CSE Global – Substantial Shareholders (CAM & Amundi)

Given the recent sell down on CSE Global counter, I figured it will be good to do a write up about its substantial shareholders (SSH) and also some thoughts regarding Amundi’s recent sell down.

For those who do not know, one can easily check out the list of substantial shareholders of company through its annual report statement. It is normally stated on the last few pages.

Under CSE Global, I will first be covering a summarised picture of CSE Global’s management who are vested in its stocks. Thereafter, a more detailed picture will be focused on the top major investment funds who are SSH – Chartered Asset Management & Amundi Group.

CSE Global’s vested management

CSE Global was a management buy-out company from the Singapore Technologies (ST). Some of the original management who were part of these buy-out team included current Chairman Lim Ming Seong, Tan Mok Koon, Kit Choon Teo & Kuok Thai Tiong. The latter two had since left the company while the first two are key people which many CSE Global investors are probably familiar with.

Here is a quick summary of those who are vested and have aligned interest with the CSE’s shareholders:

• Lim Ming Seong (Chairman) – 3,100,000 shares (0.6%)
• Tan Mok Koon  (Non-Independent Director) – 38,700,750 shares (7.5%)
• Alan Russell Stubbs (Group CEO) – 971,641 shares (0.19%)
• Lim Boon Kheng (Group CFO) – vested but amount uncertain

One thing to take note is that Tan Mok Koon still have a significant portion of shares invested under CSE Global. Thus, it is very unlikely that his sabbatical leave should play any catalyst role in deteriorating the company’s fundamentals. As long as one is intending to hold his/her shares over a long term horizon, Tan Mok Koon’s sabbatical leave should not be a worrying concern.

Funds who are vested in CSE Global

Given the excellent track record, I reckon there are probably many smaller institutional funds who are invested  in CSE Global but looking at the list of SSH, Chartered Asset Management (CAM) & Amundi Group are probably the two with the largest stake in it. For those who are not familiar with CAM, it is a Singapore boutique investment firm headed by both Colin Lee and his spouse Low Siew Kheng. Both of them are renowned fund manager – especially Low Siew Kheng who had won numerous awards during her employment with Baring Securities & UBS. Perhaps, CAM is also better known for their other huge investment stake in Boustead Singapore. Moving on to Amundi Group, they are probably a much larger investment firm than CAM – with around €650 billions of assets under management (AUM). More important to note, they are a French-based asset management company.

Based on their announcements made, I have a Bloomberg-captured summarized graph of their various purchase/sale since 2008:

With just screenshot, it isn’t really that interactive.

Instead, I have compiled an estimated measurement of both funds’ probable unit cost of investment for CSE. Concluding with the estimation was pretty straightforward though I can’t ascertain a full 100% accuracy of the result. Instead, its purpose was to offer a glimpse of the overall movement for both CAM’s and Amundi’s fund. I had also realised Amundi tend to not disclose several huge stake movement as well – often leaving behind gaps in between its announcements in SGX.

Estimation approach for CAM & Amundi:

The last 5 years information can be drawn from the announcement disclosure provided in the SGX website. As for earlier stake movement, a detailed excerpt is nearly impossible. Hence, I simply referred to end-of-FY disclosure in the annual reports and then reflect the average share price for that particular year. Quite cherry-plucking you may argue but too detailed of an estimation may not always guarantee accuracy and hence, I chose a simplistic approach. After all, once the unit cost has been estimated, a further 20% discount is applied for conservatism. All in all, the estimation modeled a unit cost of S$0.69 for CAM’s investment in CSE Global. If a 10% discount had been used, it would result in a unit cost of S$0.77.

The same goes for Amundi. And at a 20% discount, it translated to a unit cost of S$0.66. A 10% discount will yield a higher unit cost of S$0.74.

Now, the bigger issue is perhaps related to Amundi. During the latter half of 2011, Amundi had been gradually selling its stake in the open market, so much so that the fund hit below the 5% benchmark requirement needed for stake disclosure. Needless to say, Mr Market took it at face value and plunged the counter downwards as well. On mid-March 2012, Amundi resurfaced with a few open market purchases at an average price of S$0.845. So, perhaps the firm probably felt that things might have turned for the better and hence initiated bigger purchases. Yet on April 2012, Amundi announced an open market sale of 2.5 million shares. The rest is history as the market took it with over-pessimism. Till date, CSE Global last closed at S$0.76.

So, what is Amundi thinking?

Unless Amundi is simply speculating this counter – which I seriously doubt so – there are probably 2 reasons for their actions:

1. They could have discovered something drastically wrong in CSE’s fundamentals, hence the sudden 180° u-turn
2. It was probably a capital movement – something common with large asset management firm and hence, independent to whatever CSE’s fundamentals or business prospects are

Well, to me, the second option seemed largely probable and these are the reasons why:

1. It is important to look at all the fund movement in totality instead of drawing a conclusion from one open market movement. As much as one shouldn’t base all his/her conviction on a single trade by any funds, the same goes for an open market sale. On March 2012, Amundi had sold 2.5 million shares. Yet, from the period between the two open market sales – 2H of 2011 & March 2012, Amundi had actually repurchased a total of around 10 million shares – with half not disclosed via SGX announcements. As for its sell-off during 2H 2011, Amundi sold a total of around 14 million shares. Net-net, Amundi had purchased back almost half of the amount which they had sold in 1H 2011.
2. I had also spoken to CSE management during the last AGM and Chairman Lim Ming Seong had also suspected it to be mere capital movement within Amundi. He mentioned that many institutional funds had also queried him regarding Amundi’s actions and he too wish to know the reason as CSE’s fundamentals still remain the same as it was then.
3. Based on my own research work, I am also convinced it was a capital movement within Amundi. Looking at the larger picture, CSE is facing favourable business condition – record high contract order book and having no problems re-financing. Thus, unless there is a huge insider movement unaware by others or Chairman Lim Ming Seong is out to deceive – which I hardly believe – there is currently nothing bad against CSE business.
4. And lastly, option 1 is invalid as I believe Amundi should have their own intensive due diligence team working their research to its core. Besides, if CSE had indeed deteriorated, a 2.5 million share sales could have been too little to be justified.

Conclusion

My only question in assessing the recent plunge in share price is this: Why did it fall? Was it the anxiety caused by Amundi sale only? True enough, the market can argue about the poorer prospect faced by CSE Global’s performance in FY11 but I believed if it was so, it should have been discounted earlier on. If that is so, then it could have been solely due to Amundi’s open market sale and probably amplified by the overall poor market sentiment. In that case, the question now is whether such a reason been valid? Perhaps, the better question is, has CSE Global became cheaper?