From my understanding, UBB Amanah is a lender to most of the MOF approved factoring companies.

The majority of these factoring companies only support invoices that are guaranteed by either the government, or by large listed corporations like TM, meaning that the risk of a NPL is minimal (albeit, there is still a risk).

Many (I dont know a %) of companies awarded government cleaning and security contracts rely on factoring for cashflow, and there are literally thousands of these contracts.

The factoring companies can return between 18-36% p.a, so would likely borrow from UBB at between 12-14% p.a.

Planworth and Ikhitar generally charge a 2% upfront fee for lending, plus around 1% per month until the invoice has been settled.
They lend between 80-90% of invoice value. The invoice is "sold" by the contractor to the factoring company, meaning that the government pays directly to the factoring company.
They take out what they are owed, and remit the balance to the contractor.

Contractors use these factoring companies due to their fast approval times to enable them to pay immediate obligations such as payroll and minimal collateral requirements.

Contractors have very few options, as these factoring companies can provide capital within 4 working days where as commercial banks may take 1-6 months for approval as well as requiring heavy collateral.

The products offered by commercial banks are far less suited to these objectives when compared to those companies that focus solely on providing cashflow to companies with government related contracts.

I do not know much about Kenaga Factoring, but do note that they make an effort to avoid mentioning rates on their website.

Hence, I don't see UBB being a scam, but rather they have found a niche in a particular market that can absorb a lot of capital.
I don't know who else is filling this void?

That said, an investment in UBB is not risk free.

There are potential collection issues is a contractor is bankrupted or wound up or any other situation where their accounts are frozen.

Contractors can be terminated or heavily penalized by the government for poor performance. It would be possible for a factoring company to lend more to a contractor than what they are paid (say a contractor invoices for RM100,000. Factoring company will lend 85% or RM85,000. Government imposes a poor performance penalty of 30%. Factoring company gets paid RM70,000 but has already lent RM85,000). Though this can be mitigated by having a minimum duration of factored invoices (say if it for a cleaning contract that has a monthly invoice, the factotring company can have a minimum of 12 invoice factored concurrently.

There is a potential for the government to tighten up their procurement process and only award contracts to companies with substantial cash reserves, essentially eliminating the need for factoring, and trapping UBB with excess funds that they are unable to loan.

Do your home work and know your risks.

Both and also an investor with UBB a couple of years back.

Based upon my analysis, I like what they do, but have never gone in as heavily as I would normally do so as there contracts are very peculiarly worded and their investments completely lack transparency.

The line above basically states that upon the agreed duration of the deed, they will distribute the capital as per their T&C.

Possible to post a full copy of that?

No need. Let me find a copy of their documentation and get back to you.

Being around since 1988 and their past performance helps create trust.

Delivering what people expect is in their best interest, but I've run through a copy of their latest "Trust Proposal Form".

These are the clauses that stand out to me:

1.1 I/We hereby grant the mandate for the Trustee to manage and administer the Trust Capital as instructed by me/us from time to time and/or as provided in Clause 2.1 of this Instrument of which the Trustee shall have all the powers over and in respect of the Trust Capital and the Trustee could exercise as if the Trustee is the owner of the Trust Capital to invest, in part or in whole, in one or more Authorised Investment, provided always, the Authorised Investment is safeguarded with asset of equal value and accumulatively, the Authorised Investments are projected to provide returns of an average between seven percent (7%) to nine percent (9%) per annum of the Trust Capital.

COMMENT:
"Safeguarded with an asset of equal value". The assets in which they invest must be MYR cash based and not exposed to fluctuation.


3.2 At the expiry of the Tenure of Trust, this Instrument shall be determined and Trustee shall release the Trust Capital
and/or any accumulated income derived from the Trust Capital minus all liabilities to me/us.

Notwithstanding anything herein, the Trust Capital may be subjected to costs and expenses, directly and indirectly, incurred in connection to the establishment, management, operation and execution of the Trust including but not limited to any payment of any and all tax liabilities and Trustee Remunerations (as defined hereinafter in Clause 6 of this Instrument), charges or assessments whatsoever, any stamp duties, statutory tax or any other Governmental taxes or changes payable by the Trustee for which the Trustee may be liable in respect of such distributions.

COMMENTS:
Liabilities is a strong word.
These two Clauses mean that your initial capital is not guaranteed to be returned in full.

All else is quite straightforward and standard.

"This Instrument shall be determined and Trustee shall release the Trust Capital and/or any accumulated income derived from the Trust Capital minus all liabilities to me/us."

"The Trust Capital may be subjected to costs and expenses".

Basically they can charge whatever expenses they need fair and deduct this from your initial capital before they return it to you.

Like most financial related institutions they use some very ambiguous wording that enables them to save their own ass if their business model fails or falters, and pass these losses to the investor.

That said, so far UBB's track record since 1988 is solid. If they were to ever fail their investors, investors would pull their capital.
But of course the same observation could be made about Bernie Madoff...

Has any investor had a negative experience with UBB so far?

Ive had the same experiences, being a yearly payout without fail.
My cycle is about to expire, and I will likely reinvest.

Just wanted to see if these defamation have had any impact on UBB investors as they do have exposure to a a run on cash withdrawls.