Dr Yu: ‘I’m a long-term investor in HLCap’

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Dr Yu: ‘I’m a long-term investor in HLCap’

Post by Cals on Mon 25 Aug 2014, 04:51

Published: Saturday August 23, 2014 MYT 12:00:00 AM 
Updated: Saturday August 23, 2014 MYT 10:29:23 AM

[size=40]Dr Yu: ‘I’m a long-term investor in HLCap’[/size]

THE market moves by veteran investor Datuk Dr Yu Kuan Chon always attract attention. After all, he has so far managed to outwit tycoon Tan Sri Quek Leng Chan via his strategic holding in Hong Leong Capital Bhd (HLCap) to block it from being taken private.
While a new test awaits Yu at HLCap – the stock faces yet another threat of a delisting from the stock exchange regulator – he has been busy buying into precision tools specialist Rapid Synergy Bhd, a company in which he has been the single largest shareholder.
Yu’s flagship is YNH Property Bhd, a Perak-based property developer.
Market talk has also surfaced that Yu has been nibbling shares of Malayan United Industries Bhd (MUI), clearly indicating that this low-profile investor is active in the market. While this talk cannot be confirmed, it is noteworthy that MUI shares have been steadily trending up since early-July.

So far, Yu, who surfaced in HLCap early last year, has had the upper hand in the company.
Without his buy-in, Quek’s Hong Leong Financial Group Bhd (HLFG) wouldn’t be able to take the company private.
Yu has cleverly traded HLCap shares in such a way that it hasn’t suffered a prolonged breach of the minimum 10% free-float threshold required for active trading, which could have led to an automatic suspension of the shares by the exchange.
But listing rules also dictate that listed companies have to maintain a minimum 25% public shareholding spread requirement.

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It is this rule that could checkmate Yu in the HLCap saga, given the looming Aug 31 “extended deadline” to meet this requirement. With a week to go, is time running out for Yu?
Interestingly though, Yu isn’t perturbed by this prospect.
Yu, a 53-year-old medical doctor-turned-entrepreneur, is prepared to stay invested in HLCap for the long haul, no matter what.
“The suspension (of the stock) is the prerogative of Bursa Malaysia. What matters to me is that the company is doing well and is well-managed. I’m a long-term investor in HLCap and will continue to buy the shares if the company is well-managed,” he tellsStarBizWeek via email.
Yu says another reason why he is investing long-term in HLCap is that based on the last five-year profit record, the company has achieved a 740% increase in its profit.
Some industry observers reckon that Yu, with his deep pockets, may want to hold on to his HLCap shares even if the company gets delisted, considering that Quek’s ultimate plan is said to be a consolidation of his banking and financial businesses involving HLCap, HLFG and Hong Leong Bank Bhd.
Yu could then end up owning some shares in the merged entity, a seemingly lucrative opportunity.

Savvy investor
Yu’s shareholdings in HLCap, YNH Property and Rapid Synergy is worth some RM514.87mil.
Interestingly though, Yu has been “taking profit” in HLCap ahead of the Aug 31 deadline, paring down his interest in the company to 7.22 % as at Aug 20. Bursa filings showed that a total of 2.57 million shares were disposed by Yu between Aug 15 and 19, representing 1.04% of his shareholding in HLCap. The price these shares were transacted at was not stated, but stock market data showed that six blocks of HLCap shares were traded off-market for prices between RM12 and RM12.80 apiece on the same days that Yu had sold his shares.
Taking an average of RM12.45 a share, Yu would have made gross proceeds of some RM30mil by selling that 1.04%.
On Thursday, stock market data showed another 1.935 million shares were traded off-market at RM12.50 apiece. But as at press time, it was not known whether these were sold by Yu.
Before this transaction, Yu had last sold HLCap shares on June 16 to help keep the stock’s public shareholding spread above 10%.
He had also periodically sold about 1.8 million shares between March 4 and June 16 this year to keep the public spread above the 10% threshold.
Based on the company’s record of depositors as at June 30, 2014, HLCap’s public shareholding spread was 10.41%.
Yu had emerged as a substantial shareholder in HLCap after Quek, via HLFG, launched an offer to take the former private at RM1.71 per share in January last year. From then on, Yu continued buying HLCap shares, and at its peak, had 22.19 million HLCap shares or close to a 9% interest in the company. Had Yu sold all his stake to Quek at the offer price of RM1.71, he would have only realised about RM37mil. Taking Friday’s last-traded price of RM12.74 a share for illustration purposes, Yu’s paper worth for the remaining 7.22% he holds stands at RM227.09mil
As of now, HLCap has only a week to comply with the 25% public shareholding spread, failing which the exchange “may exercise its discretion to impose trading suspension of HLCap shares”. If Bursa chooses to suspend the stock, then a notice of five market days would be given.
Up till now, HLCap has not identified a satisfactory plan to address the non-compliance with the 25% public shareholding spread requirement.
Even if Yu did sell his remaining stake, it would not be enough to comply with the requirement, unless, of course, HLFG, which controls 81.33% of HLCap, sells a substantial stake. But this is an unlikely scenario, reckon industry observers.
Worth noting is that this is HLCap’s third six-month extension to comply with the 25% rule. The company has until the end of next week to propose a plan to the exchange or apply for another extension, say analysts.
But in assessing whether a counter should remain listed, the exchange also considers other factors like trading and liquidity of the shares. “On this score, HLCap shares have been largely thinly-traded, which raises the issue of whether there is any sense in keeping it listed,” asks an analyst.
HLCap’s share price has risen several-fold since its failed privatisation to hit a high of RM14.60 on June 17 and easing then on to close at RM12.74 on Friday. It is because of this that Bursa has advised investors to trade (this stock) with caution
Analysts say Yu and other minorities have gone into HLCap fully aware that Quek has no intention of keeping HLCap listed. “They have had ample time to cash out if they had wanted to,” says one analyst.
So far, however, Bursa has not suspended and delisted any stock for failing to comply with the 25% public shareholding spread. If HLCap is, then it would be a first for the exchange. Yu will still go down in corporate history for denying Quek the chance to buy up the rest of the shares he does not own in HLCap.

“It cannot be said too often that in speculation and investment, success comes only to those who work for it”

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