This article first appeared in The Edge Financial Daily on March 20, 2019

KUALA LUMPUR: Businessman Tan Sri Wan Azmi Wan Hamzah has re-emerged as a substantial shareholder of property developer Eastern & Oriental Bhd (E&O) with a 9.1% stake, after exiting from the company six years ago.

“The decision [to buy into E&O] is dictated by a very sophisticated investment methodology. It’s now six years since I sold out my entire holding in E&O, which was bought six years before that… We call the system the six-year itch,” Wan Azmi said jokingly with The Edge Financial Daily (TEFD) in an interview yesterday.

On a more serious note, Wan Azmi said he sees value in E&O, and is committed to taking a longer-term view of a company which has little to dislike.

In an announcement to Bursa Malaysia, E&O said that it had completed a private placement of 130.23 million shares at 98 sen per share, raising approximately RM127.6 million.

The issue price of 98 sen is a 14.66% premium to the five-day volume weighted average price of E&O’s stock up to and including March 11, 2019, being the last traded day prior to the price-fixing date, 85.47 sen.

The private placement shares, which amount to 9.09% of the enlarged share capital (net of treasury shares), were subscribed by Wan Azmi’s vehicle Sweetwater SPV Sdn Bhd.

To a question on whether he took up the private placement to help out his friend Datuk Terry Tham, Wan Azmi chuckled and said: “No friendship is worth RM130 million.”

E&O is next expected to disclose details of its proposed rights issue, now that the private placement exercise is completed. Wan Azmi said that he may end up with a higher investment amount if he takes up the rights issue.

In an hour-long interview, Wan Azmi answered many of TEFD’s questions candidly and sometimes with great humour. Here are excerpts of the interview.

The Edge Financial Daily: The popular view in investment circles does not reflect enthusiasm for property companies. You seem to be against the herd, as you are putting in a big chunk of cash into E&O Bhd.

Tan Sri Wan Azmi Wan Hamzah: On the contrary. That view is not one that I am in violent disagreement with. There are so very few reasons to like the property sector. Every sub-sector — residential, office, retail commercial, even industrial, faces daunting challenges. The residential segment looks burdened by oversupply still coming from the pipeline as well as overhang of some RM20 billion unsolds, a number I suspect is an underestimation. But the financial markets are pretty efficient, which explains the huge write-down of values within the sector. Some players will have existential challenges ahead, but the sector as a whole is not necessarily overpriced. A few may have become quite undervalued.

If you are a patient investor, and committed to taking the longer-term view, this is a buying opportunity. InsyaAllah, in six years’ time, what I buy today shall be worth quite a lot more.

TEFD: In this context, do you view E&O as mispriced and undervalued?

Wan Azmi: Without having to run a magnifying glass over the company, it is apparent that E&O remains a very niche player, concentrating on the high-end residential segment. It does not have anything under construction in central Kuala Lumpur, where it used to be a major player and where the high-end residential market looks quite ugly. The company has a Johor exposure, but that is relatively insignificant. The major part of the company is in Penang, where it has cemented its reputation and track record with the Seri Tanjung Pinang (STP2) development. STP2 is no longer the twinkle in Terry Tham’s eye. It is now an actual island that you can walk on. It is possibly the largest development site in the whole of Penang island.

Unsold stock values, possibly the most crucial thermometer reading for checking on a property company’s health at this moment, are less an issue with E&O, thanks to the policy of restraint and timely timidity over the last two years. Investors have been harsh in selling down the company, in my opinion. For the incoming investor, there is little to dislike in E&O.

TEFD: As the third largest shareholder of E&O, are you seeking board representation or to be actively involved in the company?

Wan Azmi: There are more than 100 property sector companies on Bursa KL (Bursa Malaysia). I have chosen to invest in one. I like the way the company is run. As a financial investor, I should leave them alone, the board and management, to make the money.

TEFD: Six years ago, you sold your stake with Datuk Terry Tham and the GK Goh family to Sime Darby Bhd, a transaction that attracted controversy and provoked an investigation by the Securities Commision. With your re-entry, will the issue of concert party resurface?

Wan Azmi: Both Terry and GK Goh rebuilt their shareholdings in the company, buying quite soon after the transaction with Sime. I stayed out and did not buy a single share, until this placement. That is hardly reflecting a coordinated action of concerted parties.

Investing has always been an individual and not team sport for me. I value my freedom to “buy”, “sell” or “hold” based on my own judgement. Any arrangement that inhibits that independence is not something that I would enter into.

TEFD: This is quite a substantial investment. But there is plenty left from the SPLASH (Syarikat Pengeluar Air Selangor Holdings Bhd) sale proceeds. What other plans do you have to utilise the available funds?

Wan Azmi: Sweetwater has two shareholders. I think I have used the substantial part that is mine to invest. You really have to ask my wife for her shopping plans.