Quek sees opportunities in turmoil

KUALA LUMPUR: With the uncertain global economy, market conditions are likely to stay unsettled in the near term. But Malaysian billionaire Tan Sri Quek Leng Chan believes the recent market jitters have opened up attractive long-term investment opportunities.

The man behind conglomerate Hong Leong Group Malaysia is of the view that equity valuations are not demanding now and companies are in much better financial shape than before.

“We take market corrections as buying opportunities for the accumulation of quality counters. We hold a positive outlook for the Asian economies and build significant positions in strategic long-term investments,” he said in Guoco Group Ltd’s financial statement for the year ended June 30.

Hong Kong-based Guoco Group, cash-rich after selling its interests in Dao Heng Bank in 2001, is the holding company for most of Quek’s investments, including Hong Leong Financial Group Malaysia, Guoco-Land Ltd (property developments in Singapore, Malaysia and China) and GuocoLeisure Ltd, which runs hotels and casinos in the UK.

Contrary to Quek’s take on the market, consensus increasingly points to the prospect of another recession. In the US, jobs data showed zero growth in August while World Bank president Robert Zoellick warned last Saturday the world economy is stepping into a “new danger zone” as growth slows and investor confidence weakens.

But the gloomy outlook hasn’t stopped Quek from investment hunting, and his stance on China is bullish despite the negative views of most market watchers.
The tycoon, who derives most of his fortune from Hong Kong-listed Guoco Group, has an estimated net worth of US$4.8 billion (RM14.3 billion) and is ranked 219 on the Forbes list of the world’s billionaires published in March.

“We remain positive on the Asian economies and believe that China will not face a hard landing. As a result, we gradually increased our allocation to markets during the year and selectively raised our exposures in some developed markets focusing on under-valued and recovery situations,” he said.

It is worth noting that Quek recently emerged as one of the top shareholders in American Airlines Inc’s parent company AMR Corp.

According to the US Securities and Exchange Commission (SEC), Quek and a group of affiliated entities, acquired 24.4 million out of 335.2 million AMR Corp common shares in August. This gives Quek control of a 7.3% stake in AMR Corp,the fourth largest stake of investors in the company, according to Bloomberg data.

The other major shareholders of AMR Corp are PrimeCap Management Co with 41.5 million shares or 12.4% equity interest as at June 30, Capitol World Investors with 25.4 million shares or 7.6% and ICC Capital Management with 21.25 million shares or a 6.34% stake.

Shares in AMR Corp rose slightly to US$3.62 on Aug 31 from US$3.54 on Aug 18 when news of Quek’s foray into the company broke. But the counter has since dropped and closed at US$3.42 last Friday, near its 28-month low.

Quek is known in the financial community as a savvy and shrewd investor. His Guoco Group performed relatively well for FY11 ended June 30, posting a 47% increase in net profit to HK$4.16 billion (RM1.58 billion) from HK$2.83 billion a year earlier.

Although Guoco Group’s core activity, equity and direct investments and Treasury operations, saw a slight drop in pre-tax profit to HK$1.63 billion from HK$1.75 billion a year ago, the division is still the single largest generator of group’s total pre-tax profit of HK$4.94 billion.

And as the global financial market suffered setbacks over the past year, total assets under Guoco Group’s principal investment division grew 29% to HK$34.97 billion in FY11, from HK$26.95 billion a year earlier. This indicates that Quek has increased his bets on the market.

Guoco Group could have exited part of its investment well before the market correction took place. Note that its proceeds from sale of investments in securities for FY11 more than doubled to HK$29.87 billion from HK$11.67 billion a year earlier.

This shows that investment turnover has doubled during the year, but with most of the proceeds ploughed back into the market resulting in the net 29% increase in total assets under the principal investment division.

With Quek’s strong business and investing acumen, it will be interesting to see how the acute billionaire will steer his investments through the current macro headwinds.