.html
But over time, as technology improves, even Ferrari will go electric (expected in 2025).
Yamaha cannot afford to repeat the mistake of Japanese car companies. If Yamaha has a good range, HLI can formulate a roadmap and have a good story to tell investors. Investors are forward looking. The changes in future market composition gets reflected in today valuation.

Can Neo help Yamaha to maintain its market share in the future?
https://www.e-scooter.co/yamaha-neos/

But it's investing RM400m in Guocera. To realise a good disposal value, the new factory has to be up and the business turned around, At least a few years from now.

Let's see if Kenanga's coverage could stimulate institutions' interest. Now I wonder whether the Dato's Jim Khor's buying could be related. Kenanga analyst could have made a company visit before they initiated coverage.

In the foreseeable future, I’m confident that HLI’s Yamaha franchise will continue to generate solid free cashs to support dividends. The current DY at above 6% is respectable.
Beyond that, anything is possible. When it happens, I just hope everyone gets a fair deal.

I've finished watching TTB's YouTube. His explanation is sensible.

Anyone interested on the Ringgit value may also check out The Edge Tong's Portfolio published on every Sat. The Edge's boss has written a number of articles on this topic, covering both cyclical and structural factors mentioned by TTB.

Apr 10: "What determines the exchange rate and is ringgit fundamentally undervalued?"
Apr 17: "The dichotomy of words and actions on the ringgit"
Latest: "A depreciated ringgit is an indirect tax on savings"

Tong touched on the interplay of these factors
1. interest rate differentials
2. inflation - also how our CPI was understated
3. trade balance - Malaysia has enjoyed 20+ years of current account surplus. But the surplus has dwindled, and how the magnitude is dependent on the commodity prices;
4. investment flow - how our share of FDI within ASEAN has dwindled since Asian Financial Crisis, coevred in depth in his other articles
5. investor confidence - Malaysia imposed capital control twice - in 1998, and a lesser form in 2016; scandal like 1MDB; political stability....
6. government debt, and so on.

So what happened to the cement factory which HLI invested in 2010?
Refer page 14-15 of HLI's 2014 Annual Report, HLI sold its interest to Narra in exchange for Narra's share issuance in 2013-14. Narra was renamed as Hume Industries Berhad, and the shares received by HLI was distributed to HLI shareholders.
The info can also be found in page 12 of Hume Industries Berhad 2015 Annual Report.

So the irony is, although the old Hume Industries owned the cement manufacturing license, their shareholders did not see the factory as the company was privatized in 2010.
Instead the license became Quek's private asset, whcih HLI invested in 2010 via ICPS, and in 2013 sold to Narra (the new Hume Industries today). It was HLI shareholders that got the distribution (although they indirectly funded the factory construction via HLI rights issue in 2010).

Afer the disposal of cement manufacturing interest, and now the disposal of Hume Cemboard Industries, HLI is almost a pure consumer product company (except Goucera, which I don't consider as consumer market).
Unless HLI return its cash to shareholders, it's unclear where the HLI ship will be heading next as it could easily tap into its cash pile for other acquisitions, on top of the RM400m investment in tile manufacturing announced early this year

A summary and follow up on the previously mentioned The Edge article of 2010.
That article mentioned that in early 2010, Quek managed to privatize (the old) Hume Industries. The offer price was RM4.30, raised to RM4.50 later, which was below net asset value of RM5.17. The NTA included 37% of net cash at RM1.90.
In other words, if net cash excluded, Quek privatized the company with NTA of RM5.17 - RM1.90 = RM3.27 at mere RM4.50 - RM1.90 = RM2.60, or about 80% of book value.
By paying RM280m in cash, Quek took full control and privatized the old Hume Industries which had RM362m cash.

But in the same year, he sold several businesses under now private Hume Industries (Malaysia) Sdn Bhd to HLI. HLI acquired Quek's now private assets by raising funds through rights issue.
Among the businesses sold to HLI included Hume Cemboard Industries Sdn Bhd, where the disposal was announced recently.

HLI also subscribed to the ICPS of Hume Cement Sdn Bhd (which was parked under Hume Industries before the privatization). Importantly, by the 6th anniversary of the ICPS issue date, HLI would have owned 75% of Hume Cement which now planned to utilize its license to build the cement factory.
These corporate development was reported in page 12 of HLI's 2011 Annual Report.

3iii, thank you for the sharing. I watched some part of it.
I agree it's good for any investor to pick up knowledge about balance of payment and other factors affecting currency movement.

However, I must point out that, maybe TTB can explain it well, but so are any good economist.
Besides, TTB's job is a value oriented equity fund manager, not an economist, nor a macro hedge fund manager.

If he could apply his macro knowledge to benefits his fund, even tangentially, it will be good for his fundholders.
But clearly he could only talk but fails to connect.
Anyone who could foresee that the Malaysian Ringgit is on a long term downward trend will be very dumb to hold half of his fund in Ringgit for over a decade.

After deducting for tax and management fee, the idle cash in Ringgit basically gives zero return to fundholders in nominal term, and negative return in real term due to inflation and Ringgit deprecation.
A smart manager would have converted the depreciating Ringgit to earning powers, in the form of ownership in good companies, long long time ago!

"ICAP is an excellent buy now, even for the shorter-term"
Really?

If it's such an excellent buy, why does ICAP with its RM100+m idle cash does not buy ICAP itself?
Why does TTB want new investors to benefit, but taking no action to benefit the ICAP old investors?

I'm a relatively new to HLI. I'm not familiar with its early history.
I found this article published in 2010 talking about HLI, Hume Cement, Hume Industries, the earlier round of delisting and Quek's private asset injection and so on.

https://theedgemalaysia.com/article/new-hli-looks-lot-former-hume

Is anyone familiar with that history? Could you share?

I also overlooked the privatization of Tasek by Hong Leong Asia.
This is another example of controlling shareholders picking the best time to privatize at cheap. The price chart showed that Tasek share price was above RM16 during the infrastruture boom in 2015. After several years of share price decline, Hong Leong offered to takeover at RM5.5! After failing, they raised a mere 30 sen to RM5.8 and they succeeded.
Long term minority sharehodlers, faced with the threat of delisting, just threw in the towel.
Nothing against Hong Leong. But generally I won't expect charity from these controlling shareholders. I'll be thankful if they don't take advantage of me.

I overlooked two things in my earlier comments.
One is the amount of net cash. I overlooked the ~30% of MI held by Yamaha Motor Co. Based on Jun-2022 balance sheet, about half a billion of cash sat at subsidiaries, so ~RM150m or about 50 sen per share is to be deducted from my earlier calculation.
But my argument remains unchanged. HLI holds too much cash. If they can't invest wisely, better return to shareholders. Sooner the better.

@Sardin, Hume Cemboard Industries doesn't produce cement. Cement is their input to manufacture cellulose fibre cement boards. They must be paying higher cement price now.
Cement production is under Hume Industries, which enjoys a good run lately.
But I don't follow Hume Industries. I've spent time on Malayan Cement instead.

@TabulaRasa, appreciate your info.
Yes, I had to agree that likely no special dividend, or at least it will take a long time "pending identification of suitable investment opportunities and expansion plans" pointed out by Fabien.
Not that the 20 sen is a lot. I just want to see whether there is a shift in the Board's thinking.

The two businesses have a combined customer base of 3.8m. But customer overlap is only 100+k. They're right that there exists opportunity for cross-selling. Just not sure how easily that this can be done given the need to align incentives.
https://klse.i3investor.com/web/blog/detail/ceomorningbrief/2023-06-23-story-h-247530969-Allianz_Mum_on_FY2023_Dividend_But_Targets_Over_30_Payout_Ratio

Ping An also emphasizes and even regularly reports its agents' cross selling contribution.

For minority shareholders, outcomes A and B are not desirable. A will impose opportunity cost due to the low yielding cash.
B is not only risky, but as a small shareholder I believe I could better invest the cash by myself at other undervalued companies without the need to pay a premium.
As I've argued before, C is the best for minority shareholders. But we don't know when he will personally need the cash. Each year of waiting is one more year of opportunity cost incurred.
Therefore I see the recent disposal as a test. A test on whether they are willing to take care of minority interest though at least a token of special dividend.

However, I feel the more likely outcomes, which are also the path of lesser resistance, are
A. Status quo, maybe with gradual increment in payout ratio depending on current business needs and performance.
B. An acquisition of an adjacent business.
C. Special dividend when he needs cash for other parts of his empire or other personal reasons.
In other words, HLI could serve as a kitty bank. A spare cash which itself is kept with HLB (including its money market funds), to be withdrawn when need arise. One don't expect the kitty bank to work hard to earn return.

What he deems as fair price might be unacceptable to the minorities.
Besides I can think of several reasons why privatization is not likely.
1. Check out the Hong Leong Capital privatization saga. At the age of 81, he probably has no appetie for another round.
2. HLI is not a core component in his empire. Not worth the time and effort
3. The minority interest is under RM1 billion. It is just 2% compare with his net worth estimated at over USD10 billion.
Of course, you may argue that he only needs to order his lieutenants to do the job. Besides, I have no knowledge of his family circumstances, which may or may not favour such an arrangement.

In other words, we as shareholders should observe whether greater values are delivered, either through greater growth via higher ROE and ROIC, or greater return of cash to shareholders through higher dividends or share buybacks.

Through their actions, both Dato Jim Khor and Tan Sri Quek are telling us that they believe the company is undervalued.
Among them, Dato Jim's action is more credible (given that he is not as rich as Tan Sri).
It will be even better if other management staffs and directors start buying. Will they?
However, there is still a difference between outsiders and insiders when it comes to the concept of "undervalued". Being insiders, they have the knowledge and control, and are capable to make what seems undervalued to become valaubale.
Being outsiders, we can only rely on our observations, judgement, and ultimately our trust on these insiders to deliver values.

Sardin, yes he could. But he would not.
Allowing HLI to give away cash so that he could earn a temporary (what if Fed cuts interest rate?) 5% USD interest rate in his personal account, is no match for the freedom of action by controlling all the cash (including cash belongs to minority) in the company's account.
Cash, once distributed away, is difficult to get back.
But his share purchase today is encouraging. At least he sent a good signal. Though don't expect him to buy much since he's already above 75%.

An interview with Dato Jin Khor last year.
https://www.theceomagazine.com/executive-interviews/automotive-aviation/dr-jim-khor-mun-wei/
He mentioned electric motorcycle. I believe this is going to be a game changer. Yahama could not afford to lose.
However Japanese are falling behind in EV. Japanese car producers including Toyota are trailing not only the Americans but also Chinese. This is despite Toyota was the leader in hybrid with Prius and also hydrogen powered cars.
In Vietnam both Honda and Yahama are losing market share to the electric motorcycles.
Although the electric segment in Malaysia is still small (~1%), it's fast growing.

Good to see Dato Dr Jim Khor buying. This is a vote of confidence.
https://klse.i3investor.com/web/insider/detail/D_173185_2005374652

Because of diverging interest between minority and controlling shareholders
What is there for the controlling shareholder?
Yes, it too will get the one off dividend of RM5.2 per share, or 231m *RM5.2 = RM1.2 billion.

Whle minority shareholders will be happy with their special dividend, RM1.2 billion is a headache for controlling shareholders as it has to find another place to park its billion.
Since it sits on and controls the Board, it may as well keep the cash in the company (including the minority's shareholders' portion).
The company cash is in turn parked in Hong Leong Bank, where the controlling shareholders also owns.
It can always return the cash, partially or wholly, at a time of its choosing.
The minority shareholders get their cash only when controlling shareholder need it!

The arrangement would benefit minority shareholders, who get the RM5.2 dividend and can choose to cash out the share at a revalued fair price (assumed RM6.85 in above example).
But will this happen?
Unfortunately, no.
Why?

The total return is RM5.2 (one off dividend) + RM6.85 (revalued share price) = about RM12
A 37% upside from today closing price at RM8.79.
Such an arrangement will immediately unlock value for shareholders.

Bear in mind, with all this changes, the TTM PE would have actually reduced from today 9.2 times (=RM8.59/ RM0.9347) to a lower 7.3 times (=RM6.85/ RM0.9347).
A 7 times PE company with good cash flow, zero net debt, and the knowledge that the Board is willing to return all excess cash to shareholders, is a reasonable valuation.
RM6.85 is conservative.

The shareholder's equity is reduced to RM2,067m - RM1,636m = RM431m, or RM1.37 per share
With reduced equity, ROE will be boosted to RM294m/ RM431m = 68%!
The company could be easily valued at 5 times P/B multiple
(In fact, based on Gordon Growth Model, assume cost of equity 10%, stable ROE of 50% and a conservative 2% growth, it will be valued at 6 times PB)
With a conservative 5 times PB multiple, the share price can still fetch 5 * RM1.37 = RM6.85

Given HLI's stable operating and free cash flow, it could still thrive with a small dose of debt.
Hoever, for simplicity, assume it returns all of its net cash and takes zero net debt.
It will then distribute its net cash of RM1,636m to shareholders as one-off dividend.
That works out to be RM1,636m/ RM314.6m = RM5.2 per share.
(For simplicity, also ignore the RM400m tile factory investment)

Below calculation could show much big the gap is.
The TTM ROE is RM294m/ RM2,067m (use ending equity) = 14%
Current price to book ratio is RM8.79/ RM6.57= 1.3 time

Unfortunately, you're right.
So there is little surprise that the share price today hardly reacted to the news.
Over RM1b has been sitting in the bank since 2019.
It has taken a long time for the Board to find suitable opportunity.
There is a huge opportunity cost involved. Cost of equity is in the order of 10% per annum.

Overall I believe disposal of non-core asset is the right decision. To most investors, the only attraction of HLI is the cash generating Yamaha franchise (including Vietnam's associate), and the ~RM1.6b cash earning low interest at Hong Leong Bank (RM400m for tile factory not considered)
The disposal proceeds is about RM0.24 per share. After deducting expenses, such as the 50% retrenchment cost at PJ plant and the RPGT, the leftover could be ~ in the order of 20 sen per share.
The test for HLI Board is whether they are willing to distribute the entire cash as special dividend. Clearly with their RM1.6b cash hoarding, HLI doesn't need the money. This will be a test of HLB's corporate governance.

Looking at PB, item 4.2 in Appendix shows the disposal is RM20m above NAV. So it's a premium.
However, given the lack of investment (the CAPEX of the entire group has been very modest over the years), the assets would have been heavily depreciated by now. The NAV figure is not very reliable.
Based on item 1 in Appendix, we know that lands, including Kanthan land and building, have been excluded from the disposal. The 3.2m sq feet freehold industrial land at Kanthan worth some money. The net book value is RM7.19m but was last revalued in 1990. I googled and found asking price for even leasehold industrial land there is RM31 psf. So the land is unlikely to be part of the disposal which is estimated at only RM79.5m
However, item 4.2 (e) mentions RPGT associated with Kanthan Land disposal. I'm confused what the RPGT is for. Maybe another piece of land is involved? Hope HLI could clarify.

From MD&A of the annual reports, we know the fibre cement business has been struggling even before the pandemic.
However very little info has been shared. Instead of reporting the performance of each business separately, in the past the management chose to aggregate fibre cement with other businesses when providing revenue breakdown. Fibre cement was parked under industrial products up to 2019, and grouped with marine from 2020 onwards. No segmental profits/losses had been disclosed.
But during the change of grouping, it can be deduced the fibre cement revenue in 2019 was RM224m - RM46m (marine revenue) = RM177m.
Lets assume the latest annual revenue was RM200m. Given the projected disposal price was about RM79.5m, the disposal is valued at only 0.4X revenue, which is rather low (likely the business has incurred losses in recent years).

ROE and P/B relationship can reveal the extent of bank premium/discount.
Public Bank still enjoys the highest P/B multiple, as it's the leader in ROE, and also in key indicators like cost to income ratio, gross impairment loan ratio, loan loss coverage ratio.

The hope is this deleveraging process may come to an end. RHB CET-1 ratio has increased from 10.4% as of 2012 to 16.9% in 2022. Any further increase is unlikely.
So RHB has started to give back more dividends to shareholders (since it cannot invest the excess capital in a profitable way, by earning above its cost of equity)
So hopefully, barring any disaster in Malaysian economy, the next 10 years will be better.

But RHB is not alone. In fact, Public Bank has also performed poorly over the last decade as compared to the previous decade.
Based to Public Bank annual reports, net return on equity has declined from 24.1% in 2012 to 12.8% in 2022. As a result, price to book multiple has declined from 3.2X to 1.7X.

However, over the same 10-year period, return on average assets is almost unchanged, which is 1.9% in 2012, versus 1.8% in 2022 (so is return on risk weighted assets). Decline in profitability is mostly due to reduced leverage.

In RHB case, net profit to shareholders (the numerator) has actually increased from RM1.8b 2012 to 2.7b in 2022. However, shareholders’ equity (the denominator) has increased even more, from RM15b in 2012 to RM29b in 2022. The result is ROE of 13.4% in 2012 has declined to 9.7% in 2022.
A ROE of 9.7% is below RHB's cost of equity. So the price to book ratio is less than 1 time (currently below 0.8X)

ROE = net profit to shareholders/ average shareholders’ equity. As regulators demand more capital, the equity (denominator) increases, lowering the ROE which is a measure of profitability.
As ROE declines, price to book multiple also declines. Lower P/B leads to lower share price.

Since the introduction of Basel 3, a few years after the Global Financial Crisis, banks everywhere are required to hold more capital to reduce the risk of bank bailouts.
European banks were badly hit (they also had other problems). But Malaysian banks are not immune.
The direct impact can be seen on the lower Return on Equity (ROE) over the last decade.

I agree DRP is not fair to retail investors.
However, to put it in perspective, the five rounds of DRP by RHB total about RM0.38. At 10% discount, the “loss” to retail shareholders who did not subscribe is not more than 4 sen per share.
From the long run perspective, DRP is like a zero-sum game (ignoring fees), transferring wealth from a group of shareholders to another group. The trading activities by funds before and after DRP did not affect long term share price.
Yes, DRP is dilutive on per share basis. So are the effects of right issue, share distribution and employee share grants.
But DRP has very minimal to no impact on total return basis (i.e. after adding up all the dividends and extra shares gained from DRP, share distribution etc).
There are other factors responsible for the long-term share price under performance (again, measured on total return basis, not per share basis).

As mentioned before, if sharehodlers have to subscribe to DRP in order not to get diluted, the dividend yield is not 7.5%.
The effective dividend yield is (RM0.40 - RM0.10)/ RM5.31 = 5.6%

Shareholders can vote no to DRP during AGM.
But it is hard to succeed since the resolution is supported by the substantial shareholders.
In fact, the latest AGM outcome showed the DRP resolution was supported by more than 99.9% of the votes!
In terms of numbers, 1,723 shareholders voted in favor versus 201 against. Almost 9 to 1.
Some probably have voted yes despite not subscribing to the DRP and get diluted!

DRP is not friendly to small investors considering the cost (RM10 stamp duty), odd lots, and most importantly the trouble (before the e-DRP days, where one must rush to post office after receiving the form very close to deadline).

So DRP ends up being a transfer of wealth from small investors to bigger ones, who enjoy up to 10% discount.

Looking at past 5 rounds of DRP by RHB, the DRP subscription rate run from 85.96% to 87.65%. So about 87% has taken advantage of the 13% who did not subscribe.

Based on the analysis of shareholding as of 28-Feb-2023 (Annual Report page 196), 96.42% of the shareholding is held by investors owning more than 100,000 shares.

Given the latest round of DRP subscription was 87.02%, it means even some of the reasonably well-off investors owning more than 100k did not subscribe. I’m sure majority of the smaller investors owning less than 100k just gave up and received cash dividends instead, thereby subsidizing substantial shareholders EPF, KWAP and OSK.

How funny that i Capital describes its NAV discount as "transitory"!
The Fed first described inflation as "transitory" in early 2021. But the Fed abandoned the term before year end after realizing that it was plainly wrong.
Now i Capital picked up the word "transitory" to describe its NAV discount, which has been widening for more than a decade. "Transitory" over the time scale of a century?
The discount will only be "mean-reverting" when either iCAP is forced to return hoarded cash to unit holders, or the Board is voted out in the next AGM.

As for long term share price consideration, it's only fair to look at total return. Need to correct for the effects of dividend, DRP, bonus etc.

To illustrate the point, it's like we wouldn't say QL share price is "only" RM5 after more than 20 years of listing while ignoring the bonus issues along the way.