Plenitude – paying for not being fearful?

I first invested in Plenitude Bhd in early 2007 at an average price of RM 1.54 per share. When the price began to rise in 2010, I sold off some of it at an average price of RM 3.79 per share.

When the price dropped to below RM 2.50 per share sometime in 2012/13, I bought additional shares. My average price was then RM 2.28 per share.

When the price rose to RM 3.20 in 2014, I did not sell as it was still below its intrinsic value. Unfortunately, that was the peak price. Plenitude today is trading at RM 1.14 per share compared to its NTA of RM 4.15 per share.

Warren Buffett once said that it is wise for investors “to be fearful when others are greedy and to be greedy only when others are fearful.”

I am not sure which category I fall into. Greed enabled me to buy in 2007 and make money. But I was not fearful enough in 2014 to sell and this led to my current situation.

But I have not given up hope on Plenitude. Plenitude has two major potential profit contributors – property development and hospitality.

Property development has been contributing to the bottom line, even in the 2020/21 pandemic years. With the opening of the economy, I expect the contribution to be better. The property development segment was the major contributor to the Group’s performance.

Plenitude started as a property developer but in 2001 diversified into the hospitality business. Today the hospitality business is the largest segment in terms of the Total Capital Employed. But it was not profitable since 2013.

The hospitality segment’s poor performance was due to competitive pressures. The Group had refurbished and rebranded the hotels to address this. At the same time, it had also focused on efficiency to improve the margins.

There are signs that gross profit margins are improving but the jury is still out on whether revenue will improve. The hospitality business is a turnaround case. Because of its size, the creation of shareholders’ value will depend on a successful turnaround.