Here, I would like to share what kind of stewardship of a PLC can create shareholders’ value for 10-20 years. What I am going to share may piss you off. So in case you want to learn something more systematic, you can visit http://www.morningstar.co.uk/uk/news/123626/10-steps-for-evaluating-company-management.aspx#sthash.HaRa4CYo.dpuf.
Do you ever wonder why the following counters worth what they priced in the market?
- BAT – 16.4 (Sep 1999) – 69.56 (Feb 2015)
- NESTLE – 13.18 (Sep 1999) – 73.64 (Feb 2015)
- DIGI – 0.11 (Jan 2003) – 6.32 (Feb 2015)
- DLADY – 1.75 (Sep 1998) – 47.22 (Feb 2015)
- GAB – 2.76 (Sep 1998) – 13.42 (Feb 2015)
- CARSLBG – 3.38 (Mar 2009) – 12.5 (Feb 2015)
- PANAMY – 5.24 (Sep 1998) – 20.8 (Feb 2015)
- UTDPLT – 2.9 (Mar 2001) – 25.4 (Feb 2015)
Well, we can say these companies have wide economic moats, strong financial position, etc… But here, we talk about stewardship.
I attended AGM of these companies before, and I am brave enough to conclude one fact: Management who capable to make a company highly priced is “有样看的”. What these words mean “you can see the quality from their style or face expression”. In the same context, the management who make a company underperform also “有样看的”.
If you want to invest a company for very long term, meet the management team in AGM.
For further elaboration, this is quite accurate one. Few examples:
You see the performance improvement of these companies before and after changing CEO:
- TENAGA – Current CEO: Azman, Former CEO: Khalib
BURSA – Current CEO: Tajuddin, Former CEO: Yusli
MAXIS – Current CEO: MORTEN LUNDAL, Former CEO: Sandip Das
I attended Maxis AGM by proxy during Sandip management, and I was feeling “meh” in the AGM. And Morten gave me very positive impression. You can see performance of Maxis under Morten leadership. Tenaga and Bursa were also the same. Once I had impulse to throw bottle to Khalib, you can see how poor price performance of TENAGA under Khalib leadership.
Years ago (Nov 2007), I bought my first position of AIRASIA at 1.7++, then AIRASIA dropped below 1.00. I was considering to just cut lost, but I gave AIRASIA a chance by attending the AGM. When I saw charisma of Tony Fernandes, I immediately made decision to hold AIRASIA, and “sapu” AIRASIA below 1.00.
During DotCom bubble, from financial perspective, DIGI looks like a “going to die” company. I taken a proxy and attended their AGM. After seeing the way management team speak and address in the meeting, I just got a sense that these guys know what they are doing, and this company will be superior one day. I accumulated their shares after that.
GAB had an edge for some good years under leadership of Tan Sri Saw Huat Lye and Charles Henry Ireland, but in year 2011-2012 AGM, I can sense the complacency in the management team. You probably read news that CARLSBG grabbed quite substantial markets shares from GAB in the past few years. Mixed with some macro-economic factors, GAB had been punished by the market, and you can see from the price performance.
In 2013, under Dato’ Saw Choo Boon and Hans Essaadi leadership, I can sense a “reboot” during the AGM. Can both of them take GAB to the next level? We shall see, but I can feel a new flow of energy.
HAIO management gave a very genuine and honest impression to me. They impressed me that they will take care shareholder, and it is safe to invest in HAIO. This management style lifts up HAIO to certain extent, but now I want to see the management team after the old folks retire.
I attended OSK AGM few years ago by proxy. At that time, I feel “meh” with Ong, and then I never touch Ong’s companies. Looking at last year drama of Ong’s companies, I feel very fortunate.
I know “有样看的” is something very subjective, but sometimes you can sense the energy and charisma of the management team. Trust your instinct.