Asianpac Holdings. Reviewing some of my investment Ideas (ASIAPAC 4057)

 Fallen angels (Cigar butt companies?)


When I initially started investing. I started looking at industries or sectors that have been hit badly, while looking for potential "fallen angels", good companies that have gone down when the sector has taken a large hit. That was the idea for the oil companies. The most notable ones I used to monitor was Borr Drilling and Valaris, to a lesser extent. Noble Corp. Looking back. This is really what the late Charlie Munger would call. Buying a fair company at a wonderful price, rather than a wonderful company at a fair price.


Asianpac fits into this description. It really is a fair company trading at a wonderful price. The key thesis in my investment into this company is really its shopping mall. IMAGO Mall in Kota Kinabalu.


Without going into detail about the company. This is really a back of the envelope calculation.

Asianpac's assets can be divided into:- 

1) IMAGO Mall

2) Parking Assets

3) Developer business (Land held for development)

4) 74 acre land in Taman Medan.


It's an investment that pops out at me. Why?

The shopping mall and parking assets made about RM11million in their last quarterly. June of 2024. The developer business (which I segregate the 74 acres in Taman Medan out due to its size and focus), is currently loss making. 

Profit from the shopping mall is steady and rising every few years. As per my conversation with their finance manager almost 8 years ago. The mall revises tenancy rentals every 3 years. The mall is also one of the only malls where it is managed by a single management, without selling off plots. So they are able to control the tenant mix and the atmosphere of the mall.

The sponsor is wealthy, having made a foray into China in the early 90's. They have a similar mall in Shanghai, the first ring road with the same name. IMAGO Mall. So they are able to bring in their tenants from their existing mall to populate their mall in KK.


Subsequently, the IMAGO mall in KK is considered to be one of the best malls in KK. The parking assets are also substantial. As parking rates in KK are at a decent price. Together these 2 assets contribute about RM45million in gross profit annually to Asiapac. 


At its current price of RM0.105 cents. Asiapac's market capitalization is at RM149million. Giving it a market PE of 4. This is just the first 2 assets of the company. The majority of the NTA of the company is actually in their development business. According to the finance manager, the sponsor is currently focusing on their development business. The reason this doesnt pop out is because the development business is loss making and dragging their overall profit down.


Apparently the company was going on autopilot prior to purchasing the large plot of land in PJ for development.


They had purchased the land with a price of approximately RM100 persqft in 2018. IMO, the surrounding area of the land is middle lower class. However the size of the land and its proximity to 2 large highways is a big selling point for me. I believe this land is undervalued. A similar plot of land in the industrial area along LDP was purchased by Sunway to build a pocket development was purchased at almost RM350 persqft.

The first phase of the development was sold out in a day. The second phase Dwi tara 2 was also sold at a decent clip. I believe the development business is likely to turn a profit soon, with some of the older development rolling off. (LikasVue, Mahogany). The PJ development has shown strong and steady sales. It will likely be quite profitable compared to some of their older landbanks.


However, even if the development side only breaks even. The other 2 assets are bringing in about RM36million per annum. Asiapac is truly undervalued.


Again, the investment thesis is really the bolded part. The development arm, which is really the bigger part of the company. Is actually the gamechanger. If the development side can turn a RM20million profit per annum. Asiapac would be selling at a PE of 2-3.


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