Boss, U've a working crystal ball ar?
Heheh take a look.

http://turtleinvestor888.blogspot.com/2012...al-deja-vu.html
SUNDAY, AUGUST 5, 2012

iCapital. Deja Vu?
As of Aug 4, 2012, iCapital closed end fund was selling for RM 2.30 but NAV was RM 3.01, represents a discount of almost 24%. As of May 30, 2012, iCapital has net asset of RM 400 million and almost RM 133 millions are in cash. Investors may be sceptical that it can maintain its high elevated level.

The fund has never declare any dividend since it was launch in October 2005. In a few months time, the fund will be getting almost 7years. Using the market price around first week of October of every calender since it was listed we all can see that all the capital gain was in the first 2 years and return was practically non existent since 2008.

There are some interesting developments since last year with emergence of two foreign funds. One of them is City of London Investment Management Company LTD with initial interest of 5.26% in November 2011 and increased their holding to almost 6.2% as of July 31, 2012. The other fund is Lexey Partners Limited with initial interest of 5.92%. They started buying some time April 2012.

What Lexey Partners did reminded me of of a closed-end fund Amanah Millenia fund. That fund was forced to closed in 2007 after in existence of 10 years. Lexey Partners bought an initial interests of 5.05% with almost 29% discount to its NAV. After the initial interest, they kept buying until it reached 16.2% and forced it to close.

Amanah Millenia was way under-performing at that time in terms of NAV with 21.9% gains only over a period of 10 years while iCapital managed to improve its NAV over time of almost 3 times.

The question is will iCapital face a similar fate? Will this time be different with City of London Investment and Lexey Partners already accumulated combined interests of 12.7%.

Many of closed end funds in listed in NYSE actually paying dividend regularly. Many of closed end funds sweetened their investors with generous dividend to compensate for the discount to NAV.

Having foreign funds buying is a good news to current holders and certainly adding pressures to its fund manager. The mentality of foreign funds are very different from small holders will just wait patiently hoping something will happen. They will make things happen and it will be a big dent to TTB's pride if his fund get liquidated!

Matey

One has to be innovative nowadays to make money....this one is no rocket science..

Pay Rm322 mil using credit, you have the pot of Rm133 cash instantly!

Plus you can leverage on the shares......how good is that?

Crystal ball? How you know i am not doing this already?

Wah! The Prophet of London (City of London)!
Gambate!! Hehhe - i've already vested interest in it

So we are betting that Lexey Partners will 'make things happen'.

But what if things never happen in 10 years, and the NAV increases at 5% annually

Hehhe - i don't know about "we", i'm already holding since late Dec/early Jan

My exit criteria are either:
1. Trailing Stop Loss hit
2. Less than 6% CAGR if held for more than 1 year
3. hehhe, now new probability if City of London OR Lexey Partners does the buy out and delist general offer

Looks like you are doing well..... Dec/Jan prices were around 205.....

Not familiar with closed ended fund prospectus set.

Can a closed ended fund being liquidate?

Since share price is discount to NAV >20%.
Bought all the share in the market, having total control stake in the fund, then liquidate all the portfolio share at NAV, since can gain 20% out of it.

Thats was waht we were discussin...

140m shares at Rm2.45 say offer....Rm343m.....NAV is Rm2.8....so total NAV is Rm392m.

Thats an 'instant' 14% profit of which Rm133 is cash......something to ponder

Yes, I knew, but the question is possible or "do-able"?

We can talk long, day and night, but it this route is not viable or do-able (be it from regulation set, shareholders issue, from SC pov), all discussion just merely for "syiok ourself" only.

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Added on August 6, 2012, 11:41 amJust like A listed company NAV is Rm5.00 or net cash RM3.00 or whatever, while share price just Rm1.50, with no debt and profitable.

We can talk about take over the company at Rm2.00, then liquidate the asset, sound a good strategy, but if there is a single major shareholder controlling >50%, it is impossible the major shareholders will let go at cheap.

So for a closed ended fund, it is possible if >50% of the closed ended fund shareholder demand a resolution to liquidate the fund, and get the money nearly to its NAV?

This is one of several keys discussion or previously query that I raised.

This post has been edited by cherroy: Aug 6 2012, 11:41 AM

if the company needs to liquidate for some reason... wouldnt it normally take a haircut to the market price of its assets?

Not necessary.

It depends.

Buying/selling of asset/company is happening everyday.
It depended on negotiation skill and willingness of both parties.

For I-cap to delist and have capital repayment, first the 4 directors( TTB friendly) must propose it and then vote in EGM. The vote by shareholders require >51% passing before they can have capital repayment.

Also TTB will lose out ~RM 5 million/year in fees if the fund delist, so I think he will fight all the way if such proposal is even mentioned.

At best case it that I-cap will start to give out dividend (~3%) if pressured by shareholders.

This post has been edited by gark: Aug 6 2012, 02:41 PM

Thank you for the info.
This is what I want to know.

From the 2011 annual report, there is no single substantial shareholders hold more than 2%.
So can (or why not) shareholders give some pressure to give dividend?

After all, the fund surely got receive dividend from its portfolio investment, just give (or a portion) back to shareholders, win-win situation.
Some little passive income may be needed for old investors like me.

If give good dividend, no bad considering this fund considered that it is in discount, as compared ordinary UT needs to charge 5%, and need to buy at full NAV.

Recently there are already substantial shareholders... both the same entity and combined already command 12%... so these new shareholders will want to pressure for unlocking some value.. but depend on how TTB will resist. These substantial shareholders will first want to get a seat at the board, even if you hold many % but no board seat also no use as you can't propose resolution.

The more dividend given out, TTB will lose more income as he charges 1.5% of NAV as management fee. That is why he does not give out dividend, he is stuck as a closed end fund cannot receive new capital hence cannot grow it's AUM like most mutual funds, if want to earn more, TTB have to increase the NAV. By giving out dividend the NAV will shrink accordingly, hence pay cut for TTB.

This post has been edited by gark: Aug 6 2012, 06:30 PM

Even giving out dividend, it may be merely 3-4%. (3-4% is considered high dividend already).

And 1.5% of the 3-4%, just a small sum difference only. If a fund is 300 million, (3% of 300 million mean 9 million. 1.5% of 9 million is only 135k only)

But with the consistency of pay out of dividend (from the dividend received from the fund),
it may change drastically investors confidence and willingness to own the fund, hence may be better pricing for the closed ended fund.
I knew, market price doesn't affect the manager fee, as better market pricing or worst pricing, do not alter the NAV,
but confidence on the fund by investors is invaluable, and open up more opportunity to set up another closed end fund which can attract more investors,
eventually manager can earn more and better off with managing 2 funds or even more.

What's the point of telling an investor, that his/her fund value has increased in paper, yet did not receive any dividend, nor capital appreciation (as there is always discount of market price vs its NAV, current situation).

As minority has only 2 source to earn or make a profit
1. Dividend
2. Capital appreciation through market price.

So if 1) is not available
then only left 2).
If 2) is mis-pricing due to lack of willingness of buyer in the market.

Then what a minority investors can do?

This post has been edited by cherroy: Aug 6 2012, 10:14 PM

Fully agreed.
I wish can hear small investors shout out loud in the AGM.
Anyone here attended their AGM before? Did any investor shout out for dividend there? Please share share.
btw, I finally sold all my Icap today because the paper profit has been too little after holding it for so long. I think 99% able to buyback at lower price if no dividend declared in future. Its price has been on 22-27% discount on NAV in past 2 years, today it's about 23%, so i guess it's already at the high side. Can buy back when it hits 27% range. Besides, F&N and Padini has been surged to sky high now, so there is high possibility of its NAV dropping down in near future. Anynow, i still think TTB is a great investor. So Icap is still one of the most defensive stock to buy and keep long term (to keep at least 5 years and above). But for myself, I only want to keep for 5 years if it pays dividend yield of at least 3%.

This post has been edited by yok70: Aug 6 2012, 10:53 PM

Thanks gark for the wrteup!

That TTB is a cunning bloke....fees based on NAV means no pressure to improve shareholder value.
If its based on market value, then the onus is on him...

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Added on August 7, 2012, 8:27 amMethinks he is trying to create a mini Berkshire here. BH has never given dividends.
Its all in the share price.

This post has been edited by prophetjul: Aug 7 2012, 08:27 AM

Sorry not familiar with close end fund...
iCap can't issue new shares/units like REITs?

This post has been edited by river.sand: Aug 7 2012, 09:08 AM

TTB has previously declared himself warren buffett of Malaysia. He did proclaim that he wants the closed end fund to mimic berkshire hattaway's investment stratergy. So yes, that means he will not pay out dividend. But... BK is trading above book value.. while Icap is trading below... so is both fund same kah? Looks like investors does not have a lot of confidence on TTB.

Maybe why they dont have confidence is



One is using this to enlarge his wealth by fleecing in fees while the other is its just his hobby!