Contrarian extraordinaire? Jim Rogers says there’s upside in this Indonesian coal miner
American legendary investor and commodities market commentator Jim Rogers has staked his name on a small Hong Kong-listed coal miner, betting industries and markets ignored and disdained by investors today may one day regain popularity.
Rogers garnered attention in April as word spread that he had taken up an advisory role to the board of little-known Indonesian coal miner and crude oil transportation firm Agritrade Resources, despite not having management experience in the industry.
He was granted options giving him the right, exercisable over 10 years, to buy the company’s shares at HK$1.38 each.
Agritrade shares Friday closed at HK$1.51, 14.4 per cent higher than before his appointment was announced.
Rogers is sitting on a paper profit of almost HK$2 million (US$257,000) - a drop in the bucket compared to his personal fortune, estimated by Forbes at US$300 million..
“The company is intriguing to me since it is in coal which most people don’t like ... [and] it is in Indonesia, which some people don’t like,” Rogers told the Post in an interview.
“I have learned in my investment career that if you find something that is being ignored or bad-mouthed, especially if it is cheap, you can [potentially] make a lot of money.”
A Yale and Oxford university graduate, Rogers and George Soros co-founded the Quantum Fund whose value surged 40 times in a decade, allowing Rogers to take a sabbatical at the age of 37 to travel the world.
He moved to Singapore a decade ago from New York to allow his two daughters to learn Putonghua, partly driven by his belief that China will be the most powerful country in the world this century.
According to Agritrade’s stock exchange filing on his appointment, Rogers will advise the board on “coal mining business, logistics business, corporate business plans, mergers and acquisitions, pricing and market strategies”.
But he acknowledged he was not yet ready to give operational advice to the firm. “If I knew [what specific advice to give], I wouldn’t even be here, I’d have told them what to do and go away,” he said.
Rogers said energy prices are “making a complicated bottom now and that will present opportunities for the future,” adding he is optimistic about the future of energy and “extremely optimistic” on the opportunities in Asia.
He said that coal was an out of favour investment, yet one which has a potential upside in the age of clean energy.
“All coal is bad to the public and to the press, which is not correct,” he said. “All coal can be clean even though it may be expensive ... you put in the time, effort and money to make it better.”
However, fund managers appear to be shifting away from investments linked to carbon-based fuels. Investment funds valued at US$5.2 trillion have committed to selling off fossil fuel assets, according to a recent report by United States-based Arabella Advisors, which is part of a coalition calling on divestment away from traditional fuels. The figure is up from investment funds valued at US$2.6 trillion who were backing the divestments as of September 2015.
Fiona Reynolds, managing director of London-based Principles for Responsible Investment, the world’s leading proponent of responsible investment, told the Post that other than divestment, setting a price on carbon emission, transparent emissions targets, and a wind-down in fossil-fuel subsidies should also be encouraged to help combat climate change.
“The reality is that fossil fuels will still be needed for several more decades,” she said. “Divestment on a global scale simply isn’t an option without triggering serious volatility and asset price risks that will impact every fund and beneficiary.”
Family controlled Agritrade’s chief executive Ng Xinwei said the firm plans to spend US$50 million to triple its coal output capacity in Indonesia to 3 million tonnes by the end of 2018. He added that the company produces high quality coal with a high heating value and low sulphur-content.
A further US$80 million could be injected to raise annual output to 6 million tonnes in later years, he said. Agritrade has a market capitalisation of HK$2.3 billion.
It is the second time in three years that Agritrade has invited a high-profile financial media personality to join the firm.
Patrick Wong Man-hung, a renowned stock market commentator, was appointed vice chairman in September 2014, entitling him to an annual director’s fee of HK$100,000.
He was granted 10 million share options in July 2015 exerciseable at HK$1.72 apiece. He exercised the options by the end of March last year, according to Agritrade’s annual report.
Wong resigned 10 months after receiving the options, citing “commitments to his other business”.
Meanwhile, BDO resigned as Agritrade’s auditor a month before Rogers joined the company, citing a failure to agree on audit fees.
Rogers said although he has not communicated with BDO, he said he is “convinced that everything will be OK.”
HLB Hodgson Impey Cheng has been selected as the new auditor of Agritrade.