Investment Newsletter – March 2024
A rare rally in both US tech stocks and commoditie...
We integrate strategic resources, provide solutions and create comprehensive values for all.
Crisis Investing 1.0
Dear Family, Friends and Partners,
1. During 2021, in the midst of the pandemic lockdowns, we came across a retail company called Perdanis Distribution which was badly affected by the lockdown. This company has barely started with the new retail business of selling garments with a new brand and was in the midst of renovation and opening stores. Talk about bad timing.
2. However, despite the pessimism on the retail industry and economy, we proceeded with the due diligence on the company because we like the management team. They are experienced and have a good track record. Still, it took us 6 months to deep dive into this investment opportunity before we are convinced of the potential.
3. We offered to take up 50% of the company at a cost of RM5m, giving a valuation of RM10m to the company. We deemed the entry price as very attractive with no premium given. This is crisis investing at its best. Our bid was accepted because the management knew we can add value.
4. As Omni Capital Partners has just started on July 2020 after the first lockdown, we were in the midst of fund raising and the environment was extremely challenging. No one is feeling confident. At the end, we missed the opportunity as we failed to raise the funds to take up the 50% stake. We were so disappointed as the audience is simply not interested in any retail story.
5. However, we were not deterred. Instead of waiting for the durians to fall, we initiated on our merger and acquisition strategy and we found our target company Redina with a stroke of luck. Due to the severe downturn of the retail industry and with no successor, the owner was willing to sell it cheap and quick. Battered by the pandemic, the company was suffering successive falls in revenue and earnings losses too. However, we have strong faith in the recovery once the pandemic is over. We bargained hard and bought the company at a 45% discount to net equity. What a steal!
6. With the deal clinched, we tried another fund raising in 2022 (Please refer to our article “Rising of the Phoenix” written on 7th March 2022). This time, the valuation has moved up to 30m with the acquisition. Again, we offered 15m for the 50% stake. We thought it was another fantastic opportunity with stronger foundation. However, we failed for the second time and were extremely disappointed because most professional investors could not see the value we pitched very hard.
7. Eventually, we closed the acquisition with borrowed mezzanine financing. With the end of the lockdowns and businesses reopened at the end of 2022, strong recovery happened as anticipated. Revenue surged from 32m to 49m with losses of 3m turning into profits of 5m. Astounding? Not really. We expected that.
8. On December 2023, a public listed company announced buying 51% of Redina for a valuation of RM70m which we believe is a fair valuation. If we had invested 5m for the 50% stake in 2021, our stake will be valued at 35m today. Within 2 years, we would have made 30m or 600% on this investment.
9. We felt vindicated but heartache. This is what crisis investing is all about. You profit from disruptions. You buy cheap and sell it when good times are back. We understand it but most don’t because they tend to be overwhelmed with fears. Value creation is hard but very rewarding. We guess we will work harder on the next opportunity.
10. If we approach you on the next investment opportunity, please hear us out. You might regret again if you don’t even give us a chance. We know what we are doing. And we are good at doing it.
∞
Different approach, perspective and ideas
Global Investing with focus on China, ASEAN, and United States
Thematic Investing with focus on Disruptive Technology
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We have dedicated and professional teams and partners spanning across Asia
Our technical skills and expertise draw on decades of experience to ensure successfull execution
We have great performance track record with accolades
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Derrick has working experiences at one of the big four professional firms as an advisor. He is specializing in researching and investment. Derrick was engaged in a divestment project and act as an sell-side advisor for a sovereign wealth fund of the Government of Malaysia in dealing with due diligence and stakeholders management. Besides, he has experiences working at private equity firms based in both China and Malaysia.
Norashikin has more than 27 years experience in asset management, banking and finance. An experienced finance practitioner, she has managed more than USD10 billion in assets and liabilities as Treasurer. She was named as one of the most influential women in Islamic Business and Finance by Woman-i report in 2020.
Has 30 years of experience in finance field that involves corporate restructuring, strategic finance operation, group treasury and tax management.
Involved in various policies and law-reform initiatives relating to the rules governing the Listing of Securities on the Stock Exchange of Hong Kong Limited and other corporate finance rules and regulations.
Chief Technology Officers for several companies of various industries, actively giving consultation to SMEs, providing training and mentoring besides giving lectures in few universities.
15 years solving management system which include improving efficiency of work through process mapping, reengineering and creating unique operation strategies
Serial Entrepreneur, Speaker, Mentor and a recognized expert in Application Risk Analysis, Defense Surveillance Architect, Smart Solution Design who believes in LEAN Operations.
An accomplished business executive with over 18 years of experience in corporate finance, strategic planning, business development and investment management.
Financial Supervisor of investment, commercial and Islamic banking covering portfolios including Corporate and Commercial Banking, SME, Asset/Fund Management, Corporate Finance and Trade Finance
Strategic communications and crisis management specialist, with more than 25 years in the media and communications industries.
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