Felicity Investing

Author: Felicity75   |   Latest post: Fri, 9 Oct 2020, 4:27 AM


This stock equity portfolio outperformed the market for 10 years but share price selling way below its NTA!

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JcbNext Equity Portfolio Performance

10-year CAGR 11.4% vs 5% for KLCI




Mark Chang, The Warren Buffet of Malaysia



Dear shareholders,

For 2016, we saw the exit of some of our larger shareholders. After holding on for a couple of years since the sale of the JobStreet.com operation, SEEK was keen to sell their shares and some other substantial shareholders through the years thought it was a good time to exit as well. Albert (Wong Siew Hui) and I decided to buy their block of shares which triggered a Mandatory Take-Over Offer to the rest of the shareholders. As the result of this exercise, management (including myself) now emerges as the majority shareholder of JcbNext. Hopefully, shareholders will now have extra comfort knowing that, being the majority shareholder, the management's interest will be more aligned with the rest of the shareholders. With this corporate exercise, it also allows management to focus on longer-term and not short-term results.

The aspiration of JcbNext moving forward is to be a listed company that can continuously distribute dividends to shareholders every year and for many years to come. For that, our investment focus is on companies that are able to generate good free cash flow and willing to distribute those free cash as dividends back to shareholders. We are also mindful and conservative with our finances - we don't have much debt and prefer not to have any debt at all. Debt always increases the risk to our Company and has a higher chance to interrupt our future dividend payout. As management of this Company, our ultimate performance goal is the dividend payout to our shareholders. Revenue, profit, book value, share prices and others are secondary objectives.



As for the type of companies we are looking at, we look for both listed and unlisted companies and we don't mind buying a minority interest or 100% of companies.


The criteria we look for will be:- 


1) Good business. We define good businesses as businesses that have good loyal customers, do not require a lot of capital reinvestment, a healthy profit margin, relatively stable business in operations for a number of years, and not in an overly competitive industry. Good businesses will generate good free cash flow that can be returned to shareholders as dividends. 


2) Shareholder-friendly management. Good management is a given criteria for any good company. Equally important is having a shareholder-friendly management so that when there is extra profit, those profit will be managed to the best interest of all the shareholders. Those extra profit can be reinvested in the company for future growth or returned to the shareholders as dividends. Non- shareholder-friendly management will use those extra cash for the benefit of their personal interest first. So the company could be a good business but as a shareholder, we receive only a small portion of our rightful share of the gain or potentially none at all. 


3) Right price. Even for a good business with a shareholder-friendly management, our investment will still be bad if acquired at a high price. It is important that we are conservative in our valuation of businesses so that we have a good margin of safety in our investments. As our main goal is investment for future dividend, we can compare the potential dividend return from an investment opportunity presented to us, versus returns from alternatives like S&P 500 ETF, KLSE Index ETF or money market fund. We could be busy evaluating all the various business ventures everyday but if the price is not right, we will not do any investment and we don't mind waiting for years to find the right company at the right price. This is an advantage JcbNext has as compared to other companies such as fund management companies where they have pressure to invest all year round even when the market is near its peak.



Share price has diverge from that underlying value of its assets significantly 
Share buyback as management believes JcbNext shares are undervalued at a substantial discount to book value 




Paying 50 Sen for RM1 Bill 

Cash-rich JCBNext trades at  mindblowing 50% discount to its net asset value! Market price RM1.45 and there is RM 2.93 of net assets where majority are in cash and investments in liquid assets. Put another way, you are paying only for its investment in associates 104 Corp ( Jobstreet of Taiwan) and Innity Berhad (refer Appendix). You get the rest for free - cash and cash equivalent, liquid assets and investment property worth RM 1.50 per share. What a bargain.


Cash and Cash equivalents: RM 95 million 

+ Investment in associates and other long term investments (fair value): RM 280 million

+ Investment properties: RM 19 million 

+ Other assets: RM 2 million

- Total liabilities: RM 2 million 

= Net assets: RM 404 million 

/ Shares outstanding: 135 million

Net assets per share: RM 2.93



Insider buying and share buybacks

 Independent Director and former major shareholder of Jobstreet.com Lim Chao Li has been accumulating shares lately. JCBNext also buying back shares aggressively.  JCBNext has good track record in share buybacks and cancellations which really create value for shareholders. The management had indicated share buybacks as a way to return value to shareholders. Jcbnext had cancelled more than 2 million shares and expect more cancellation as it aggressively buying back shares. 



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Related Stocks

Chart Stock Name Last Change Volume 
JCBNEXT 1.40 +0.04 (2.94%) 72,100 

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