CN Asia’s ventures

       TRYING to follow the ventures of CN Asia Corp Bhd is no easy feat. From blockchain to digital banking and from green energy to the metaverse.

       It does seem that CN Asia does not lack ambition. The problem though seems to be execution. It remains a loss-making company that isn’t even able to churn out any cash flows from current operations.

       There have also been a number of major shareholder changes. The latest venture the company is trying to embark on is in oil and gas. It signed a heads of agreement with a company in which former Renong Bhd executive chairman Tan Sri Halim Saad is a director.

       The deal involves a proposed joint-venture for the construction and facilities operation at the Rakushechnoye Oil and Gas Field in the Karakiyan District of the Mangistau Oblast, Kazakhstan.

       CN Asia said the parties would collaborate in the development, production, marketing and export of hydrocarbon, including liquid and gaseous hydrocarbon in the field, with CN Asia investing and developing the Central Processing Complex together with the partner company.

       What is interesting is that this is similar to a deal in which another Halim Saad entity had tried to embark on. Recall that in October 2019, Sumatec Resources Bhd, then controlled by Halim Saad, had received a termination notice for the Rakushechnoye oil field deal.

       The PN17 status-Sumatec had entered into the agreement for the proposed project on March 8, 2012.

       The deal had been terminated due to the financial and legal predicaments of the financially-distressed Sumatec.

       One wonders if CN Asia will be successful in the deal.

       According to the stock exchange filing, the investment value for the implementation of the complex is about US$285mil (RM1.19bil) for the first phase – the equity to be injected by CN Asia is 15%, while the balance of 85% is to be raised via issuance of debt or loan.

       CN Asia said the project provides it the opportunity to expand its source of income and it would contribute positively to its future earnings and improve its financial position. Time will tell if CN Asia is able to pull off this deal successfully.

       Going in a new direction

       WE have seen such developments over and over again. Listed companies jumping on the bandwagon of a sector that is hot.

       Back in the day, there were many newcomers into the property development business. That was made easier as one of the requirements prior to a listing years ago was said to be land in the balance sheet.

       Then it was tech. The dotCom boom saw many companies announce their intent to start tinkering with solders and tech. Did not matter what as long as they could latch onto a hot sector that will raise their share prices.

       After that was oil and gas. Again, booming oil prices saw companies again aim to drill for higher share prices by announcing deals that got them “involved” in the oil and gas business.

       And over the past two years, the fad was PPE and rubber gloves where companies jumped into that business, with many regretting that move.

       Now the rise in palm oil prices have seen companies back in the day scurry to get into that segment when prices clawed their way towards RM4,000 a tonne. There were many planters’ schemes for individuals to invest in a hot crop. The same happened with Musang King durian.

       Now, as the price of crude palm oil jumps towards RM8,000 a tonne and maybe even an unimaginable RM10,000 a tonne, it has happened again.

       Vortex Consolidated Bhd on Thursday announced its intent to buy a small plantation company. It is spending RM21mil to buy a small plantation company, or RM23,000 an acre, that made an unaudited RM330,000 in profit for its 2021 financial year.

       Vortex share price was unchanged at seven sen yesterday.

       The surprise was that the shares ended flat for a company that signalled a desire to venture into the plantation business.

       Maybe investors, after seeing how a large number of counters that went into the rubber glove business only to see there once stratospheric share prices come crashing back, were a lot less bullish. After all, they can see how the supernormal profits of the rubber glove companies have returned to normal profits today and the same is to be expected with crude palm oil. It is just a matter of time.

       The golden goose

       IT is no secret that the bulk of profit made by the Employees Provident Fund (EPF) is a result of its investment abroad. It was a decision every member of the provident fund will be thankful for as the investments overseas have delivered handsomely to the returns the fund has made.

       Foreign investment made 52% of the RM67.06bil in total gross investment income the EPF recorded last year. That is more than admirable given that foreign investments are not the bulk of the EPF’s assets. Most of the money invested ins in Malaysia. Out of a fund size of RM1 trillion, RM639bil is invested at home.

       Despite foreign investments delivering way better profit for EPF, the fund had to liquidate RM22bil in overseas investments over the past two years to partially pay for the RM110bil that was disbursed to those who had withdrawn from their EPF savings under the many withdrawal schemes during the tumultuous times of the pandemic. The last of the withdrawal schemes ended last month.

       Maybe there will be an impact from unwinding of investments abroad sooner than anticipated.

       After all, when there is a need for liquidity, all investments will have to be looked at.

       The hope is that the decision to wind down much-better performing foreign assets does not dilute the performance of investments abroad when it is time to deliver this year’s dividend.