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Dear Shareholders,

It is our pleasure, on behalf of the Board of Directors to present the Annual Report and Audited Financial Statements of JcbNext Berhad (“JcbNext” or “the Group”) for the financial year ended 31 December 2019 despite the challenging situation that we find ourselves in now. I hope you have been keeping yourself and your families safe and healthy.


For the financial year ended 31 December 2019, the Group recorded revenue of RM8.69 million, profit before tax of RM11.82 million and a profit attributable to shareholders of RM10.31 million, representing year-on-year growth of 1.8%, 3.3% and 4.2% respectively. The Group’s financial performance is largely dependent on the Group investing into several high-quality investments which can generate dividend income for the Group. As the Group continued to work on realising this plan in 2019 and beyond, it is expected that the Group’s financial performance from a P&L perspective to be relatively flat for the time being. We are thankful that during the year, our associated companies continued to contribute RM9.09 million to the Group’s bottom line which was consistent with the RM8.98 million recorded in 2018. An item which can result in volatility in our P&L in any given year is the effects of foreign exchange on our foreign currency denominated cash holdings. As you may be aware from previous years’ disclosures, the Group maintains some of its cash in USD and SGD to ensure that we have purchasing power should there be an investment opportunity outside Malaysia during a time of crisis. For the year ended 31 December 2019, the Group recorded a net foreign exchange gain of RM0.27 million which was lower than the RM0.40 million recorded in 2018.

To have a balanced picture of the financial performance of the Group during the year, we would also have to look into the consolidated statement of financial position, specifically in equity. Despite recording a net profit attributable to shareholders of RM10.31 million in 2019, shareholders’ funds had decreased from RM328.59 million in 2018 to RM325.82 million in the current year. Besides shares bought back and dividends paid amounting to RM3.24 million and RM5.47 million respectively, there was a decrease in the fair value of the Group’s equity investments designated at fair value through other comprehensive income (“FVOCI investments”) amounting to RM4.93 million which was the primary reason for the decrease in net assets or shareholders’ fund during the year.

During the year, we continued making progress in controlling our costs with our operating expenses, excluding foreign exchange gains/losses, decreasing slightly by 1.4% to RM5.79 million in 2019 from RM5.87 million in 2018. The key takeaway is that operating costs had not increased as we have maintained a small team and managed our operations prudently.

As at 31 December 2019, our total assets stood at RM327.83 million with shareholders’ funds recorded at RM325.82 million (RM2.40 per share), compared with RM330.12 million and RM328.59 million (RM2.39 per share) as at the end of 2018. With liquid cash and short-term investments totalling RM136.53 million, and no debt, we continue to actively search for acquisition opportunities and believe we are positioned well to enter into long-term partnerships when such opportunities eventually arise.

A detailed discussion on the Group’s financial performance can be found in the Management Discussion and Analysis included in this Annual Report.


The Board of Directors is pleased to propose a final single-tier dividend of 4.0 sen per share for the financial year 2019 (2018: 4.0 sen). The proposed dividend is subject to shareholders’ approval at the forthcoming Annual General Meeting.


2019 saw some changes taking place in our Board of Directors. Firstly, given my long tenure on the Board as an Independent Director since 2004, I had expressed my intention to be redesignated as a Non-Independent Non-Executive Director and consequently, my tenure as an Independent Director came to an end at the conclusion of the Fifteenth AGM held on 27 June 2019. I continue to serve as Chairman of the Company thereafter albeit as a Non-Independent Director. The next change was the resignation of Mark Chang from the Board, also on 27 June 2019. Prior to his resignation, he was the only Executive Director on the Board and now our Board is wholly comprised of non-executive directors, fostering greater objectivity in the boardroom and separation of powers from executive management. I am sure you will be relieved to know that Mark continues to serve as the Group’s CEO despite not holding a board seat. Last but not least, Cindy Ko joins our Board as an Independent Director, bringing with her a wealth of knowledge and experience in the area of investments in addition to contributing to the gender diversity of the Board.

In the area of investments, the Group had, during the year, invested approximately AUD3.52 million (equivalent to RM10.14 million) in the shares of Hastings Technology Metal Ltd, an Australian Securities Exchange listed exploration and development company that is currently involved in rare earth projects in Western Australia. Besides Hastings, the Group had also accumulated some shares in Hup Seng Industries Berhad, a company that is involved in the manufacture and sale of crackers/biscuits and confectionery food items.

We believe that at the prevalent share prices of the Company in 2019, buying back our shares was a good use of our cash. During the year, we had bought back 2,163,600 shares which substantially made up the 2,172,200 treasury shares held as at 27 December 2019 which were cancelled, an action we believe is appropriate from a corporate governance perspective. Given how the share price of the Company had fallen further in 2020, we have been continuing with our share buy-back program.


The Board and management are committed to try to be patient and disciplined so that we invest only when the right opportunity presents itself at the right price. Our experience along these lines in the past, especially with 104 Corporation and Lion Rock Group Limited (“Lion Rock”), has been very fruitful and gives us confidence that this is the right path for us. With the outbreak of the COVID-19 pandemic in 2020 triggering lockdowns and closure of borders across the globe, the world is coming to terms with the negative impact of the pandemic on global economy. Stock markets have taken a hit in February continuing into March, but have since appeared to have stabilised. There may be some stocks trading at attractive valuations right now but we do not know how deep is this hole that the world has found itself in. The search for a vaccine is understood to be 12 to 18 months in the making and in the meantime, we do not know how the COVID-19 situation will play out. During this time, the Board and management will continue to tread cautiously as we have done in the past, searching for yields and investing only when our pre-determined investment criteria has been met and only in investments that are aligned with the Group’s interests and beliefs.

During the year, Koperasi Co-opbank Pertama Malaysia Berhad who has taken up a majority of the space in Wisma JcbNext, moved in towards the end of the year. Given the glut of office space in Kuala Lumpur exacerbated by the COVID-19 outbreak, we are thankful that we have a tenant in place for the year ahead and beyond. I would like to take this opportunity to officially welcome them to Wisma JcbNext and we hope they will enjoy operating from their new office and find continued success.


The Group continues to endorse principles of sustainability in its business operations and corporate activities. We are pleased to present to you our Sustainability Statement in the Annual Report where you can find our thoughts on the matter and also some of the initiatives that are already in place.


We would like to record our appreciation to all our employees, valued partners, business advisers and shareholders for your continued support during the past year.



Dear shareholders,

For 2016, we saw the exit of some of our larger shareholders. After holding on for a couple of years since the sale of the operation, SEEK was keen to sell their shares and some other substantial shareholders through the years thought it was a good time to exit as well. Albert (Wong Siew Hui) and I decided to buy their block of shares which triggered a Mandatory Take-Over Offer to the rest of the shareholders. As the result of this exercise, management (including myself) now emerges as the majority shareholder of JcbNext. Hopefully, shareholders will now have extra comfort knowing that, being the majority shareholder, the management’s interest will be more aligned with the rest of the shareholders. With this corporate exercise, it also allows management to focus on longer-term and not short-term results.

The aspiration of JcbNext moving forward is to be a listed company that can continuously distribute dividends to shareholders every year and for many years to come. For that, our investment focus is on companies that are able to generate good free cash flow and willing to distribute those free cash as dividends back to shareholders. We are also mindful and conservative with our finances - we don't have much debt and prefer not to have any debt at all. Debt always increases the risk to our Company and has a higher chance to interrupt our future dividend payout. As management of this Company, our ultimate performance goal is the dividend payout to our shareholders. Revenue, profit, book value, share prices and others are secondary objectives.

As for the type of companies we are looking at, we look for both listed and unlisted companies and we don't mind buying a minority interest or 100% of companies. The criteria we look for will be:-

  1. Good business. We define good businesses as businesses that have good loyal customers, do not require a lot of capital reinvestment, a healthy profit margin, relatively stable business in operations for a number of years, and not in an overly competitive industry. Good businesses will generate good free cash flow that can be returned to shareholders as dividends.
  2. Shareholder-friendly management. Good management is a given criteria for any good company. Equally important is having a shareholder-friendly management so that when there is extra profit, those profit will be managed to the best interest of all the shareholders. Those extra profit can be reinvested in the company for future growth or returned to the shareholders as dividends. Non-shareholder-friendly management will use those extra cash for the benefit of their personal interest first. So the company could be a good business but as a shareholder, we receive only a small portion of our rightful share of the gain or potentially none at all.
  3. Right price. Even for a good business with a shareholder-friendly management, our investment will still be bad if acquired at a high price. It is important that we are conservative in our valuation of businesses so that we have a good margin of safety in our investments. As our main goal is investment for future dividend, we can compare the potential dividend return from an investment opportunity presented to us, versus returns from alternatives like S&P 500 ETF, KLSE Index ETF or money market fund. We could be busy evaluating all the various business ventures everyday but if the price is not right, we will not do any investment and we don't mind waiting for years to find the right company at the right price. This is an advantage JcbNext has as compared to other companies such as fund management companies where they have pressure to invest all year round even when the market is near its peak.

So far from our experience, the companies that would be attracted to JcbNext would be of the following kind:-

  1. Mature companies and entrepreneurs who wish to partially retire. We have come across a few of such companies. They are good companies with good entrepreneurs. However, their children might not want to take over the business and the entrepreneurs would like to have some cash up front that he can use and not have to feel too stressed that his entire retirement wealth is tied up to the fortunes of his company. The entrepreneur sells us part of his company, he has some cash up front to use, he continues to work in the company he loves - and he can sell the rest of his shares to us in the future, if he so chooses. We believe such an arrangement is a good win-win for both JcbNext and the entrepreneur. JcbNext will become a place where entrepreneurs can park their good companies with us knowing that we will continue with their legacy after they retire and help them to reduce their risk close to retirement.
  2. Smaller listed companies. All listed companies need shareholders. However, if the companies only consist of individual public shareholders and fund management companies, during economic downturn, listed companies normally experience panic selling of their shares, which would depress their share price and cause more panic among the remaining shareholders. Smaller listed companies can diversify their shareholders by having JcbNext as their long term shareholder because during an economic downturn, there is no pressure for JcbNext to sell our investments and on the contrary, JcbNext will be glad to buy more of the cheaper shares of a good company.
    Note: If you are an owner of a listed company and wish to diversify some of your shares to us, please contact us. For JcbNext to perform this function well, JcbNext must ensure we have good cash reserve and we don't have much debt so that when we receive the phone call, we can write the cheque.

We do look at startups for potential investment and so far, it is always the pricing that prevents us from investing into this group of companies. There is a saying about companies being "priced to perfection". In startup investing, we realized that a lot of startups are "priced to dream come true". That means the asking price of the startup is only a fair value to investors like us if the startup achieves what they dream. As we know, most of the time, dreams do not come true for most startups. We have discovered that we lack the ability to pick the “winners� from this group, without the ability to time-travel to the future and back. As such, we choose not to risk our shareholders’ money, when the valuation figures appear, in our view, high.

The main weakness in our Company’s search for investments is that we are not high risk takers willing to go out to offer the owner a price that he cannot refuse. We don't know how to drum our chest and drop a stash of cash in front of the owner to buy his company. We are also not the type of people who would go out to promise 101 things to the owner, and try to sweet talk him into selling his company to us at a bargain. In fact, there are times we ask the owner not to sell to us because he can get a better price selling his company to someone else. We are not a good Romeo. Princesses are most likely not attracted to us - except the wise ones :-)

While we are waiting for the right investment to come along, we need to make sure that we protect our current cash from inflation. Our treasury role is to ensure we invest cash into short term investments that are not high risk, are fairly liquid and diversified across a few currencies as a way to hedge against currency fluctuation. When the right investment opportunity comes along, we must be able to convert our treasury holdings into cash for the investment.

As any investment is risky in nature, we are rather careful with our investments and we try to reduce risks that we can control - like assuming no debt, making minimum investments into risky startups, keeping our operating cost low and ensuring we have ready cash for rainy days. The other risks that we have no control over, we have to find ways to live with it when it happens. In hindsight, we are glad that we did not get into many of the investments that were presented to us in the last 2 years.

As we continue with our investment journey, we constantly have to remind ourselves to be humble with our opinion as this world is so complicated and there are so many unknowns that we aren’t even aware of.

May we have wisdom and humility to guide us to seek good investments that contribute greatly to society.

Mark Chang
Chief Executive Officer

Note: For ease of reading, we refer to all business owners as he, him and his. There are equally many fantastic business owners who are female.



JcbNext Berhad is an investment holding company. It owned and operated the online job portal business from 2004 to 2014. In 2014, the job portal business was sold to SEEK Ltd for close to RM2 billion with the net proceeds paid as dividends to shareholders. Today, the Company has stakes in associates, 104 Corporation, the largest job site in Taiwan and Innity Corporation Berhad, a leading provider of interactive online marketing platforms and technologies in Malaysia. It also has a majority stake in a small consultancy business in Japan and operates the Autoworld automotive classifieds and content website. JcbNext also has quoted investments in Malaysia, Hong Kong, Australia and Singapore and owns a 8-storey office building in Kuala Lumpur and a 2-storey shoplot office in Johor.


During the year, the Group generated revenue from services, rental of office space, dividends, interest and other investment income. Dividends of RM3.31 million from the Group’s quoted investments contributed 38.1% of the Group’s revenue. This was followed by investment distribution income from the placement of funds in money market unit trust funds amounting to RM2.14 million which contributed 24.6% of the Group’s revenue. Interest income of RM1.89 million and revenue from services of RM1.01 million contributed another 21.8% and 11.7% of the Group’s revenue respectively.

An analysis of the Group’s revenue is as follows:

Group 2019
Services 1,013,570 1,053,116
Rental income from investment properties 331,184 166,267
Dividends from other investments 3,311,707 3,202,188
Investment distribution income 2,138,308 1,976,949
Interest income 1,891,895 2,131,747
8,686,664 8,530,267

No material changes in total revenue were recorded in 2019. The increase in rental income from investment properties was due to the collection of rental income amounting to RM0.28 million from Koperasi Co-opbank Pertama Malaysia Berhad (“Co-opbank Pertama”) for lease of office space in Wisma JcbNext from September 2019 onwards. The total area leased to Co-opbank Pertama is approximately 20,000 square feet which is approximately 75% of Wisma JcbNext and the tenancy is for a period of 3 years. The Company retains approximately 13% of Wisma JcbNext for its own use with the remaining 12% available for lease. Rental income is set to increase in 2020 with the expected collection of rental from Co-opbank Pertama for a full year duration in addition to ancillary income from advertising.

Dividend income grew 3.4% to RM3.31 million compared with RM3.20 million in 2018. Total dividend income from Lion Rock Group Limited (“Lion Rock”) amounted to RM2.82 million in 2019 compared with RM2.61 million in 2018. The remainder of dividend income of RM0.49 million were from the underlying investments in quoted shares made through the Group’s Equity Portfolio Fund that were received prior to the liquidation of the fund in April 2019 and to a lesser extent, from the Group’s investments in Nova Pharma Solutions Berhad and Hup Seng Industries Berhad. During the year, the Group continued to receive dividends amounting to RM8.66 million from its associate, 104 Corporation, although such dividends are not accounted for as revenue.

Investment distribution income from investments in unit trust money market funds together with interest income totalled RM4.03 million which was a slight decrease of 1.9% compared with RM4.11 million in 2018. The decrease was partly due to Bank Negara’s decision to cut the Overnight Policy Rate by 25 basis points to 3.00% in May 2019. In addition, in October 2019, the Group withdrew its money market funds and temporarily placed them in current accounts while awaiting Budget 2020 to be tabled by the Finance Minister of Malaysia.

In terms of services, the Group derives revenue predominantly through its subsidiary in Japan which provides contract staffing consulting services on a small scale. The Group did not invest to expand the automotive classifieds and advertising services business via the Autoworld website in 2019 but nevertheless, the Group continued to update the website with automotive related content.

The Group’s operating expenses in 2019 amounting to RM5.52 million was consistent with the previous year’s operating expenses of RM5.47 million. The slight decrease in staff costs from RM2.68 million in 2018 to RM2.56 million in 2019 was due to reversal of bonus provisions made in respect of 2018. Other operating expenses had increased slightly by 8.7% to RM2.03 million in 2019 compared with RM1.86 million in 2018. Included in other operating expenses are foreign exchange gains or losses. In 2018, other operating expenses included foreign exchange gains of RM0.40 million which had decreased to RM0.27 million in 2019. This was the primary reason for the apparent increase in other operating expenses. Looking into the individual components, the increase in directors’ fees was due to the appointment of Ms Cindy Ko, an Independent Non-Executive Director, to the Board of Directors on 27 June 2019. Mr Mark Chang who resigned from the Board of Directors on the same day, was not paid directors’ fees in the past. The increase in staff benefits cost were mainly from group insurance benefits and staff training while the increase in travelling expense was mainly attributed to trips conducted for investment monitoring purposes.

Further breakdown of the Group’s other operating expenses is as follows:

Group 2019
Net foreign exchange (gains) (274,264) (402,680)
Professional fees 990,751 1,052,500
Directors’ fees 255,000 214,000
Office expenses 195,822 190,177
Security costs 128,268 119,228
Utilities 99,080 94,543
Staff benefits 137,792 82,881
Quit rent and assessments 61,171 66,875
Travelling 123,052 55,751
Telecommunication 36,714 37,969
Insurance 38,828 37,757
Miscellaneous 237,879 315,853
2,030,093 1,864,854

The Group continued to rely a great deal on our associates, primarily 104 Corporation, to contribute to the Group’s earnings in 2019. To recap, 104 Corporation is principally involved in the online job portal business and also provides executive search and HR consultancy services in Taiwan. Our share of profit from 104 Corporation in 2019 had increased marginally to RM8.82 million compared with RM8.67 million in the preceding year. On the back of a modest GDP growth of 2.7% in Taiwan, 104 Corporation’s revenue grew 3.7% year-on-year to NT$1.64 billion compared with NT$1.58 billion in 2018. Despite the increase in revenue, the company’s profit before taxation decreased slightly by 4.6% to NT$335.93 million compared with NT$352.06 million in 2018 mainly due to a 5.0% increase in operating expenses primarily from higher staff costs and depreciation expenses. However, net profit attributable to shareholders increased marginally by 1.3% year on year to NT$286.00 million compared with NT$282.21 million a year ago due to a decrease in income tax expense as a result of an income tax benefit of NT$18 million recognised from R&D investment tax credit. The balance sheet of 104 Corporation remains solid with cash holdings of NT$2.17 billion at the end of 2019. 104 Corporation has recently announced a dividend of NT$8.62 per ordinary share representing 100% of their net profit attributable to shareholders for the 2019 financial year, which will be paid out after the company’s AGM on 28 May 2020.

Our other associate, Innity Corporation Berhad (“Innity”), is principally involved in the provision of technology-based online advertising solutions, to their customers in the Asia Pacific region, using inhouse developed technology platforms. Innity has an established presence in Malaysia, Hong Kong/ China, Indonesia, Philippines, Singapore, Taiwan, Thailand, South Korea, Myanmar, Cambodia and Vietnam. Our share of profit from Innity in 2019 amounted to RM0.26 million, down 13.8% from RM0.30 million in the preceding year. Innity posted revenue growth of 9.6% year-on-year to RM117.19 million compared with RM106.93 million in 2018. The increase in revenue was mainly contributed by its operations in Malaysia, Singapore, Vietnam, Indonesia, Hong Kong/ China, Philippines, South Korea and Cambodia. Despite the increase in revenue, Innity’s PBT decreased by 45.4% to RM2.25 million compared with RM4.12 million in 2018 due to higher direct costs, staff costs and share of losses from its equity-accounted associates. Direct costs represent the costs paid to publishers based on rate card profit margin.

Overall, net profit attributable to shareholders for 2019 increased marginally by 4.2% to RM10.31 million from RM9.90 million in 2018. As highlighted earlier, this was primarily due to the slightly higher revenue and share of profits from equity-accounted associates. As the Group’s 2019 financial performance indicated, the Group is sensitive to external factors and dependent on the performance of its associates. Earnings per share amounted to approximately 7.55 sen per share. The Board has recommended the payment of a final dividend of 4.0 sen per ordinary share to be paid after the forthcoming AGM

Our financial position remains strong with net assets of RM325.82 million as at 31 December 2019, down slightly from RM328.59 million at the end of the previous year. On a per share basis, this translates to RM2.40 per share with the Company’s share quoted at a price of RM1.45 as at 31 December 2019.


The Group’s investments and cash reserves comprise of:

Group 2019
Investments in associates
- 104 Corporation 108,505,800 107,789,120
- Innity 12,439,438 12,181,069
120,945,238 119,970,189
Financial assets at fair value through other
comprehensive income
- Lion Rock 34,200,967 38,379,607
- Holdings Ltd - -
- Nova Pharma Solutions Berhad 4,929,578 3,239,436
- Hastings Technology Metal 7,305,412 -
- Hup Seng Industries Berhad 676,620 -
- Equity Portfolio Fund - 10,093,363
- Unquoted investments 3,005,558 2,448,954
50,118,135 54,161,360
Financial assets at fair value through profit or loss
- Money market unit trust funds 55,896,225 64,191,174
Cash reserves
- USD 16,590,148 20,616,901
- HKD 16,547 1,701,072
- SGD 32,685,065 27,540,260
- RM 30,880,178 20,879,575
- Others 458,853 289,892
80,630,791 71,027,700
307,590,389 309,350,423

The performance of the Group’s associates has already been detailed in the previous section of this report. The carrying value of the investments in associates on the Group’s balance sheet increased marginally by 0.8% in 2019 to RM120.95 million. Against the Taiwan dollar, the Ringgit had weakened from TWD1:RM0.1354 as at end 2018 to TWD1:RM0.1364 as at end 2019 and this contributed to an increase of RM0.79 million in the carrying value of 104 Corporation on our balance sheet. In addition, while the share of profit from 104 Corporation for 2019 amounted to RM8.82 million, the dividend received from 104 Corporation during 2019 based on its 2018 net profit amounted to RM8.66 million. Although it does not benefit the Group’s bottom line, the dividend from 104 Corporation provides liquidity for the Group to fund its annual working capital requirement without having to tap into the Group’s reserves set aside for future investments. This is apparent from the Group’s statements of cash flows for 2019 which shows that the dividends it receives from 104 Corporation, Lion Rock and other investments in quoted securities totalling RM11.97 million being more than sufficient to cover the RM3.23 million working capital utilised in 2019.

The largest investment under the FVOCI category is Lion Rock with a carrying value of RM34.20 million. Lion Rock is principally involved in the provision of printing services to international book publishers, trade, professional and educational conglomerates and print media companies. This is a stock that the Group had accumulated from 2011 to 2013, investing a total of RM2.98 million. However, in 2014, Cinderella Media Group Ltd which used to be the parent company of Lion Rock, rewarded its shareholders by declaring a dividend-in-specie of its stake in Lion Rock and spinning it off as a separate listed company on the Hong Kong Stock Exchange. As a result of that, the Group’s stake in Lion Rock had increased by an additional 36.5 million shares in 2014. At the end of 2019, the Group held an equity interest of approximately 7.0% in Lion Rock. Lion Rock pays dividends regularly and for the financial year ended 31 December 2019, its dividend yield was 5.8%. The Group received RM2.82 million in dividends from Lion Rock during the year. At its AGM on 8 May 2020, Lion Rock’s shareholders approved a final dividend of HK$0.04 per share as well as a special dividend by way of distribution in specie of shares in Left Field Printing Group Limited (“Left Field”) on the basis of 1 Left Field share for every 16 shares for every share held in Lion Rock. The fair value of the Group’s investment in Lion Rock had decreased by 10.9% in 2019, mainly due to the drop in its share price from HKD1.34 at the end of 2018 to HKD1.20 at the end of 2019.

Lion Rock’s revenue for the year ended 31 December 2019 decreased by 3.5% to HK$1,607.0 million from HK$1,665.4 million in the previous year. The decrease was mainly driven by decrease in sales from subsidiaries Asia Pacific Offset Limited (“APOL”) in the US and South American regions and a decline in printing spending from government agencies from Left Field in Australia. Lion Rock’s business especially its China based printing operations continue to be impacted by the ongoing US-China trade war. The US imposed tariff on books printed in China since September. Even though the tariff was subsequently reduced to 7.5%, it has kickstarted the trend for publishing houses to diversity their print production away from China. Lion Rock reported a net profit attributable to shareholders amounting to HK$138.80 million in 2019, a decrease of 18.1% compared with 2018. Apart from the decrease in revenue, the decrease in net profit was also due to a decrease in share of profits from its associated company, The Quarto Group, Inc (“Quarto”), by 55.1% to HK$5.06 million in 2019 compared with HK$11.27 million in 2018. Lion Rock has an equity interest of 25.4% (subsequently increased to 31.6% in January 2020) in the London Stock Exchange listed associated company which is involved in the English language illustrated book publishing business in the US and UK. Despite the reduction in share of profit, Quarto had returned to profit for the first time since 2016. In the previous year, Lion Rock had equity-accounted the results of Quarter from 17 May to 31 December 2018 which was profitable while the company reported a loss for the full 2018 year. The 2018 losses were mainly driven by exceptional items related to its reorganisation. As at 31 December 2019, Quarto has net current liabilities of USD46.83 million mainly due to outstanding borrowings amounting to USD66.08 million which included a USD7 million loan note owed to Lion Rock. In January 2020, Quarto successfully raised USD16.5 million net of expenses to pay down bank debts and the bank facilities have also been extended to July 2021. The management of Quarto have warned of a possible material reduction in the group’s revenues and results for 2020 due to the impact of the COVID-19 outbreak on the group. This could also lead to a breach of financial covenants with its lenders.

China’s print manufacturing sector continue to decline due to the tightening of labour laws, diminishing low-cost labour pool and increasing content regulation. The ongoing US-China trade war and the recent coronavirus outbreak have fast tracked the supply chain diversification away from China. As part of the group’s long-term diversification strategy, Lion Rock had on 25 February 2020 completed the acquisition of Papercraft Sdn Bhd, a Johor-based printing plant. The acquisition will not only expand its print capacity in South East Asia but together with the group’s manufacturing footprint in China, Singapore and Australia, the group’s strategy is to be able to provide comprehensive service to their global customers, enabling them to launch book titles simultaneously in different parts of the world. Holdings Ltd (“Asiatravel”) is an online travel company that offers various travel products through its multi-channel distribution platforms. In 2018, several of its creditors had filed writ of summons and various demands against the company and one of its subsidiary. On 7 August 2018, the company and its subsidiary had filed applications with the High Court of the Republic of Singapore to seek a moratorium against enforcement actions and legal proceedings by its creditors, with the intention of subsequently proposing a scheme of arrangement (“S211B Applications”) (through a series of multiple applications, the High Court had on 18 February 2020 granted a final extension of deadline to convene a meeting of creditors to 29 September 2020 and the moratorium to 27 October 2020). In addition, on 5 October 2018, the group received a notice from the Singapore Tourism Board (“STB”) informing of its decision to suspend the group’s travel agent licences (the licences were subsequently revoked sometime in November 2019). On 10 June 2019, Asiatravel announced that it had entered into a financing agreement with an investor to allow the companies to restart their operations. On 19 June 2019, Asiatravel had served writ of summons on an investor in China and on 3 October 2019, it had obtained default judgment in Singapore against the same investor for an outstanding sum of SGD7.35 million (at the time of writing, this sum has not been recovered). On the trading of its shares, the Singapore Stock Exchange had on 27 April 2020 granted Asiatravel an extension of time up to 27 October 2020 to submit a trading resumption proposal. In light of these negative developments, the Group has since 2018 reduced the carrying value of its investment in Asiatravel to zero.

In 2019, the Group decided to liquidate its Equity Portfolio Fund (“Equity Fund”), a discretionary mandate fund managed by a licensed firm of professional fund managers. This fund was started in 2012 with an initial injection of RM8 million which was subsequently increased by RM4.8 million in 2013 and decreased by RM5 million in 2014. This fund was mandated to invest for the long term in high dividend yield stocks in the region. Prior to the completion of the disposal in April 2019, the Equity Fund contributed dividend income to the Group amounting to RM0.40 million in 2019. The liquidation of the Equity Fund raised proceeds amounting to RM10.64 million with gains on disposal amounting to RM1.41 million. The after-tax annualised return of the Equity Fund from inception to disposal was approximately 7.9%.

The Group invested RM2 million in Nova Pharma Solutions Berhad (“Nova Pharma”) on 29 December 2017. Nova Pharma was listed on the LEAP Market of Bursa Malaysia on 9 March 2018. Nova Pharma is principally involved in the provision of engineering solutions for the pharmaceutical and biotechnology industries focusing on the initial design and building phase of pharmaceutical and/or biotechnology plants. The engineering solutions provided by the company range from pre-design (feasibility study and site selection) to design (conceptual design, basic design and detailed design) to post-design (tendering, procurement and site supervision) to other supporting activities (GMP documents review and gap analysis and assessment). Some of the pharmaceutical and biotechnology plants that Nova Pharma has been involved in include oral solid dosage, biopharmaceutical manufacturing, vaccine filling and finishing as well as ophthalmic manufacturing. The company’s principal markets are in Malaysia and Taiwan. For the year ended 31 December 2019, Nova Pharma reported unaudited revenue of RM6.30 million, representing a decrease of 20.3% from the previous year’s revenue of RM7.90 million. The decrease in revenue was mainly due to lower contribution from local pharmaceutical projects. Profit after tax decreased by 48.3% in 2019 to RM1.12 million compared with RM2.16 million in 2018. The sharper decline in profit compared with revenue was due to lower profit margins from local pharmaceutical and advanced technology facilities projects and higher staff cost incurred for its newly incorporated subsidiary. As at end of 2019, the Group held an equity interest of 9.45% in Nova Pharma. Nova Pharma has declared an interim dividend of RM0.002 per share in December 2019 of which the Group received approximately RM28,000 in January 2020.

During the year, the Group made two new investments, one of which is in Hastings Technology Metals Limited (“Hastings”), an Australian Securities Exchange listed exploration and development company. The Group had, on 7 August 2019, subscribed for 20,700,000 new shares in Hastings for a total consideration of AUD3,519,000 (equivalent to RM10.14 million based on the exchange rate as at 7 August 2019 of AUD1:RM2.882). The subscription came with one free option for every two shares subscribed and each option is exercisable into one new share at an exercise price of AUD0.25 each. The options expire on 12 April 2022. As at 31 December 2019, the Group has an equity interest of 2.03% in Hastings. We wish to fully disclose that our CEO and major shareholder, Mark Chang, has a direct equity interest of 4.05% and a deemed interest of 7.92% in Hastings. The fair value of the Group’s investment in Hastings had decreased by 28.0% by the end of 2019, mainly due to the drop in its share price from AUD0.17 at the point of investment to AUD0.115 at the end of 2019, in part due to a share placement exercise completed in December at a price of AUD0.143 per share and delays in meeting project milestones.

Hastings is currently developing the Yangibana Rare Earths Project (“Yangibana Project”) in an area covering approximately 650 square kilometres located some 250 kilometres from Carnavon in Western Australia. Mining leases granted are for 50 square kilometres over 21 years. The Yangibana Project involves development, construction, mining and processing operations to produce Mixed Rare Earth Carbonate (“MREC”) with high concentrations of Neodymium (Nd) and Praseodymium (Pr). These elements are essential raw materials used in the production of permanent magnets, critical in many hightech products including electric vehicles, renewable energy wind turbines, robots, medical applications and others. Hastings aim to become the next significant producer of Neodymium and Praseodymium outside of China. The project’s total capital expenditure is projected to be in the region of AUD593 million. Contract negotiations for the 10 years offtake with Schaeffler Group, a leading global automotive, aerospace and industrial supplier) slowed down considerably with the onset of the COVID-19 outbreak sweeping through Germany at early March. Besides Schaeffler Group, there are also ongoing discussions with other major users of permanent magnets in both Germany and Japan for long term offtake contracts. The project is dependent on Hastings being able to secure debt financing through a German government sponsored scheme for up to USD140 million which is conditional upon the signing of the Schaeffler offtake contract. The other major source of financing is an Australian government funded agency that is interested to fund a large part of the project’s infrastructure cost of approximately AUD200 million. On 3 June 2020, Hastings announced that it has entered into a binding Master Agreement with Schaeffler Technologies AG for the targeted supply of its MREC.

The other new investment that the Group made in 2019 was in Hup Seng Industries Berhad (“Hup Seng”). During 2019, the Group had acquired 751,800 shares of Hup Seng for a total consideration of RM0.68 million at an average cost of RM0.90 per share. This Johor-based manufacturing company is no stranger to Malaysians, be it investors or consumers of their products. Hup Seng is listed on the Main Market of Bursa Malaysia Securities Berhad and the group is principally involved in the manufacture and sale of crackers/biscuits, confectionery food items and instant beverage mix products under brand names such as Cap Ping Pong, Hup Seng Cream Crackers, Naturell, Kerk and In-Comix. Hup Seng’s products have been in the market for more than 60 years. Hup Seng Cream Crackers is the group’s flagship product which is popular across generations of households. These crackers are nondescript yet continue to sell well owing to its affordability, great taste, simplicity and consistency in product quality. In general, consumers just trust the brand and its products. The Group registered slight revenue growth of 0.7% to RM309.54 million in 2019 from RM307.37 million in the preceding year. Profit after tax, however, decreased slightly by 3.3% to RM41.53 million from RM42.96 million in the preceding year mainly due to poorer margin in certain segment. Out of the total revenue of RM309.54 million, 72% was from domestic sales while export markets such as Thailand, Myanmar, Saudi Arabia, Indonesia, China and Singapore accounted for the remaining 28%. On product mix, biscuits accounted for 97% of total sales while beverages and other products made up the balance. About two thirds of biscuits revenue was dominated by sales of crackers. The challenges in the food industry are the increasing number of competitors offering more product offerings, intense price competition, changing purchasing habits of consumers and as witnessed recently, the impact of a virus outbreak on the retail industry. Food safety, hygiene and quality are major risk factors in the food industry, and any missteps in these could lead to lasting reputational damage. As at 31 December 2019, the fair value of the Group’s investment in Hup Seng has not differed materially from its investment costs.

Looking at the table below, with the exception of Hastings, Asiatravel and to a lesser degree, Hup Seng, the fair value of the Group’s investments in quoted securities including its listed associates as at 31 December 2019 are significantly above the Group’s cost of investment. The unrealised gains, with the exception of 104 Corporation and Innity, have been recognised in Other Comprehensive Income (“OCI”) at this stage. Pursuant to the MFRS 9 - Financial Instruments, the Group has elected to classify its equity investments as fair value through other comprehensive income (“FVOCI”) where fair value changes on the Group’s equity investments will continue to be presented in OCI but any cumulative gain or loss in OCI will be directly transferred to retained earnings upon the sale of the equity investments. The unrealised gains on 104 Corporation and Innity, as associates, have not been recognised at all.

Cost of Investment
Carrying Value
Fair Value
104 Corporation⌃ 75,256,303 108,505,800 167,037,486
Innity⌃ 8,487,984 12,439,438 13,016,268
Lion Rock 17,799,453 34,200,967 34,200,967
Nova Pharma 2,000,000 4,929,578 4,929,578
Hastings 10,141,758 7,305,411 7,305,411
Hup Seng 678,367 676,620 676,620
Asiatravel 3,381,639 - -
  117,745,504 168,057,814 227,166,330

^ Accounted for using the equity method pursuant to MFRS 128, Investments in Associates and Joint Ventures

The Group’s treasury management objectives are to ensure there is available liquidity when needed and to preserve our long-term purchasing power to acquire investments. In that respect, the Group has decided that the main currencies that it will maintain are MYR, USD and SGD. While the Group will not convert existing MYR holdings into USD or SGD, a portion of any future foreign currency cash inflows such as dividends from 104 Corporation and Lion Rock will be converted into USD and SGD and deposited into interest bearing accounts. Although this may result in volatility in our P&L as seen in our 2016 and 2017 results, the Group does not intend to actively manage or trade currency positions nor engage in any speculative activities. The need to preserve our purchasing power came to the fore in late March 2020 when the Ringgit weakened to RM4.44 to the dollar in tandem with the fall in oil prices. The Group’s MYR holdings are placed in interest bearing bank deposits and money market unit trust funds. Towards the end of 2018, the government of Malaysia announced the abolishment of tax exemption on interest income earned by wholesale money market funds. To maximise yields, the Group transferred funds placed with wholesale money market funds into fixed deposits and retail money market funds. Recently on 17 April 2020, the Ministry of Finance had announced the extension of the tax-exempt status of retail money market funds to 1 July 2021.

At the May 2019 policy meeting, Bank Negara had cut the Overnight Policy Rate (“OPR”) by 25 basis points (“bps”) to 3.00%. In the first five months of 2020, Bank Negara had already cut OPR by another three times: 25bps to 2.75% in January, 25bps to 2.50% in March and a further 50bps to 2.00% in May to cushion the economic impact of the pandemic on businesses and households and support the improvement in economic activity. These monetary policy actions by the central bank will mean lower yields on the Group’s Ringgit holdings in 2020 and possibly beyond.

While the Group manages its treasury function conservatively to safeguard the Group’s interests, the focus of the Board and management is still on identifying new strategic investments and/or developing a broad portfolio of investments which can contribute to the future growth of the Group. To be able to capitalise on any opportunities as and when they arise without sacrificing unduly on the Group’s returns on its reserves, the Group will need to maintain an appropriate mix of long and short-term investments and cash.


The COVID-19 global pandemic has brought the world’s economies to a grinding halt quite literally. As it is, the global economy was already slowing due to the ongoing US-China trade war and other geopolitical risks. The threat of a novel coronavirus that can spread swiftly has brought on further serious economic and social implications. “Unprecedented”, “lockdown”, “social distancing”, “new normal” and “flattening the curve” are just a few of the catch phrases synonymous with the pandemic and which describe the reality that we live in now. The pandemic outbreak with the resulting lockdowns and closure of borders, have disrupted supply chains, decreased consumption amidst lower household income, increased the prospect of lay-offs and even closure of businesses. Business confidence and consumer sentiment have hit lows for the modern era. Domestically, as an oil revenue reliant nation, our economy and currency were negatively impacted by the crash in oil prices to below $25 a barrel in March and even briefly below $20 in April. In addition, the local economy has had to contend with an unexpected change in government in February just days prior to a wave of infections hitting the country, adding political risks in the fray.

A sea of red is seen across the globe as countries released their Q1 figures. An advance GDP report showed the US economy shrinking 5% in the first quarter, its worst reading since the 2008 global financial crisis. In mid-April, China said its economy shrank 6.8% in Q1, its first contraction since 1976. Similarly, Singapore’s Q1 GDP contracted 2.2%, South Korea by 1.4%, Hong Kong by 8.9%, eurozone by 3.1% and Japan by 2.2%. Thankfully, Taiwan’s Q1 GDP expanded by 1.59%. Malaysia’s economy reportedly lost RM2.4 billion per day from the Movement Control Order (“MCO”) with estimated losses so far from the MCO to be approximately RM63 billion. The unemployment rate rose to 5% in April from 3.9% in March and 3.3% in February and 3.4% in March 2019. On 13 May, Malaysia reported that its Q1 GDP had moderated sharply to 0.7%. Bank Negara is projecting a -2% to 0.5% GDP growth for the whole of 2020 after expanding by 4.3% in 2019. The IMF is expecting a recession in 2020 that is at least as bad as during the global financial crisis in 2009, and is projecting a recovery in 2021. The economic impact of COVID-19 is, however, expected to be partly mitigated by the significant monetary and fiscal stimulus measures introduced by authorities across the world. The US Federal Reserve, for example, has in April announced that it will pump USD2.3 trillion to prop up the American economy. Locally, four economic stimulus packages totalling RM315 billion have been announced by the Malaysian government.

Stock markets across the world saw increased volatility fuelled by fears of the spread of COVID-19. From 24 to 28 February, stock markets worldwide reported their largest one-week declines since the 2008 financial crisis. Global markets into early March became extremely volatile, with large swings occurring in global markets. On 9 March, most global markets reported severe contractions, mainly in response to the COVID-19 pandemic and an oil price war between Russia and the OPEC countries led by Saudi Arabia. Three days later, there was another drop where markets across Europe and North America fell more than 9%. Despite a temporary rally on March 13, all three Wall Street indexes fell more than 12% when markets re-opened on March 16. By the end of March, global stocks have seen a downturn of at least 25% from their February peaks, and 30% in most G20 nations but a market rally has already begun. Just as swiftly as markets fell in March, the markets rebounded in April continuing into June, despite the negative impact of the pandemic on economies worldwide. The market rally was fuelled by a combination of factors such as reduction in number of infections, news of progress in the search for a vaccine, government intervention measures, economic stimulus packages, agreement to cut oil production and technology stocks positively impacted by the work-from-home trend and more people staying at home. If there is anything that these market swings prove, it is that future market direction is incredibly hard to predict, as is the COVID-19 crisis. Going forward, the markets may be influenced by further government intervention, developments positive or otherwise in the fight against COVID-19, infection numbers, prolonged lockdowns, corporate results, developments in the US-China trade war, secondary outbreaks after the easing of restrictions and even the negative consequences, if any, of rising sovereign debt worldwide.

COVID-19 has not changed our strategy which is to develop a broad portfolio of long-term investments that can generate dividend income at targeted yields which in return can be paid onwards to our shareholders. At the onset of the present economic crisis, we are fortunate to be in a cash rich position, after holding back on any material investments in the last 5 years. While the current economic crisis presents the Group with buying opportunities, rest assured, our Investment Committee is treading cautiously and together with management, we have identified suitable potential targets and set their target prices conservatively. The Investment Committee has also come up a with portfolio allocation to ensure that we do not put all our eggs in one basket and to diversify our portfolio across several investments that present different risk levels. We will do the best we can but we do not know how long the present crisis will last. As a long-term investor, we do not focus so much on short term price fluctuations and are confident that in the long run, our investments will achieve the targeted returns as long as we continue to invest in companies and businesses with good fundamentals. Certainly, it is easier said than done, and something like the COVID-19 is so unprecedented that even experts and analysts do not know the magnitude and reach of its economic and social impact.

We are certainly aware of the possibility that any one of our present or future investments could turn bad should COVID-19 and the recession prolong. In the case of Hastings, the recession could slow down its plan for commercial production and affect its ability to secure future financing. As for 104 Corporation, a recession may reduce hiring activities which will negatively impact its job portal business. Advertising budgets tend to be cut in a recession and this will negatively impact Innity’s business. In the case of Lion Rock, demand for books and publications may decrease and this will hit its printing and publishing businesses. The saving grace is that most of these investments, save for the recent ones such as Hastings and Hup Seng, were acquired many years back at much lower valuations. Our corporate results in the near and medium term may be negatively impacted by a decline in the share of results from 104 Corporation and Innity, as will a decline in dividend incomes from the other investments and a reduction of interest income on our cash. Any temporary dip in the fair value of any of these investments will not hurt our P&L as the movements are accounted for under equity. It will however reduce our net asset value. Being able to recognise a full year’s rental income from our tenant will help to partially mitigate any potential loss of income from our investments and cash. In any case, the Group has the financial wherewithal to withstand a significant and prolonged downturn and will use this time to acquire new investments should valuations become really attractive.