Investing

How to improve the price and liquidity of Latitude Tree Bhd

Letter to the CEO of Latitude Tree Bhd.

Dear Joseph Lin,

Your shareholders register will show that my wife Tan Kit Pheng, my nephew Yap Sung Pang and I are holding more than 10% of your total issued shares.

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We must congratulate your management for producing such a fantastic profit. As a result, your share price has gone up very rapidly from Rm 1.00 to above Rm 6.00 in the last 24 months. You would have noticed that it has come down in the last few trading days because we have not been supporting it. Even though it is selling so cheaply in terms of P/E ratio, many investors and fund managers I spoke to, would not buy it because they are afraid that they cannot sell at some point due to poor liquidity.

I would like your board of directors to consider my suggestion on how to improve the share price and its liquidity.

  1. Immediately give out 1 bonus share for every 4 shares held.
  2. Split one shares into 5 shares making 20 sen its par value.
  3. Declare to give out 1 bonus share for every 4 shares held for the next financial year.
  4. Declare a dividend policy of giving out 30% of net annual profit.

After the completion of item 1 and 2 above, 4 original shares with one bonus share will become 25 shares. Basing on the current share price of about Rm, 6.00, the new price will be about 96 sen. It is easier for 96 sen to move up to Rm 1. 92 sen than for Rm 6.00 to move up to Rm 12.00.

Basing on your first half year profit of 45 sen per share and 100% of your products are being exported for US$, every investor can foresee your EPS for the year will most likely exceeds Rm 1.00. Moreover, you have additional income from your huge cash deposit with Banks. Your share should deserve to sell at a higher P/E ratio.

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A higher share price will benefit all the shareholders, including you, as controlling shareholder. Moreover, with a higher share price, the company can take advantage of it for acquisition of assets and share placement every year according to Securities Commission rules to get large amount of cash for company expansion.

As one of the founders of IJM Corporation Bhd, I know that the company has been doing what I have described above regarding share placement and assets acquisitions to expand the company. Basing on the current IJM Corporate Bhd share price, its market capitalization exceeds Rm 13 billion.

Koon Yew Yin

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