What You Need to Know about ICAP (iCapital.biz Berhad) and Why It Can Make You a Lot of Money!
Nov 21st, 2007 by AhYap
ICAP is listed in the KLSE as a company under the Closed End Fund section. All companies listed in the KLSE will belongs to a section, i.e. plantations, hotels, properties, financial, etc.
It used to have only 2 stocks listed under the closed-end fund section – ICAP and AMANMFB. But funny enough, AMANMFB has closed shop a few weeks ago. AMANMFB performance sucks from day 1 and they looked even uglier when ICAP is launched 2 years ago. So instead of keep hiding their head under the table, the fund manager decided to terminate the fund.
Most people are not familiar will a closed end fund because most funds that we buy are open-ended funds. Please read the article “Closed End Fund vs. Unit Trust Fund” to learn more about them in details.
To make a quick explanation, an open-ended fund doesn’t have a fixed amount of units. Today it can have 13 million units and tomorrow it can have 10 million units, depending on how many people have bought or sold the funds. The price that you buy or sell an open-ended fund is based on the NAV of the fund, which is calculated daily by the fund companies and is published daily on the newspaper. [NAV = Net Asset Value = how much the fund is worth = the exact price of the fund]
As opposed to an open-ended fund, a closed-end fund has a fixed amount of units. For example, ICAP has a fixed 140 million units available. Tomorrow, it will still be 140 million units no matter how many people sell or buy it. The bid and ask price do not depend on the NAV but actually depends on supply and demand.
When you buy a Public Mutual fund, you are buying from Public Mutual directly at the NAV + entry fee (6.5%). If you sell, you are selling to Public Mutual directly at the NAV. You don’t need to worry whether there are buyers or sellers available, Public Mutual will always buy or sell to you.
Since ICAP only has a fixed 140 million of units, you can only buy from an existing ICAP holders who wants to sell to you (sorry, AhYap is not selling his to you). And so the price is determined by supply and demand.
The above image shows that there are 152 lots available for sale at RM2.40. If you are already holding ICAP and want to sell them, you can sell 148 lots at RM2.39 right now. A lot means 100 units/shares.
Where do you buy and sell ICAP? You do that exactly the same way you buy or sell other stocks such as GENTING or DIGI. That’s either through a reminsier or do-it-yourself via a discount broker such as HLeBroking.com. You need to pay brokerage fee, stamp duty & clearing fees when you buy or sell ICAP just like your buy or sell other stocks in KLSE.
Since ICAP is also a fund, it also has its own NAV. But instead of being calculated and published daily like other mutual funds. ICAP NAV is calculated on every Wednesday and will be published end of Thursday on icapital.biz and klse.com.my (’Listed Companies’ Menu -> Company Announcement -> Announcements -> Current -> ‘By Company’ Tab -> ‘I’ Button -> ICAPITAL.BIZ BERHAD).
From website iCapital.biz, it will look like this
Latest NAV – RM2.10
(as at 14/11/2007)
From klse.com.my, the announcement will read like this
On behalf of the Board of icapital.biz, we wish to announce that the NAV per share of icapital.biz as at 14 November 2007 was RM2.10.
If you are smart enough, you will notice that ICAP is actually selling at RM2.40 right now while the NAV is only RM2.10! What does that means? Demand is so strong that there are actually idiots trying to buy it at RM2.40 (Yes, I mean Idiots).
Logically, ICAP should be bought or sold around the NAV. So if the NAV is RM2.10, buy and sell should be around that amount. As a buyer, you want to buy it as low as possible. If you are a seller, you want to sell it as high as possible. If the NAV is RM2.10 and you pay RM2.20 to buy it, you are actually paying a premium to buy it. It is OK to pay a premium to buy a good fund. When you buy a mutual fund, you need to pay 6% to 7% entry fee as well which is also a premium. However, paying 19% of premium to buy a fund is ridiculous to me.
The reason why idiots bid it so high right now is due to the lack of understanding to ICAP and the ignorance of a bunch of traders. A lot of trading software (including IntegraStocks promoted heavily by Bursa Pursuit) are giving buy signals to ICAP because it keep on breaking new high. So these traders, who know nothing about ICAP other than its s-p-e-l-l-i-n-g thought that this stock is the next stock that will go up 500% in the next few weeks. They will be proven wrong and burned hard.
ICAP is a registered company but it doesn’t has its own ‘business’. It’s ‘business’, is to own other businesses that is listed in the KLSE (they buy stocks!). ICAP is owning around 15 stocks right now, including PARKSON, PETDAG, UMW, PIE, BSTEAD, etc.
ICAP doesn’t has a single employee! Everything is outsourced. The decisions on what stocks to buy and sell are outsourced to Capital Dynamics Sdn Bhd, which is run and operated by Tan Teng Boo (the fund manager). The annual management fee paid to Capital Dynamics yearly is 1.5% of the NAV. Almost all mutual funds that you buy will will have such management fee paid to the fund manager ranging from 1% to 2%, 1.5% is most commonly used.
Tan Teng Boo publish an investment newletter weekly since 1988. And everyone can subscribe to this newsletter (of course you need to pay lah). The gem of this newsletter is that is contains a paper portfolio where he will tell you exactly what stock to buy and sell. He called this portfolio “Section C”. The performance of this portfolio is amazing, it has averaged a 21.73% compounded return since it is started in 1991! Remember that a 20% compound rate will grow your money 6 times in 10 years. Click here for the complete track record details with yearly breakdown and chart. Since this portfolio is make public to all subscribers since 1991, everything can be traced back to 1991 and thus the track record cannot be faked.
What makes ICAP so interesting when compared to other mutual funds in Malaysia?
The core philosophy of typical mutual funds is diversification. A typical fund will own a lot of stocks, probably hundreds or even thousands of them! What they do is buy a little bit of this and a little bit of that. Their reasoning behind this is that the risk can be reduced by ’spreading’ it over a lot of counters. What they are thinking is, if the fund own 300 stocks and 1 of them go down 100% to 0, the fund overall net loss is only 0.33%. This is known as “Don’t put all your eggs in one basket”.
Unfortunately, sword has a double edge. If your fund buy 300 stocks, 1 of them go up 100%, the effect of the superior performance of this stock only net to 0.33% to the overall fund performance! So there is nothing to be proud of when one of the stock go up 100%!
Warren Buffett, the world’s most successful investor (the #2 richest man in the world) who runs Berkhshire Harthaway that is worth over USD 200 billion ($200,000,000,000) owns only 39 stocks! So for a typical mutual fund that is worth RM100 million to diversify as much as 300 stocks is meaningless.
When mutual funds owns too many stocks, their performance will be much or less same as the overall market! So if you read the headline and the stock market tumbled 3%, most probably your fund will also tumbled 3%. This is because the fund owns so many stocks that it is actually the stock market itself! If KLSE has only 1,500 stocks and your fund owns 500 of them, it is very logical that your fund price will drop when the overall market drop.
Look at Public Growth Fund (red) vs the KLSE Composite Index (blue). Look how close they mimic each other. This is because they own too many stocks. So they will have a high correlation to each other.
As ICAP owns only 15 stocks, its performance will not rely too much on what the overall market is doing. So it has lower correlation when compared to typical mutual funds. This can be seen clearly on the ICAP performance beginning at April 2007. While the market is going flatline, ICAP is able to appreciate continuously.
Performance of a value investor doesn’t depends on the market but the earning performance of the underlying companies. The companies that ICAP owns keep making good earnings on that period and thus the price is reflecting that. Note that I am using the NAV of ICAP and not the stock price of ICAP because NAV is the real value of the fund and not the price (which is insane right now).
* A mutual fund that holds too many stocks will not be able to outperform the market in a large margin for the long run. But an intelligently value investing portfolio that focus only on a few well researched stocks can easily outperform the market by a large margin in the long run. *
Before I continue, I will now write my responds to Boyboycute’s comment. He takes a great effort on researching more about ICAP which I salute (a lot of people either listen and forget, or listen blindly).
Icaptal.biz was listed 2 years ago on 19 Oct 2005. Whatever ICAP is doing, it will be under scrutinized by Bursa starting from that date only. Before the listing, ICAP self-claimed in http://www.icapital.biz/english/trackrec_1.asp about the performance of Capital Dynamics without any supporting documents or evidence. No one can certify the performance of Capital Dynamics before the listing of ICAP. Since ICAP has two years of track record only, I cannot make any good judgement about the fund. By the way, did you read the disclaimer in the website? Past performance is not an indication for future performance. See it here: http://www.icapital.biz/english/disclaimer.asp
As you have read earlier, the track record of the paper portfolio ‘Section C’ is hard to faked because he publish his newsletter weekly and everything can be traced back. Unless he can time travel and know the stock prices today in 1991, he can only make his buy and sell decision based on his investing skill at that moment.
While the paper portfolio is started at 1991. The performance is so good that people want Tan Teng Boo to manage their real money! So Tan got his fund manager license in 1997 and start managing real $$$ begining 1998. At that time, you can ask Tan to manage your money if you have RM500,000. This minimum amount has been increased many time and today if you want him to manage the money for you personally, you will need to have RM4 million (RM4,000,000). Oh…
Tan actually did better with the real portfolio than his paper portfolio. His real portfolio (published in CDAM.biz) indicated that he has been compounding at 27.52% from Apr 1998 to Sep 2007.
The problem is, most people don’t have RM4 million! I am asking people to save RM100,000 in 5 years and most think it is so tough! What about RM4 million? Many people want Tan to manage their money buy they don’t have the money! So Tan come up with the idea of closed-end fund so that each of us can pool the money together so he can manage for all of us (the poor ones) at one time!
The IPO happened 2 years ago and it raised RM140 million, which consist of 140 million shares/units at RM1 each. Tan than use this RM140 million to invest on our behalf and make money for us. This RM140 has now grown to RM294 million (based on NAV of RM2.10).
Boyboycute mention that “No one can certify the performance of Capital Dynamics before the listing of ICAP”. Listing on the KLSE itself is not a simple and easy matter, especially as a closed-end fund, because closed-end fund is a new company without any track record! If it is easy, there should be a lot of closed-end fund in the KLSE! There are thousands of mutual funds available (see the newspaper) but only 1 closed-end fund listed in KLSE. I would like to run my own closed-end fund too if KLSE will approve me! I can show them my blog! 
And yet, ICAP is the 2nd company in KLSE that obtains the fastest approval for listing on the main board! The first one is Maxis. This is because the reputation of Tan and his performance is so convincing.
All funds need to have the disclaimer “Past performance is not an indication for future performance” as required by the regulations, including Public Mutual, OSK-UOB, etc. So there is nothing unordinary.
United States is a country that people like to blame and sue each other. I just came home from Los Angeles last week and to my surprise, the amount the disclaimers is insane! Every hotel and building has a disclaimer that says ‘enter at your own risk’ because it might contain chemicals and toxin and such that may cause you cancer or serious brain damage, etc. etc. [I think they are referring to nicotine from cigarettes] and the drugs advertisement on the TV will always end with the ‘eat at your own risk’ disclaimer. Disclaimer, is used to cover one’s ass from legal law suit.
Fund management fee paid to a related party Capital Dynamics Asset Management Sdn. Bhd has doubled from RM638,479 in 2006 to RM1,363,494 in 2007. Can Tan Teng Boo explain this? Is the Board of Directors trying to take money from the shareholders in ICAP through CDAM? From loss after taxation of RM1.217 million in the last financial year, ICAP Fund recorded an after tax profit of RM14.600 million in 31 May 2007. A simple calculation shows that 9.34 % of the net profit goes to the fund management’s pocket. Will the management fees given to CDAM increase in the next financial year? We shall see then.
Wow, big misunderstanding! As mentioned earlier, annual fund management fee for ICAP is 1.5% of the NAV. All mutual funds in Malaysia charge an annual management fee and 1.5% is the most commonly used. The fee is paid quarterly at 0.375% each (1.5% / 4) based on the NAV.
Loss after taxation of RM1.217 million are the cost and expenses for listing ICAP on KLSE. Since the IPO raised RM140 million, that is merely 0.87% of the entire fund! It is very common for a lot of IPOs to spend more than 20% of their raised money in IPO cost! ICAP is one of the listed companies that spend the most little in IPO expenses to keep as much raised money as possible for the shareholders. They didn’t spend money on making big marketing and promotions on their IPO. And yet, the IPO is oversubscribed by 11 times! He already built up a big fan base before the IPO through his newsletter.
Basically, you take out RM100 from your pocket and RM1 will go for the IPO expenses (1%). RM99 will remain as your investment. If you have bought a mutual fund, says Public Growth Fund, your RM100 will be left with RM935 because they are charging you RM65 fee to buy! So who is stealing your money? ICAP or Public Growth Fund?
The after tax profit of RM14.6 million is realized from selling Digi, AsiaTic and Kumpulan Guthrie. The accounting method that we are using today is very weak in measuring the performance of a fund because our accounting method assumes that money is made ONLY after you sell the stock. But ICAP is a value investing fund and they don’t sell that often. It usually buy and hold for year! If say ICAP never sell a single stock in 2007, but the portfolio has appreciate 50%, in accounting, ICAP didn’t make any money! So it makes no sense to value ICAP based on the profit and loss. One needs to look at the NAV, which is exactly what it is worth based on the market price of its holdings. The same way you will look at a mutual fund.
ICAP is taxed at the statutory tax rate of 27%. Compare with other types of funds, ICAP is losing a big chunk to taxes. In 2007, the tax is RM2,153,669, which is about 14.75% of the net profit reported. In long term, ICAP’s performance will be affected by taxation compared with other funds which have tax advantages.
This is true. But since ICAP is a value investing fund for the long term, most stocks will be hold for a long term and there will be not much selling. For over 2 years, ICAP has only sold 3 stocks (probably 4 by now, they should have sold LIONDIV after it spin-off PARKSON by now). No selling = no tax.
Mr. Tan Teng Boo has a total of 525,700 shares in ICAP (indirectly). Assuming he bought it during IPO at RM 1.00, he only has RM 525,700 in ICAP. He cannot even make it to the 30 largest shareholders’ list. Is he poor? Does he feel uneasy putting his whole wealth in ICAP? Will you put your whole wealth in ICAP? Then, why he urged for more loyal and bigger shareholders? Meanwhile, Warren Buffet has almost 99% of their wealth tight down to Berkshire Hathaway. That is what you want from a fund manager. A quick browse on the thirty largest shareholders shows that the total ownership of the thirty largest shareholders does not exceed 30%. The thirty largest shareholders must have attended annual meeting in ICAP. What did they see, hear or feel there? If they are convinced by ICAP, shouldn’t they already increase their holdings after the 1st annual meeting? What does this tell you as a retail investor?
Haha, another big misunderstanding. But that shows you are incredibly smart when you think of this because I think of that too when I started to research ICAP! [This sentence is trying to tell people I am smart too, haha]
As mentioned earlier, before Uncle Tan launched ICAP, he is already running a stock market newsletter business since 1989. And in 1998, he is managing others people money with a minimum investment of RM500,000. He will make 1.5% yearly from the investment amount as management fee. Today, the rules has changed. Not only that you need RM4 million to have him manage your money, he will also take 20% of your profit on top of the 1.5% fee! He has also launched his new global fund that needs a minimum investment of USD200,000. He is making hell a lot of money from these.
The biggest reason why Tan doesn’t own a big chunk of ICAP is because he is not supposed to do so! That’s is not what ICAP designed for. The reason ICAP exist today is to allow small retail investor to be able to invest with Tan! Small investors pool together with a big pile of money and Tan will manage all as one. Instead of managing RM2.59 from Ah Beng and RM340 from Ali Baba. If he comes in and buy a big chunk of it, it will reduce the stock availability to other retail investors. So it doesn’t make sense. ICAP is oversubscribe by 11 times at the IPO!
Furthermore, top 30 investors doesn’t have a large percentage of money in the fund because if they have RM4 million, might as well open a private account with Tan! This way they can have more control on their money (and privacy!). Or they can buy Tan’s new global fund at USD200,000 minimum.
Uncle Tan drives a BMW 7 Series and a Lotus race car! Hopefully he won’t drive his Lotus too much because we need him to run the fund! Uncle Tan, you are already 52 year old and you are not young anymore lor! Racing is not your game anymore. Let me drive your lotus lar, I am only 27. Let me take the risk from you. :p
“In appraising the performance of your Fund, its net asset value (NAV) is the key variable to focus on. The NAV of your Fund rose from RM1.13 per share on 31 May 2006 to RM1.65 per share by 31 May 2007 or an impressive gain of 46%. The KL Composite Index rose 45.1% for the said period”
This performance is during KLSE bullish time. So, ICAP makes money during bullish time. What is so impressive? KLCI rose 45.1% while ICAP 46%. My mutual fund rose about 45.5% too. You called that IMPRESSIVE? I would say it’s normal. ICAP will try to beat the frequently efficient market. Can ICAP do it? I’m not so sure about that. We’ll see after 5 to 10 years.
This is until May 2007, the performance is achieved while still keeping RM60 million in cash! What that means is that the stock picks in ICAP has actually appreciate a lot more than 46%! Cash only appreciate at fixed deposit rate (3%). As value investor, we buy only when we found value and we will always want to keep some cash aside so that we have the money to buy when the chance arrived.
For an all equity mutual fund (means they buy only stocks and not bonds), usually 90% of their money is invested at anytime, leaving less than 10% in cash. If the stock market tumbled tomorrow, they will not have the opportunities to grab a lot of bargains on sale.
Also as mentioned earlier, From April 2007 to November 2007, while the KLSE is going sidelines and can hardly break 1,400, ICAP’s has continue to surge and beat KLSE by a big margin. A lot of other mutual funds are going sideline as well.
And again, be reminded that ICAP is holding only around 15 stocks and it still have a lot of cash to invest (RM43 million as at 31 August 2007)!
And yes, we will see after 5 to 10 years!
ICAP depends solely on Tan Teng Boo.If he involved in an accident and die tomorrow, what will hapen to ICAP. Any successor?
The performance of ICAP in the future depends heavily on Tan Teng Boo as we can say that it’s a really a “One Man Show”, something like RAMBOO. Same as Warren Buffett who runs Berkshire Hathaway. Warren Buffett is 76 years old and people has been worrying about his death for 50 years. And yet he is still eating ice cream and drinking vanilla coke happily everyday without a successor.
There is no qualify successor for Tan Teng Boo and Warren Buffett right now. If they die, you really need to figure out what to do with your money. But you will have plenty of time to decide what you want to do because as a value investor, the most critical part is to BUY a wonderful company at a great discounted price. It is the buying part and not the selling.
If Tan got hit by a truck tomorrow, Petronas Dagangan will continue to serve petrol and the mamak store will continue to cook with Petronas gas, UMW will continue to sell his Toyota Vios to those who don’t want to save RM100,000 to compound, BSTEAD will still be collecting rentals from all the tenants in The Curve and it’s 2 Royale Bintang hotels … All the businesses will continue to run without Tan Teng Boo, when we own ICAP, we are just indirect shareholders of these wonderful companies through ICAP. Warren Buffett has never sell any of his Coca Cola stocks since he bought it in 1988.
Trust me, I am 100% sure of this, I will bet hard with you! Sooner or later, he will have to die! No one leave this world alive. Not even a fly. So what I want to say is that, in value investing, buying the right stock at the right time already completes 90% of the work. And Tan has done the 90% for us. When he die later, we can then figure out what to do by then. That’s why you should subscribe to my blog as I will definitely say something when that happen, given that I don’t die before him lar!
Also on the next annual general meeting, I will suggest Tan to give me his Lotus to avoid him crashing in his own car. I may also suggest the fund to use 1% of the money to buy a life insurance for Tan and assigned it to me. Haha.
Should You Buy ICAP?
Yes and No!
Yes – When the price is right.
No – When the price is wrong.
The price now is definitely wrong. Worst, the price can remain wrong for a long time, given that there are enough fools to buy from other fools. But since this is a long term fund, there will always be a panic time that put the fund on reasonable price and you will always have the chance to buy some.
Here is another way to look at ICAP. If Tan is able keep on his record of 25% compounded return in the coming years, ICAP should perform around this
(Oct 2005) Staring – 1.00
(Oct 2006) 1st year – 1.25
(Oct 2007) 2nd year – 1.56 – we’re here
(Oct 2008) 3rd year – 1.95
(Oct 2009) 4th year – 2.43
Did you see the problem? ICAP has appreciated so much that the compounded return is 45% for 2 years (based on NAV of RM2.10). This kind of performance is too good that it will not last for the long run. In the long run, it will be pull back to around 20% to 30% which is more reasonable and is the track record for most gurus in the world. Best record are Peter Lynch (retired) and Eddie Lampert (still young and working hard). Both done 29% for 18 years.
So what I want to bring out is at one point, it will have to trace back to the reasonable rate of return. That doesn’t mean that ICAP will drop back to 1.56, I would say 99.9% chance it won’t! What will happen might be like the KLSE index right now, it will have time that it might go sideway or just drop a bit. If ICAP just stays the same for 1 more year (NAV 2.10), its averaged compounded return will still be as high as 28%! That means for people who buy at RM1.00 3 years ago, his compounded return is 28%. For those who buy today (say he can buy at NAV 2.10), the return is 0% for 1 year later since it stay the same.
So what I am telling you is that, you ‘might’ be late to the boat.
Investing return is not like a fixed deposit or Amanah Saham which can gives you a consistent rate year to year. Below is the rate of return for Tan’s paper portfolio dated back to 1991 until 2007.
| Sep.-Dec. 1991 | 7.41 |
| 1992 | 15.75 |
| 1993 | 125.88 |
| 1994 | -22.21 |
| 1995 | 14.38 |
| 1996 | 33.69 |
| 1997 | -15.55 |
| 1998 | 3.31 |
| 1999 | 77.98 |
| 2000 | -1.91 |
| 2001 | 10.58 |
| 2002 | 15.72 |
| 2003 | 50.57 |
| 2004 | -1.87 |
| 2005 | -8.07 |
| 2006 | 74.50 |
| Sept 2007 | 52.95 |
There is actually 5 negative years! This is part of the game. And did you notice that for some years, its return can go over 50% to 77.98% and 125.88% (the big years)! And what we are experiencing right now in 2007, is this kind of great return. In the coming years, ICAP will give a 3.3% return or even a negative return. It’s part of the game.
Even with 5 negative years, this paper portfolio has averaged a compounded return of 21.7%! if you can do 21.7% for 10 years, RM100,000 will become RM712,000! That’s what I have stressed again and again and again and again, investing is something that you will want to do for the long term, not 1 year, 1 months, 1 day or 1 minute! Don’t caught up to become a trader. There is nothing to brag about if you can make 1 big gain in a short time. Able to grow your money consistently over the long run is what matter.
So again, should you buy ICAP? Are you really late to the boat?
Lets’ look at it another way. If you don’t buy ICAP, most probably you will buy another mutual fund. But unless there is another great fund manager coming out from Malaysia (maybe AhYap or Boyboycute or soufulow, haha), chances of another mutual fund outperform ICAP in the long run is very slim.
While ICAP has chalked up an explosive gains last year (one of the big years), so as other mutual funds! If ICAP is having an unsustainable growth right now, so as other mutual funds!
Public Mutual makes a lot of advertisement in the newspaper a few months ago telling people they are the best mutual funds because they make 100% return for the last 5 years. 100% return for 5 years means 15% compounded return. But what they didn’t tell you is that almost 50% of the return came from 1 single year alone and that’s the most recent year! If you have sold 1 year ago, your return for the first 4 years is only a pity 50% (for 4 long years!) which is equivalent to only 7.5% compounded, far from the 15% compounded if you just miss 1 year!
Since I am very comfortable with ICAP, the philosophy of value investing, Tan Teng Boo, his Lotus if he gives it to me, and the stocks currently owned by ICAP, I would prefer to own ICAP instead of other mutual funds. If you buy a mutual fund, we usually don’t know much about the fund manager. Most probably we will know the fund salesman and the name of the fund only. And the fund manager that operate your fund this year might run away to another fund company and another Ah Beng will come and take over! And you also don’t know the portfolio of your mutual fund (do you know all the stocks your fund owns right now?) Does your fund organize an annual general meeting to let you meet with the fund manager and discuss about the future of your fund?
I would say the strategy is, if you are going to buy a fund anyway, why not buy ICAP and pay not more than 6.5% above the NAV? Since everytime you buy a mutual fund, you will have to pay 6.5% entry fee. For example, ICAP NAV is now RM2.10, you can buy it at RM2.23 (2.10 x 1.065), and then just hold it for the long term (5+ years) to see the results. It will easily outperform all other funds. Or you may even pay 10% premium if you think it is logical to you, but definitely not more than 10%, and not right now (19%)!
Writing this section on “buy or don’t buy” is very hard for me. As I always feel like someone who buy now might be late to the boat, you have miss the 1 big year. But the problem is, there might be a few great years coming on and this is only the beginning! When I bought earlier this year at RM1.55 and if I think I am late to the boat, I would have miss out a lot!
And if one evaluate the overall stock market as a whole (including global markets except China), everything is still selling very cheap in comparison to the companies earnings (the overall PE). All the stocks that ICAP owns right now look so cheap as well, there are stocks that is selling at PE10 but has the potential to grow over 20% per year!
So the only conclusion I can make is that if you have to buy a fund anyway (including the ridiculous Amanah Saham Wawasan 2020) buying ICAP at not more than 6.5% of the NAV (even up to 10%) is always better than buying any other mutual funds. A typical mutual funds that hold too many stocks will not be able to perform so well as compared to a focus portfolio. Thus a fund that invest only in KLSE will have merely no chance on beating ICAP in the long run. And any all-bonds fund or funds partial-bonds (know as balanced fund) will definitely not be able to perform better than ICAP in anywhere! So as all capital guaranteed fund and structured deposit. Only global funds that invest fully on equity (stocks) may have a chance. Other funds are just in underweight league.
But don’t be despair on this. Because I have a better solutions for those who are keen on saving RM100,000 for the next 5 years and see their money grow 36 times in 20 years, making themselves RM3.6 million! If you don’t know what I am talking about the RM100,000 and the RM3.6 million, you haven’t read AhYap’s New Economic Policy! Read it now.
Update! This article is written in 2007, you must read the update on Tan Teng Boo and his new i Capital International Value Fund.
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Great writings, lots of gold loaded but not sure how many of your readers will pick’em up.
The post reminds me of a funny situation in Malaysia: why people queue so long and fight for the Bank Negara’s bond while they can have public mutual fund? and then again, why bother mutual fund when there’s ICAP?
To BoyBoyCute: You should grab a chance to hear Tan talks and see how convincing this man can be.
Oh, by the way Yap, you didnt mention, although ICAP is such a great company, their website usability SUCKS big time!
I do agree that ICAP is certainly better than mutual funds,if bought near NAV.A high premium for ICAP is certainly crazy in short term but may be wise in long term.
By the way,why are diretors selling their shares in ICAP?Anyone have any idea?
Great! When ING FUND BHD have closed-ended fund + capital guaranteed, I will post on here… Sharing is power.
Requirement: Minimum invest RM 5k, NOT LARGE figure!!! 3rd anniversary of the Commencement Date (3 years only).
Last closed-end fund ended at 15 Nov 2007… 45 days sale.
Need to wait for next turn…
Invest need time and chance AND also CA$H… Make sure you have enough money before you planning to start those investment activity… as we know… invest have risk… but make it acceptable for your tolerance level…
Grab it when you can! ^_^
“The past performance of the Fund is not indicative of future
performance”
PAST result DOES NOT represents FUTURE value… only a guide line for investor to me decision…
everyone should know the BASIC before invest. Nothing go green forever. But for short-medium term (3-10 years), MAYBE.
and also… dun forgot the “entry fees”, “management fees”, “trustee fees”, “exit fees”… beside looking ONLY for NAV value… it make a lot of differences after all… all in percentage… every funds/shares have it times… so invest wisely… dun put all the eggs in one basket….
dun just save your money, let’s earn $, and create them, let them work for you! when you are young… time wait no one. do it when you can.
Lastly…thank you Ah yap using his 9-hours time to collect the information and adding valuable feedback.
from my short understanding, mr tan is the great fund manager in malaysia and he’s the one who manage money at capital bla bla. right? and this closed-end-fund is longer term investment.
i have quite nasty question, but the Q is a fact. What if, mr tan dies… what will happen? anyone better than him to manage our money???
@soufulow: icapital.biz is indeed one of the lousiest website in terms of user friendliness. Since this post is so long, many will just skip through. As you see, meowmeow is asking the question that I have already answered in my post.
@boyboycute: the director don’t hold any significant position in the ICAP since day 1 except the 3 million shares by Tunku. It’s good that they don’t take up so many shares and let others have them. For ICAP, the fund manager is more important the the directors. If you have been to the AGM, directors only have time to speak for 15 minutes. After that, its is all for Uncle Tan for 2 hours. We have 4 directors, each are paid RM20,000 per year. They are just there for the name.
@AK-47, ING do have a lot of closed-end fund but is not listed in KLSE. ING Capital Guaranted is structure in a way where 85% of your money in put into fixed income instrument (bond or FD) to guarantee the capital in 3 years. The remaining 15% is put to index options. The return will never be able to beat a full equity fund (all stocks). ING Asiapac guaranted lauch in May 2006 only make around 26%. Our KLSE has make 40% this year alone. If your fund can’t make good money when the market is doing good (which happens only once a while), how do you expect it to do good when the market is bad?!
@meowmeow: Read my post, I have answered it already.
you rock man! would you mind to share with us what is the 15 stocks that icap holding now? as far as i know, they are still holding to liondiv’s shares, but you told me they sold the share. could you please clarify with me? coz i just bought liondiv’s share..lol..damn
Yap, i bet you learned a lot along the way when you put up post like this (same to me too when i wrote something more than just pictures). blogging, after all, is not cue da sac at all.
LIONDIV used to own PARKSON but it spinoff PARKSON few weeks ago and become a pure steel company. Since Tan initiate a sell to LIONDIV to all his paper portfolio is his newsletter, that surely means that he have sold all LIONDIV in ICAP and keep just the PARKSON.
ICAP’s 15 holdings -
BSTEAD, F&N, INTEGRA, MIECO (very little), PADINI, PARKSON (biggest holding), PETDAG (a lot), PIE, POHKONG (very little), SURIA, SWEEJOO, TONGHER, UMCCA, UMW (a lot), VADS.
Source: 2007 Annual Report and AGM.
It’s also known to me that the fund manager have an interest in HAIO and MUIIND but I don’t know if they bought them for ICAP or not.
oh..thanks a lot for your info ah yap. hehe..so u did subscribed to his paper portfolio in the website? so u chose the on9 version 1 rite? so far very good?
I am also subscribing his icap (I converted from online to printed copies recently). To me, I benefit a lot from the icapital newsletter (not only the section C, other sections are very beneficial). The subscription fees can actually consider negligible.
One of the “disadvantage” of Icap is the “diversification” which is imposed by SC on the closed end fund. ICAP can only invest a maximum of 10% (with some relief from the authority for certain case) on a single stock. If not mistaken, the 10% here is the stock’s total shares, or the ICAP’s total asset, whichever is lower.
So, although Tan Teng Boo may like the China retail industry a lot, he can only hold up Parkson up to 10% of the icap’s nav (the current icap’s holding on Parkson exceeds 10%, and this is merely because the appreciation of the Parkson shares). However, if you are managing your portfolio on your own, you can put a lot more of your eggs on the stock which you like.
Of course, having said that, the risk may be higher (potential gain may be higher as well) when we put a lot of our money into just 1-2 stocks.
And again, managing your own portfolio, as compared to invest through ICAP, and have Tan Teng Boo to manage the money, we may not be able to catch the market timing, as what Tan Teng Boo did. (You can see how PIE shoot up after he disclosed his holdings in his newsletter’s and ICAP portfolios).
By the way, I am also a fans of Tan Teng Boo, and probably next time, I can ask Ah Yap to join together to attend Tan Teng Boo’s seminar.
Giap Seng
utmseng@hotmail.com
hey i am confused…what are the difference betweeen online and printed..now printed is having 72% discount. do they give the same information just that one in printed copy another on9? then why is giapseng changing from on9 to printed? isnt online cheaper, faster compared to printed version? hmmh
sorry..i mean 72% discount on online version
For online vs printed copies, printed copies will be much more expensive. If you subsribed printed copies, you have access to both online and printed content. The content for online vs printed is actually 90% similar.
I listed some pros and cons, based on my experience (may not be applicable to you)
Online Pros:
1. Cheap
2. Fast
Printed Pros:
1. You have all the pros of online
2. You can see the content of Section C (the section which had appreciated from RM50k (I think it starts at 1991) to the existing value of > RM1 million! (year 2007))
I actually subscribed to the online (initial years was even free!) for many years, and since myself had been benefit so much (both financially and learning), I think it would be good for me to “pay back” RM720 per year to Tan Teng Boo.
GiapSeng
utmseng@hotmail.com
thanks for explaining..hmm…so section C is so important huh? the newsletter which he analysed companies either to sell or buy is under section C? or i am still able to read those under online version?
Actually, Ah Yap should be the one to explain. I guess he is more familiar with ICAP than I do.
Anyway, I will just try to explain, Ah Yap can always add on, or correct me if I am wrong.
The section C is just a portfolio guide. If you dont follow the section C, you can still have access to section D (CD Timer) via the online version. The performance is not bad as well. Just a correction, section C starts with 55k in Sept 1991. Section D starts with 100k in April 1994, the total asset for Section D is about 770k in year 2007.
The section which analyzes a company, and call it a buy or sell, I guess is the section B. You can actually learn how Tan Teng Boo value a company. It is available in the online version as well.
So, in short, if you subscribed to online version, I think it is quite good already. For my case, I think the RM720 per year is worth more than the tuition fees which my parents paid to the stock market.
What I would advise, you can try buy 1000 shares of ICAP, and if the ICAP goes up to RM3.00 per share next time, then you can subscribe to ICAP printed copies already.
Disclaimer: I am not getting any commission or whatsoever from Tan Teng Boo. :-0
Giap Seng
icic..thanks a lot for the information
I enjoyed reading your blog very much. I hope to learn more by receiving emails from you for other writings.
Thanks for the information sharing, keep up the good work.
I have learn alot even tho im a tech guy. :p
Thanks for the information post there. The content is really beneficial and I appreciate the fact that you took 9 hours to write it for us! but haizz.. .disappointed as I m late to the boat.
Thanks for all the compliments! That really motivates me.
For the subscription, forget about the paper version. It is not the matter of price but the matter of time. The paper version reach me on Monday (and sometime Tuesday) and by that time I have read everything online from Friday to Sunday! And you have to pay so much more! End up I am receiving some junk paper every week.
The only useful thing in the paper version is Section C. But Section C is a long term portfolio that seldom change. It has only 4% cash remaining. So maybe there is only 2 or 3 buy and sells in a year. The online version is enough. Save the remaining money and put it into your RM100,000 seed capital fund.
The last buy of Section C is PIE at RM4.20 and PIE is now worth more than 15% of the entire portfolio value! He is making a big bet on it! ICAP also bought a lot of PIE recently and is owning more than 5% of PIE right now!
Hi Ah Yap,
Correct me if I am wrong on the following info.
I agree with what you said, one of the useful feature in icapital printed version is the section C. For those who are new, we should save the subscription money, and use it to increase our seed capital fund.
For PIE, Tan Teng Boo is making a big bet on the icapital newsletter Section C. However, as for the closed end fund, to say that ICAP closed end fund has bought a lot of PIE recently, it may not be true. (I use icapital to refer to the icapital newsletter, while ICAP refers to the ICAP closed end fund).
If you refer to the ICAP annual report of 2007, he holds 2970600 of PIE shares. ICAP had increased the PIE share holdings to 3407200 shares recently (meaning he had bought 436600 recently from the open market). Assuming he bought at RM4.20 per share, this means he had just spend an extra 1.83 million to increase his holdings on PIE.
Of course, from Section C point of view in icapital, he is betting big on PIE. PIE worths close to 17% of the total Section C asset in icapital. However, PIE is just worth ~5.66% of the ICAP.
The point I want to make here is, if you have extra money to invest, PIE may be a good pick. But we should not “sai lang” all our money into PIE.
What do you think?
Giap Seng
utmseng@hotmail.com
Your calculation is correct. One should never over focus his portfolio (1 stock only) or over diversify his portfolio (200 stocks).
It is very hard for ICAP to buy a lot of PIE because the volume is too thin. The recent large purchase are done by purchasing ALL PIE treasury shares at once, which are 426,600 shares. If ICAP is to buy such large block of PIE on open market from retail investor, it is almost impossible. On the other hand, the paper portfolio can do so because it only needs to buy RM40,000 of PIE, instead of RM1.8 million!
On cost basis, ICAP only have 5 holdings that exceed RM10 million, 4 of them are F&N, LionDiv (now Parkson), PetDag and UMW. All are large cap! Now, they buy a small cap stock PIE and invest over RM10 million in it. As the 3rd largest shareholders and the thin volume traded for PIE, it is very hard for ICAP to pull out from it unless ICAP want to invest it for the very very long term.
What I want to point out is not asking people to buy. I am just saying that it is a large bet. And sometimes people wonder how we come out with those information? Do we call Tan? Do we get it from the newspaper? Actually, all information is simply obtained from ICAP annual report and klse.com.my company announcement for ICAP and PIE. That’s it. So you can start investigating yourself and see if you can find what we find.
do i-cap has dividen for every year, like mutual fund?
thanks.
cp ng
CP Ng,
I think ICAP does not declare dividend as normal company, nor declaring distribution as in Unit Trust.
For me, since ICAP is a closed end fund, which is similar as a unit trust, distributions actually lowers the funds NTA, and as a result, the price may reduce after the distribution. Distribution may also mean less cash in the closed end fund, means the fund manager may have less cash to purchase the stock if an interesting opportunities arises.
So, why asking Tan Teng Boo to return the cash to you, when you should actually ask Tan Teng Boo to maximize the return using the cash he has in ICAP. However, on the other hand, if you are a retiree who needs regular income, then you can still choose to sell portion of your ICAP holdings in the open market.
Unless we are so good that we can achieve a higher ROI than Tan Teng Boo, then returning the cash to us to enable us to invest ourselves make sense.
Just my 2 cents. I may be wrong! Please kindly correct me if I am wrong.
weird.. I got the “feeling” that yap will disclosed another way of making money. But it will be another “it’s too late getting on the boat”. haha.. no offense to ahyap of course, it’s just my feeling.
@CP-Ng & Giap Seng:
Giap Seng explanation is very correct. I am writing a longer post to explain these with more details. Stay Tune.
@power:
AhYap sucks for the short term because he keep procrastinating! But AhYap promise on that boat is real! Stay Tune. “TV AhYap! Untuk Anda!”
That boat just started and we can sail along for the next 10 to 20 years.
wrote 2yap n giapseng but no reply. I read ur blog w alot of sigh, i wish i hv time to join u all, but u r a genius u know, til monish prabai u also mention. Aiya i duno how to write now, so many wan2 say, shud hv nv given in pursuing a career in this line. Anyway we wil talk more nex time, ok YAP, abt fr TTB, who else r the good FM in m’sia, i pick Tan Chong koay n Jason CHong
Thanks ah yap. In fact i just discovered another gem
BUT very unfortunate, because it’s not shariah compliance. but i’ll subscribe to the newsletter. how to subscribe? from icap website?
maybe i can start my own ‘mutual fund’ using family money.
again, great work!!
HI Ahyap;
When you will start to post back…im following your blog since last year…..You are educating people man….doing good. cheers.
Thanks
Ah yap,
I subscribed to icap online version. And the latest report i read about liondiv is that he initiate a buy to liondiv on his latest report dated 16/07/07. But then as you said:
“LIONDIV used to own PARKSON but it spinoff PARKSON few weeks ago and become a pure steel company. Since Tan initiate a sell to LIONDIV to all his paper portfolio is his newsletter, that surely means that he have sold all LIONDIV in ICAP and keep just the PARKSON.”
he is selling off liondiv in his portfolio. Did he give any reason on why he is doing so? is there any reports that i am missing? I am asking this because i have liondiv shares and i am thinkin if i want to continue buying it now or not. Hope u can enlighten me ah yap. thanks
Before the spin off, Parkson as individual share doesn’t exist. LionD is company running steel business + retail business. After the spin off, the retail business is listed individually as Parkson and LionD become a pure steel company. Tan buys LionD because of its retail business, not because of its steel business! So after the spin off, he sold all his LionD shares and kept all the Parkson shares.
thanks. yes i understood he is interested with retailing business. but did he say anythin -ve about lionD becoming a pure steel company? is it still worth buying?
As a analyst, he has ratings on a lot of companies with the buy/hold, hold and sell ratings. If you check on icapital.biz, they are still retaining buy/hold rating for liondiv for the spinoff. BUT, he sold all of it in his paper portfolio. He is expecting more from his investment capital and he think liondiv can’t deliver what he wants. If the reason u want liondiv is because u want to mimic Tan and ICAP, it make no sense to own liondiv since he has so much picks for you to choose from (in both ICAP holdings and his paper portfolio like TM and PADINI). But if you are researching yourself, you can own any stocks you want.
It’s funny how the market thinks.Today, ICAP’s NAV is at 2.02.Hence,the logical price to buy ICAP is around 5% premium of the NAV or less.But I was shocked to see naive traders/investors buying at 2.27.That was almost 12% premium.That means these ’smart’ people were buying the companies in ICAP’s portfolio by paying 12% extra.They can just subscribe to ICAPITAL.BIZ at RM 199 (can claim tax relief as books) and buy those stocks at their current prices.
ICAP has a good branding because of Mr. Tan’s capability plus some hitch hike on value investing concept which made Warren Buffet the richest person on earth.But ICAP is not the only answer to allocate one’s portfolio.Investors should put SOME portion of their money in ICAP.Don’t put ALL money in ICAP.It’s a suicide.
Currently,the political landscape in M’sia is still very unstable.Investors should only buy companies which are resillient to political shock.Buy companies at a discount and not pay a premium for them.You might think that ‘Maybe in the future,the price will reach what I paid for’.You maybe right or wrong.Future is uncertain and risky as well.So,it’s better to have safety margin when investing.
I suggested a few companies in my blog for those who are looking for bargains.These companies had been sold out for no reason during the election.
Remember, there maybe another political tsunami which may cripple the stock market,PNB (ASB,ASW) and Khazanah.One should look at how much debt which PNB has in its annual report.
Hi Ahyap..
Will this 1.68 is the good time and is below 10% that i should buy?
Its great if u could advice me..
Thanks
u shud start dollar cost averaging now
revised the DCA, but when it’s at certain price or lower
dont folw a straight DCA
lowest ws 1.48 on mon 13/10, whole mkt is weak, though buy when other is fearful, perhaps mkt can stil go lower.
TTB ws not so corect abt usa wont go into recession/ isnt in recession, but he ws corect on other occassions,yet this itself, if u folow him, would hv wiped out a lot of gain/ suffer cap losses
m considering to go for interview at icap
Hi,
As we can see here in icap that shown 1.60 on 14/10/08 and u said that it was 13/10/08. confused!!!!. How do we see the buying value currently.or as said its a premium that we are paying for???. thanks
u think its advisable to take this shares rite now…erm…advice plz
go to icap.biz or bursa website to check
jz giving estimation
13/10 it hit 1.46 lowest, i believe it’s under NAV
and soon Hai-O, PIE, TM wil give huge dividends, icap NAv wil secretly rise
“Today, the rules has changed. Not only that you need RM4 million to have him manage your money, he will also take 20% of your profit on top of the 1.5% fee!”
Such a a essential commision! Why ddn’t you mentioned ealier in the introduction but just mentiion 5% management fee?
what a stupid Q, must hv come from ….er….
5%? another self-assume info?
ICAP seems like an attractive deal if you don’t have much investing knowledge and wanna grow your wealth.
If everyone is holding ICAP for long term investment, the trading volume will be low. Can I say that this makes ICAP no liquid enough? What if i need the money urgently, then I will forced to sell down my ICAP share and that is a lost to me.
valid wory, but y wory abt sky wil fall down?
U see, ahyap dont even bother to reply when i been saying for 6mth i hv been looking for him,
Dont wory la, he doesnt bother oso, and ask u 2buy when there’s no correction oso, sigh
now drop much…1.48,but isit we must offer higher premium to buy icap…
1.if let say i want to sell,issit i selll on higher premium
2.if the stock Tan choosen is loss,so we can buy icap on lower price rightr?
So what I want to bring out is at one point, it will have to trace back to the reasonable rate of return. That doesn’t mean that ICAP will drop back to 1.56, I would say 99.9% chance it won’t! What will happen might be like the KLSE index right now, it will have time that it might go sideway or just drop a bit. If ICAP just stays the same for 1 more year (NAV 2.10), its averaged compounded return will still be as high as 28%! That means for people who buy at RM1.00 3 years ago, his compounded return is 28%. For those who buy today (say he can buy at NAV 2.10), the return is 0% for 1 year later since it stay the same.
0.01% it happens
@ckreads:
LOL, this lesson teach you not to trust anyone including your dad!
My knowledge to share market is ZERO and so have a stupid question here.
As we know, for CEF like ICAP, There are to parameters in measuring the performance. 1.NAV and 2. Market price
1.NAV = is to measure the performance of the fund manager
2.Market price =is to measure the actual returns (price performance) (dictated by the forces of supply and demand)
What i like to ask is, if the fund manager making good investment and the NAV goes sky high, but the demand for share still remain average.
example:
investor buying at market price 1.50 and NAV is 1.55, after one year, the investment is very good and the NAV jump to 2.80 but the demand for the share still remain like 1.60.
So as an investor, he/she only make a little return although the NAV is very high. Am i correct?
Will this situation happen?
iCap’s NAV @31/12/08 is 1.57
NOw the price is 1.45
Is it a value buy?
For all of you who have read this long ICAP review, the power of compounding and know the NAV and market price of ICAP now but still doesn’t know whether your should buy or not means you are still not ready to step into the stock market at all. You still haven’t done enough homework to make a decision.
@ckreds,
It can happen but someone see it as risk and someone see it as opportunity. What do you see it as?
In 10 more year years if NAV is RM5, do you think the market price still remain at RM1.60? Long term, think long term, wait for value-price gap to be too obvious and value-price gap have to close. Short term everything is smoky, long term everything becomes clear. Bear and Bull are cyclical. Market price trade above NAV or below NAV is also cyclical. Greed and fear is also cyclical. In the last 70 years of stock market, greed always return as long as no Alien come to invade earth.
ckreds, i almost felt a waste of time to reply til ah yap replied.
when CEF trade at a sizable discount, it wil be
1)rare, or not permanent
2)if discount is due to poor performace of FM , it wil invite vulture fund
Dr tan chong koay survive such attack when his fund trade at abt 20%+ discount i think in late 80s or 90s , the vulture gave up liquidating his fund.
who is he? another great FM, and both fr kedah.
I cal TTB 2day, just knew that he didnt carry a hp. Duno how true
AhYap, u memang bagus! my doubt cleared now.
ckreds, u r abt to lose $ investing obviously
cuz dun hv a proper method in buying icap,
even if u hv, u wil lose on on heavy commission, if u wan2know how, cek my newspaper writing after cny
@vinext
could u let me know which news paper and when is the date?
So, may i know ur expertise advise for the proper method in buying icap?
https://icapital.biz/subscribe2/subscribe.asp?id=2
RM199 – 1 Yr (72% discount)
yap can u confirm if we take net copy, we get 72%discount?
2) is dis wat u r paying too
3) yap u keen to share? open 1 email that few ppl can access, then share d cost
as guessed, TTB buy AEON CREDIT recently lol
I attended TTB’s presentation on i capital International Value Fund.
He is so bullish about the global equity markets.
He made comparison to the great depression in 1920’s and 1930’s and used some economical datas to support his arguement.
I am cautiously optimistic about the global markets as there may be conflict of interest in his view as he was launching his new fund.
bugger timing the mkt? too bad
Quite surprise to see the news from TheEdge for ICapital.biz. Ah Yat, would you like to comment on this:-
http://www.theedgemalaysia.com/business-news/17325-
icapitalbiz-posts-rm116m-net-loss-in-4q.html
“ICapital.Biz’s net asset per share rose to RM1.42 from RM1.37 but its net asset value (NAV) declined by 9% to RM1.77 from RM1.95.
Basic loss per share stood at 8.29 sen versus basic earnings per share of 1.21 sen in FY08.
ICapital.Biz Bhd posted a net loss of RM11.60 million for the fourth quarter ended May 31, 2009 (4Q09) with negative revenue of RM11.83 million due to loss on disposal of investments of RM14.16 million.
In contrast, it reported a net profit of RM1.70 million on the back of RM3.69 million revenue for the previous corresponding period.
“
STRONG BUY
Because it is a fund, its profit and fund ‘depend’ on realized gain/loss. You get taxed when you sell in the market. ICAP sell Axiata (old name TM Intenational), generating a big loss. Whether this loss is smart or stupid depends on the reason Tan do it.
#1. It is true that he make a bad investment mistake on Axiata since the price drop over 60%.
#2. But he use the money to buy Astro which has increase a lot more than holding Axiata
#3. He is selling something cheap to buy an investment that he think is even cheaper/better. Smart.
#4. As a listed company, you pay tax when you have realized profit, so by selling Axiata to generate loss and overwrite some of the earlier profit (like dividends) you don’t pay tax for those! Good move man!
You look at the NAV instead of the profit/loss which is quite pointless. The fund manager do a lot of funny thing to reduce tax which make things don’t look good in the paper but look good to investor.
The NAV drop year to year but it is doing a lot better than KLSE (when you compare it to something similar). And then now, the market price for it is like 10& discount to the NAV. You are like going to Jusco to buy something and they give you 10% discount. If you go to Public Mutual and buy a fund now, you need to pay 6% premium instead of getting 10% discount.
So you tell me, do I need to worry? My entering price is RM1.60. I load up more when it drop below RM1.60 and when I say 0.01% that it won’t! I take action, average down the price. I even bought at RM1.20! I bought for my mum. I am ready when opportunity arise. When something unexpected happened (0.01% chance), there is a high chance you will smell some opportunity. This is not luck, this is preparation.
Now it is still the same, what happen next few months doesn’t matter. What happen next year don’t matter as well. Do you look at you EPF everyday? Do you look at your Amanah Saham everyday? Do you look at you fixed deposit everyday? Why do you look at your ICAP everyday?
ICAP, in the long run, esp at the price right now, will do significant better than your EPF, your Amanah Saham and your fixed deposit. You will want to come back to read this post again and regret it when the price is RM3.00.
Of course, there is another 0.01% that will screw them all. What is it? The death of Tan Teng Boo. So in the next AGM, I will ask him to invest a small portion of his fund money to uy us a Life Insurance. Haha. Even Michael Jackson can die!
Oh what a knowledgable site. By the way, I never trust any unit trust fund before, may be due to its name “trust”. Poor name, instead of making me think it is trust worthy, it make me think twice to survey. After survey, my conclusion it cannot be trusted. Sorry may be I am wrong.
But I have once bought it. When I put my short term money into FD for near future use. My banker came to tell me to split the amount half into Unit trust. In order to entitle for 35% pa (take note) for 1 mth FD. 18% for 3 mth FD. As for Unit trust, I choosed equity type because that moment share market was everyday booming. After made sure these 2 split investments are working individually, I put ALL my money into 1 and 3 mth FD, 50% of course in the unit “TRUST”. That time I have a gambling heart, not myself. After one week, I sold my unit trust for a return of 20% (my minimum level or kia soo) though I know I can earn more from equity at that moment. My aim is to get 35% pa high interest (I wonder what gimmick is this), I got it and I have some extra. This scheme opened for very short period of time. So excited everytime I recalled this earning. The most also 10% back in 1980’s, right?!
I also have experience eg hopping from one bank to another for low and revised mortgage loan. This is long before the banks realised and start lock their customer for 3 – 5 years. So happy to be able to “cheat” bank for their loophole.
Those who comes back form China, complaints how they were cheated by the roadside money changer include my parent, not only one or two times… As a frequent backpacker, we know their tricks so far, we either get a much better rate (compared to local bank) or they say no deal.
In last year, I won a lucky draw from Mattha Fair a roundtrip ticket to Taiwan. The lady called me half a year and I did not border to it, afraid to be connedlah. Luckily I got her final call (one day b4 I went to climb KK mountain); she told me you are “chosen” among the nation. Since it sound like a calling from Him, I asked someone to check out from their office before I show face. I went to KK with a happy heart with a free ticket in my life. Is a big gift for a backpacker like me…. Thanks God
seriously crap & writing irrelevant stuff.
Maybe u shud hv tried it at 2008 peak of the bubble on the FD UT combo
Hey Ah Yap, were you the first person to ask ttb questions at the recent AGM. Sounds like you, lol.
@leewah, I think it is me.
Dear Ah Yap,
ICAP is now trading at RM1.79, about 8% discount of it’s NAV !
Do you think it’s a golden opportunity to buy now?
Also it is likely to get a approval to invest overseas?!
Rgds
@Investor1,
I did bought some at RM1.79 last week seeing that discount has been standing for quite some time (robust NAV). As long as you don’t see Tan Teng Boo dying anytime soon, you can buy and expect it to deliver very good results in the long term. If you buy mutual fund, you need to pay 6% fee up front! When you buy ICAP, you get 8% discount now. While the gap between price and NAV won’t close until the greed come back, even if it didn’t close at all and stay at 8%, you are still ahead of mutual fund because you don”t lose 6% up front.
Hi Ah Yap,
For the last 6 months, iCAP price have been range bound at 1.75-1.80. Is it something to do with the uncertainty of the direction of the fund ? THere is alot of market talk about impending ‘double dip’ in the next few months. What is your view on the impact on iCAP ?
Hi guys,
I just came across this blog recently. My two cents worth is that if you are an enterprising investor, it might be wise to stay away from Icap shares. A few of you here are more than capable of finding bargains elsewhere where you can have bigger margins of safety and wait for the payoff. Most value investors almost never buy into funds because it trades too close to NAV.
I guess for more passive investors who just want to invest in good businesses and compound money at a good rate over time, it would make sense to put money in it over periods of deppressed levels. Right now GENERALLY it might be a bad time to buy a lot of companies in Asia (however bargains can be found anywhere if you look hard enough). I assume a lot of the holdings that iCap have are already trading at high ratios thus if you are buying them now you are buying them at inflated prices. Just a thought. Very welcome to criticism.
PS: I do agree with Mr Buffett that sometimes you should pay a little more for a stock because its a special business. But remember Buffetts world got smaller as his funds grew larger so he had no choice but to do this.
Hi Ah Yap,
Do you plan to go to Tan Teng Boo’s seminar?
I plan to go for TTB’s seminar on 10th April only, and am looking to see whoever wants to go to the 11th April. If any of your friends is planning to go to 11th April seminar, then we can register together and save some $.
http://mediafiles.icapital.biz/ext-files/icap-files/files/seminar-042010-en_rev2.pdf
Giap Seng
utmseng@hotmail.com
Hi Giap Seng & All,
Not going myself as I am in a trip vacation that time.
wat a ridiculous academic comment u wrote munger man
Yap, Good work!!! I like your post…appreciate the time you took to write it…Keep it up!!!
I read your latest post on “Financial planning & screwing up your retirement fund”, I thought you were bullshitting…But after reading your other posts, I found that you really knew what you’re talking about…I think you deserve some credit, good job!
Ah Yap,
Any more updates on icap ? Its price has been rangebound between 1.70 – 1.80 for many months.. Can anyone provide some enlighthenment on what is the probable reason ? I have been a faithful investor of icap since its IPO and continue buying from 1.25 – 1.70 but its price seems to be losing ’steam’ in the past few months despite the KLCI moving up.
Hi Tan,
Actually, I wish that ICAP market price can continue to go down, so that I can buy more at lower price.
The fund manager had done pretty well on his asset allocation and stock picks. This can be seen from the rising NAV, and stable NAV despite the correction on market.
I will just buy when the price is cheap, and let the NAV take care of themselves.
However, despite saying that, I foresee the discount between NAV and market price will be there for the short term, as there are several factors leading to this discount. Eg, the low liquidity, holding company discount, …
Does anyone know how to calculate ICAP intrinsic value? The analyst use multiple of book value approach to value Berkshire Hathaway. Can this method use for ICAP’s Intrinsic value calculation?
ICAP is very different than berkshire harthwary. ICAP is just a fund that hold stocks that have traded price. BH is a complicated conglomerate. The intrinsic value is its NAV (Net Asset Value) updated in http://www.icapital.biz/ once a week Thursday night.
I hope the shareholders of ICAP will urge the fund manager to buy back ICAP’s stock in AGM this year since this fund is definitely undervalued . This procedure will able to narrow or remove the discount.The discount to NAV is -20% on 07 May 2010. The discount to NAV will become wider if the fund manager still decides not to purchase ICAP’s stock or the fund investors keep on selling the fund.
Hai Ahyap and everyone else.
I really excited to play saham after reading your all post in intelligent investing categories, but how i begin? please bear with me as i dunno nothing about saham.
1) This is a very noob question, but i need to ask or i will go no where. How to make a first move? Mutual public its much easier but it will make we pay the extra cost. They like agent. But i dunno where to register, I have read your last post, did i need to register at maybank? Thanks if u willing to answer my question. =D
I promise to write how to get started guide to investing in a blog post but I cannot promise on when. At the mean time, DO NOT OPEN a trading account, instead, read books – read “The Little Book That Beats The Market” by Joel, “The Dhandho Investor” by Mohnish Pabrai, “Rule #1″ by Phil Town. DO NOT TRADE first because an engineer is expect to start work only 4 years in University and each semester he needs to study 6 to 7 subjects. How could you expect you to do good in investing if you only read a few online articles? Investing is tougher then engineering, at least emotionally.
I am quite satisfied with the performance of ICAP (18% annual growth rate of return) until now (03/07/2010). The proven management team maintains its good performance.However, it is undervalued right now. I keep on buying ICAP stocks quarterly until it is overvalued. Now ICAP still has pretty margin of safety (16% discount to its NAV). As a rule of thumb, buy ICAP when it has 15% discount or more to its NAV.
The perfomance of ICAP is a good yardstick to measure whether it is undervalued or overvalued. Buy ICAP when it is not perform very well or below the target return (20%）. When it is perform very well (above 20%), I think it is time to sell to other people. The best time to buy ICAP is when its annual growth rate of return below 15%.
WOW! Uncle Tan drives a BMW 7 Series and a Lotus race car?
He must be the richest fund manger in Malaysia
After the Investor Day, the investors start to buy icapital.biz Berhad shares.The discount to its NAV is -13% on 16-08-2010. The discount is narrowed due to the demand higher than supply.Hopefully, market price moves closely to its NAV in the future.
“The objective is to buy a non-dividend paying stock that compounds for thirty years at 15% a year.”—— Charlie Munger.
I hope who invest in icapital.biz Berhad will embrace this investment objective which stated by Charlie Munger, the long-time partner of Warren Buffett. During the Sixth Annual General Meeting, some shareholders of icapital.biz Berhad ask the board of director to pay out the dividend for the investors. It is not wise to pay out the dividend since this company still can allocate the capital wisely and the shareholder fund will be cut by government tax after paying dividend.Why they ask to pay out dividend?The intelligent investor will not ask the board of director of a company to distribute dvidend as long as the company can use this capital wisely for the benefits of shareholders.
Recently, I found that Value Partners Group Limited which is a value investing style asset management company.The company managed about 7 funds which performed very well, roughly 20% compound return annually.
But we need USD$10,000 as an initial investment capital to invest in these funds.These funds primarily invest in China and Pacific Region.It is wise to capitalise on these fund.
http://www.valuepartners.com.hk
Hi Master Yap,
First of all i must say i like ur analysis/sharing and the humours in it.
Now i have a question regarding icap’s NAV and it’s current trade price.
it’s NAV as at 06 Oct 2010 was 2.42 but the share is trading at only 2.00
can u tell me what does it indicate? and the P/E ratio is 7.68, is it low?
i apologize if my question is to `newbie`, would apreciate if u can help me out here…
Thanks !
It means you are buying something worth RM2.42 at RM2. You can always buy things at 3 prices, for ICAP it will be more than RM2.42, around RM2.42, below RM2.42, which is better and why? Which one will make you the most money? Which one has less risk?
PE is useless when evaluation ICAP because it is a fund and not a normal business. NAV and the its underlying stock values (are stocks it holds worth holding?) are more important.
Thx Mr Yap for ur kind answer. it means i’m gettin a bargain buy right now with the 2.00 price, right? but how do i know what stock icap holding now, if i’m not a subscriber to the newsletter?
You will need to read the annual reports.
Now RM2.06,right time to enter?
The discount to its NAV is more than 20% this time (20/07/2011). It is time to open your wallet to buy icapital.biz Bhd.Capitalizing on icapital.biz Berhad is an intelligent decision now.