Investors exit stocks linked to beleaguered Tabung Haji

People want to sell before TH sells, says Lau, who thinks the sell-off would likely be temporary


INVESTORS continue to dump shares in companies linked to Lembaga Tabung Haji (TH) as worries heightened on a major sell-off by larger funds which could hammer further the values of these companies.

The pilgrim fund’s move to sell its assets — about 80% equities of dismal performing companies in cash for an asset swap valued at RM19 billion — had also raised concerns among investors.

Based on Bloomberg data, the top 10 companies where TH is a major shareholder saw RM607 million of the total market capitalisation evaporated since Monday, the day the government released a damning audit report on TH’s suspicious practices.

TH has a 73.84% stake in TH Plantations Bhd, Theta Edge Bhd (68.7%), BIMB Holdings Bhd (53.47%), TH Heavy Engineering Bhd (29.8%) and Pelikan International Corp Bhd (28.66%). The fund invests in about 100 listed companies and has about 150 properties.

A special purpose vehicle (SPV) will purchase TH’s assets before the end of the year, with the former issuing Islamic debt papers to the tune of RM19.9 billion.

Rakuten Trade Sdn Bhd VP of research Vincent Lau said investors with shareholdings in TH-linked firms may be looking to pare down their shareholding before the fund makes a move by year-end.

“It is a situation where people want to sell before they (TH) sell. It’s not so much that they are concerned with what is going on at TH.

“Investors would want to make an exit first before the big fund sells. That is why we are seeing the decline,” Lau told The Malaysian Reserve (TMR).

He said the sell-off would likely be temporary with investors being expected to buy back stocks related to TH-linked companies based on how strong the companies’ fundamentals are.

“If it is good, other funds may come in and take a bite at it,” he added.

Inter-Pacific Securities Sdn Bhd head of research Pong Teng Siew expects investors to take a more cautious approach after TH group MD and CEO Datuk Seri Zukri Samat said the fund is considering an exit in sectors such as information technology and plantations, which are not giving positive returns.

“Investors will be very cautious. There are lists going down. We ourselves circulated a list of counters that are substantially owned by TH.

“We don’t want to be caught blindsided with selling in stocks that are owned by TH. You are buying and they are selling. We don’t want to be in that situation,” he said.

TMR had reported earlier that TH’s equity value had plummeted by RM1.4 billion in the last eight months as key investee companies’ share prices were hammered throughout the year.

The fund’s total equity asset for the first quarter of 2018 (1Q18) stood at RM4.61 billion. However, the value had fallen below the RM4 billion mark to RM3.97 billion in 2Q18 and RM3.77 billion in 3Q18. To date, its equity investment is valued at RM3.2 billion, about RM1.41 billion short of its 1Q18 figure.

Zukri recently told Bernama that TH is also considering to cap each depositor’s deposits to reduce the government’s liability and exposure on the depositors’ savings at the fund.

It was reported that one depositor has RM190 million saved in the fund. Presently, the government guarantees fully all deposits at TH, increasing the risk if the fund goes under.

Normal savings at banks are only guaranteed at a maximum of RM250,000.

The pilgrim fund, which was originally established to help Muslims save money and perform the haj, has become a haven for individuals to capitalise on the high dividend payments.

Pong said: “That is way more than what is needed for pilgrimage to Mecca. If they continue to accept huge amounts of deposits like they did, it would constrain their flexibility in investments.

“If 50% of your portfolio is in stocks, it becomes a whale in the market. That means you cannot get out when you need to. If you get out, you will find that everyone else will dump it too.

“Keeping TH to a reasonable size, which is in line with its stated objective, is actually very good for maintaining the fund’s flexibility in investments,” Pong said.