Against the wind

2015-02-06T15:05:00.000+08:00

Media Statement by Tong Kooi Ong

6 February 2015

I believe Low Taek Jho or Jho Low is the person responsible for the malicious lies and fabrications against The Edge Media Group and I through several blogs using the WordPress blogging platform.

This morning, my lawyers served on Jho Low a demand that he cease and desist fabricating the malicious lies against The Edge, The Malaysian Insider and I in the following blogs: malaysianexpose.wordpress.com and kronismemahathir.wordpress.com.

The same person is also behind the attack on Tun Dr Mahathir Mohamad and Datuk Seri Nazir Razak using the same blogger who goes by the author name ahrily90 (subsequently changed to pen jingga, julijulipeh, saberarturia18 and/or rahmanirwan74).

This is done through the blogs kamibukanbodohtau.wordpress.com, corruptednazirrazak.wordpress.com, kronismemahathir.wordpress.com, politikukus.wordpress.com, and malaysianexpose.wordpress.com.

Besides the above blogs used to attack us, ahrily90 is also responsible for these blogs - bisnes2malaysia.wordpress.com, worldofcorporate.wordpress.com, and todayinbusiness.wordpress.com. These blogs exclusively promote Jho Low, 1Malaysia Development Bhd (1MDB) and their businesses.

Knowing we are on his trail, some of the sites were recently shut down.

However, we have downloaded their entire contents as we were able to save them before they were taken down.

I would like to explain the background and the reasons for these attacks.

1. ahrily90 has posted various articles that attacked Tun Dr Mahathir, Nazir Razak, The Edge and I in his many blogs. We are all known critics of 1MDB.

2. The first attack in kronismemahathir.wordpress.com was on 26 January 2015 under the title "Mahathir uses The Edge and the Malaysian Insider to take down his own people" by ahrily90. This was followed by the article titled "Rogue betting against ringgit" published on 28 January 2015 in both kronismemahathir.wordpress.com and malaysianexpose.wordpress.com by ahrily90. This second article has since been removed from kronismemahathir.wordpress.com but remains in malaysianexpose.wordpress.com with the author's name changed.

On 22 January 2015, just four days before the first attack on The Edge and I, a journalist from The Edge had sent a number of questions to 1MDB on a US$975 million loan provided to it by Deutsche Bank on 1 September 2014. The journalist had asked 1MDB whether the money was used to principally pay Abu Dhabi’s Aabar Investments PJS to terminate an option to take up a substantial stake in the future IPO of 1MDB’s power assets.

The journalist had asked what was the basis for the options to be valued at such a high price, and had requested that 1MDB reveal the terms of the agreement it signed with Aabar in May 2014 on the termination of the options.

(1MDB had given the options to Aabar in return for co-guaranteeing two US dollar bond issues arranged by Goldman Sachs totaling US$3.5 billion in 2012 for the acquisition of power plants)

1MDB responded by saying that it had nothing to add other than what was stated in the Company’s 2014 annual report.

The Edge has published substantially on 1MDB because of concerns, held not only by us, but also by many others in the corporate and banking world and the civil service as well.

The Edge Media Group, which includes The Edge and The Malaysian Insider, believes in economic and social inclusion. We want to promote transparency and good governance. We love our country and as a media, we have a public duty to report on any issues that are of national importance.

I am a Malaysian and no, I do not have dual citizenship as alleged.

In highlighting the challenges the country faces, we are not sabotaging the nation. Instead, we believe it will help direct people towards finding solutions for the betterment of the country.

We highlighted concerns about 1MDB because we are fearful of the fallout for the country should it fail. As it is, 1MDB is already facing financial difficulties. It has failed to pay – missing three deadlines – a RM2 billion loan to a consortium of Malaysian banks.

All the spinning by 1MDB cannot hide this fact.

The only reason The Edge has highlighted the problems at 1MDB is to try to get these issues addressed, so that they can be contained and resolved.

Thank you.

TONG KOOI ONG

2015-02-02T12:14:00.000+08:00

Media Statement by Tong Kooi Ong
2 February 2015

The log of the mobile chat is fake

Yesterday, 1 February 2015, the blog, malaysianexpose.wordpress.com posted yet more lies and fabrications against me.

This is the same blog that had on 28 January 2015 accused me of shorting the Ringgit to break Bank Negara Malaysia and crash the Ringgit.

This time, it faked a phone chat log and used it to accuse me of manipulating former Prime Minister Tun Dr Mahathir Mohamad to drive down the Ringgit. The blog also accused me of using The Edge Media Group to irresponsibly paint Malaysia in a negative light for my personal benefit.

I have already vehemently and absolutely denied that I have ever shorted the Ringgit (my Press Statement of 1 February 2015). I do not think it is even possible. I have also never shorted equities. How can I possibly gain by painting Malaysia in a negative light?

News media communicates with society by presenting facts, analysis and commentaries on important matters happening around them. Sometimes, they are positive and critical, and other times, they are not. We believe readers want all the facts and views, and they are smart and savvy enough to make up their own mind using the information given to them. We doubt that they can be manipulated.

Over the past 20 years, The Edge has contributed positively to the country by promoting social and economic inclusion. It has the highest level of editorial credibility and it is successful because of this. Our views and reporting are done in the open. We do not hide behind blogs who do not reveal themselves.

As for the fake phone chat log, I invite the relevant authorities to investigate. I suspect such records can be obtained from the telecommunication company for verification. It is also clear that the last 2 digits of the phone number are missing from the screen grab posted. Why blank it out if it is genuine?

Finally, anyone who knows me will confirm that many of the words used, such as “Friendlies” and “Jugular” are not part of my vocabulary.

The person behind all these baseless attacks is clearly acting out of desperation.

After attacking Tun Mahathir in his other blogs (politikukus.wordpress.com and kronismemahathir.wordpress.com), he now fabricates a story that Tun Mahathir could be manipulated by me. Tun Mahathir deserves a lot more credit and respect than that.

Calling Tun Mahathir senile and listing 10 reasons why Tun Mahathir should be jailed (kronismemahathir.wordpress.com, 1 October 2014 and 25 August 2014) is disrespectful and vicious. It shows how fearful this person, and whoever that is behind him, is of the criticisms and issues our former PM has raised in recent times, and the reporting of The Edge Media Group.

Thank you.

TONG KOOI ONG

2015-02-01T13:43:00.000+08:00

Media Statement

by Tong Kooi Ong

1 February 2015

I refer to the malicious lies and fabrications against me in the blogs malaysianexpose.wordpress.com (29 January 2015) and kronismemahathir.wordpress.com (28 January 2015).

I vehemently and absolutely deny the accusations. I did not at any time short the Malaysian Ringgit.

I am an equity analyst, besides being an established entrepreneur. I am a value investor.

I have never shorted currencies or equities. I acquire and build companies, create value for shareholders and create employment through ideas and innovation. My track record speaks for itself.

I am certain Bank Negara Malaysia will be aware if there is such a heinous crime. Bank Negara has not contacted me and I pledge to cooperate fully with Bank Negara if my assistance is needed at any time.

As a Malaysian, I too am against economic saboteurs. I support the Prime Minister’s call that those who sabotage the country’s economy must be brought to justice.

Personally, I do not believe it is even remotely possible to break Bank Negara or crash the Ringgit. The foreign exchange reserves of the country are in excess of USD110 billion. The current account of the country is in surplus. Non-Ringgit borrowings are very low. I have gone on record with the above statement, both in my speeches and in the articles I wrote. Again, this is a matter of record.

The facts are that almost every currency in the world is currently falling against the USD (United States Dollars). This is due in part to the strengthening of the US economy and the expectations of an interest rate hike, following the end of the US quantitative easing since October 2014. Further, many countries in the region as well as Europe are depreciating their currencies and lowering their interest rates to promote growth.

I am currently unable to ascertain the individual(s) who is (are) responsible for the malicious lies against me, and what their intentions are. I will pursue legal course of action once I am able to identify those responsible. Making up such lies is beneath human decency.

Thank you.

TONG KOOI ONG

Starting my Value Investing Portfolio

2014-10-13T10:16:00.000+08:00

Tong's Value Investing Portfolio, The Edge, 13-19 October 2014
This week marks the beginning of my Value Investing portfolio. As the name denotes, the portfolio will buy stocks that appear underpriced relative to some intrinsic value or fundamental analysis.

It is not just about buying stocks at bargain prices. More importantly, we aim to discover companies with sustainable business models, improving productivity, unique products or services, innovative ideas or disruptive technologies, low stock valuations, good growth and strong balance sheets.

It is unlikely we will find a company with all the above characteristics. But we hope to find companies with some of the above characteristics, sufficient for us to be confident that they can be good long-term investments.

On October 10, we bought 50,000 shares in the first of these companies, OceanCash Pacific Bhd. It manufactures and exports resonated and thermoplastic felts that function as heat and sound insulators. The products are used in automobiles, air conditioners, and as insulation for buildings.

The company’s sales have grown consistently, with EBITDA margins rising from 14% to 18% in the last 4 years. With no additional investments into assets, ROE has climbed from 5% to 14% the last 3 years, generating huge productivity gains. Inventories and trade debtors are flat and well managed, despite rising sales revenue. Its gearing ratio is 3.7% and an interest cover of 23 times.

The stock has a beta of only 0.2, ideal when the overall market is volatile and uncertain. Edge Research gives this company a fundamental score of 2.1 out of 3.0 and a valuation score of 1.80 out of 3.0. A score of 3.0 is the best to have.

The stock’s trailing 12-months P/E is 9.6 times and the price to book ratio is 1.5 times with a dividend yield of 1.2%. Market capitalization is small at RM65 million. We believe it has strong growth potential in both existing and new markets. With an excellent balance sheet and with rising productivity and margins, OceanCash fits our criteria of Value Investing.

Some will say it is too small to invest. Well, wait till the price is much higher and the market capitalization is big enough for you then. In any case, our next stock pick will be about 10 times larger.

For those of you who are keen to be updated faster than reading this column only on Saturday each week, there are a number of options. Firstly, we will only buy the stocks in this portfolio after it has been highlighted in the daily Stock Pick of the Day by Insider Asia. This stock pick will be featured in The Edge Financial Daily and in www.theedgemarkets.com.

Secondly, all the analysis that I have presented above for OceanCash and more, including news and comparative analytics with other companies, are available for free at www.theedgemarkets.com. In fact, the same data and analysis are available for all companies listed on Bursa Malaysia and Singapore SGX. In other words, by using www.theedgemarkets.com, you can discover you own value stocks to invest in. You do not have to wait for us.

Why am I starting this portfolio now?

Partly, it is to promote The Edge and in particular, www.theedgemarkets.com.

It is also a challenge to discover undervalued companies in the face of an overvalued overall equity market, precariously supported by excessive liquidity and by local funds. Besides high valuations, we are also concerned with the prevailing negative real interest rates scenario, likely capital outflows and a lower Ringgit, falling corporate ROE and productivity, regional geopolitics and heightened racial and religious polarization.

But we understand that despite the above, many investors will continue to invest. Cash in hand and deposits in bank will only lose real value over time. And the property market will continue to consolidate in 2015.

Value investing for the longer term worked in the past and will continue to create value in the future for investors. Finding these stocks is difficult especially in an overvalued market. I believe using www.theedgemarkets.com can help you make better decisions.

Chart 1 shows the KLCI Index performance and the corresponding Normal P/E and the Schiller P/E Ratios. While the market is not excessively expensive, trading at just above the historical average P/E, it is also clear there are not going to be many bargains around.

In Chart 2, we show the drivers of the FBM KLCI performance. The overall market was driven to an overvaluation in 2013, but for 2014, the market has flattened out and corporate earnings have caught up a bit.

Chart 3 shows foreigners were net buyers up to the middle of 2013 and have since turned net sellers. Local institutional funds are supporting the stockmarket. While it reduces the downside, markets that have little volatility lose investors over time.

The real drivers going forward relates to the macro environment. In terms of valuations, are companies investing for growth, is labour productivity rising, will private investments grow, are margins and sales rising?

On the economic front, how far will interest rates rise in the face of rising domestic inflation and higher US interest rates? What will be the extent of capital outflows, and will crude oil and palm oil prices head further south?

While foreign ownership of domestic stocks is relatively low, foreigners currently own more than 40% of the Malaysian Government Securities. Should they exit, local institutions will need to fill the void and they will have to sell other assets to raise this capital. Of course for the short term, Bank Negara can also step in to buy these securities.

The point is this. There is no reason why the overall market should have a higher valuation than it is now. The balance sheet of the government and households are already extended. Corporate earnings growth is unlikely to surprise on the upside. Momentum for growth is slowing. There is no sign of overall productivity gains and in fact, total factor productivity trends for Malaysia fare badly. Heightened domestic political, racial and religious polarization is not a recipe to be positive.

At the same time, the market is not excessively overpriced. Much depend on what policies the government adopts and executes in the near term. Much will also depend on how the people come to a social consensus.

With this as the background, a possible strategy for the average investor would be to buy undervalued companies for the longer term. Enjoy reading and I hope you will have as much fun as I will.

Note to readers

2014-10-08T16:43:00.000+08:00

Dear readers,

Thank you for your support, comments and insights shared in this blog to date. You can soon view my trading portfolio in a new online platform by The Edge Media Group (TEMG).

Starting tomorrow, 9 October 2014, this blog will cease updating my trading portfolio. Please go to The Edge’s newly launched financial portal www.theedgemarkets.com to view the latest updates.

Tong’s Momentum Stock Trading portfolio and the fundamental analysis and reports on Stocks with Momentum (which are generated by our proprietary algorithm, based on trading volume and price trends) will be published in The Edge Financial Daily (FD) every Monday to Friday from 10 October 2014.

You can get free digital copies sponsored by SP Setia Bhd by registering at the above portal. A four-page news and analysis bulletin on Singapore business and investment news as well as the fundamental analysis of Stocks with Momentum listed in SGX can also be obtained for free.

By its very definition, these are companies which saw a price and volume breakout. The probability of substantial price movements after we highlight them are more than 90%. Equally, these companies are very likely to make subsequent announcements.

But stock prices do go either way. So, we ask you to check out the company’s fundamental and valuation scores and its risk assessment - either by reading FD or by using the simple-to-use analytics in www.theedgemarkets.com.

In the experiment we did in this blog by buying many of these companies on the basis that they were selected on Momentum, the verdict is still out. While Tong’s Momentum Stock Trading portfolio is up by 6.2% compared to the 3.1% decline for the stockmarket as a whole since 8 July 2014, it was mostly accounted for by one major successful pick and we lost money in many of the stocks we bought. Or we sold out the stocks too early. The lesson of the experiment is that even for us, with reasonably good knowledge of the equities market, short term trading is extremely high risk and the probability of profiting after transaction costs are less than fair.

Starting 10 October 2014, I am also introducing Tong’s Value Investing portfolio. This portfolio will be published in The Edge Malaysia business weekly paper. The companies selected will be those featured in www.theedgemarkets.com and in the FD, as Insider Asia’s Stock Picks.

This is our attempt to build a portfolio of stocks for longer term investments. We will try to discover companies with sustainable business models, improving productivity, unique products or services, innovative ideas, low stock valuations, good growth and strong balance sheet. Certainly not all the above characteristics are likely to be found in any one company. But there will be some companies with some of the characteristics above that will justify investing.

You can also track your own portfolio with risk management tools and receive email alerts on companies of interest to you, again for free. We will alert you on any newsbreak or announcements of these companies in your watch list. We also provide you the ability to calculate the risk of your portfolio against the market.

We at TEMG are excited about www.theedgemarkets.com and hope you will benefit from it as well. We welcome you to share your thoughts and ideas. This is only version One and we promise more exciting innovations and features soon. So, stay tuned.

Tong

Tong Kooi Ong's Portfolio

2014-10-03T09:58:00.000+08:00

On Thursday, my portfolio decreased together with the broader market.

The portfolio value went down by 1.85% to RM 105,958.31 while the FBM KLCI declined by 0.41%.

Total returns for the portfolio decreased from 8.0% to 6.0%.

The portfolio started on 8 July 2014 with a capital of RM100,000. Since then, it has outperformed the FBM KLCI by 8.9%, and has registered an annualised return of 25.0%.

Total profits currently stand at RM 5,958.31.

The gainer for the portfolio was Ken (+0.9%). The stocks that lost ground were Willow (-6.4%), Fibon (-4.0%) and KSL (-3.3%).

There were no stock transactions yesterday.