Singapore-based 8i Holdings seems to lack investing nous it espouses

FOUR years ago, Singapore-based investment and financial education firm 8I Holdings (8iH) opted to list on the Australian Stock Exchange instead of its home exchange.

The move might have caused some consternation, given the dearth of new listings on the Singapore Exchange (SGX) then.

For a while there, it seemed ASX had hit paydirt. In just 14 months following its debut on December 2014, the stock climbed five-fold to take its market value to over A$400 million.

Fast forward to the present, it's hard to shake off the feeling that SGX may have dodged a stinker, with 8iH's market value having dwindled to some A$47 million.

Certain events that have unfolded at the firm appears to have cast doubts over the sustainability of its business model, which is ironic considering its flagship investment course widely touts the value investing tenets championed by some of the world's greatest investors like Warren Buffett, Peter Lynch and Benjamin Graham.

Apart from its financial education programmes that are held in Singapore and Malaysia - it also has offices in Thailand, Taiwan and Australia - 8iH operates a licensed fund management business called Hidden Champions Capital Management (HCCM) in Singapore that according to its annual report, invests in public-listed and private "low-profile under appreciated Asian Hidden Champions" for long-term investment returns.

Based on this philosophy, it launched Hidden Champions Fund in October 2015.

As at June this year, it has assets under management of US$20.3 million. Its year-to-date performance - also as at June - based on its latest factsheet, has yielded a negative return of 23.8 per cent.

Bottomline has weakened in the past couple of years, with 8iH booking its first annual loss since its was founded 10 years ago. For the year to March 2018, the company posted a net loss of S$4.2 million on the back of a 26 per cent decline to S$22 million in revenue and investment income.

Noteworthy too is that the loss arose from the absence of a one-off gain of S$10.4 million from a disposal of a subsidiary in FY2017 (it earned S$10.8 million that year). There were other instances of one-off gains that had aided its financial showing in the past years too.

Several transactions over the years have also piqued one's curiosity.

One was in relation to 8iH's purchase of a 51 per cent stake in CPA Academy for S$1.53 million in 2015. CPA Academy provides training courses on online lead generation marketing and at that point, was in operation for a little less than two years. 8i said the acquisition would allow the group's education division to offer more courses and help create more events and programmes.

Then just one month after the acquisition was completed, 8i sold 20 per cent of CPA for S$4.5 million and said that CPA would transform from an education provider to being a provider of an internet advertising traffic platform which, if successful, may result in a listing on the ASX. To date, this has not happened.

"8iH has recouped its initial acquisition cost and made a positive return," said the group's executive director Clive Tan, after announcing the partial stake sale that valued CPA by 7.5 times more in a span of two months.

Another two months later in May, 8iH further sold its remaining stake in CPA through a swop for 28.18 per cent in Singapore-based holding company Digimatic Group and would sell 14 per cent of Digimatic for S$10 million cash.

Through these series of transactions between January and May 2015, CPA's total implied value achieved an eye-popping jump from S$3 million to S$63.54 million.

8iH was also active on the capital market. It listed Digimatic Group in December 2015 on ASX and followed with Velocity Property Group two years later.

Both these companies are trading way below water from their issue price of 20 Australian cents each, that is, if one discounts the effect of Digimatic's 50-for-one share consolidation exercise last year.

Investors who had bought into 8iH's story and the value it espouses in terms of investing must be perplexed, if not downright worried.