Singaporean investment company 8I Holdings Ltd (ASX: 8IH) has seen its share price soar by 190% since listing in December 2014, and now boasts an impressive market cap of $321 million.
Shares are trading at around 90 cents – but the company recently said it holds just 9 cents in net tangible assets – not much for an investment company when shares are trading at 10x the value of its assets.
Millionaire Investor Program
The company's main claim to fame appears to be its flagship investment course, Millionaire Investor Program – which 8I says is based on the value investing philosophies and techniques of some of the world's greatest investors like Warren Buffett, Peter Lynch, sir John Templeton and Benjamin Graham.
Interestingly, the Millionaire Investor website says, "Our system for picking the right stocks that will make you 39.07% returns in just seven months!"
Source: millionaireinvestor.com (highlighting is mine, but the bold text is original)
Now that's the average return on six stocks covered as case studies – but clearly it could be worded better. Interested applicants can't sign up for the program either – you need to attend a 2-hour seminar first – and costs of the program aren't mentioned anywhere.
That's not exactly what I picture when I consider the noted and respected investors mentioned above.
Investment business
Incidentally, the company's listed securities business held shares worth $6.6 million as at September 2014 while the Investment business held listed securities worth just S$691,000. Performance according to the prospectus was unremarkable – matching the index in most years. 2014 net profit was boosted by a huge jump in the sale of investment securities and a number of positive one-off items.
Purchase and sale of CPA Academy raises red flag
Also at odds with the value investing image chairman Ken Chee projects, is the purchase of 51% in a business CPA Academy for just S$1.53 million in late January. 8I sold 39.2% of the company for S$4.5 million to an undisclosed party at the end of March, and is in discussions to sell 20% to 39.2% of its remaining interest in CPA to the same undisclosed party, which 8I says could bring in between S$5 and S$10 million. Is there a specific reason the company can't say who it sold CPA to?
At the time of the acquisition of CPA, 8I said the acquisition would provide the group with additional course offerings. CPA Academy provides training in online lead generation marketing. 8I also announced in March that CPA would transform from an education provider to being a provider of an internet advertising traffic platform. SO CPA's existing business wasn't good enough?
Brisbane property
Another potential red flag is the investment of S$60,000 into a property development in Brisbane, Australia. Units are due to be completed in late 2015. What a Singaporean investment company with interests in providing training seminars as well as investing in listed securities and property, and now an online advertising platform has to do with investing in a Brisbane, Queensland residential property unit is beyond me. It doesn't appear to be in the company's investing 'circle-of-competence' espoused by the likes of Buffett, but I could be wrong.
Who's looking after retail shareholders?
The chairman, Ken Chee, holds 86 million shares directly while executive director Clive Tan holds 65 million shares directly. Both men are also directors of 8 Capital Equities Group – which holds a further 73.8 million shares. Between their three holdings, the two own 63% of 8I.
Clearly they control enough of the company to do whatever they want and appear to be doing just that so far. Australian investors need to be acutely aware of what they are investing in – and currently, 8I has little in the way of tangible assets to back up the share price.
Buyer beware.
