Investing

My Opinion of Gadang after the AGM and EGM

I am surprised to see so many shareholders attended Gadang’s AGM and EGM on 3rd Nov 2016. In fact, I must say that the total number of attendees is the most I have ever seen in all the companies’ including IJM’s AGM, I have attended. Moreover, there were so many shareholders asking so many intelligent questions.

While the officials were counting the votes, Tan Sri Kok Onn and I renewed our 30 year old friendship and there were so many people including Kok Onn wanted to take photos with me. I was like a famous actor. I am sure some of them have put up their photos on face book. You can see the photo below.

As I said Kok Onn and I renewed our friendship and chatted. There were so many asking for my opinion of the company. Moreover, I see there were so many commentaries in i3investor; some said that they would cut loss, some said that they would sell and be contented with a smaller profit since the price crashed due to the reduced profit announcement for 1st quarter for the new financial year. Some said that they would hold on because the company said that the company’s profit for the coming financial years will be better.

You may like to know my opinion.

  1. I think the price correction is overdone. In my long experience, I have not seen any share crashed so severely in one day. It dropped more than 10% with more than 28 million shares traded. Obviously there were more sellers than buyers- panic selling.
  2. Most investors cannot control their emotion and think logically. If every investor can think logically, all shares will be fully valued and there will not be any undervalued stocks in the stock market for smart investors to buy.
  3. As I said many a time before, no share can continue to fall or rise indefinitely for whatever reason. I think the worst is over and I will buy back some shares.
  4. Since the company has given us the reassurance that the company will make more money in this financial year than last year, I will buy it because it complies with my share selection golden rule.
  5. Assuming the share price is Rm 3.00, the price will be about Rm 1.20 after the bonus issue and share split. There will be more shares in the market and the price is much cheaper. I believe the price will not continue to drop. The worst is over.
  6. Faint heart will not win you a fair lady. It means timidity will prevent you from achieving your objectivity. In the stock market you cannot succeed if you are faint hearted and afraid of your own shadow.
  7. Gadang has been making increasing profit in the last 5 years as shown in the latest annual report. During these 5 years, its quarterly profit might be bumpy because construction progress payments often vary. It is the inherent nature of the construction business. As you can see most of their contracts are completing, but I understand it expects large sum of money from its claim for reimbursement of additional cost which did not come in time before its 1st quarter profit announcement. That is why its 1st quarter profit was lower.
  8. I am very impressed by Gadang’s ability to secure a Singapore property company as joint venture partner to develop its land named Capital City at Iskandar Johor Bahru. Gadang bought the land about 20 years ago and it revalued it for the JV. It has no risk. The Singapore partner has injected this development into its listed company in Singapore and is responsible for the development cost and sales.
  9. I am also impressed by its ability to secure a joint venture of 121 acres of land namely Laman Land View, Cyberjaya.
  10. Kwasa Land Bhd must have faith to select Gadang as joint venture partner to develop 24 acres of its land in the choicest area near Kuala Lumpur. The JV period is for 20 years. Although the property market is soft currently, Gadang will only start building when there are buyers. Gadang can wait because it has no holding charges, it did not pay for the land. While waiting the land will continue to appreciates. Can you imagine the land price in 20 years? In the property development business, it is called using a silk string to tie up a cow which continues to produce milk.
  11. Readers must bear in mind that I have a lot of Gadang shares and I am not asking you to buy. If you decide to buy, you are doing at your own risk.

koon

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