Undervalued Gem- Global Investment Limited Huge Discount Gap to Fair Valuation Narrowing

It is interesting to note that despite the almost daily share buy-back by management, Global Investment Limited ("GIL") remains at a huge discount to its fair valuation. The good news here is that the prior to the commencement of the share buyback exercise in early January 2019, the Company's shares were trading at a discount of 39% relative to its NAV per share as at 31 December 2018. Following the implementation of share-buyback, the fair valuation gap has narrowed slightly. Based on current market price of S$0.151 as at 23 June 2021 relative to Q1FY2021 announced NAV of S$0.1977, this represented a discount of 30.9% to fair valuation (since investible assets marked up to fair value, NAV here will approximate fair valuation). 

1. Recap of Addition Asset Purchased During 2020 COVID Induced Economic Downturn

One of the key investment by GIL was to exploit the opportunity to invest in more bank contingent convertibles (CoCo) when markets fell drastically due to COVID-19 in 2020. Hence CoCo percentage concentration increased to 58% in 2020 relative to 43.4% in 2019. This turned out to be a brilliant move as the risk of holding CoCo reduces with various European markets gradually recovering from COVID due to higher vaccination rate.    

2. Key Management lead by Mr Boon Swan Foo and team still going strong

Mr Boon Swan Foo who has extensive experience continued to be on the board of directors of GIL. 

Mr Ronald Seah, Lead Independent Director, who has served for over 10 years will be stepping down at the end of the 2021.

Mr Tan Wee Peng, has also stepped down at the AGM to make way for election of new directors as part of the board renewal process. 

Mr Lay Charlie Nhuc Hiang has joined the BOD in June 2020. He is an economist of an International Investment Bank (Commerzbank) who understands the investment business well. 

Rest of the BOD remains intact. Mr Boon Swan Foo and Mr Ronald Seah also continue to increase their shareholdings in GIL through the Scrip Dividend Scheme. Interest with shareholders are thus aligned.

3. Parting Thoughts

Despite the rally in share prices of GIL, the Company is still very much undervalued. At a discounted price of 30.9% to NAV, it offers a fair buffer margin of safety. The annualized dividend yield is currently at 5.29% (based on S$0.008 per share to market traded price of S$0.151 per share). I reckon that the cash dividend paid out has been conservative due to COVID as well as encountering good opportunity to invest into marketable securities. If it goes back to pre-COVID period, dividends payout has the potential to increase by another 20%. which will mean a 6.6% dividend yield.