I analysed past AGM votes on resolution of directors’ appointment. Over the years the number of shareholder votes supporting directors’ appointment has declined while the Against votes has kept increasing (presumably most are from COL)

Year No. of Shares For No. of Shares Against
2021 43,623,877 (58%) 31,099,317 (42%)
2020 42,332,043 (58%) 30,267,507 (42%)
2019 43,829,446 (61%) 27,963,500 (39%)
2018 46,261,889 (62%) 28,389,753 (38%)
2017 44,554,250 (64%) 24,832,500 (36%)
2016 57,089,178 (71%) 23,646,300 (29%)
2015 60,198,263 (75%) 20,281,250 (25%)
2014 47,978,106 (73%) 17,777,592 (27%)

Hence the urgency to stop COL.

With 140 million shares outstanding, a full 47% have not bothered to vote. If shareholders don’t care to defend their own interests, the current sorry state could continue for many more years.

The Forbes article below explains why closed-end funds often trade at a discount to their NAVs.
https://www.forbes.com/sites/simonmoore/2020/04/12/wider-closed-end-fund-discounts-have-historically-been-a-good-sign-should-you-bite/?sh=1eb964e050a7

Check out this closed-end fund screener mentioned in the article.
https://www.cefconnect.com/closed-end-funds-screener

It lists a few hundred closed end funds. Sort these funds by the Discount/ Premium column. It shows that about 90% of the closed end funds suffer from NAV discounts!

What is even more interesting is out of the few hundred funds, only one fund called DMA (Destra Capital Advisors LLC) suffers from a greater NAV discount than iCAP!

At the time I sorted the list, DMA’s discount was 41%. Based on latest Bursa announcement, ICAP discount was 1 – 1.96/3.23 = 39%.

In other words, if ICAP were to be included in the list, it would be the second worse performer in premium/ discount out of the few hundreds!

Just before anyone concludes that ICAP offers the opportunity where NAV discount may narrow over time, read the last paragraph which says,
“So if you see a closed-end fund trading at an unusually high discount there may be an opportunity. Discounts and premiums do appear to be mean reverting. Unfortunately these opportunity often comes at times of high market panic, such that other opportunities may be large too. Plus these trades do involve some risk and cannot be fully arbitraged in a riskless way. Also, a final note of caution is that closed-end funds can move systematically over time. For example, in the early 1970s closed-end fund discounts in the US and UK exceeded 30% on average for several years. So these discounts don’t necessarily always close as rapidly as an investor might hope.”

I'm not saying Poh Huat is doomed. Its share price has corrected due to the the darkened outlook. However my view is anyone who hold the stock should have a long term outlook and be prepared to ride though volatility. Exchange rate gain and current high dividend yield (which is based on historical earning anyway) may not be sufficient reasons to own the stock.

According to the article, "Paul Krugman has warned the Federal Reserve is at risk of going too far in fighting inflation, causing unnecessary economic damage."

In other words, there is a real danger that in the attempt to regain its inflation fighting credential, the Fed may have gone too far and trigger a deep recession. The Fed would then have to switch back to rock bottom interest rate in order to resuscitate the damaged economy.

I'm not saying this scenario will definitely happen (no one is sure about the future, including the Fed). However based on past experience, when the Treasury 10 year - 2 year bond yield is inverted for a substantial duration, the economy would enter recession in the next few quarters. The yield curve has stayed inverted since Jun.
https://fred.stlouisfed.org/series/T10Y2Y

A complete operation halt for three months will be worse than Covid lockdown. If the news is genuine, which I doubt so, the management would have to make annoucement in Bursa as such decision will have material impact on the share price. However no such annoucement can be found.

Nevertheless it's quite likely that furniture demand and therefore production have slowed considerably in recent months. I shared the news in Jun that US furniture retailers were facing serious inventory problems. It's likely that customer orders are drying up now. But such info should have been reflected in the current share price. The share price has declined by a quarter since Jun.

According to the sensitivity analysis as disclosed in 2021 Annual Report, a 5% appreciation in USD would have increased profit after tax by RM0.48m. Based on FY2021 profit after tax of RM32.2m, it is equivalent to 1.5% increase in PAT, if other factors remain unchanged.

Between end Oct 2021 to today, USD has appreciated by 14% (from 4.14 to 4.72). Let's assume the exchange rate hits 5. The appreciation will be 5/4.14 - 1 = 21%. Based on the disclosed sensitivity analysis, PAT would have increased by 1.5% * (21%/5%) = 6.3%.

However, other factors will NOT remain unchanged. Over the short term, furniture retailers are delaying or cancelling orders as they struggle with inventory problems. Falling revenue will erode profit, offsetting any gain in exchange rate.

A longer term concern is the US 30 year fixed rate mortgage average has almost tripled from the low point of 2.65% in early 2021 to 6.92% lately.
https://fred.stlouisfed.org/series/MORTGAGE30US

Check out the housing start chart below. The US private housing start has increased steadily from 0.5m units per month after Global Financial Crisis in 2009 to 1.8m units per month early this year. The new housing fueled furniture demands over the last decade. The housing boom has provided a tailwind to Asia furniture exporters over these years. But will this multi-year trend go into a reversal if high interest (mortgage) rate persists? How will it impact furniture demand in the coming years?
https://fred.stlouisfed.org/series/HOUST

There are many exporters in Bursa. In theory they all benefit from a weak Ringgit. Exchange rate alone is not a sufficient reason to pick Poh Huat over other exporters.

"Do participate in its coming Annual General Meeting and make your ownership counts. It can help narrow the NAV discount."

How does participation in AGM help narrowing the NAV discount? By indoctrinating and firing up shareholders so that they will buy the shares up?

It sounds like religion. When has value investing turned into a faith based investing?

Benjamin Graham also wrote,
" Given two companies in the same general position and with the same earning power, the one paying the larger dividend will always sell at the higher price"

"Assuming that the reported earnings were actually available for distribution, then stockholders in general would certainly fare better in dollars and cents if they drew out practically all of these earnings in dividends."

"Although we have concluded that the payment of a liberal portion of the earnings in dividends adds definitely to the attractiveness of a common stock, it must be recognized that this conclusion involves a curious paradox. Value is increased by taking away value. The more the stockholder subtracts in dividends from the capital and surplus fund the larger value he places upon what is left."

In other words, Graham observed almost a century ago that the market prefers companies which return idle cash to shareholders. The more idle cash is returned to shareholders, either via dividends, or share buyback (if the stock is undervalued), the more valuable the company becomes. The shareholders will enjoy the double benefits of returned cash and a higher share price assigned by the market.

Graham's wisdom then has become common sense nowadays. The only problem is the self proclaimed Graham's disciple doesn't walk the talk.

Extracted from Security Analysis, the classic written by Benjamin Graham in 1934.

In Chapter 29, The Dividend Factor in Common-Stock Analysis, Graham wrote that
"... if stockholders’ opinions were properly informed, it would insist upon curtailing the despotic powers given the directorate over the dividend policy. Experience shows that these unrestricted powers are likely to be abused for various reasons. Boards of directors usually consist largely of executive officers and their friends. The officers are naturally desirous of retaining as much cash as possible in the treasury, in order to simplify their financial problems; they are also inclined to expand the business persistently for the sake of personal aggrandizement and to secure higher salaries."

Does it sound familiar?

I remember you the promoter of DNEX, when the share price was a lot higher than today.

I agree. There are few places in stock market to hide from such risks. Prudent asset allocation is absolutely necessary to weather the coming storm.

However rising interest rate and the depreciation of British pounds may affect sentiment

Thank you for the clarification.
Based on balance sheet as of Jun 30, the assets side has about RM20b investments, RM1b reinsurance asset. Insurance contract liabilities is RM18b.
Does it mean around 20 + 1 - 18 = RM3b of investments may still be subjected to FV impact post IFRS17?

A report from Am Investment Bank:
https://klse.i3investor.com/web/pricetarget/research/64791

The last point "Upon the adoption of FRS 17, the negative revaluation on the group’s life insurance’s investments which dampened the group’s net profit in FY21 and FY22 will no longer have any P&L impact from FY23F onwards. We understand that the marked-to-market changes in valuation of securities portfolio commencing from next year will flow through the comprehensive income."

Is that true?

@Petermoo, the largest ever research involved more than half a million population in 10 European countries over a period of 16 years. The result was published in 2017. It was widely reported then.
The conclusion of the research was "Coffee drinking was associated with reduced risk for death from various causes. This relationship did not vary by country."

https://www.imperial.ac.uk/news/180494/drinking-coffee-reduces-risk-death-from/
https://pubmed.ncbi.nlm.nih.gov/28693038/
https://www.cnbc.com/2017/07/11/coffee-drinking-could-lead-to-longer-life-studies-say.html

Of course, instead of drinking expensive Starbucks coffee, we may also enjoy the same benefit by making our own coffee (as long as not 3-in-1 or kopi-o)

Current quarter PBT for Power Seraya is RM191m (vs. RM135m last quarter, and RM27m a year ago)
But PBT for Wessex Water is only RM14m (vs. RM89m last Q, RM91m a year ago). Given quarterly revenue is ~RM1b, the margin seems low. Management attributed to higher operating expenses.
YES continues to be loss making.
Full year dividend is unchanged at 2 + 2.5 = 4.5 sen. At current price dividend yield is 6.25%.

@wsb_investor, thanks for the explanation. It makes sense. Liability will reduce when the assumed discount rate is raised.
However is it common for insurance companies to change their discount rate assumption from quarter to quarter? This could open up opportunity for life insurers (probably not Allianz) to massage their profits in every quarter, despite such reported profit may not be reflective of long term company potential.

Sorry I have no idea too. Maybe others can help explain.

You may refer to slide 7 on core PBT calculation. It strips off the FV and tax effects.

Yes, the demand is weak across the industry. In the current year prospect section, it mentions that the higher inflation may impact claim costs while lower disposable income may impact consumers’ purchasing power and spending on longer-term commitments such as insurance products.

It seems that life NBV growth remains weak. The presentation mentions lower sales volume from agency (slide 21, 23)
https://www.allianz.com.my/content/dam/onemarketing/azmb/wwwallianzcommy/pdf/investor-updates/2022/2022_Q2_AMB_Analyst_Briefing.pdf

Truly long term investors will not be overly concerned. Long term doesn't mean buy and never sell. Some would have taken some profits during the glove mania in late 2020 as valuation was clearly not sustainable.
With the market swings to the pessimistic end now, it's good time for LT shareholders to rebuild their glove exposure gradually even though share price is likely to fall further. Calling the bottom in share price is as hard as calling the top.

Another useful input from CIMB on the supply-demand dynamics in the glove sector:

Hartalega’s in-house research indicates that glove buyers would need an inventory adjustment period of approximately 16 months (from peak inventory levels) before they replenish their inventory with new stocks. Hartalega believes inventory levels have peaked in Jun 2021 and hence it expects glove demand to recover by end-2022.

Hartalega did a projection analysis on the global glove demand for 2022- 2025F by assuming i) a 6% annual growth rate for the best case scenario, and ii) that 2022F glove demand would equal that of 2020 for the low case scenario. Note that the Malaysian Rubber Glove Manufacturers Association (MARGMA) estimated that global glove demand could grow 12-15% next year.

It estimates that in the best case scenario, the global supply-demand dynamics in the glove sector could reach equilibrium by 2024F. This is assuming an 80% capacity utilisation rate by then as well as no decommissioning of existing capacity. Should decommissioning happen, it projects the supply-demand dynamics in the glove sector would reach equilibrium earlier, by 2023F.

The report mentions MARGMA. MARGMA should be totally discredited by now given its unsubstantiated bullish forecasts at the height of pandemic, just like Frost Sullivan its rosy projection was used by Top Glove in its HK IPO document.

Extracted from several reports today:
Maybank:
1) Management has turned more bearish on the sector outlook given stiff competition. We understand that ASP has resumed its downward trend since June 22 after stabilising in Apr-May 22 and utilisation rate has dropped to 50% (in line with the industry), from 70% in Apr-June 22,
2) management expects the demand-supply equilibrium to take another 24 months to rebalance. Prior to 2024, it will focus on sharpening its capabilities and improving cost efficiency to prepare for recovery, and
3) management no longer enjoys premium pricing for its products due to stiff competition.

Affin:
Management mentioned that in a worst-case scenario, the current overcapacity situation could persist past 2023

Hong Leong:
We caution that Hartalega could be at risk of being booted out of the KLCI in the upcoming FTSE Bursa Malaysia KLCI semi-annual review should its share price deteriorate further, as it currently ranks at the 35th spot (based on 9th Aug closing).

It seems that the over capacity situation will persist for quite a while yet. Those looking for opportunity to add could probably wait. Exclusion from KLCI, if happens, could trigger another round of selloff as seen in other stocks.

With this ruling, motor insurance companies will automatically pick up the bill. It's only right that innocent accident victims should not go through the legal nightmare just because the motorists are at fault and insurance companies refuse to pay. But could there be unintended consequences?

With the ongoing liberalization, insurance companies need to better differentiate pricing based on motorists' past records, such as traffic summons.

"A landmark ruling by the Federal Court has held that victims of road accidents should be automatically compensated by insurance companies without requiring legal action to do so.
...
According to the report, of the eight appeals, five involved Pacific & Orient Insurance, Amgeneral Insurance, Allianz General Insurance Company, and Malaysian Motor Insurance Pool. The three-person bench, comprised of Rahman as well as Hasnah Mohammed Hashim and Rhodzariah Bujang, awarded RM150,000 in costs to each of the successful parties in the appeal.

The appeals came about as the insurance companies had obtained a declaration in the High Court to nullify the policies of motorists due to allegations of misconduct on the part of the vehicle owners, the FMT report said. This action had denied accident victims monetary compensation that had been due to them, prompting the appeals.
The appeals included a sambung bayar case, where the dispute arose when the vehicle owner attempted to claim on his vehicle following an accident.

However, he had “sold” his vehicle to a third party through such an arrangement, with the insurance company being unaware of this. When it learnt about this, it then obtained a declaration from the High Court to nullify the policy of the motorist, citing misconduct on the part of the vehicle owner. Following this, the insurer refused to cover the vehicle owner’s loss.

In another case, while the Sessions Court had found the driver of the other vehicle negligent after a full trial, the insurance company took a court order alleging it had been defrauded, and declined to pay the vehicle owner who was claiming for damages.

The case victim was eventually found to merely hold a paper judgement, which the Federal Court said was “not even worth the paper it was written on,” continuing that it was unfair because the victim’s constitutional rights to be treated fairly had been infringed"

https://paultan.org/2022/08/09/federal-court-rules-that-road-accident-victims-should-be-automatically-compensated-by-insurance-firms/

You can check the Circular to Shareholders published a few weeks ago.

Assuming no hiccup, over 90% of proceeds will be distributed to shareholders within 45 days of completion date, where completion date is expected to be 15 Aug. The remaining will be distributed within 12 months.

The quarterly report mentions a decrease in sales volume by 28%.

Based on my record, the shipment Q1FY22 was 10.09 billion. It means Q1FY23 shipment was 7.26 billion.

The report does not mention new capacity coming online, so can assume it remains unchanged at 43 billion. The utilization was therefore 7.26/ (43/4) = about 68% (assume shipment and production at the same rate).

If my calculation is right, this would be lower than historical standard. It is about the same level as Kossan's latest quarter.

It's much better than Top Glove which was about 56% in last quarter, not a surprise given Top Glove expanded aggressively, and is also catching up on the lost share in the US market.

I attended the EGM. As expected, questions about ALR financing came up.

To be fair, Litrak could not answer on behalf of ALR. So just like Gamuda, it could only point out conditions in ALR favor, such that it was triple A rated, first sustainable highway Sukuk, MGS yield has been coming down and so on.

It's funny that the Chairman assigned all the questions to their advisors, including questions which rightfully the Board itself should answer.

For example, when someone asked whether an extension would be given if ALR fails to raise funding in time, the Chairman asked Hong Leong to reply. But how could Hong Leong commit on behalf of Litrak board? So it was not a surprise that the Hong Leong guy just sidestepped the question and talked about something else.

This shows how much ownership the Board has in their company. I agree when someone mentioned that these people are probably busy looking for another job.

Company continues to buyback shares, while insiders from CEO to Vincent Tan continue to sell. The company buys back as if the share price is undervalued. But insiders action say otherwise. How nice. If the company has excess cash, why doesn't it distribute to shareholders as dividends instead of supporting the share price, only for insiders to take opportunity?

LPI has just released Q2 results. Its motor net claims incurred ratio for 2Q22 is 88.8%, as compared to just 60.8% in 2Q21, and 76.3% in 1Q22. The ratio is around low 70% before the pandemic.

According to its press release, "The increase was due to a higher frequency of motor claims reported as most vehicles were back on the road, and due to the increase in average third party bodily injury claims reserve as a result of an increasing trend in court awards."

I wonder if the factor of court catching up with backlog will also show up in Allianz General claim ratio in Q2.

Annual reports showed that in 2013 the market cap reached RM4.2b. But PBT and shareholders' fund then were only half of today's.

I noted GWP growth hit 19.9% in 2013, before slowing to about 3% in 2015-17. Last year growth was 7.2%. Maybe the slower growth has made the stock less appealing to the market.

Earlier someone commented that ALR financing threshold was 5%.

In today Gamuda EGM, the management clarified that this was a misunderstanding. During an earlier interview with The Edge, Gamuda management mentioned ALR's WACC was 5%, and not that ALR's financing threshold was 5%.

While Gamuda could not speak on behalf of ALR, the management sounded positive by drawing attention to the fact that 10Y MGS had gone down by 40 basis point from 4.37% earlier to 3.97% as of yesterday.

Refer to Note 36.4.1(c) in the 2021 Annual Report:
"The Group is subject to commodity risk with respect to price fluctuations in coal markets and attempts to limit its exposure to fluctuations in commodity prices by increasing its use of alternative fuels and renewable energies.
From time to time, and if a market exists, the Group hedges its commodity exposures through derivative instruments at the latest when a firm commitment is entered into or known, or where future cash flows are highly probable.
There is no outstanding commodity contract and commodity derivative instruments as at year end, accordingly, the Group is not exposed to commodity price risk."

The statement seems to imply difficulty in hedging its coal exposure. There was no outstanding coal contracts as of 2021 year end. There was also no derivative financial asset in the balance sheet as of Mar 2022.

During 2020-21, bulk cement ASP was in the range of RM200-250 per mT. ASP increased 30% to 65% to RM330. However coking coal price chart showed it had more than quadrupled from below USD100 per mT to above USD400 per mT.

If 50% operating cost consists of coal and energy (can't find the data), you're right it will be a problem, at least temporarily.

@dragon328, since we last spoke about Malayan Cement, the share price has declined by almost 30% from its recent height.
The bulk cement price hit almost RM330 per ton earlier this year before declining a bit. So the company should be be able to pass on most if not all of the rising input costs.
The market probably expects a decline in housing activities (as reflected in property sector share price) and the much talked about infrastructure projects not happening soon. But given the consolidated market, current price probably offer good safety margin for long term holding.

True. We've discussed this point before. However, usually the full valuation can only be realized during M&A, where the buyers are willing to pay the full value for controlling stake. At normal times rational minority investors like EPF, who has no control over the company, are right to demand a discount as their margin of safety.
Similar behavior can be observed in other companies too, for example YTL Power. Based on the recent M&A case in the UK market, the full valuation of its UK asset alone is already a few times over its current market cap. Yet I believe the market is also rational to value the company based only on its dividend yield rather than more elusive asset valuation.
Personally, as a patient investor here, knowing the EV, NBV growth etc gives me peace of mind on the downside protection, while hoping for dividend to grow in the future. When that happens share price should follow. But it probably takes time.

Why did you say GE donated in a smart way? Why can't other insurers copy its way?
If the issue remains unresolved in time, what are the likely action by BNM? Stop them from underwriting new policies?

Back to the topic of foreign insurers being forced to dispose 30% stake/ donation. Let's explore a bit.

You mentioned AIA/Prudential/Tokio Marine/Zurich. Assume their combined size in Malaysia is double of Allianz. Currently Allianz's market cap is ~RM4.5b (inclusive of ICPS). At a similar valuation, these four foreign insurers' Malaysian business equity value should be around RM10b.

If they are to be valued at say 50% higher, a 30% stake will worth around RM10b * 1.5 * 30% = RM4b to RM5b range. Not a small sum under current market condition, but still doable. For comparison, the twenty odd Bursa IPOs in 2021 including CTOS raised a total of RM2+ billion.

Who could be the buyers? Local banks like Affin and Am Bank have trimmed their insurance arms. Not sure if larger banks, especially the bancassurance partners of these foreign insurers will be willing to pay premium to acquire stakes.

I suppose GLIC like EPF, KWAP, Khazanah have the capacity to take a slice or even as sole partner. But again are they willing to pay premium?

The negotiation over valuation will not be easy. Don't see why these local investors would like to pay premium for insurers given the competitive market, especially listed insurers are currently priced below EVs. On the other hand, the foreign insurers could not justify to their shareholders if they sell on the cheap. Perhaps that was the reason that Great Eastern donated RM2billion?

I see. It's quite counter intuitive. Normally when applying a low discount rate to future cash flows will result in a higher valuation. It seems that a lot of industry specific knowledge is required to get a handle on life insurers' valuation.

@dragon328, thank you for sharing your thought. It's very educational.

Your last point is very important. Even EPF is just another passive investor like you and me. We depend on Yeoh family to not only manage the underlying assets well, but also to share the fruits through improved dividends. If they do that, the share price could go higher. If they don't, even EPF could not do much about it.

Because of such consideration, in my view there are two types of valuation. One type of valuation if for controlling shareholders like the Yeoh family. They can value YTL Power value like how KKR values Northumbrian. They can exercise power over the company while others can't.

As minority investors have to ride on the goodwill of controlling shareholders, their valuation have to be conservative. That is probably why YTL Power share price is driven more by the dividend yield (which is tangible to minority shareholders) rather than company's asset values (don't know when they will be unlocked).

But as mentioned before, at current dividend yield the share price should have support. When the Group MD Datuk Yeoh talked to the press about under valuation it also sent a positive signal that they care about the share price (in some companies the controlling shareholders don't). Hope Datuk Yeoh can back up his words with not only good results but also better dividends.

I wasn't aware that there was a 70% cap on gearing. But it makes sense that regulator doesn't want utilities to take on too much risk.

Compare to Northumbrian, Malaysia utilities' valuation is a lot lower. However foreign shareholding in Tenaga remains low, and even lower if passive funds like Vanguard, State Street and Blackrock are excluded. I've also counted probably just one foreign fund on YTL Power Top 30 shareholding.

Their lower valuations should have adequately compensated for the regulatory risk (Tenaga) and currency risk (Tenaga and YTL Power). But why foreign funds shun these Malaysian utilities while they chase after more expensive assets like Northumbrian or ElectraNet? Are there other risks that are putting them off?

Based on what I can find, quite a few public listed life insurers in this region, with the exception of AIA, are priced below their EV!

They are not confined to Chinese insurers such as China Life or Ping An, where valuations are depressed. Take for example, The Edge Saturday edition on May 14 had a table extracted from Bloomberg showing Great Eastern and Prudential were sold at 0.53X and 0.88X P/EV respectively.

Why does the market place a huge discount on life insurers? And not just in Malaysia. Have I missed something?

RM3.5b EV is quite close to RHB's and Am Bank's estimate of RM3.3b.

I don't understand when the minutes say discounted at "risk free rate". Does it mean the future profits are discounted at 10 year MGS, which is about 4%, rather than a higher rate?

If discounted at 4%, the EV will be inflated. As a contrast, in page 69 of the AIA presentation I mentioned earlier, AIA adopted a 8.56% discount rate for Malaysia (4% 10Y gov bonds + 4.56% risk premium).

What are the implications?

@dragon328, the case becomes much clearer now with your explanation. Yes, I overlooked. The RCV multiplier should be in EV rather than MC.

I like the way you check using equity cashflow yield. If I understand correctly, after netting off the equity's share of capex, what remains should be the free cash flow right?

I have a side question. I'm curious about how KKR could justify its investment case.

Based on your calculation, the KKR's equity yield is 4.9%. Presumably most of it will be paid out as dividends. Future capital gain is probably limited, not unless KKR can sell the asset at an even higher multiplier than 1.5X RCV (RCV organic growth is probably in low single digit, in line with CK group's return).

However private equities like KKR usually aim for double digit return. That is after their fat fee! At least this is the expectation of typical PE investors. This is only possible through leverage.

However KKR's borrowing cost will have to higher than 10Y Treasury yield, meaning at least 3%. With 4.9% equity yield for Northumbrian Water, every dollar of debt that KKR takes on can only earns 4.9% - borrowing cost (minimum 3%) = 1+% at best.

Does it mean KKR has to use maybe 7 times, or even up to 10 times leverage in order to achieve a desired double digit return? It looks quite crazy.

Additonoal information can be found in another document.
"Ofwat commissioned EE to assess the premium to RCV on listed companies. Its decomposition analysis indicated a residual market premium over RCV of 1.04 - 1.08x in February 2020, once outperformance from factors such as totex, debt finance and ODIs was reflected"

In other words, the earlier expectation was a slight market premium over the RCV. Figure 18 in page 88 also shows historically valuation swinged from 20% discount to 30-40% premium, and the mean was at single digit premium.
https://assets.publishing.service.gov.uk/media/5eda1e5ee90e071b734d2ca7/Northumbrian_Water_Reply_to_Ofwat_response_27.05.2020_NON-CONFIDENTIAL.pdf

CK and Hutchison have strong balance sheets. It's unusual for them to sell assets on the cheap. The 17% discount in the deal probably shows the current market condition is probably quite unfavourable.

The document has further explanation on market value versus RCV
"If investors expect the company to perform in line with the regulatory determination (e.g. in terms of costs, incentives and returns) in perpetuity, then the MV of the business will be equal to the RCV, and the MAR would be 1. If investors forecast that the actual performance of the company would be different to the regulatory settlement, then the MAR could be greater than 1 (if investors expect to perform better) or less than 1 (if investors expect to underperform)."

According to company websites, Northumbrian Water serves 2.7 million customers, versus Wessex Water serves 2.8 million. They're probably in the same league. Northumbrian Water's valuation over its RCV (Regulatory Capital Value) could provide a guidance on how much Wessex Water is worth today.

Northumbrian's RCV can be found on page 53 of its 2021 Annual Report
"RCV at 31 March 2021 was £4,196.4m"
https://www.nwg.co.uk/globalassets/corporate/apr/annual-report-and-financial-statements-2020_21_final_1.pdf

Given KKR's transaction values the company at only £3,468m, the valuation put a discount of 1 - 3468/4196.4 = 17.4% on the RCV!

After the collapase of UK Power Networks deal, KKR acquired a 25% stake in Northumbrian Water. Based on the acquisition price, the company is valued at £3,468m.

I checked the OfWat ranking, Northumbrian Water is also quite high on the table, which may be positive for valuation.

However, according to Forbe's article below, the original acquistion cost was £2.4 billion in 2011. That means the CAGR return over 11 years is only 3.4%. I'm a bit surprised that the return is rather low.
https://www.forbes.com/sites/robertolsen/2022/07/15/kkr-to-invest-1-billion-in-british-water-company-owned-by-li-ka-shings-ck-group/?sh=33bd74827576

Not to mentioned on one year basis, Pound Sterling has depreciated by 16% against US Dollar (from 1.42 to current 1.19). Given HK Dollar is pegged to US Dollar, the gain for Li's HK based companies will be even smaller.

As shown in page 70-71 of the Yearbook, some of the GIs' combined ratios are quite close to 100%. Axa Affin General, which should have scale, is 99.82% (98.71% in 2020).
The best performer is Loanpac under LPI, where combined ratio is 60% (65% in 2020). I suppose it's helped by its dominance in fire insurance, where industry net claim ratio is only 41%, much lower than motor's 55%.
Fire net claim ratio is only 13% for Loanpac! Whereas Allianz General is as high as 70%.
Net commission ratio, Loanpac is 6%, versus Allianz General 15%.
Any idea why the huge discrepancy in performance?
No wonder LPI share price commands a premium despite limited growth prospect in the sector.