Value or Value Trap in Worldwide Holdings? Part III

There was some interesting comments posted in my mumbling box.

I thought I shall post it here for all to have a clearer view... (ps.. this is merely for sharing and exchanging of views.. not an issue of who is right or who is wrong.. and it's best the reader be their own judge!)

• Worldwide landfill business is taking off and its power share gave it lots of cash through dividend payment but yet price is muted because it did not have much publicity done unlike electronics stock that got a shot in the arm due to comments from Thestar newspaper.In my opinion, Worldwide is safe counter and if one keeps it long term will receive more payment than putting money in bank FD.

If one keeps for long term it will receive more payment than putting money in bank FD.

Well that's what one wants in an investment, no doubt. However, for Worldwide, has it shown any past indication that the dividend yield is any better than FD?

With all the cash in the piggy bank now, wiill Worldwide be willing to pay more in dividends in the future? (would you consider this as an investment or would you consider it as a speculation?)

Take the best example, The Star did publish a rosy article on Worldwide but that was in Sept 18th 2004. ( click here for the article in full ). Worldwide closed that day at 2.04 after the nice publicity article from the Star. Buying the stock then at 2.04 would have seen the investor collect a total gross dividend of 15.6 sen since then. Closing price today is 1.89.

Which was better? FD or investing in Worldwide?

Now that was the past... future? Will Worldwide be better than the safer FD rates?

• Oppss... I mean waste treatment services and not landfill! Thousand apologies ...Okay for all you folks out there, this is the revenue/profit breakdown for 4th quarter.
• 1.Property and investment holdings, 1.532mil/907k
• 2.Property development, 74.712mil/6.025mil.
• 3.Waste treatment service, 24.168mil/11.045mil.
• 4.Others,profit 1.659mil.
• 5. Power,57.467mil profit.

Point is... power contributed 57.467 million and Worldwide's total earnings for fy 2005 was 50.708 million.

How? Did Worldwide other business contributed positively to Worldwide's bottom line?

• Total profit is 77.097million!!Not bad.Her sister companies all made colosal loses in property business but worldwide still brings in profit from that venture.Being a GLC its business is protected and with such huge cashpile and zero debt it may one day decide it do not need this stash away. So may give it out to shareholders. Then the price will move up rapidly. Mind you, from what I observed the management is very careful and conservative.
  

The point is Worldwide has a historical record of making poor business ventures!

Yes, it has a huge cash pile.. but let's not forget, if you read the star article again, the following statement is a good indicator..

• And the proposed sale of its loss-making theme park operation in Sydney, Australia, for RM56mil cash is expected to boost the company's cash reserves to almost 81 sen a share.

The cash reserves was boosted by 56 million because Worldwide sold it's venture in that Sydney theme park. The following was a comment from a long-lost friend...

• If you look back in history, you see that they sold a themepark in Australia. First you can scratch your head why the hell they want to invest in something like that. And secondly, the themepark was all the time losing money. ( click here for full details)

Can one gurantee that this won't happen again? Was there any hank-panky in that deal? What were the management thinking? And as mentioned by hhc regarding the cash per share..

• Great to boast that u in a business with lot of cash in hand. But to have the cake and eat it is totally impossible. The best thing is , u will never know when the cash will be depleted (pumped into funny oversea venture with no return, remember epic in canada).

So how safe is it to invest because of the cash pile?

And lastly.. does one reckon that 'the management is very careful and conservative'.?

How?

Comments and feedback will be welcomed...

Oops here is more.. LOL!!

• What interest me is its huge cashpile and the conservative management coupled with a safe and protected business.Remember what you preach us on Warren Buffett's investment strategy.

Safe and protected business? I guess you mean that WEB stressing in investing in business with a strong competitive advantage. So where is the advantage in Worldwide? Their earnings contribution from Genting Sanyen is via a 20% stake. A minority stake. How safe is this?

Conservative management? Their theme park venture was a poor indicator of their conservative management. Don't you agree?

~~~~~~~~~~~~~~~~~~~~~~~

• kingpin:well i bought it 1.78, and it pays 5.6s +another 10s this year 9total15.6s)...definitely better than FD. The power business contributes about 75% and landfill maybe 10%, so forget its property business...so long as it doesn't lose too much on it. Wldwide is definitely a buy at 1.88.

==>' so long as it doesn't lose too much on it' - good point isn't it?

~~~~~~~~~~~~~~~~

7.45pm March 16th

From Our Goal

• Our goal is to acquire either part or all of businesses that we believe we understand, that have good, sustainable underlying economics, and that are run by managers whom we like, admire and trust.

~~~~~~~~~~~~~~~~~~~~~~~~~

from hhc:

Since the topic is v hot, i would add some more comments on this worldwide.

From KLSE-RIS
Substantial Shareholders
Perbadanan Kemajuan Negeri Selangor 89,835,590 52.780%
Malaysia Nominees (Tempatan) Sdn Bhd - Kumpulan Perangsang Selangor Berhad 10,000,000 5.870%

Just by looking at its major shareholder, u oredi know how good they are in managing company in commercial sense.

2) Director ownership of the company.
From KLSE-ris again, we will see that its CEO
YBhg Dato' Haji Ibrahim Md Yusof, DSIS, SSA Group Managing Director 104,000 share Only,
The other director holds 0, kosong share.
Let me ask u, if the comp is so profitable, why the director wont put his money into it?
Even with ESOS going on, the director is still not holding any share in this comp.

3)GLC
When it's GLC, u better stay away. In msia, sometime, political consideration will overshadow commercial one. See Tenaga. And u have to know the gov mentality, even they are flushed with cash, why they need to share it with u? Who do u think u are? Can u raid the company? With 60% in the hand of Selangor gov, u r strcuk w them. Dancing w the wolf(es), i think.

If u like this kind of yield, cash and nta stuff, i suggest u look at other better candidate.

Lastly, i think warren also recommend that the management staff is professional and well motivated. What is a better motivation than owning part of the comp you manage and enjoy the long term return together? If the director dont trust their own skill in growing the company, i dont see reason why i should part w my hard earned money.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Moola: 9.32 pm March 16th

more from hhc:

found interesting article from malaysia today..

"Worldwide Holdings Berhad (WHB)

This is what The Edge reported on 7 June 2005 in its report entitled " Poser over Worldwide's partner " (note the parts in red italic):

On the face of it, Worldwide Holdings Bhd's success in securing two privatisation waste management deals from the Selangor government should have brought much cheer to its shareholders. Not only will the company be building a waste transfer station in Shah Alam and a waste landfill in Sepang, but it also has the concessions to operate these for 25 years. This means that Worldwide will get the construction profit as well as a steady revenue stream from operating the facilities.

What is even more interesting about the deal is the role of Worldwide's 30% partner in the waste transfer project. The company says the waste transfer project will be undertaken by its newly acquired 70% subsidiary Panorama Worldwide Sdn Bhd. Little-known Kekal Positif Development Sdn Bhd holds the remaining 30%.

With Worldwide and Kekal Positif having a stake in Panorama, one would expect both parties to finance the construction of the waste transfer station, where the amount of capital to be injected is determined by their share of ownership in Panorama. However, that is not the case.

When announcing the deals two weeks ago, Worldwide explicitly stated that "the cost of the (waste transfer station) project shall be solely financed by WHB (Worldwide)". {Is this the so called professional management?}

Market observers are puzzled. "As a shareholder in Panorama, why is Kekal Positif not putting up its portion of funding for the construction of the waste transfer station? Why is Worldwide fully financing the deal?" they ask.

Another pertinent question is: why were the privatisation awards not given directly to Worldwide, which is controlled by the (Selangor) state government? {not hanky panky?}

Worldwide did not reply to queries from The Edge.

Vital information that would interest shareholders was conspicuously missing in Worldwide's announcement. The company did not explain why it was solely financing the waste transfer station project nor indicate the cost. There was no information on the business nature of Kekal Positif, and more importantly, who controls the company.

"If it does not have to provide the capital, what exactly is the role of Kekal Positif and its input in the project?" asks a market observer.

Waste transfer stations are facilities where municipal solid waste is unloaded from collection vehicles and briefly held while it is reloaded onto larger long-distance transport vehicles for shipment to landfills or other treatment or disposal facilities.

Meanwhile, the inert waste landfill project will be undertaken by another newly acquired company, WL Environment Sdn Bhd, which is wholly owned by Worldwide Landfills Sdn Bhd -- a 60% subsidiary of Worldwide. The landfill project is being financed solely by Worldwide Landfills, which is expected because it owns all of WL Environment.

That Worldwide was able to secure the two privatisation deals from Selangor is not surprising because the state government controls Worldwide via the Selangor State Development Corporation (PKNS), which holds 89.83 million shares or a 52.55% stake. The second largest shareholder, with a 5.85% stake, is another Selangor government-controlled listed company, Kumpulan Perangsang Selangor Bhd. The Employees Provident Fund holds 3.62%.

The privatisation deals were initially awarded to Panorama Worldwide and WL Environment, after which they were acquired by Worldwide. "The intermediary parties will increase the cost of the transfer station and landfill projects," say market observers. {money is passed to the orang tengah}

According to filings to the Companies Commission of Malaysia, Kekal Positif is controlled by 37-year-old Wan Aminuddin Wan Daud, who holds 10,000 of the company's 25,000 shares of RM1 each. He is neither a board member nor part of the senior management team in Worldwide.

Adnan Che Mud and Setu Ahmad each hold 6,250 shares in Kekal Positif. Mohd Noor Jaafar holds 2,498 shares while Haslina Mohammed Fesal Arbee and Suzlita Nasron hold a share each. None of them sits on Kekal Positif's board. The five directors -- Noor Suhaila Saad, Mohd Rizal Ramli, Mohammad Rizal Abidin, Khairul Anuar Shaharudin and Mohamad Nizam Yaacob -- are all in their early 30s.

Kekal Positif, which states its nature of business as "housing developers and general traders", was registered in April 2001.

Corporate Information on Worldwide Holdings Berhad (WHB)

WHB was registered on 29 December 1965 and its present paid up capital is RM170,159,405. Its latest accounts filed with the Companies Commission of Malaysia shows it has fixed assets of RM202,579,562, current assets of RM193,919,775 and investments of RM295,769,245. Its total assets is RM665,818,555 against liabilities of only RM30,460,563.

That can be considered a healthy balance sheet. WHB's accumulated profit is RM377,879,794.

The Directors of the company are mostly politicians, all nominees of the state government while its major shareholder is PKNS (89,835,590 shares), EPF (6,184,600), and many bank-owned and investment nominee and trustee institutions, ECM Libra being one of them that holds 1,111,000 shares.

Well, that is the story of Worldwide Holdings Berhad, the flagship of PKNS, indah khabar dari rupa (the news in prettier than the picture). And that is the good news, mind you. In part 3 we shall look at the bad news. And yes, there are plenty, so stay tuned."

http://malaysia-today.net/reports/2006/02/part-2-pkns-indah-khabar-dari-rupa.htm

Moola: 10.03 pm March 16th

saw this article: Worldwide Pt 2 – assured earnings, undervalued assets

• Valuation & financials
  
  Worldwide has stayed consistently profitable and its balance sheet is strong, helped by a series of asset disposals, which include a hotel and office building in 1999 for RM101.3 million and most recently, Kuala Lumpur’s Holiday Inn on the Park hotel for RM55 million in 1Q2003.
  
  As at March 2003, Worldwide has net cash totaling RM15.5 million. For the first three months of this year, pre-tax profit rose to RM35.7 million from RM15.8 million, mainly from an exceptional one-off gain of RM18.7 million from the Holiday Inn disposal and higher waste management earnings. Net profit was RM29.9 million, or 17.9 sen per share, in the first quarter.
  
  We estimate Worldwide’s full year EPS, excluding exceptional items, to be around 29 sen per share. At the current share price of RM1.95, that translates into an equivalent P/E of just 6.7 times – less than half the market’s average and Malakoff’s 8-9 times. Including exceptional gains, full-year EPS is likely to come in at around 40 sen.
  
  Pay for power, rest comes free
  
  Apart from low P/E valuations, Worldwide is also trading at a significant 46 percent discount to their NTA of RM3.64 per share. Its NTA itself is understated due to the increase in value of the company’s two main assets, Genting Sanyen and the Subang Bestari.
  
  The Genting Sanyen stake is carried in Worldwide’s balance sheet at RM271 million. Malakoff’s 1,715MW capacity is currently valued by the stock market at RM2.25 million per MW. Applying this to Genting Sanyen’s 740 MW capacity, Worldwide’s 20 per cent stake should be worth RM330 million. This represents a surplus of RM59 million or 35 sen per Worldwide share.
  
  Ironically, Worldwide’s entire market capitalization stands at just RM325 million – equivalent to the value of Genting Sanyen. So, investors are effectively just paying for the IPP – with no value ascribed to Worldwide’s properties and others assets.
  
  Land at Subang Bestari is carried in Worldwide’s books at just RM2.40 psf, but is worth much more. For example further down the same Batu Tiga-Sungei Buloh road, Amcorp’s leasehold Kayangan Heights is selling bungalow lots for RM30-40 psf. Leasehold land in upmarket privatized developments in Kota Damansara are going for RM75-90 psf.
  
  Assuming a revaluation to just RM10 psf, Worldwide’s remaining 280 acres would be worth RM122 million, instead of a book cost of RM29.2 million. The surplus of RM92.8 million is equivalent to 55.6 sen per share. These two factors alone could add a potential surplus of 90.7 sen to Worldwide’s NTA, raising it by 25 per cent to RM4.54 per share.
  

hmmm... that article was posted 27th June 2003.

Kinda dejavu...back in 2003, price of Worldwide 1.95, low PE (6.7x!), discount to NTA...

now March 2006... err... same old, same old... !!