HLIB's TP is RM2.78 based on 0.87x P/B multiple.
Working backward, the book value per share = RM3.2, which is slightly lower than my calculated BVPS at RM3.3
10 year average PB should therefore = 2 * 0.87 = 1.74x.
P/B multiple should correlate with ROE. The highest ROE achieved was about 11% in 2012-13.

However I notice the share price peaked in 2013 to 15, close to RM10 per share, even though profits were less impressive.
I suspect the share price then was driven by speculative fever as it was the period where the Najib's government tied to push multiple mega projects like LRT3, MRT3, HSR, ECRL ...

Yes, HLIB's position of 50% discount to 10-year PB average is arbitrary. However, they have a point that future infra spending is unlikely to match Najib's time, which sent Lafarge Malaysia share price to almost RM10 on future expectation that never came true. Hence a lower valuation now as compared to the past standard.

Their second justification on "heavy carbon emitting business" probably refers to fund managers today shunning perceived polluting companies. Either these managers' mandate prohibit them from investing, or they're concerned about how to exit in the future if many other fund managers are prohibited from investing. Such reduced interest from money managers due to ESG factor is a recent development. So it could also drive valuation lower as compared to the past.

A really dumb question. Do EV (as we discussed in Allianz context) and EV Equity (as disclosed by AIA) mean the same thing?
(disregard the fact that they use different EV approaches)

Refer my EV calculation example above. Can I take the following short cut on EV estimate?
1) Assume unwind impact = opening EV * discount rate (i.e. risk free rate)
2) Assume profit released = PBT (i.e. IFRS4 profit as you said) * (1 - tax rate)

If not, short of depending on Allianz's disclosure, is there any shortcut to estimate closing EV based on P&L data?

However, the signs are different.
"Expected return on EV" increases AIA EV Equity. But "profit released" reduces Allianz EV.

Meanwhile, AIA presents its EV Equity calculation in the following way (refer page 18 of its 2022 annual results presentation):

(1)
Opening EV Equity + EV Operating Profit = EV Equity before non-operating variance
where EV Operating Profit = Expected Return on EV + VONB + Operating Variances + Finance Costs
(2)
EV Equity before non-operating variance + Investment Return Variances + Economic Assumption Changes + Exchange Rate and Other Items = EV Equity before Return to Shareholder
(3)
EV Equity before Return to Shareholder - Dividend Paid - Share Buy-Back = Closing EV Equity

Based on its past results, I notice the component "Expected Return on EV" is a large number, about 6% to 7% of opening EV Equity. This expected return is off set by investment return variances, which is a volatile number.

The other major component is the return to shareholder, i.e. dividend paid + share buy-back.

I wonder, conceptually, how can the AIA equation be mapped to equation we use for Allianz (Closing EV = Opening EV + NBV - profit released + unwind impact).

Instead of deducting profit released, AIA equation only deducts dividend paid and share buy-back.

AIA adds "expected return on EV" + "investment return variances" to its EV equity. But Allianz equation does not include such return.

Where are the links?

Based on your input, can I estimate the 2022 closing EV in this way?

Unwind impact (discounting) = opening EV * discount rate = RM3,500m * 4.5% (assume a long term risk free rate of 4.5% is used, like AIA) = RM158m

After separately account for the unwind impact, can I use PBT (which as you said is based on IFRS4) to estimate the profit released, which is 287.2m * 0.76 = RM218m?

And therefore, Closing EV
= Opening EV + NBV - profit released + unwind impact (discounting)
= 3,500m + 275m - 218m + 158m
= RM3,715m

Allianz Malaysia does not disclose its latest EV in the 2022 annual report. I wonder whether it can be estimated.

As disclosed last year, EV for ALIM as of 31 Dec 2021 was about RM3.5b.
NBV for 2022 was RM275m
PBT for life insurance for 2022 was RM287.2m.
Assume a standard tax rate of 24%, net profit released from life in 2022 = 287.2m * 0.76 = RM218m
(The effective tax rate in 2022 was actually 32.8% due to prosperity tax. However I believe the EV has not expected this one off prosperity tax. Therefore I used 24%).
2022 closing EV = 2022 opening EV + NBV - profit released = 3,500m + 275m - 218m = RM3,557m

In other word, 2022 year end EV is more or less unchanged from a year ago. Is this the right way to go about it?

Thanks for the clarification. OK, I didn't know that risk free rate is also used as assumed earning rate. It's reassuring to know that the MCEV does not result in an inflated EV!

I wonder why risk free rate is used in MECV. I asked Chat GPT and this was the response.

"Market Consistent Embedded Value (MCEV) does not necessarily use the risk-free rate as both the discount rate and earning rate. In MCEV calculations, different discount rates and earning rates are often employed to reflect the specific characteristics and risks associated with different cash flow components. However, the use of a risk-free rate as a component of the discount rate in MCEV calculations is not uncommon, and there are several reasons for its inclusion:
1. Risk-Neutral Valuation: The risk-free rate is often used in MCEV calculations as part of the risk-neutral valuation approach. By employing a risk-free rate, MCEV aims to remove the effect of market risk from the valuation and focus on the time value of money alone. This helps in isolating the intrinsic value of the insurance contracts and facilitates comparison across different types of liabilities.
2. Consistency with Market Pricing: The risk-free rate represents the return available from investments considered to have no credit or default risk. By utilizing the risk-free rate, MCEV aligns the valuation of insurance contracts with the pricing of financial instruments in the market. This promotes consistency and comparability between the market value of liabilities and the value attributed to them in MCEV.
3. Long-Term Horizon: Insurance liabilities often have long-term durations, and the risk-free rate is commonly used to discount future cash flows over extended time periods. The risk-free rate reflects the time value of money and is considered a reasonable approximation for long-term risk-free investment returns.
4. Policyholder Security: The use of a risk-free rate as part of the discount rate in MCEV calculations helps ensure that policyholder obligations are appropriately valued and provides a conservative approach to safeguard policyholders' interests. By employing a risk-free rate, MCEV captures the minimum level of return that should be earned on the invested assets to meet future policyholder obligations."

Although I don't fully understand, it seems that comparability is an important objective, and using the same risk free rate makes comparison easier.

@dragon328, can you explain how did Wessex Water make a loss due to "interest accruals on index-link bonds, a non-cash impact of RM75 million"?

How does it work? Is the loss due to "interest accurals" also get compensated in the form of higher tariff in future regulatory period?

Extracted from HLIB's latest report:

"We believe attaching a 50% discount to 10 year P/B mean is justified considering: (i) structurally
lower infra spending (vs the past) and (ii) heavy carbon emitting business"

"Our TP is derived based on fully diluted target P/B multiple of 0.87x based on c.50% discount to 10 year P/B average (implies -1SD to 10 year mean)"

@dragon328, thanks for sharing your calculation.

I refer to quarterly report Note B13 (i) and (ii), wt. avg number of ordinary shares is 1,310m. ICPS 467m. The fully diluted share base = 1,310m + 467m = 1,777m.

Yes, it's difficult to project future revenue and profit for such cyclical industry with highly variable cost, volume and ASP.

One simple approach I used is to assume that, in the long run, the business will at least earns its cost of capital, and shareholders earn their cost of equity. Price to book should be at least 1 time.
The latest equity attraibutable to owner is RM5,870m. Divided by 1,777m (assumed all ICPS converted), net asset per share = RM3.30. So I assume RM3.3 is a conservative estimate for the long term share price.

However, when acquiring from Lafarge, and again when injecting assets into Malaycan Cement, YTL valued it at RM3.75 per share. Maybe they're confident to generate synergy and to create more values from the enlarged business.

Another approach is to use asset replacement cost. I once read in a HLIB report that replacement cost is USD100 per metric ton of capacity. I failed to find other sources that confirm their assumption. Let's assume they're right.
HLIB put the current capacity at 23.84m Ton.
Therefore the enterprise value = 23.84m * USD100 * 4.6 (exchange rate) = RM10,966m
Fair market cap = EV (10,966m) - non controlling interest (4m) - debt (3,519m) + cash (474m) = RM7,921m
Dividend by 1,777m shares, value per share = RM4.46

Based on above methods, the long run value I got is between RM3.3 to RM4.5 (but your value is lower at RM3.13 if divided by 1,777m shares)

About EV, as mentioned in Allianz Malaysia 2022 Annual Report,
"ALIM computes the Embedded Value using market consistent embedded value approach whereby the Embedded Value is the present value of future shareholders distributable profits after tax discounted at the risk free yield curve with volatility adjustment plus the Net Assets Value."

I don't understand what it mean by "risk free yield curve with volatility adjustment plus the Net Assets Value". But if future profits are discounted based on risk free rate at about 4%, by similar arguement, the resulting EV will be too large (from a shareholder's valuation point of view).

In this case, is ALIM actually worth less than the RM3.5b (which is the EV as of 31 Dec 2021)? Of course, for simplicity we ignore the extra value associated with NBV growth.

As comparison, I believe AIA uses Traditional EV approach.
As explained in AIA Annual Report, "AIA Group Limited, together with its subsidiaries use a traditional deterministic discounted cash flow methodology for determining its EV and value of new business (VONB) for all entities other than Tata AIA Life Insurance"
AIA's 2022 annual result presentation mentions it uses a risk discount rate of 8.92% for Malaysia business (4.5% of long term 10year government bond + 4.42% risk premium).
AIA Malaysia EV as of 31 Dec 2021 is USD3,274m.
Given that AIA uses a higher discount rate, can I say that the EV presented by AIA is more "prudent" or "conservative" than Allianz Malaysia?

You mentioned "IFRS17 must use market consistent (i.e. risk free rates) for all cashflows projection".

I'm not sure if my interpretation is correct.
From a shareholder's stand point, usually future earnings are discounted based on the cost of equity, which is higher than the risk free rate (10Y MGS yield is ~4%).
If the unearned profits as estimated from CSM + RA are discounted based on risk free rate, the value will be too large (to be used as a proxy of a life insurer's valuation)
Maybe it's still useful as a valuation proxy of general insurers. The discounting effect is smaller for general insurer since their insurance policy tenures are within a year.
Is this a fair comment?

You mentioned that CSM + RA = future unearned profit, before tax (241m + 232m = 473m)
Next, by applying a standard tax rate of 24%, you worked out the sum of future net profits (473m * 0.76 = 360m).

My next question is, will this after-tax unearned profit (i.e. CSM + RA, after tax) be roughly similar to Embedded Value (EV)?
After all, EV is the PV of future profits, after accounting for tax effects.
I wonder whether it is possible to (roughly) cross check the EV based on published CSM and RA figures.

Thanks for the explanation. It’s very useful!

How much leeway do insurance companies have in calculating CSM for old block of business? Are we talking about an under estimation by 10% - 20%, or could be a lot more?

I've done a simple exercise on Manulife valuation.

The asset management services generated annual PBT of RM18m in both 2021 and 2022 (refer page 177 of 2022 Annual Report). Assume after tax profit of RM14m, and assume 7 times PE, the asset management business is worth about RM100m.

After deducting this RM100m from Manulife market cap of RM420m, the life insurance business is value at about RM320m.

This is more than its CSM of RM241m. RM320m is equal to 100% of CSM (at RM241m) + 34% of RA (=0.34 * RM232m = RM79m).

Is this the way to look at the valuation?

I have a question on "intentionally" setting a low CSM.

Based on what I read, for group of profitable contracts,
PV of cash inflows = CSM + RA (risk adjustment) + PV of cash outflows.

Therefore if Manulife, being conservative, sets a low CSM, it will have a correspondingly higher RA to reflect the greater risk perceived.

However, if the risk does not "materialise", the RA will still be "released" along with CSM at the end of period.

Refer Manulife Note A13, the insurance revenue is made up of RM11m of "CSM recognised for service provided", as well as RM8.7m of "Change in risk adjustment for non-financial risk expired"

What I tried to say is, if we suspect Manulife is being "too conservative", can we treat its true CSM as not only the reported CSM of RM241m, but also to include part of its RA of RM232m?

@dragon328, thanks for the sharing.

With increased pace in property construction, and assuming more infrastructure projects are rolled out in 1-2 year time, what is your estimate of a sustainable revenue level, margin and valuation of MCement?

Looking back at Lafarge Malaysia history, annual revenue reached ~RM2.8 billion during the boom time of 2012-14. PBT margin was as high as 18% (in 2013).

After acquiring YTL Cement assets, capacity should have been expanded further. Rawang plant has been closed for upgrade. Once completed, it should become a more efficient plant.

On the valuation side, we have to account for the 467m ICPS issued when acquiring YTL Cement assets.

I'm trying to get an idea of what a full valuation will look like. Any idea?

Manulife just annouced its results. Note 2b shows effects of MFRS9 and 17 adoption, where total shareholders’ equity increased from RM955m to RM1,186m

Note B3 mentions
"Life insurance business – Operating revenue of life insurance business increased by RM13.0 million or 11.6% mainly due to higher contractual service margin (“CSM”) amortisation and risk adjustment release as a result of higher inforced business."

Manulife revenue and profit have been rather stagnant over the years. It seems the company is not doing too well. Any idea why?

Maybank published its results today. Not sure if I've missed something. The effects of MFRS17 adoption have been rather muted.

Group insurance & Takaful contributed RM238m to Maybank's total operating profit of RM2,979m (Note A30). The effects of MFRS17 adoption was to increase operating profit by a mere RM2.8m i.e. 1% only (Note A40 i)

Maybank has a balanced insurance portfolio. Based on total operating income, life/ family takaful/ general takaful/ general & others are RM350m/ RM171m/ RM93m/ RM57m respectively (Note 38a)

Does Maybank's experience with MFRS17 has any bearing on other insurers?

@dragon329, thanks for the heads-up.
Hope the government knows where it's heading by replacing SWN with DWN. Five years have passed since first PH government engaging telco players on 5G.

@dragon328, good inputs on electricity tariff.
On 5G, it's unclear how DNB could become financially viable if government does not force major telcos to subscribe its wholesale service (and thereby spread the fixed cost).
Although details are still lacking, if CelcomDigi and Maxis are given the leeway to set up their second network, and they are allowed to only roll out 5G to profitable urban areas (instead of the entire county as demanded on DNB), these incumbents can enjoy lower 5G infrastructure cost by not shouldering the national duty to bring 5G to rural areas. Maybe their 5G cost will be even lower if Huawei offers them a sweet deal in order get into the Malaysian 5G market.
If DNB fails due to blunder by the government action, I'm afraid YES could be hurt as it's not only a customer but also a 20% equity owner of DNB.

On the other hand, it's not very clear how the flipflop in commitment towards SWN may affect YES

The lifting of RE export ban is the right move.
The earlier ban by the previous government in order to induce foreign investment is short-sighted. If Mayalsia with its abundance of cheap land does not want to sell solar powered energy to Singapore, it will only benefit Indonesia.
Of course, the greater availability of RE in Singapore means more green energy powered data centers can be built on Singapore soil. But I don't believe the tactic of grabbing business from Singapore by starving them of RE could work (Singapore can still buy RE from Batam).
Part of the profit from the RE export can be used to cross subsidize the domestic power sector. It also goes someway towards "compensating" the 3 sen per 1,000 gallon water deal, which in the past has been a sore point in bilateral relations. Malaysia through its hinterland can and should continue to supply water and electricity to the city state in a mutually beneficial way.

Great Eastern's NBEV in Malaysian market grew at 3%. Meanwhile AIA reported double-digit VONB increase in Malaysia.
Given the Malaysian market has recovered, let's see if Allianz can finally deliver some growths after four quarters of decline.

CPO prices depend on many other factors besides palm oil production output. If other edible oils remain weak, CPO price cannot go much higher.
https://www.theedgemarkets.com/node/664033

Since the excessive rainfall affects other companies, the shortfall in 1Q output has been compensated by higher prices.
“This has resulted in a sudden spot month shortage of CPO contributing to a significant inverse market with spot prices reaching above RM4000/MT. This temporary market shortage due to the sudden lower production is expected to reverse from May onwards as production is expected to increase again. “

However, when output recovers in 2Q, spot price may come under pressure.

This is the historical data for own CPO production from Jan to Mar:
2023: 53,888 MT (-7% YoY)
2022: 57,866 MT (-1% YoY)
2021: 58,217 MT (-2% YoY)
2020: 59,680 MT

The data shows a steep fall in 1Q23 production output. This is not due to seasonality.

The management has provided the explanation
“… excessive rainfall and flooding experienced during the last 4 months of 2022 and spilling over into the first 3 months of 2023 have resulted in overall palm growth being stressed thereby reducing production very significantly during the first quarter”

Comparing ICAP to Magni?

I checked tradingview. On dividend and split adjusted basis, ICAP total return was about 1 time since its debut in Oct 2005 until today in Apr 2023. The annual return on compounded basis is 4.3%. In other words, over the 17.5-year period, ICAP has successfully earned the FD rate for its unit holders!

Magni, on the other hand, has registered a return > 17 times during the same period. CAGR is 18%.

Magni normally pays dividends on quarterly basis. At current price the TTM dividend yield is about 5%.

Meanwhile ICAP has paid dividend twice in its entire 17.5 years of existence. Not sure how to calculate its dividend yield. Maybe ICAP will pay its third dividend on its 20th anniversary, the time when it faces the unit holders’ vote to dissolve the fund?

RHB publishes a report with the title “rise of data centres in ASEAN”.
The report mentions that “Malaysia is seeing a raft of new/emerging DC investments with over 800MW capacity projected to come on stream in phases over the next five years”
Currently TM operates 9 data centers with rated capacity at 46MW. It is adding the tenth with enhanced security. TDC’s data centers are parked under AIMS, located in several countries and slightly more capacities than TM. For context, YTL Power data center will eventually have up to 500MW.
Many other established players are coming to Malaysia too. Just last month it was announced that Amazon AWS will invest up to RM26b by 2037. Yondr Group announced a hyperscale DC of 200MW in JB (SunCon secured its RM1.7b construction contract).
I wonder how much of thee capacities will be eventually realized.

Good inputs from all of you!

I checked past monthly production data. Own CPO production for Jan-Mar 2023 is 53,888MT. Jan-Mar 2022 is 57,866MT. On YTD basis, it's still a 7% decline.

According to USDA, as of 2021 CPO yield for Malaysia, Indonesia and India are 3.8, 3.5 and 0.64 metric ton per hectare.
While we cannot rule out that India may one day replace its CPO import with home grown crop, I believe it still has a long way to go, starting from soil and seedlings.
Yes, it could still be a threat. But I feel it's more of a distant threat, which is at least a decade away.
There are many other distant threats too. Someone mentioned lab grown palm oil in this forum. Besides the eventual widespread adoption of commercial EV could see the collapse of biodiesel mandate too.
However, most of the values of palm oil companies are made up of discounted cash flows in the next 10 years. We need not be overly concern about prospect beyond a decade from now.

The Reuter article shared by Sardin mentioned that Telangana currently has less than 1m acres. It plans to add up to 2m acres in the next 4 years.
Even if it is achieved by 2027, the total planted area is 2-3m acres, or about 1m hectares.
For perspective, this is less than 5% of total planted area in Malaysia (about 6m ha) + Indonesia (about 15m ha).
Besides, most will be young palms not yielding fruits yet.
It’s also not clear to me how conducive are the conditions there, although India has labor advantage over Malaysia.
More importantly, as CPO prices come down, some would be producers may be put off by future price uncertainty for such a long investment period.

The news about Indian production appeared last year after the record CPO price. The high price tempted new Indian growers.
Sometimes windfall in commodity products can be a curse. High prices attract new entrants who are not competitive at normal price level. The increase in supply will depress future price. However, due to the huge upfront investment, producers are compelled to produce even at a loss. This goes on until inefficient producers go bust, or demand eventually catches up with supply.
This happened to oil. It happened to gloves too.

The monthly production figure published today shows output declined >20% YoY

When Warren Buffett said "virtually all of our shareholders are individuals, not institutions", it was in 1985. Google it.
A full 38 years ago!
Warren Buffett has said so much in his life. Anyone can cherry pick enough words from Buffett to suit their personal agenda!

@Sardin, they produce 6 to 8 million coconuts a month. So <100m a year.
I don't know their ASP. But I can get RM3 coconut from the roadside. Wholesale price should be much lower.
Multiply the two you get a ballpark figure. Unless UP coconuts are very different from the roadside coconuts, I guess revenue is less than 10% of FY22 revenue at RM2.5b.
Besides, if not mistaken, UP will have to list coconut plantation as a separate segment from plantation segment in the Segmental Information if revenue exceeds 10%.
Actually I also have a coconut question. Why is production output stagnant or even decline?

@GS, many funds own UP. EPF, KWAP, ASM, Aberdeen ... Perhaps they don't actively trade, at least not in large volume. Maybe due to liquidity constraint.

Haha. Source?

AmInvestment Bank published an insurance sector report today. It maintains Neutral on the sector. Buy call for Allianz.

It sees “Allianz Malaysia (Allianz) to benefit the most from a reduced volatility of interest rate movements on earnings after adopting FRS 17 commencing 1 Jan 2023.
…
Allianz focusses strongly on investment-linked (IL) products for their life business … more than 90% of the group’s life insurance contracts will be measured under VFA (Variable Fee Approach)
…
The adoption of FRS 17 will see the movement in interest rates on the securities portfolio backing VFA contracts to have lesser volatility on their earnings under the P&L. This is due to interest rate impacts on securities portfolio under FRS 17 being now adjusted from contractual service margin (CSM), which will then be spread out over time through the contracted period of the IL policies. Prior to this under FRS 4, the full impact of fair value changes on securities or investments backing VFA contacts flows through the P&L of Allianz, hence impacting earnings.”


AmInvestment also says
“We stay NEUTRAL on the insurance sector premised on the following considerations:
i. Continued liberalisation which will exert pressure on the pricing for fire and motor products on general insurance and takaful operators (ITOs) moving forward. Also, gradual detarrification could impact the contract liabilities (reserving) of ITOs;
ii. Slower demand for general and life insurance products in line with the slowdown in global growth rate. Economic uncertainties and volatile markets are likely to lead consumers to defer purchasing longer term insurance plans in the near term. We have seen smaller ticket-sized life insurance policies sold by certain insurance companies of late. Our economists have forecast a lower GDP growth of 4.5% in 2023 compared to 8.7% in 2022;
iii. Uncertainties surrounding the day 1 impact of FRS 17 implemented on 1 Jan 2023. These include the changes to revenue recognition and the retrospective adjustments to ITOs’ retained earnings, and
iv. Potentially higher medical claims on life/family takaful businesses in 2023. Cost for medical expenses are expected to rise due to inflationary pressures. “

@wsb_investor, thanks for the sharing. Does it mean we can look forward to higher IFRS17 profit too for Allianz Malaysia?

I looked up AIA results. AIA's VONB (Value of New Business) in Malaysia grew to USD308m in 2022 from USD283m in 2021, which is 9% YoY growth. The growth has come from higher VONB margin (as ANP actually declined to USD440m from USD491m)

In comparison, Allianz Malaysia NBV declined to RM677m from RM717m.

It looks like AIA Malaysia still outpaces Allianz in terms of growth.

I fully agree on the importance of cash. The troubles at SVB and Credit Suisse reminds me of the early stage of GFC when Northen Rock, Countrywide and Bear Stearns failed. But never had I expected then that it could morph into a full blown crisis near the scale of the Great Depression.

I hope this time round we will not see another Lehman moment. However this is a game of confidence. Troubles tend to emerge from unexpected corners and panic can spread fast. Moreover, the geopolitics today is also more complex, US politics more dysfunctional, and Malaysian politics less stable.

@dragon328, yes, we talked about SEM before.

The challenge now is it's not sufficient to value these Berjaya companies based on business fundamentals alone. It has to be discounted against potential companies' actions that could go against, or perceived to go against minority shareholders' interests.

It may be OK for small investors like us, especially skillful ones like you, who could read the market and jump in and out at a moment of notice.

But funds that holds millions or tens of millions of shares could be trapped. The mere doubts of potential corporate governance issues will deter some fund managers from investing in such companies. The lack of support from big funds could in turn cap their valuation, no matter how rosy their businesses are. This is not friendly to long term shareholders. (Ironically the situation isn't too different from Daibochi, though I would argue Berjaya is a lot worse)

The Board's decision to acquire SEM shares from VT controlled company is unfortunate. It's unfortunate because I like BJFood for its strong franchise and seemingly capable management.

This acquisition amount was about RM22 million. Not a big sum. BJFood could definitely afford given its strong cashflow.

Main Market Listing Requirements 10.08 states that "... where any one of the percentage ratios of a related party transaction is 5% or more .... a listed issuer must -
...
(b) obtain its shareholder approval of the transaction in general meeting; and
(c) appoint an independent adviser..."

I noted the RM22m acquisition is just below 5% of BJFood's net asset at RM498m. No EGM is required to approve the transaction. Is this RM22 million purchase amount merely a coincidence? I don't know.

The fact that VT has been actively trading both BJFood and SEM shares recently is a further warning signal for me. This is warning regardless of whether SEM represents a good investment to BJFood at RM1.85.

If the Board truly believes that BJFood generates too much cash than it could invest profitably in its own business, why don't it return the cash as higher dividends to all shareholders? Let shareholders who believe in SEM to invest themselves. BJFood is not a fund manager. Don't act like one.

This incident reminds me of Genting Malaysia buying Empire Resorts from Lim Kok Thay's family in 2020. Regardless of the synergy and whatnot given by GENM Board then, the fact remains GENM has yet to recover from the valuation discount suffered until today. Genting companies' reputation have been tainted (which is not great to start with, I must say)

For this reason I disposed the share this morning despite liking the company. BJFood has been a very rewarding investment. The share price may recover and even go higher after today selloff. But that it no longer important. I prefer to invest in companies that won't spring me with such surprises.

During the glove stock mania in Dec 2020, Tropicana whose Chairman was none other than the Top Glove boss and VT's buddy, purchased Top Glove shares at RM6.97 per share.
https://www.theedgemarkets.com/article/tropicana-buys-rm7847m-worth-top-glove-shares

Why did Berjaya Food buy SEM shares from Vincent Tan?

The Board didn't explain. It only gave the lame excuse that "the Acquisition is in the best interest of the BFood Group"

For strategic partnership? So that 7 Eleven can sell more Starbucks coffee for BJFood and cheapen the brand?

Or does VT want to do a charity to BJFood minority shareholders, so that they can purchase SEM an at "undervalued" price of RM1.85 from VT?

The Board of Directors (“Board”) of Berjaya Food Berhad (“BFood”) wishes to announce that its 100%-owned subsidiary, Berjaya Food (International) Sdn Bhd (“BFI”) had on 15 March 2023 acquired a total of 11.87 million ordinary shares representing about 1.07% equity interest in 7-Eleven Malaysia Holdings Berhad (“SEM”) (“SEM Shares”) from True Ascend Sdn Bhd (“TASB”), a company controlled by Tan Sri Dato’ Seri Vincent Tan Chee Yioun (“TSVT”), via a direct business transaction for a total cash consideration of about RM21.96 million or at RM1.85 per SEM Share (“Acquisition”)

When stock price going down, people stops drinking morning coffee here....

Apparently, NTA per share is only RM0.515 as of 31 Dec 2022