I am not initiating coverage on this business not because I'm not interested with this business but because I'm not convinced with the management. To cut long story short (World Cup season ma so story short a bit lo):
How it make it to the The Good?
Its business: A moat in Malaysia, a monopoly, a toll bridge and CASH!
How it doesn't make it to the Great?
Its management: History of bad acquisition in fact never once convincing, questionable related party transactions (this year itself at least twice) without proper explanation, bad capital allocation (why the heck are they keeping all those cash in the bank doing NOTHING?)
Sometimes it makes me wonder if the management has been using this company as their cash cow for their parent and other sisters. The series of RPT this year do raise such concern.
Let's have a look on their balance sheet (Q1FY10):
Cash in Bank: RM3.1bln
Money Market Instrument: RM2.1bln.
Number of shares: 5.7bln.
If they return all cash plus those that they have invested in money market instrument as dividend, that will be a total of RM0.91 per share which in today's price (RM2.61) gives a yield of 34.9%.
If they return all the cash as dividend, that'll be a total of RM0.54 which gives a yield of 20.7%.
If they return half the cash, that'll be 10.3%.
It might even serves the shareholders better if they return the RM3.1bln that is deposited in the bank which give roughly 2.8% interest annually because it'll allow the shareholders to make investments with better return. If shareholders where to deposit those money in FD, they could do it themselves. And given the fact that the management has the history of bad acquisitions and questionable RPTs, there aren't many good reason for the management to hold them.
"If Only They Return The Cash"
This comment is based on my personal thoughts, opinions and my risk tolerance. It should not be considered as an investment advise. Please consult your financial advisor or do some research of your own before making any decision. You might have your own thoughts. I would love to here from you. You can always place your comments here and or email me privately at firstname.lastname@example.org