Showing posts with label Tanco. Show all posts

Wednesday, 10 June 2026

Tanco: recent sell-off reflects a long-overdue reality check, not a buying opportunity.

Tanco Holdings—a company whose stock market valuation has become completely untethered from its deteriorating financial reality.

Summary

1. Share Price Collapse & Insider Trading

Tanco's share price fell limit-down for two consecutive days, dropping from RM1.76 (June 3) to RM0.80 (June 9)—a 54% decline in just four trading days.
RM6 billion was erased from market capitalization, which fell from ~RM10.8 billion to ~RM4.91 billion.
Group Managing Director Datuk Seri Andrew Tan Jun Suan sold 24.63 million shares at RM1.555—a 40% premium over the day's peak market price of RM1.11 (and far above the closing price of RM0.80). This suggests an off-market or negotiated transaction.
His brother, Edwin Tan Kium Suan (an executive director of subsidiaries), bought 7.64 million shares at the intra-day low of 78.5 sen (RM0.785).
Between May 28 and June 9, Andrew Tan sold a net ~17.4 million shares (17.83M bought, 35.25M sold).

2. Valuation Disconnect

Tanco is described as a "loss-making" company (though the article notes nine-month net profit of RM6.7M on RM122M revenue—marginal profitability).
P/E ratio: 741.4x—extraordinary for any company, let alone one with weak cash flow.
Price-to-net asset value: 18x—implying the market values Tanco at 18 times its book value, despite negative operating cash flow and opaque assets.

3. New Developments Announced Amid the Sell-Off

Tanco signed an MOU with China Mobile International (CMI) to explore a 50 MW data centre in Port Dickson.
It is also pursuing a Port Dickson Free Zone (PDFZ) industrial park, with up to RM250 million in financial assistance proposed for a JV with the Negeri Sembilan state authority.
The AI container port project has been revised from a long-term lease to a port development concession model over ~180 acres. The EPCC contract (RM3.53 billion) was awarded to a unit of China Communications Construction Company (CCCC).

4. Regulatory Scrutiny

Bursa Malaysia issued unusual market activity (UMA) queries in April and again on June 8 (after the crash). Tanco's response was vague: ongoing discussions, but no finalized announcement.

Commentary

1. The Stock Is a Pure Momentum Play, Not an Investment

The numbers speak for themselves:

741x P/E and 18x P/B for a company with negative operating cash flow for five straight years, thin profitability, and an equity base built on continuous dilution.
The recent nine-month net profit of RM6.7M (on RM122M revenue) is tiny relative to a RM4.9 billion market cap. Even if annualized to ~RM9M, the P/E would still be >500x.

This valuation cannot be justified by any rational fundamental analysis. The stock was driven by speculation on the Midport AI port narrative, not by earnings or cash flow.

2. Insider Selling at a Premium While the Stock Crashes – A Major Red Flag

Andrew Tan sold 24.63M shares at RM1.555—a price far above where the stock was trading intraday (RM1.11 peak, RM0.80 close). Who bought at that price? The article suggests a "direct business transaction," likely a negotiated off-market deal.
Meanwhile, his brother bought at 78.5 sen—the bottom tick. The optics are poor: one brother sells high (off-market), the other buys low (on-market).
Andrew Tan's net selling over the period (35.25M sold vs. 17.83M bought) suggests reduction of exposure by the group's controlling figure. That is not what confident insiders do.

3. The "New MOUs" Smell of Narrative Management

Tanco announced:

A data centre MOU with China Mobile International – but MOUs are non-binding and exploratory. No concrete commitment.
The Port Dickson Free Zone industrial park – requiring RM250M in financial assistance (i.e., more cash to be raised or borrowed).
The port concession model revision – a positive structural change, but the EPCC contract value (RM3.53B) is indicative, not firm.

These announcements, coming as the stock crashed and Bursa issued UMA queries, appear designed to distract from the insider selling and valuation collapse. They provide no near-term cash flow or earnings visibility.

4. Bursa's UMA Queries and Tanco's Vague Responses

The company received two UMA queries in two months – a sign of extreme volatility and possible information asymmetry. Tanco's response ("ongoing discussions, no finalized announcement") is the standard non-answer. Regulators may take a closer look at the timing of the insider sales relative to the undisclosed "discussions."

5. The Fundamental Problem Has Not Changed

Despite the port, data centre, and free zone narratives, Tanco's core financial reality remains:

Negative operating cash flow – cannot fund itself.
Reliance on equity dilution – the share count has ballooned.
Opaque assets – large "other assets" and long-term receivables.
Thin profitability – RM6.7M net profit over nine months.

The AI port is years away from generating revenue. The data centre MOU is exploratory. The free zone needs RM250M. None of these address the immediate cash burn.

Final Verdict

In one sentence: Tanco's share price was a speculative bubble built on port hype and momentum trading; the insider selling during the crash and the company's chronically weak cash flow fundamentals suggest that the recent sell-off reflects a long-overdue reality check, not a buying opportunity.

Tanco hits another limit-down

Verdict on Tanco's Cash Flow

Aspect Assessment

Operating Cash Flow Severely weak – negative for 5 years and 4 of last 5 quarters.

Investing Cash Flow Heavy outflows – rising capex with no operating cash to support it.

Financing Cash Flow The only lifeline – entirely dependent on equity issuance and some debt.

Free Cash Flow Consistently deeply negative – the business model is cash‑incinerating.

Sustainability

Low – cannot continue without further equity raisings or a dramatic turnaround in working capital.

Critical Conclusion:

Tanco’s income statements show profitability, but its cash flow statements reveal a fundamentally unsustainable financial engine. The company is effectively a cash-burning machine that relies on repeated shareholder dilution to stay afloat. Unless the Midport project begins generating significant positive operating cash flow in the near future, the current trajectory is problematic.

[Not an uncommon problem faced by developers of properties. ]

Tanco’s balance sheet looks strong on the surface – low leverage, high equity, improving current ratio. However, a critical review reveals thin liquidity (very low cash), opaque and potentially illiquid assets, and an equity base built on continuous share issuances rather than internal cash generation. The company is not bankrupt, but the balance sheet’s strength is fragile because it does not translate into operational cash flow. If the Midport project fails to generate cash, another equity raising will be needed – further diluting shareholders.

In one sentence: Tanco’s balance sheet is structurally solid in terms of low debt, but its true health is undermined by poor asset quality, low cash, and a history of funding operations through equity dilution.

Tanco hits another limit-down, erasing nearly RM6b in market value

By Malay Mail

Tuesday, 09 Jun 2026 6:58 PM MYT

KUALA LUMPUR, June 9 — Tanco Holdings Bhd slid sharply again today, extending a four‑day sell‑off that has erased almost RM6 billion from the property developer’s market capitalisation.

In a report by The Edge, the latest decline followed a similar slump earlier today, as Tanco’s share price had already fallen for four straight sessions and triggered an automatic suspension of intraday short selling.

Tanco told Bursa Malaysia on June 8 that “there are presently endeavours at the stage of being discussed or negotiated”, adding that any announcement would only be made “once such matters become more definitive or are finalised and confirmed”.

The company also said it was unable to explain the unusual market activity that has driven the counter sharply lower.

Tanco’s shares dropped as much as 33.5 sen, or 30 per cent, to 78.5 sen today, marking its lower limit for the day.

The stock later closed at 80 sen, with nearly 78 million shares traded in its busiest session in more than three months.

The steep fall automatically triggered a suspension of intraday short selling, which will only resume at 8.30am tomorrow.

An exchange filing showed that Edwin Tan Kium Suan, an executive director at two Tanco subsidiaries and the younger brother of managing director Datuk Seri Andrew Tan Jun Suan, purchased 7.64 million shares at the day’s lowest price.

Tanco has now lost more than half its market value since June 4, reversing a rally that had lifted the stock by over 50 per cent by end‑May and briefly pushed its valuation above Sime Darby Property Bhd’s between March and May.

The counter is also back to levels last seen in September 2025.

Before the sell‑off, Tanco had been one of the most actively traded property stocks on Bursa Malaysia this year.

My 18 points guide to Successfully compounding your money in Stocks

Be a good stock picker.
Think as a business owner.
Always look at value rather than the price. Do the homework.
Buy and hold is alright for selected stocks.
Compounding is your friend, get this to work its magic.
Mr. Market is there to be taken advantage of. Do not be the sucker instead. BFS;STS.
Always buy a lot when the price is low.
Never buy when the stock is overpriced.
It is alright to buy when the selected stock is at a fair price.
Phasing in or dollar cost averaging is safe for such stocks during a downtrend, unless the price is still obviously too high.
Do not time the market for such or any stocks.
By keeping to the above strategy, the returns will be delivered through the growth of the company's business.
So, when do you sell the stock? Almost never, as long as the fundamentals remain sound and the future prospects intact.
The downside risk is protected through only buying when the price is low or fairly priced.
Tactical dynamic asset allocation or rebalancing based on valuation can be employed but this sounds easier than is practical, except in extreme market situations.
Sell urgently when the company business fundamental has deteriorated irreversibly.
You may also wish to sell should the growth of the company has obviously slowed and you can reinvest into another company with greater growth potential of similar quality. However, unlike point 16, you can do so leisurely.
In conclusion, a critical key to successful investing is in your stock picking ability.

http://myinvestingnotes.blogspot.com/2012/07/my-18-points-guide-to-successfully.html

11 Lessons From Peter Lynch

Peter Lynch taught me:

1. Behind every stock is a company. Find out what it’s doing.
2. Never invest in any idea you can’t illustrate with a crayon.
3. Over the short term, there may be no correlation between the success of a company’s operations and the success of its stock. Over the long term, there’s a 100% correlation.
4. Buying stocks without studying the companies is the same as playing poker – and never looking at your cards.
5. Time is on your side when you own shares of superior companies.
6. Owning stock is like having children. Don’t get involved with more than you can handle.
7. When the insiders are buying, it’s a good sign.
8. Unless you’re a short seller, it never pays to be pessimistic.
9. A stock market decline is as predictable as a January blizzard in Colorado. If you’re prepared, it can’t hurt you.
10. Everyone has the brainpower to make money in stocks. Not everyone has the stomach.
11. Nobody can predict interest rates, the future direction of the economy, or the stock market. Dismiss all such forecasts and concentrate on what’s actually happening to the companies in which you’ve invested.

Lynch’s advice had a profound effect on my stock market approach. He taught me that investment success isn’t the result of developing the right macro-economic view or deciding when to jump in or out of the market. Success is about researching companies to identify those that are likely to report positive surprises.

Capital Expenditure

A great company with a Durable Competitive Advantage will have a ratio of Capital Expenditures to Net Income of less than 25%. Less is better.

Capital Expenditures are expenses on:
- fixed assets such as equipment, property, or industrial buildings
- fixing problems with an asset
- preparing an asset to be used in business
- restoring property
- starting new businesses

A good company will have a ratio of Capital Expenditures to Net Income of less than 50%.

A great company with a Durable Competitive Advantage will have a ratio of less than 25%.

Less is better.

Benjamin Graham's 113 Wise Words

The true investor scarcely ever is forced to sell his shares, and at all times he is free to disregard the current price quotation. He need pay attention to it and act upon it only to the extent that it suits his book, and no more. Thus the investor who permits himself to be stampeded or unduly worried by unjustified market declines in his holdings is perversely transforming his basic advantage into a basic disadvantage. That man would be better off if his stocks had no market quotation at all, for he would then be spared the mental anguish caused him by other persons' mistakes of judgement."

Philip Fisher's Wise Words

"The refusal to sell at a loss, while completely natural and normal, is probably one of the most dangerous in which we can indulge ourselves in the entire investment process.

More money has probably been lost by investors holding a stock they really did not want until they could 'at least come out even' than from any other single reason. If to these actual losses are added the profits that might have been made through the proper reinvestment of these funds if such reinvestment had been made when the mistake was first realized, the cost of self-indulgence becomes truly tremendous."

(Common Stocks and Uncommon Profits)

The Ultimate Hold-versus-Sell Test

Here is the overriding primary test, followed by observations on why it is so critically important:

Knowing all that you now know and expect about the company and its stock (not what you originally believed or hoped at time of purchase), and assuming that you had available capital, and assuming that it would not cause a portfolio imbalance to do so, would you buy this stock today, at today's price?

No equivocation. Yes or no?

Answers such as maybe or probably are not acceptable since they are ways of dodging the issue. No investor probably buys a stock; they either place an order or do not.

Here is the implication of your answer to that critical test: if you did not answer with a clear affirmative, you should sell; only if you said a strong yes, are you justified to hold.

Some thoughts on Analysing Stocks (KISS)

Ideally a stock you plan to purchase should have all of the following charateristics:

• A rising trend of earnings dividends and book value per share.
• A balance sheet with less debt than other companies in its particular industry.
• A P/E ratio no higher than average.
• A dividend yield that suits your particular needs.
• A below-average dividend pay-out ratio.
• A history of earnings and dividends not pockmarked by erratic ups and downs.
• Companies whose ROE is 15 or better.
• A ratio of price to cash flow (P/CF) that is not too high when compared to other stocks in the same industry.

Margin of Safety Concept: Stocks should be bought like groceries, not like perfume

The high CAGR in the early years of the investing period, due to buying at a discount, tended to decline and approach that of the intrinsic EPS GR of the companies over a longer investment time-frame.

Chapter 20 - “Margin of Safety” as the Central Concept of Investment

A single quote by Graham on page 516 struck me:

Observation over many years has taught us that the chief losses to investors come from the purchase of low-quality securities at times of favorable business conditions.

Basically, Graham is saying that most stock investors lose money because they invest in companies that seem good at a particular point in time, but are lacking the fundamentals of a long-lasting stable company.

This seems obvious on the surface, but it’s actually a great argument for thinking more carefully about your individual stock investments. If most of your losses come from buying companies that seem healthy but really aren’t, isn’t that a profound argument for carefully studying any company you might invest in?

Bullbear Buffett