Saturday’s AGM will decide on whether to stick with Tan or allow entry of new directors

THE only closed-end fund listed on Bursa Malaysia, iCapital.biz Bhd has been thrust into the limelight because it has become the target of opportunistic investors. Come Saturday, shareholders will have to decide whether to allow three new board members into the company or to say no to that request and give in to the wishes of its existing management, led by the enigmatic Tan Teng Boo, sometimes described as the Warren Buffett of Malaysia.

Tan, who is the founder and managing director of the Capital Dynamics Asset Management Sdn Bhd, which is the investment advisor for iCapital.biz, is none too pleased with the developments that have hit iCapital.biz, namely the request by new substantial shareholders to have three new board members.

Tan has written a letter to his 3,000 shareholders that should anyone of the new directors (who stem from Laxey Partners Ltd's request) are nominated, Tan will resign.

It is understood that Laxey is seeking to get three of its representatives, namely Andrew Pegge, Lo Kok Kee and Low Nyap Heng, on board iCapital.biz. Pegge is the founder of Laxey.

“iCapital.biz is our baby. But if the boardroom changes, and the board cannot agree on one direction, then my reputation is at stake,” Tan said.

“My 18% growth which I have built up may be gone. Our NAV has gained 189% since listing or 18% per annum. At such a rate, in seven years time, it would be RM8.78. We give consistent long-term returns,” he added.

Since its listing in October 2005, iCapital.biz's NAV had risen from 99 sen to RM2.95 as at Oct 24. The gap between share price and NAV had been at approximately 30% until the last few days, when it is now some 15%.

But European fund Laxey Partners, which presently has a 6.89% stake or 9.6 million shares in iCapital.biz, has a different story to tell shareholders. It reckons that while the manager of iCapital.biz has done a good job delivering NAV growth, it is concerned with the substantial discount that the fund has been trading at. As at Oct 31, the market price of iCapital was RM2.30 versus its NAV of RM2.96.

Laxey is recommending, among others, share buybacks to close the discount between the shares and NAV. It argues that the company is more than able to do this, as its cash position stands at 99 sen per share or around RM140mil.

But Tan argued that the share price's discount to the NAV boiled down to three reasons.

“The global economy has been in turmoil. Look at how the indexes of the major economies such as Singapore, Hong Kong and Australia are currently performing. Secondly, Malaysia's political front has also been uncertain. Thirdly, our share price is trading at a discount to a rising NAV,” said Tan.

iCapital.biz says it exists for one simple reason: to allow long-term shareholders or more aptly called share owners, to benefit from value investing.

As for Laxey, little is known of its track record. But it had been reported in 2008 that the Swiss banking regulators had recommended legal action against Laxey Partners for breaching disclosure rules by using contracts for difference to build a big stake secretly in the country's biggest building services company, Implenia, where it had a 22% stake.

The matter was subsequently settled through the payment of a sum of money.

And last August, Laxey attempted to oust some members of the board of United International Securities (UIS) on the account of wanting to narrow the discount of UIS' share price to the NAV.

It failed in that bid and also failed to appoint Pegge as director of UIS.

Laxey presently also owns two funds of its own: Terra Catalyst Fund Performance and the Value Catalyst Fund.

The NAV and share price of both funds are lower than their IPO prices but insiders say this is because of the overall market sentiment.

Thus, the AGM this Saturday will be crucial in determining the future direction of iCapital.biz.

There are nominations to elect five new directors three from the Laxey faction and two from the iCapital. biz faction.

For the AGM, two of iCapital.biz's exising directors, Datuk Ng Peng Hong and Datuk Norraesah Mohamad, are up for reelection. Another two directors, Tunku Seri Ahmad and Tunku Abdul Aziz Tunku Ibrahim, are up for reappointment, as both are over 70 years of age. From iCapital.biz's existing board, they are looking to nominate Datuk Tan Ang Meng, who is the former CEO of Fraser & Neave Holdings Bhd, as well as Dr Yin Thing Phee as new directors to the board.

In a letter to shareholders, Laxey is urging shareholders of iCapital.biz to vote against the elections and appointments of all the existing directors, and to vote for their three key nominees Pegge, Lo and Low.

Shareholders will need to decide: do they stick with Tan who has consistently been giving them healthy returns or do they want the entry of new directors who may push for more aggressive action from the board to ensure that the stock does not lag its NAV.