Published August 22, 2008

Going against conventional wisdom

By S JAYASANKARAN
IN KUALA LUMPUR
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WHEN Tan Teng Boo listed icapital.biz on the Kuala Lumpur Stock Exchange in October 2005, he predicted that the firm would double its assets in five years. It took him two years.

icapital.biz is Malaysia's only listed closed-end fund and, to his credit, Mr Tan also proved that the great cliche about closed-end funds - that they inevitably trade at a discount to their net asset value (NAV) - was a lie.

Since the listing, icapital.biz has consistently traded at a slight premium over its NAV. Currently, the fund trades at RM1.81 compared with a NAV of RM1.75.

More to the point, Mr Tan's fund has consistently outperformed the Kuala Lumpur Stock Exchange.

From listing to July 25, the fund's NAV has made an annual compounded gain of 23 per cent a year as opposed to 8 per cent by the benchmark composite index of the stock exchange. Meanwhile, the fund's market price has jumped 80 per cent.

Given that the fund's profits principally come from realised investment gains and dividends, it is quite remarkable that icapital.biz made a pre-tax profit of RM41.1 million (S$17.4 million) for its 2008 financial year, a figure mainly driven by RM36.7 million in investment gains.



The gangling, bespectacled Mr Tan eschews borrowings completely and believes firmly in the virtues of 'value' investing along the lines of that preached by people like Warren Buffett. He has told investors bluntly that 'if you expect dividends, forget it, but I will give you capital appreciation'.

So far, he's delivered and many investors in Kuala Lumpur buy his weekly newsletter (icapital) to follow his stock recommendations. Among the fund's major investments: Parkson, Fraser and Neave, Petronas Dagangan, VADS, PIE International and TM International.

Among the fund's newer investments: Suria Capital, Telekom Malaysia, TM International, Boustead Holdings and Hai-O Enterprise. And by the way, Mr Tan rates the fund as a 'long-term buy below RM2'.