Koon Yew Yin's Blog
My share investment style - Koon Yew Yin
Koon Yew Yin
Publish date: Sun, 25 May 2014, 05:57 PM
Koon Yew Yin
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An official blog in i3investor to publish sharing by Mr. Koon Yew Yin.
All materials published here are prepared by Mr. Koon Yew Yin
All materials published here are prepared by Mr. Koon Yew Yin
How I started investing in shares?
In 1983 I had my heart bypass surgery in London. While recuperating in Harley Street Hospital, I read from the newspaper that the Hong Kong stock market crashed because Margret Thatcher, the British Prime Minister failed to secure the extension of British rule of Hong Kong. The British had a 99 years lease of Hong Kong and a part of Kowloon. The lease was expiring and the Chinese Communists would soon take over.
Everyone was afraid and everything was on cheap sale. The stock market crashed.
At that time, I did not know how to select shares basing on the fundamental criteria of value investing. I did not know how to invest for long term or short term or timing the market to hit and run. I just bought shares that went down the most in terms of percentages. You can say that I started blindly.
As soon as China agreed to offer 50 years extension of capitalist system, the Hong Kong stock market rebounded and I sold all the shares I bought initially with more than 200% profit. With all the proceeds, I bought HSBC and other better known shares. After about 2 years, I made so much money that I bought 46% of the small stock broking company in Hong Kong that gave me margin finance which help me make more profit.
After this short experience in Hong Kong, I decided to retire as Managing Director of Mudajaya and be my own boss. Why should I work so hard when it is so easy to make money from the stock market? Moreover, all my profit is tax free and I don’t have any management problem. I do not need to deal with people which I find most difficult.
After my retirement, I have more free time to read. I have learned the investment philosophy of Warren Buffet, Peter Lynch, Benjamin Graham and others. I found the best book is called “Valuegrowth Investing” by Glen Arnold.
What is value growth investing? It means that the best stock to buy must be undervalued and it has strong profit growth prospect.
What is long term investment?
If I ask you all what long-term investing mean to you. I might get many different answers. Some may say 10 to 20 years, while others may consider five years to be a long-term investment. Individuals might have a shorter concept of long term, while institutions may perceive long term to mean a time far out in the future. This variation in interpretations can lead to variable investment styles.
For investors in the stock market, it is a general rule to assume that long-term assets should not be needed in the three- to five-year range. This provides a cushion of time to allow for markets to carry through their normal cycles. However, what's even more important than how you define long term is how you design the strategy you use to make long-term investments. This means deciding between passive and active management.
Long-Term Strategies
Investors have different styles of investing, but they can basically be divided into two camps: active management and passive management. Buy-and-hold strategies - in which the investor may use an active strategy to select securities but then lock them in to hold them long term - are generally considered to be passive in nature.
Active Management
On the opposite side of the spectrum, numerous active management techniques allow you to shuffle assets and allocations around in an attempt to increase overall returns. There is, however, a strategy that combines a little active management with the passive style. A simple way to look at this combination of strategies is to think of a backyard garden. While you may plant different crops for different results, you will always take the time to cultivate the crops to ensure a successful harvest. Similarly, a portfolio can be cultivated along the way without taking on a time-consuming or potentially risky active strategy.
Market Timing
When it comes to market timing, there are many people for it and many people against it. The biggest proponents of market timing are the companies that claim to be able to successfully time the market. However, while there are firms that have proved to be successful at timing the market, they tend to move in and out of the spotlight, while long-term investors like Peter Lynch and Warren Buffett tend to be remembered for their styles. Studies have shown that most day traders cannot outperform the market index because of the transaction cost.
The Bottom Line
If volatility and investors' emotions were removed completely from the investment process, it is clear that passive, long-term (20 years or more) investing without any attempts to time the market would be the superior choice. In reality, however, just like with a garden, a portfolio can be cultivated without compromising its passive nature. Historically, there have been some obvious dramatic turns in the market that have provided opportunities for investors to cash in or buy in.
My investment style
Basically my style is a mixture of all the above mentioned strategy including the use of margin finance to increase my profit. With due respect to professional fund managers, they consider current earning EPS the most important criterion. But, I consider future profit growth prospect is more important. For example, Jaya Tiasa which has very poor current earning but it has tremendous profit growth prospect. That is why it has gone up about 30% in the last few months.
It is easier for me to explain by showing you the shares I own and how I manage them. In view of the sustainable palm oil price increase in the near future, most of my investment are plantation shares eg Jaya Tiasa, Kulim, TH Plantations and Sarawak Plantations. Besides plantation, I have about 20% worth of my total investment on Mudajaya, MFCB and Success Transformers. I have only 7 counters so that I can closely keep track of them.
All my shares are pledged for margin finance. I normally use up to about 80% of the allowable limit.
How do I use Price Charts
I do not use charts to trade frequently. I only look at the long term price charts to buy shares that have been depressed for a long time. For example, Kulim is now selling at around Rm 3.50 which is lower than the average price in the last 3 years. This is simply not logical. It the last 3 years, Kulim’s plantation land especially those in Johore must have appreciated in value. Moreover, Kulim would have planted more oil palms and also made profit in the last 3years. I believe the price of Kulim will soon be re rated.
How I take advantage of the share price fluctuation
It is important to note that any share cannot continuously go up or come down for whatever reason. I must take advantage of this phenomenon to make money. For example, I have sold some Jaya Tiasa because it has gone up 30% within a few months so that I have funds to buy Kulim, TH Plantations and Sarawak Plantations which have been depressed for a long time. Jaya Tiasa is still my largest holding.
Please note that all the shares I bought are meant for long term. But it does not mean that I cannot sell them to get money to reduce my borrowing or to buy some other shares which are relatively cheaper.
Those who wish to know more about my investment style or have questions to ask, please attend my seminar on 1st June as according to my announcement.
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Discussions
14 people like this. Showing 45 of 45 comments
"I just bought shares that went down the most in terms of percentages. You can say that I started blindly."
OMG Mr. Koon get rich by luck. Beside the courage to take risk, luck is important as well.
2014-05-25 20:43
Thank you for sharing Mr. Koon. So the benefit of 'luck' definitely your main investment success. 'luck' require a highly gifted 'EQ' in order to succeed in investment. No matter how high your 'IQ' is, if you do not have 'luck' or 'EQ' then you are doomed in investment.
2014-05-25 21:21
i think Mr. Koon is being humble with his writings. He is a savvy businessman; and knowing full well that China will not sabotage HK
2014-05-25 21:46
Taiwan was advanced country ?It is a high income country. Please go read up world history.
Ignorance kills
2014-05-25 21:54
Jacky Ching, What do you mean when you say any registration request? If you are talking about my investment seminar on 1st June, please read the announcement carefully and you will know what to do.
2014-05-26 09:31
Hello Ir. Koon,
I live in Sabah. I am interested in Sabah Oil Plantation Stocks.
Do you have any recommendation?
thanks
2014-05-26 10:31
TQ Mr Koon for sharing yr investment style / strategy. Hope can attend nx seminar as I'm away on 1/6/2014! I'm impressed how well you accumulate yr wealth & not stingy when giving out scholarship!
2014-05-26 11:13
.
sop
You are right... absolutely correct. Since I live in Sabah...Iand I like to see with my own 2 eyes and hear from staff and management.... by visiting them.
Thanks
2014-05-26 14:11
Tsh is the best yielding plantation, also with many young trees. Will mr koon consider them?
2014-05-26 17:15
Someone contacted me (kiasutrader@gmail.com) to register for the afternoon session for Mr Koon's seminar on Sunday 1 June using email username InvestKCL but the email address is not reply-able. Please re-submit. Thanks
2014-05-26 18:46
Mr Koon, can you explain whether the result newly announced is encouraging? http://www.bursamalaysia.com/market/listed-companies/company-announcements/1633745
2014-05-26 20:01
The following is an extract from Kulim's 1st Q result: Revenue, FFB production and selling CPO price are all improved. But I cannot understand why the EPS is so poor. Perhaps one of the readers who is an accountant can explain to us.
Review of the Performance of the Company and Its Principal Subsidiaries
Group Results and update
The Group recorded revenue of RM830 million for the quarter under review compared to the corresponding period 2013 with revenue of RM715 million, an increase of 16.06%.
The Group recorded a PBT of RM91 million for the first quarter 2014 compared to PBT of RM33 million for the corresponding period in 2013, an increase of 178%.
Plantation Operation - Malaysia
The Group’s FFB production for the first quarter 2014 was at 177,399mt compared to the corresponding period in 2013 at 159,059mt an increase of 11.53%
The Group’s cumulative CPO production for the first quarter 2014 was at 59,964mt. This was 16.33% higher compared to the CPO production for the corresponding period in 2013 of 51,545mt.
Total FFB processed by the Group mills for the first quarter 2014 was at 287,569mt which was 13.62% higher compared to the corresponding period 2013 of 253,091mt. Total FFB processed was inclusive of crops purchased from outside the Group.
The Group’s OER for the first quarter 2014 was marginally higher at 20.85% compared to 20.37% for the corresponding period 2013.
Malaysian plantation operation achieved average CPO price of RM2,585 and PK at RM1,756 per mt respectively for the first quarter 2014 compared to RM2,475 and RM1,184 per mt for CPO and PK respectively for the corresponding period in 2013.
Plantation Operation – Papua New Guinea & Solomon Island
NBPOL Group produced 455,988mt FFB in the first quarter 2014 which was 12.54% higher compared to the corresponding period in 2013. Together with crops purchased from outside the Group, NBPOL Group processed 618,880mt FFB for the first quarter which was 10.3% higher compared to the corresponding period in 2013.
NBPOL Group’s cumulative CPO production for the first quarter 2014 was at 137,031mt.
This was 12.5% higher compared to the CPO production for the corresponding period in 2013 of 121,758mt.
NBPOL Group’s cumulative CPO production for the first quarter 2014 was at 137,031mt.
This was 12.5% higher compared to the CPO production for the corresponding period in
2013 of 121,758mt.
NBPOL Group’s OER for the first quarter 2014 is at 22.14% compared to the
corresponding period in 2013 of 21.7%.
NBPOL Group’s achieved CPO price averages of USD907 per mt for the first quarter 2014 compared to USD878 per mt achieved for the corresponding period in 2013.
2014-05-26 22:04
Mr Koon, i found this "However, its earnings were RM38.13mil compared with RM345.15mil a year ago when there was profit from discontinued operations net of tax of RM339.3mil. Earnings per share were 2.98 sen."
in the news reported in http://www.thestar.com.my/Business/Business-News/2014/05/26/Kulim-profit-from-continuing-ops-jumps/
I think this explained why Kulim EPS is so poor as compared to the corresponding period 2013.
2014-05-26 23:58
Quick Financial difference Q1'14 vs Q1'13:
- My 2cents summary: Even through EPS Q1'14 vs Q1'13 increase to 543% ratio (exclude one-time discontinue operation earn RM 339M), Net Profit margin is still very low vs revenue generated, with high PE ratio = 36.9 vs other same palm oil industry market.
Quarterly ($M)
(FYE Dec) 1Q14 1Q13 % YoY Remark
Revenue 830 715 16.08%
PBT 91 33 175.76%
Net Profit 38 6 533.33% exclude discontinue operation earn
$339M (one time deal)
EPS 2.96 0.46 543.48% exclude discontinue operation earn
$339M (one time deal)
Operational:
Prod FFB (mt) 177,399 159,059 11.53%
CPO (mt) 59,964 51,545 16.33%
Total FFB 287,569 253091 13.62%
processed (mt)
OER (%) 20.85 20.37 2.36%
Sales
CPO (t) 2,585 2,475 4.44%
PK 1,756 1,184 48.31%
Plantation - NBPOL
Combine FFB 618,880 556,990 10.30%
nucleus (mt)
CPO 137,031 121,758 12.50%
OER (%) 22.1 21.70% 2.03%
2014-05-27 00:46
The current price of Kulim is lower than the average price for the last 3 years and basin on this I have been accumulating it in the last few months. Although its 1st Q EPS is not so good, I believe it is very much undervalued. During the last 3 years they must have made some money and planted more area and also increase FFB production. I am looking forward when the management start develop their plantation land in Johore which must have appreciated a lot. I am sure one day they will develop properties for sale like KLK and IOI.
I hope some smart accountant or readers will tell me that Kulim is not a good investment for the long term.
2014-05-27 01:01
If we were to include the special dividend RM0.90 paid in Jan 2013, RM3.4 plus RM0.90 = RM4.4, Kulim share price already at historical high.
2014-05-27 10:10
Kulim's core business is in Palm Oil biz in Malaysia and overseas. Further catalyst for higher share price will come from:
- increasing volume of CPO production and higher CPO selling prices in the future
- announcement of new property development projects in its Johor plantation lands
- New Oil & Gas servicing business in Pengerang Johor
Price downside is very limited as this level but the future price upside will be much more when the above catalyzing factors gain traction over time.
2014-05-27 10:32
solvent, the highest price was Rm 5.40 about 18 months ago before payment of the 90 sen special dividend.
2014-05-27 10:42
Noted. Thank you Mr Koon for your info. Mislead by adjusted price chart.Sorry for that.
2014-05-27 11:36
"Why should I work so hard when it is so easy to make money from the stock market?" this statement make me ponder..
2014-05-27 17:50
Mr Koon, I thought you owned Xingquan. Have you given up hope on China stocks listed in Malaysia? My opinion is their accounting book cannot be trusted.
2014-05-27 22:48
IF we are re-rating plantation companies based on CPO price fluctuation, then how many times we have to re-rated it in a year if it fluctuates in a wide range?
Even so, can we wait for CPO price to stabilize above Rm3000 before we call for re-rating. IS it not too soon Now for re-rating as price just manages from Bottom half a year ago?
Having said that, i sure agree on long term perspective.
2014-05-28 01:11
It is Not an easy call for re-rating. Well who knows CPO might Hit above Rm3000 few months from Now?
Even if it did, what price do we pay for plantation stocks? So we better Buy now, is it so?
2014-05-28 14:37
Kulim overseas operation in PNG is interesting. Sales in PNG is more than double that of Malaysia but its profit is only 1.6 time that of Malaysia. Could it be the drop in currency value of PNG or younger trees or something else ? Looks like the future of Kulim depends how the operation in PNG is managed.
2014-05-29 14:32
Mr Koon, you use 70000 per Ha as valuation basis to come to conclusion that Kulim is under valued. But could it be because Kulim major planted area is in PNG which yield lower than Malaysia therefore a lower than 70K per HA should be used instead ?
2014-05-29 14:49
pls factor in div paid out...Kulim paid out RM0.9094 of dividend in Jan 2013, the price hence adjusted from RM4.80 to RM3.79...not too much being depressed...
2014-06-01 10:30
Kulim is already way overpriced
It's mgmt also is quite the type which sleeping most of the time
If they are not sleeping , maybe they are making a very bad deal or decision
Better to buy smaller cap plantation in Msia as the big cap already way overpriced with limited upside
For other countries can check out indo Agri or golden Agri
2014-06-01 11:37
The Better metrics is EV (Enterprise Value) over EBITDA as plantation company has been hoarding cash for past 5 years.
2014-06-03 00:00
If you all think plantation companies P/E has been high that is Not the accurate picture as their EV has been Low for the reason above.
2014-06-03 00:03
I need a lesson from stockoperator. How do you calculate EV? Why do you say that plantation company is hoarding cash?
What do you think of TH Plantation, Kulim and Sarawak Plantation?
2014-06-03 00:16
Hi Mr Koon,
EV is market capitalization + debt + preferred share + Minority interest - CASH. Lower is cheaper Or better as EV is used for price calculation for takeover target and we want to pay cheaper price for good company.
Generally, from records of most plantation companies their cash level is increasing for past 5 years as such EV NOW is cheaper for cash rich plantation and well managed company.
It is general trend they keep cash for future expansion and re planting as they are growing bigger in size Now. It is interesting to see how this industry evolve in futures.
Mr Koon, as you are the Businessman, you are looking for deep value, Big deal, Big opportunity, Big jump in profit growth. Whereas I am looking for well managed companies.
2014-06-03 10:03
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nsk82
it is always inspiring to read your writings. Keep it going strong and long life, like Dr. M
2014-05-25 18:41