Value Investment???

Honestly, since conception of this Value Cap Sdn Bhd back in 2003, I don't hear much about what they do, what they invest in and what is their performance like (except one small news about Value Cap making RM250 million for financial year 2003 (FY2003)). Though they are equally funded by Khazanah Nasional Berhad (Khazanah), Permodalan Nasional Berhad (PNB) and Kumpulan Wang Persaraan Diperbadankan (KWAP), much of what they did remains a secret other than buying into "undervalued" companies listed in Bursa Malaysia on "portfolio" basis.

Source: http://www.khazanah.com.my/portfolio.htm

Originally it was envisioned to invest RM10 billion in KLSE but somehow, it only invested RM5 billion based on the limited information I have extracted from the press. And now the Government is happy to invest another RM5 billion to make it into RM10 billion. I wonder how much profit has Value Cap generated over the years and whether these returns have benefited the rakyat? No one knows and since KLCI goes up and down, values are created and lost.

So is propping up the KLCI the agenda of the government of the day? Or really seeking real value companies? Well, let's not be prejudicial towards the Government of the day. Let's just use a simple comparison to see how this policy has faired today shall we?

When Value Cap first started investing on 10 January 2003, the KLCI was at 625.76 points. Today's closing is at 909.51 points. That means over the course of roughly 4 years and 10 months, KLCI grew at about 8% per annum. Have Value Cap grew at that rate or more given it selectively chooses the undervalued investments?

Though this is not an exact science, using whatever little I have and assuming no distributions made by Value Cap to their shareholders, let's connect the dots and see what Value Cap made.

On 14 February 2004, Nor Yaakob was quoted by the Star Online that:

“ValueCap has used just RM4bil of the RM10bil it has,'' he told the media after the KLSE Corporate Awards 2003 in Kuala Lumpur yesterday.

As of today, the Edge Online reported that:

The government will invest an additional RM5 billion into Valuecap Sdn Bhd to double the latter's funds to RM10 billion, Deputy Prime Minister Datuk Seri Najib Razak said today.

So using simple Compound Annual Growth Rate (CAGR) formula for a period of 4 years and 10 months, the annual return of Value Cap works out to be about 4.7% per annum. Now compared it to KLCI performance in the same period (see above).

Source: http://www.temasekholdings.com.sg/index.htm

Let's not look too far for other comparison, let's look at Temasek. Voila... you can download their latest annual report here. You know what is amazing?

From FY2004 to FY2008, Temasek made an average return of equity of 11.4% per annum, saw its profit after tax before minority interests grew by 25.4% and shareholders' equity grew at 22.2% per annum.

Yup, their shareholders funds grew from FY2004 at SG$ 64.5 billion to SG$ 144.1 billion during about the same period Value Cap was picking up under value companies in KLCI using RM4 billion to grow to RM5 billion.

Speaks volume isn't it?

In an age where converting a simple word document to PDF version is only a few clicks away and publishing it on the net is not a very complicated procedure, why don't the Government choose to be accountable and reveal what they have been doing for the rakyat to judge for themselves?

Afterall, wouldn't it be fair to the Government if we can have the figures (not just Value Cap, but its shareholders as well) to do a simple comparison with performance of the likes of Temasek?