Is Avenue Hotel Property Scheme a SCAM ?

1. After digging about Avenue Hotel Property Scheme, i thought it might be a good thing to share here.

   Info about Avenue Hotel Property Scheme (PDF).

   Company's website: Avenue Properties Bhd.

   My research:

   1) From the prospectus (http://avenuepropertiesberhad.com/pdf/avenueproperties_prospectus.pdf), look at page 40. The company’s RM 5 Million paid up capital is NOT funded by cash, but by Director’s words that he owes the company RM 5 Million. Then, at page 40, it says that amount is unsecured, interest free and without fixed repayment terms. In other words, this is a RM 2 company in disguise. To stretch that matter further, i can even create a company which is owned by me and my wife, paid up capital of say…. RM 100 Billion, with the only asset of the company is that i owed the company RM 100 Billion.

   How much is a “Guarantee” worth if that person DON'T have any assets and NO income? Do you think the bank would lend such person Millions (or for that matter, even thousands) ? Why would we treat this company differently?

   2) The Trustee they use (My Premier Trustee) is not registered (http://www.sc.com.my/eng/html/resources/stats/RegisteredTrustees.pdf). Why don’t they use registered trustee ? I asked the same question to a so called “Property investment company”, and that promoter's answer was, “Tell you what, you form one with the same terms using registered Trustee, and i’ll invest with you.”.

   Today, that company is no longer around (after separating quite a number of ignorant and possibly greedy people from their money). hhmm……

   3) Look at My Premier’s Trustee’s company profile ( http://www.mpt.com.my/Company%20Profile%202011.pdf) . Then, take a look at the companies they worked with. Notice none are companies u heard of. Next, google those companies. And……

   3a) AZZ Marketing. Some headlines when u search in google (in 1st page) are,
   – “AZZ Marketing Tidak Bayar Hasil Pemilik”
   – “Azz Marketing menipu jutaan ringgit duit rakyat”
   – “AZZ Marketing Berhad Pelaburan Ikan Keli Penipu!”

   - Facebook Group – bongkar AZZ Marketing. (http://www.facebook.com/group.php?gid=155223407845386).

   The funny thing is, My Premier Trustee on their website says that they’re not trustee for AZZ Marketing Enterprise, but only for AZZ Marketing Bhd. But when you go to main page of AZZ Marketing Bhd (http://www.azz4u.com/) , and you clicked on the bottom link http://www.kppazzmarketing.blogspot.com/ , that page wrote in their title , “KESATUAN PEMILIK PAKEJ AZZ MARKETING ENTERPRISE “. I might not be smart, but definitely i’m Not dumb to know that AZZ Marketing Bhd is related to AZZ Marketing Enterprise, and My Premier Trustee is related to both of these companies one way or another.

   3b) Arowana Ventures Sdn. Bhd. – Google it, and the scam has been a few years ago. I remembered surfing their website, and it’s closed. Now, it’s reopened again, promising a certain guaranteed return.
   – Read the lowyat’s forum (http://forum.lowyat.net/topic/2100249/all). I’m surprised they Recycle the same scam again.
   – Posted in June 2009 in investlah.com (http://www.investlah.com/forum/index.php?topic=3234.0). Search for “Arowana”.

   Same guarantees with all companies in MPT’s portfolio, different product. I wonder does “Ikan Keli” is the malay word for Arowana Fish. If that is so, that scammer really good in Recycling.

   3c) Search ” Prestige Diary Farm Berhad” on google, and on the main page, you’ll get:
   - [SCAM] Prestige Dairy Farm (M) Sdn Bhd (832757-A) [Archive …” (http://www.carigold.com/portal/forums/archive/index.php?t-57912.html)
   - “Prestige Dairy Farm memang scam – Topix” (http://www.topix.com/forum/world/brunei/TCM4J1NON9DPOE8UH/p34)
   - “Scam or Not? Prestige Dairy Farm” (forum.lowyat.net/topic/834067/+60)
   – “Skim cepat kaya versi baru : Labur dalam syarikat penternakan” (http://www.saifulsham.com/2008/skim-cepat-kaya-versi-baru-labur-dalam-syarikat-penternakan/)

   Also, forumers commented that the person behind “Prestige Diary Farm” and “Arowana Ventures” is the same person.

   3d) Look at ICT Venture – the structure looks about the same as all the rest too.

   Now, what does all these companies have in common:
   1) They give Guaranteed Return.
   2) The Return is way higher than FD (otherwise, how to lure the greedy + igporant people from “safe” bank?).
   3) THey give referral fee for promoting it, or it’s promoted by 3rd party marketeer.
   4) THEY USES MY PREMIER TRUSTEE.
   5) And lastly, … after a few years, the company is gone, like David Copperfied’s magic trick.

   Now, let’s assume we’re not sure “Avenue Hotel Property Scheme” is a scam or not. If that is so, then that means we’re not sure we might get back our Capital or not. Now, at 7% return, it’ll take 15 years for us to get back all our capital. Forget about Opportunity Cost lost during this 15 years. If that is not long, well, i don’t know what is.

   For the benefit of people who have already invested, i suggest you try to get back your refund. If can’t get back refund, then let’s pray that this is NOT a scam. After all, if it talks like one, acts like one, breath like one, smells like one, …… Maybe it might Not be one.

We try to price, rather than time, purchases.

This article was extracted from Warren Buffett's letters to Berkshire Hathaway's shareholders in 1994. It's available at : http://www.berkshirehathaway.com/letters/1994.html

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We try to price, rather than time, purchases. In our view, it is folly to forego buying shares in an outstanding business whose long-term future is predictable, because of short-term worries about an economy or a stock market that we know to be unpredictable. Why scrap an informed decision because of an uninformed guess?

We purchased National Indemnity in 1967, See's in 1972, Buffalo News in 1977, Nebraska Furniture Mart in 1983, and Scott Fetzer in 1986 because those are the years they became available and because we thought the prices they carried were acceptable. In each case, we pondered what the business was likely to do, not what the Dow, the Fed, or the economy might do. If we see this approach as making sense in the purchase of businesses in their entirety, why should we change tack when we are purchasing small pieces of wonderful businesses in the stock market?

Before looking at new investments, we consider adding to old ones. If a business is attractive enough to buy once, it may well pay to repeat the process. We would love to increase our economic interest in See's or Scott Fetzer, but we haven't found a way to add to a 100% holding. In the stock market, however, an investor frequently gets the chance to increase his economic interest in businesses he knows and likes.

Take a look at what Warren Buffett wrote to his investors at July 12, 1966 after Dow Decline by more than 10% since it's peak to May that year. Sounds familiar to what we're facing currently?

"I resurrect this "market-guessing" section only because after the Dow declined from 995 at the peak in February to about 865 in May, I received a few calls from partners suggesting that they thought stocks were going a lot lower. This always raises two questions in my mind:

(1) if they knew in February that the Dow was going to 865 in May, why didn't they let me in on it then; and,

(2) if they didn't know what was going to happen during the ensuing three months back in February, how do they know in May?

There is also a voice or two after any hundred point or so decline suggesting we sell and wait until the future is clearer. Let me again suggest two points:

(1) the future has never been clear to me (give us a call when the next few months are obvious to you – or, for that matter the next few hours); and,

(2) no one ever seems to call after the market has gone up one hundred points to focus my attention on how unclear everything is, even though the view back in February doesn't look so clear in retrospect.

If we start deciding, based on guesses or emotions, whether we will or won't participate in a business where we should have some long run edge, we're in trouble. We will not sell our interests in businesses (stocks) when they are attractively priced just because some astrologer thinks the quotations may go lower even though such forecasts are obviously going to be right some of the time.

Similarly, we will not buy fully priced securities because "experts" think prices are going higher. Who would think of buying or selling a private business because of someone's guess on the stock market?

The availability of a question for your business interest (stock) should always be an asset to be utilized if desired. If it gets silly enough in either direction, you take advantage of it. Its availability should never be turned into a liability whereby its periodic aberrations in turn formulate your judgments. A marvelous articulation of this idea is contained in chapter two (The Investor and Stock Market Fluctuations) of Benjamin Graham's "The Intelligent Investor". In my opinion, this chapter has more investment importance than anything else that has been written."

Worth over a hundred millions, and get paid in tens of millions a year

1. Is it possible to be millionaires from employment?

2. How about getting paid in millions a year from employment?

3. How about getting paid in millions a year before 40 years old and worth at least 100 millions in Net Worth purely from employment, and that company doesn't belong to your parents (or relatives) ?

Take a look at Value Partners Group. In the year 2007, the executive directors of the company (with their age) is as below:

- Cheah Cheng Hye, aged 54

- Law Ka Kin, aged 47

- Ho Man Kei, aged 41

- Choi Nga Chung, aged 36

- Ngan Wai Wah, aged 34

- Renee Hung Yeuk Yan, aged 33

- Louis So Chun Ki, aged 32

Below is their total compensation for the year 2006 and 2007.

Compensation and Benefits of Executive Directors for the year ending 31st Dec 2006

Compensation and Benefits of Executive Directors for the year ending 31st Dec 2007

Their annual salary is slightly above HK$ 1 million (about RM 440k) , but look at their bonus (for year 2006 and year 2007)!

In 2007, 5 of the Directors were paid about HK$ 40 Million plus (about RM 18 Million), while Cheah Cheng Hye was paid HK$ 234 Million (about RM 103 Million) !

How are they paid so high? There's a quote that says, "The best way to get what you want, is to deserve it."

Do they deserve to get paid so high?
Value Partners manage Value Partners Classic Fund, which have gained 2,173.0% from 1st April 1993 up to 29th October 2010, an annualized return of 19.4% over 17+ years! They manage USD 4.5 Billion and USD 7.3 Billion for the year ending 2006 and 2007 while earning 41.8% and 41.1% for their Classic Fund investors (A Units) for the year 2006 and 2007.

Since they add value to their fund investors, i believe they deserve such high pay (they're paid 1.25% management fee + 15% performance fee).

And how much are they worth in Assets?



At the end of 2007, the each share is priced at HK$ 7.63 (about RM 3.3572), while as of this posting (12th Nov 2010), the share is priced at HK$ 7.27 (about RM 2.908). So, they're worth above RM 100 Million each (except for Mr. Law, who joins the company only in the December 2004).

Cheah Cheng Hye is a Billionaire in HK$ as well as in RM. And he's a Malaysian (Penangite, and an old frees, not to mention he's also one of the top chess player in Penang Free School back then.)

Source of the information: 2007 Annual Report of Value Partners Group
Value Partners Group's Website
Value Partners Classic Fund
Value Partners Investment Philosophies

About Gold

Is Gold a good investment?
It depends what's your definition of "good". When compared to cash, i think Gold is a better choice, since government have the legal license to keep printing money and thus diluting our cash while we're not compensated enough from interest earned from our cash. That is assuming you're not buying Gold at an overvalued price.

But i don't keep my surplus in "cash". I don't enjoy being "poor" slowly but surely.

To me, keeping Gold is like running on a treadmill. Yes, you're running, but you're going nowhere (after adjusted for inflation). On the other hand, keeping cash is even worse! That's like walking up slower than the escalator coming down, and thereby you're moving slower and slower down.

Question : Where do you think gold will be in five years and should that be a part of value investing?

Buffett : I have no views as to where it will be, but the one thing I can tell you is it won't do anything between now and then except look at you. Whereas, you know, Coca-Cola will be making money, and I think Wells Fargo will be making a lot of money and there will be a lot--and it's a lot--it's a lot better to have a goose that keeps laying eggs than a goose that just sits there and eats insurance and storage and a few things like that. The idea of digging something up out of the ground, you know, in South Africa or someplace and then transporting it to the United States and putting into the ground, you know, in the Federal Reserve of New York, does not strike me as a terrific asset.

Source: Ask Warren Buffett on CNBC's Squawk Box - Part 7 (9th March 2009)

Buffett also says "You could take all the gold that's ever been mined, and it would fill a cube 67 feet in each direction. For what that's worth at current gold prices, you could buy all -- not some -- all of the farmland in the United States. Plus, you could buy 10 Exxon Mobils, plus have $1 trillion of walking-around money. Or you could have a big cube of metal. Which would you take? Which is going to produce more value?"

Benjamin Graham in The Intelligent Investor also expresses his opposition to investing in gold.

Jeremy Siegel in Stocks for the Long Run writes how gold has barely beaten inflation over the past 200 years.

It is impossible to put an intrinsic value on gold. Companies or properties can be evaluated in numerous ways based on earnings, assets, growth etc. However, gold is just a metal which has no intrinsic value. Any time you are buying without establishing a margin of safety you are more likely speculating than you are investing.

If you buy gold at $1350 an ounce and it drops 50% there is no way to tell if it is trading above, at, or below its intrinsic value. That is why you will have no idea what do to if there is a sharp decline in gold prices. On the other hand, if you buy a property or stocks of a good company, you can check to see whether the earnings is affected as much as the drop in the price.

Take for instance, if you buy a property at RM 200,000 that gives you a Net annual rental of RM 20,000, giving you an annual rental return of 10%. If after 3 months and the property price drops to RM 100,000, we can check to see if the rental drops or not. If the rental did not drop, then we'll know that the property's intrinsic value did not drop. In fact, we can confidently buy more provided that the property price drop while rental remains. I don't know how we can say the same thing with Gold.

Owning a goose that lays eggs vs a goose that does nothing

From the green line of the graph above, it shows that Dow grows at a higher rate than Gold. Owning Equities represents ownership of companies and owning good companies is like owning a Goose that keeps on laying eggs.

Does Gold price keeps going up?

No! Infact, if you have bought at the "peak" in 1980, you have to wait 27 years to breakeven, and that's not including the depreciation of money over these 27 years. At this high price of gold currently, it's quite hard to justify recommending investing in gold.

Letter to a fund manager of a local Insurance Company

Here's a letter i wrote to a fund manager (investment-linked) of a local insurance company. Until today, there's no reply from them.

In the year ending Nov 30th, 2007, A** Equity Fund had 92.6% in Equities. That time, the index was 1,396.98. 1 year later, when KLCI is at 866.14, A**'s Equity Fund's equity exposure drop to 42.5% ! Isn't that "buy high, sell low"?

Put it another way, the summary is as below:
Date ------------------- KLCI ---------------A** Equity Fund's Equity Exposure
30th Nov 2007 --------1,396.98 ---------------------------92.6%
30th Nov 2008 ---------866.14 ----------------------------42.5% !!!

Shouldn't it be the other way round? And if the fund manager can't time the market (which i believe nobody can), shouldn't A** Equity Fund maintains as an "Equity" Fund with 70% to 90% in Equity? Having 42.5% in Equity is less than what a balanced fund is putting! And having 42.5% in Equity when prices are low is even more unexplainable!

Please explain this when i can't see any logical reasons for it (other than the fund manager having "buy high, sell low" syndrome, or join the herd mentality to be fearful when prices are low or trying to gamble the market's direction).

And in year 2009, KLCI earned 44.7% while A** equity fund earned less than 2/5 of KLCI's return! And the annual report don't even mention the reason for such poor performance! If the unit holders are truly the owners of that fund, don't they deserve an explaination for such poor performance?

And please don't say that A**'s equity fund return of 17.5% is better than FD! If you travel from Penang to Singapore by flight, and reach there after 7 hours (when other air planes can reach within 1 hour), do you accept excuse as "At least our flight is faster than going by car" ?

As a result, A** under perform KLCI during these times. Am i right to say that? If that is so, then what's the point of hiring A** as the fund manager for their equity funds? Might as well they just buy the Index or ETF and save the 1.5% management fees, and don't earn a return WORSE than KLCI (not to mention savings on the huge upfront service charge, or ended up being tied up to the terrible fund for 6 years to enjoy 0% service charge).

And also, please don't say A** equity fund beat benchmark since launch. The comparison is simply not fair because KLCI doesn't include dividends into their price. Had KLCI add between 3% to 4.5% yearly dividends to the price, A** Equity fund would under perform by a wide margin!

Waiting for an explaination for me to explain to my unhappy clients.

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Lesson Learned:

Don't find mechanic regarding your health.

Don't find doctor regarding legal issues.

Don't find investment companies for insurance.

Don't find insurance company for investments. They Suck!