Transcipt of interview with analysts.
Disclaimer: contain forward looking statement
Q: Why is that u have such a high concentraded bet, I mean investment on silverlake axis? Given that u always proclaim to take a conservative stance when investing?
S: yes, we are still accumulating. To put it most simply, we expect core earnings to grow in double digit over the next few quarters. We find it difficult to find a company with a good yield and also growth prospects.
Q: why the confidence in growth?
S: Silverlake has been winning several contracts over the last 12 months. The most recent one being the biggest core SIBS platform with a whole suite of services. It is not a upgrade but a new customer. The earlier contract wins should begin to show its contribution in the upcoming quarter. In fact, the last quarter already show a improvement in core earnings but price continue to went south instead.
The acquistions of GOH private entities would then lift Q4 earnings and its insuretech segment is also making headways. In short, I believe it will fire in all cylinders soon and market will rerate it.
Q: whatever u are saying, the market knows, its all old news. Why the underperformance of the counter then?
S: well, there could be unknowns unknowns. But let me haphazard a guess. The acquisition of Goh private entites couLD lead to dilution of shares rather massively. It is not exactly a straight forward deal, and with razor short selling report still in people mind, people just avoid the company with a 10 foot pole.
Q: why wouldn't u then?
S: Let me try to explain. Silver lake give generous dividends, because of the profits from.sale of GIT. Is GOH shareholder friendly or at least fair, I think he is, and why not since he owned 65% of silver lake, he would want to also take his fair share of gain. Even discounting the special dividends, we believe 6% dividend is possible and sustainable.
Of course, corporate governance is important. But look at the recent deal, he didn't took cash out of the company. He took more shares of silverlake axis.
The company didn't even dilute the existing shareholders holdings by issuing new shares. Instead it transfer treasury shares to Goh. You might want to say that company cash in doing shares buyback is also money, but what Goh effectively done is injecting his Private entities in exchange of more shares using company money. That doesn't at all smell like he is exiting in anyway.
Given his cost of shares buyback of silverlake is less than the 71cents that he offer to sell.his priavte entities, the PE of the collective 3 entities is about 7. PE 7 for a deal, seems like a good and reasonable deal to.me.
Of course, profit might fall, and he could be doing a HPHT, exiting at a high, but given his track records, I doubt that is the case. He got more of the company, unlike HPHT case with Li.
Also, company is still buying back it's shares. But there is a blackout period leading to release of quarter results. I believe the buying will continue after the results is released. In fact, I felt that if I am Goh, I might want to take it private and either go list back at Malaysia or Hong Kong to command better valuation.
Q: That all sound very convincing, but shareholders are worried, and what if u get it wrong.
S: Even if we manage to accumulate all that we wanted, it would still be less than 15% of portfolio. It is currently less than 10%. Also we have stop loss mechanism in place if we get our earning prediction wrong.
Q: Any other notes for potential investors
S: It is important to.note that when licensing and special projects fulfilment increase, it's maintaince rev will.somewhat drop, but net net, it should still.be growing. Also, some might frown at family members as executive directors, but this is a situation not unique to Asian companies. YZJ has a young CEO at its flagship yard which is Ren Yuanlin's son.