Tuesday, January 09, 2007

A Discussion on Strategic Investors of Hong Kong

One of the blog readers has posted the following comment which is quite interesting to discuss :

"Regarding stategic Investors. Both Cheng Yu Tung (New World) and Thomas Lau have "Interesting" histories and not always friendly to minority shareholders. Care to comment?"

My response is as follows :

Many people may have bad experiences in investing in the companies owned by these two people. The major problem is that many major shareholders of listed companies in Hong Kong have treated these companies as a way to gain money from but not sharing the profits with majority shareholders. The most profitable part is still hold in their own hands. For example, Chai Tai Fook is the most profitable company of Mr Cheng which is privately owned and New World Development (0017) is a listed company but with high level of debts. For profitable projects or investments, Mr Cheng will invest with Chai Tai Fook instead of New World. This is a typical example of common thoughts of Hong Kong rich people not just Mr Cheng. Even Mr Lee Shau Kee who is recently treated as Warren Buffet of Hong Kong is investing with his own investment flagship but not his listed company Henderson Land (0012) . Therefore, when considering the roles of strategic investors, we need to identity by what means these people are investing in the new companies. If they are not the major shareholders but simply strategic investors, it should be a good news to minority shareholders like us as we do not have to worry about any "capital tricks" and instead they can act in a positive way for us to push a good performance from the new company just like TCI 's role in the Link Reits (0823). However, in the case of Kingboard Laminates (1888), there is no confirmed information up to now that they actually have invested in this company.

In some forums, I have read that some people invested in Kingboad Laminates simply because they think that Mr Lau will drive the share price up. These thoughts are very dangerous. We have to remember profit is the final driving force of share price not strategic investors!