Which Stocks to Invest – GENTING OR Public Bank?



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May 28 2007
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Last Friday I blogged about TOP 10 Things You Can Do With RM15,600, an open suggestion on what you can do with those 5-figure cash. One of the reasons I gave out the ten alternatives to readers is to plan well with the money gained (should you decide to let go of your Maxis shares) and to grow it instead of spend it. I’m sure by now the minority shareholders of Maxis Communications Berhad (KLSE: MAXIS, stock-code 5051) should have received the conditional take-over offer from CIMB Investment Bank on behalf of tycoon Ananda Krishnan. If you decide to give-in, please note that 14-June-2007 is your deadline to submit the form or else you can just leave it to collect dust.
Now, having suggested that you can invest your new found windfall in Genting Berhad (KLSE: GENTING, stock-code 3182) doesn’t mean that you cannot look at other stocks which you think would generate better return for you. I used the word “think” because even after you did a comprehensive research and analysis, your portfolio is still subject to external factors. You don’t think your stock will goes up in one direction only, do you? If China economy suddenly decided to make a major correction, you don’t think your stocks are in-vulnerable, do you? So, please don’t take the ten alternatives as the holy-bible – you should have your own investment strategy and stocks preference.
And so I received multiple mails concerning Genting stocks, one of my readers asked me if Public Bank Berhad (KLSE: PBBANK, stock-code 1295) or Berjaya Sports Toto Berhad (KLSE: BJTOTO, stock-code 1562) could be a better alternatives to Genting reasoning that the dividend of Genting is rather pathetic. Well, the reader is right if you’re looking from the dividend point of view. In fact there’re tons of other stocks which can give you greater dividend compare to Genting, such as Nestle (KLSE: NESTLE, stock-code 4707), Guiness Anchor (KLSE: GUINESS, stock-code 3255) and other consumer-based listed companies. These companies are almost recession-proof, mind you, simply because its’ business can be projected and hence the profit-loss are within their control.
Having said so, I do not have problem if anyone prefers to buy Public Bank. As a matter of fact Teh Hong Piow is probably one of the most admired captain in the corporate world, I blogged about him in Teh Hong Piow – Malaysian’s Warren Buffett back in March. Imagine a 1,000 Public Bank shares in 1967 would now be owner of 129,720 Public Bank shares worth a whopping RM1.16mil. Together with RM 391,000 paid out in gross dividends, Teh said the net worth of the 1,000 shares would be RM1.55mil, which represented a compounded annual return of 20% for each of the 39 years.
However there’re certain facts about Public Bank which made me abit nervous. Amongst others is the lack of succession plan for Public Bank. Warren Buffett’s Berkshire Hathaway (NYSE: BRK.A, stock) is worth US$ 109,320.00 per share today mainly because investors are willing to pay premium for the captain. While Public Bank is currently being administered by Tay Ah Lek (of course Teh Hong Piow still overseas the group), Genting has a successful transition in the form of Lim Kok Thay. In terms of expansion both companies recognized the need to expand out of the soil of Malaysia. Genting has been doing great in both UK and Singapore while Public Bank has branches in Hong Kong and getting ready to pounce on China once the foreign banking liberalization starts.
If you’re looking at how the dividend pay-outs look like for both companies, the chart has the data (from the year 2000) which shows how Public Bank shareholders were rewarded with special dividends since 2005. Prior to that the dividend pay-out for both are almost the same but when you take the appreciation of stock-price into consideration, Genting is obviously the winner with a whopping 200% gain versus Public Bank 50%. I do not have the data of stock-split for the time period (let me know if you have and would like to share with the rest of the readers) although I can get it through the tedious way.
Market talk has it that Teh Hong Piow might call it a day and potentially sell the group soon. But this is a giant that has great value and any buyer would have to prepare to pay high premium for it. The chances of him selling it to existing local banking institution might not be there at this moment but it could spring a surprise by acquiring instead of selling. Also it might opened up for foreigners to acquire it should the price be right (could that be the reason why the stock price has risen steadily recently?) – at least
that’s the best thing the Malaysian-Buffett can do before his retirement. Nevertheless from the impact-analysis, I would still prefer Genting but the timing and price has to be right.

Don’t forget the Malaysia government can easily force Public Bank to submit to other smaller local banks, not that it has not happened before. But it’ll be harder to take-over Genting because of the gambling business nature which might not make sense from the religion point of view. Heck, if you want to spread the risk, just buy both Public Bank and Genting so that you can have good night sleep and never have to choose between both.

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Comments

personally, i would choose genting. my main concern over public bank is who is going to take over the important role from teh once he steps down? he is not young anymore …

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