probably time to top up. My cost 0.9 lol.

We are in the end human.

We say must go gym everyday, in the end, manage to go only 3 times.

But we must try to better, and to have people help to remind us would be useful.

Mr Koon, volume count both ways.

Not all 130m is sellers, that day probably 60-70% "sold".

Mr Koon,

Check with you, did you mean Earning Before Interest and Tax of 200-300m, or Earning Before Depreciation , amortisation Interest and Tax of 200-300m.

sslee,

Remember your promise to not layan qqq3 anymore.

Its not for anyone's sake that you should follow what you said, but for your own.

You may feel different.

Yes, i dont have the PPA.

So i have to make my best estimate.
===
godhand the way u written how they handle debt is purely assumption.
07/12/2018 09:13

sslee,

I am just basing off my own guess.

Or KYY figure.

Which if you want, try and twist it into postive (zero debt plus say 5%% irr).

The amount of rake hikes needed is intersting.

In investing, certainty can be a serious problem, because it causes one not to reassess flawed conclusions.

Nobody can know or obtain all the facts. Instead, one must rely on shreds of evidence, kernels of truth, and what one suspects to be true but cannot prove.

I had a feeling i was wrong about jaks, and so i wrote it out. Every time i ask someone here or in jaks why i'm wrong.

Nobody seem to have answer, beyond it should be profitable. Govt sure guarantee. China bank not stupid.

Show me on paper, at least rough figures? Silence.

Icon would rather write 3 more articles about why people should buy, instead of just providing a simple table like the one above (which in the end is not relevant anyway, if the old man/management and my friend is right).

In the end, thank god i sit down, write, calculate and broadcast my mistake/stupidity.

And to top it off, it wasn't others who found/explained my mistake, but myself. And even funnier, it wasn't really wrong either in the end. And the funniest thing, criticism from others without even knowing the specifics of where it was wrong!!

I'm seriously considering turning off the comments section like kyy. But how to get criticism (no matter how inane) like that. Takkan stay in my own bubble meh, its not like i have all the facts.

I've read through it again, don't see any problems.

Its more conservative than most. But that's margin of safety for you. Especially since i'm not from a power background or had experience auditing power utilities.

My thought process. Not yours.

Keep up the criticism though!

What did i calculate wrong? Simple.

I didnt bother calculating KYY estimate, since i know, if use his figures, sure dead.

Mine, well, i didnt bother since we have a better source , ie kyy mouth.

But having thought abit, i felt mine should be profitable if worked out, since it had cashflow from depreciation as i used EBIT.

Having did it up using my own valuation using my estimates, i found out it was 11% irr (instead of the roughly single digit IRR when i did it in my head), which is pretty good, and by my valuation, at this price, the company is probably in "not stupid" investment category.

Its not smart at RM1, and probably stupid above that.

So i needed to find out if its true. Turns out, kyy's estimate is probably the right one (according to a friend who spoke to the MD at the AGM, and the md hinted as such), but we'll find out in 2 years i guess.

Logically, i still think my estimate should be correct, as i don't see how it would work other wise, but, oh well.

Got better things to buy.

Its quite rare to find people who are happier than me, except in a derogatory way, when i find out i'm wrong.

having said that, i'm not the one staring at paper losses in Jaks. So i understand. I would be emotional if my rcecap was down 50%, even if i tried really hard not to be.

For your sake, i hope my estimates instead of KYY's/management is right.

Or vietnam govt really going to guarantee top to bottom for you.

?

Without proper information? Well none was given. I dont have a copy of the PPA.

How else to buy, unless you decide for yourself how much it is worth? And what can you do beyond making an educated guess. And try to avoid any mistakes.

Btw, apparently KYY said 200m EBITDA, that was also what my friend who spoke with the MD told me he hinted.

In which case, it appears the best case scenario does not apply, and it relies heavily on strong rate hikes to be profitable.

You guys have so much experience? Well, show me your world bank ipp estimate for jaks.

I put my thought process down on paper. Icon got 6 articles to push people to buy, all of them don't go beyond "I guess it should be good, can gamble". Vietnam should pay for others, without actually seeing the clauses in the PPA or even a sample from vietnam.

Don't see anyone complaining there.

Cute lah you guys.

Anyway thank god i wrote it down. Otherwise i would never have realized where i went wrong. I don't do much projections on paper to begin with.

Hahahaha

But not stupid at this price lah.

What is there to apologize. I ask people to correct me, nobody step up. Despite how arrogant I sound.

In the end, I have to find out my own stupidity, and I share the calculation summore, in case people dunno.

In any event, fv in my view is abt maybe 1.2 or so. Before taking into account dilution and future right issue.

Probably got better things to buy gua.

Turns out it's not I too Warren buffet.

Its that I'm a stupid version of him.

The errors I made in my calculations was so bloody stupid and obvious.

Must actually do out the cash flows moving forward.


===

Posted by Icon8888 > Dec 6, 2018 09:25 PM | Report Abuse

I have been punting for so many years still alive and kicking. No need warren Buffett one

Dear Sslee,

The calculations above is correct. The FCF does not change, because redued interest cost meant higher principal payment.

if 200m EBIT. Well. We are going to need very very very stron rate increases to make up for the 312m cashflow from the depreciation in my estimate.

Ok, i checked my figures.

I calculated wrong.

If i'm right, its a steal. Someone needs to check with KYY does he mean EBITDA of 200-300m or EBIT!

I calculated wrong.

Using my estimates, the stake is worth 360m when discounted at 5%. With IRR on the 603m at 13%.

Cash IRR is 40.8%

IF my estimates, which are RM350m higher in cashflow than management/kyy estimate.

Someone needs to check with them. Which does he mean!

EBIT or EBITDA

===
Someone needs to check with management if its correct.
06/12/2018 22:01
X
Choivo Capital If my best case estimates is correct. Worth a punt.
06/12/2018 22:02

Haha.

I'm wired differently lah.

Good luck though. I hope you make a lot of money.

EBIT: RM227mil
Depreciation: RM312mil

If we use my calculation (not management), operating cashflow is about RM539mil. After interest cost of say RM350m. THat is rouugh fcf of about RM189m.

Even if all the FCF is used to pay the principal, by the end of the 25 years (yes, i took into account interest in terms of reducing balance). There is about RM3.24bil left.

The only way this works, is if they can transfer some debt over. Need to find out here.

icon8888,

Its because you're in it that im tempted. Because i know you're no fool.

But aiyah, cannot, bad habit. Must be very sure only can buy!

See lah, warrant out, if 15 sen or less. I think 1% can consider haha.

If this was tropicana with a power plant. And selling at the current valuation of tropicana.

It would be an easy buy.

Sslee is correct.

However, the image given by accounting often do not properly describe the reality of the economics of the business.

Example, coca cola recognizes almost zero intangible assets. but they have arguably on of the best intangible asset out there.

And its futile to try and match them. The goals are different.

For example, in the one above, we cant exactly let companies just recognize any intangible asset that they please.

In investing, one needs to both know the figures in terms of accounting standards, as well as their economic reality.

Another example, PBA and TM, have very undervalued PPE. They have fully depreciated PPE that are still in use and still provide economic benefit.

Dear sslee,

The figures above, given by KYY and (probably by extension the management), is BEFORE depreciation and Interest Expense. They quote 200m-300m.

By my calculation, interest expense if more than RM300m

Optimally, id like a margin of safety. Which means cashflow of RM400m at least.

Having said that, i never really liked any management that focuses on EBITDA as if depreciation and amortisation is not an expense

Dep and Amor, is the worst kind of expense there is. Most expenses, you pay as you use. For these two, you pay for ALL your future use upfront! You miss out on opportunity cost, as well as the natural inflation, which makes your future expenses cheaper than they are today.

In scenarios like this, the only thing we should pay is below book value, and far below.

Thats just my view anyway.

====
Sslee Dear Choivo Capital,
Depreciation is cash flow positive. If you use 10 years to depreciate the capital cost that mean you have 10% of total capital cost as cash every year.

Thank you
06/12/2018 20:04

Not buying.

===
lcwin Choivo Well you better make a more rational assumption if you are into Jaks. Any half baked boss will corner the shares way before the deal is done. Its human nature to be greedy...look at ahcheat and Jlow.
So here Jaks have a presumably super power station deal and he the Boss is just holding less than 30% of the company .
Malaysia Santa Claus ?
06/12/2018 19:22

lcwin,

I'm assuming that this management is not great, given their track record.

Looking forward to that.

Sure. However, i dont think you know anything about the actual profitability of the plant beyond and "I guess can gua".

That's the key info, it would be odd for you to have written 6 articles with close to zero real data on this, if you actually enough data to support it.

nor would the position be a mere 4% lol.

====
Posted by Icon8888 > Dec 6, 2018 05:06 PM | Report Abuse

I just couldn't be bother

CharlesT,

I felt that the IPP going holland was probably 65% chance. Because i don't have all the data and accesss to the actual contract and cashflow models.

No, whether or not i'll take the bet, depends on the odds.

1:5 payout, can consider.

But this price, no idea man. So many other things to buy. 20 sen can gua. Buy 1-1.5% lol.

I'd rather be shown to be stupid and wrong.

At least i'll learn something.

Mind helping me out with that in relation to JAKS?

====
Posted by Icon8888 > Dec 6, 2018 05:00 PM | Report Abuse

Anyway this is an entertaining article

Now people know how good you are

I'm not the one putting money in it.

And i've never said i was sure.

Hmm he stated clearly its before dep and interest.

If he were to refer to 30% portion, i would think they would net those off?

Unless they mean net dividend, but that would mean the entire plant can transfer to gov with the debt.

Very unlikely.

Its a too hard for me, unless someone can bring some light into it.

Because they thought it would.

But i say the probabilties are low. We'll see a few years from now.

I'm happy to be proven wrong.

====
ew8888 if they know this project cannot generate profit, y do they take up in the first place?
06/12/2018 16:23

Not i say one.

Management/kyy say one. 200-300m a year before depreciation and interest cost.

You heard of commercial loan from bank no need pay interest?

I'll put it like this. You should consider reading more financial statements of failed companies.

Look at sapura and the seadrill deal. One look at the figures then can tell its a bad idea. But they did it.

in any event, just a 4% position for you. Its a gamble.

=====
Icon8888 Do a project so that over next twenty five years loss 400 mil per annum ?

Ok ok let's say jaks is stupid and they do they, what is the chance that CPECC is also stupid at the same time and jump in to die together ?

I surrender

Kasi,

Its not my money on the line. If i were religious, i'll pray for you. But since im not.

Good luck.

Well, thats pretty much a given.

I call EBITDA bullshit figures.

Now, if you disagree, show me the figures.


Serifah, give me all your assumptions and supporting documents.

===
i3lurker classic layman (who are also qualified accountants) mistake

business success does not depend on EBITDA
06/12/2018 15:16

Haha, nice. I'm thinking about it. Since its margin/borrowed money after. Best to be more conservative.

And i keep wondering what did i miss out on.

Only thing i don't like, is i dont have the figures for marketing seperately. But at this valuation. Well..

It covers alot more than yours.

Only question is if the cost structures of other plants is hugely different. No idea.

Or if those earnings have extraordinary expenses or income. Nope, but details are scares.

Or you can just trust KYY and by extension, indirectly, the management figure of Rm200 -300m EBITDA.

If they can compound the interest and just throw the plant plus debt to the vietnam govt after 25 years. Or even just pay 50% of interest cost.

Massively profitable.

But i have never seen such a contract in my life, so i doubt it.



CharlesT No wonder jaks got such a lucractive contracts...at first i thought ALP opened his legs to get it
06/12/2018 14:41

serifah,

I think your method might be a touch too simplistic. Theres too many factors.

I think the best estimate is the EBIT of a power company in vietnam.

Do you calculations using your won method if you want.

I dont take typically lunch. Makes me sleepy.

I had the research down from last time. And that long comment made in jaks forum.

Well, might as well compile it.

Can build plants profitably.

But this one dont look like it.

Feel free to provide new information or insight that will prove me wrong.

===
Posted by qqq3 > Dec 6, 2018 02:18 PM | Report Abuse

choi...everybody lose money....nobody built plants lo...

that is the trouble with all these extrapolate here extrapolate there...all starts with the conclusions and work backwards.....

well...market bearish...every body runs for cover.....

I'm trying to lose an argument, and to be wrong.

but you sure aren't making it easy!

===
Posted by Icon8888 > Dec 6, 2018 12:49 PM | Report Abuse

Damn... you again ... as I said, just assume I am wrong about jaks and you are right... ok ?

Time for lunch lah. Go and grab something to eat kiddy. Don't waste time here trying to win an argument with a stranger over internet

Its not "retort", i don't wake up in the morning thinking how do i not buy what could be a fantastic investment and lose out on potential gains.

I want to be proven wrong, so i can go whack some.

Out of respect for you, ive actually gone and read all your comments and articles on jaks, along with that of DK66 and KYY.

I even went and study history of IPP's worldwide and the vietnam power industry etc.

On paper, using highly macro views, everything looks great.

But the numbers don't add up. Which makes me wonder if im completely wrong. If any of my assumptions were too crazy or wrong.

Btw. KYY and the management concurs with my figures

"It is only good in securing the 1,200 MW coal fired power plant in Vietnam with a very good power purchase agreement (PPA). It will have very good profit every year for 25 years. I understand in the first few years, its annual profit will be Rm 200 to 300 million before interest charges, depreciation etc. Moreover, I understand all the profit from the sale of electricity is tax free."

This is the only bit i can find, which indicate some figures from the management.

Depreciation on a (USD2.25b*4.16) RM9.36b plant at on 25 years (concession period) is RM374.4m btw

Interest expense of RM350m (75% of USD2.25 bil or (USD1.68bil in borrowings, that is RM7 billion int rate of 5%)

Net loss of rougly RM500m a year. assume zero tax.

At best, what happenered here, is that JAKS won a contract. They can't build or finance it. They essentially sell it to a CPECC for a "free" 30% stake.

The banks are willing to loan the money, because it will be able to get back in the interest cost via earnings at minimum. One can argue how the principal is going to be paid, but its a chinese bank. They need growth and for their GLC's to put that overcapacity to work.

CPECC, willing to do it, because well, bank funding and taking most of the risk d. Also they get to build that project, and its their staff running the plant. Putting some of their overcapacity to work. Working for a company that makes zero or negative profit, but have may some cashflow for divs.

Worst case, it'll lose a little. And for a company expected to make a loss of almost RM500m a year after tax (normal assumption), give you free 30% no problem.

Oh and jaks have to pay RM200m up front.

Now, that sounds like the kind of contract a chinese company would make. That is a very very hard line.

So now, we've got to ask, how much is that RM191m + RM400M (construction profit) stake in the JV is worth. I have no idea. But if its free i wont mind holding it.

So, question now is. Are you willing to buy a mediocre constructiona nd prop dev company, with less than good capital structure and overhanging legal issues and lad etc etc.

For something like 40% of RNAV. (When you can get far better propdev and construction co at similar or far cheaper valautions.)

In exchange for an adventurous element, which brings with it the chance to trade on sentiment?

Not for me, maybe it'll work for you.


====
Posted by Icon8888 > Dec 6, 2018 12:07 PM | Report Abuse

jon choivo, I saw you wrote a lot of things, but I lazy to response, because you never listen. There is no point for me to response

whatever I say will be met with further retorts from you. Ended up I get angry you get angry

just assume that you are right ON EVERYTHING and that Icon8888 will go pookai

that is all I can ask of you

and btw, golden hair is not a bad thing, no need to be ashamed

6 articles about one company. And the size turns out to be 4%.

That's just well, odd.

4% share how to pokai.

Show me your confidence and raise it back up to 15%. Or even 30% if you so sure.

Icon8888,

I like how any critique of jaks, is categorized instantly, as childish. Makes me wonder if you actually have any confidence in this investment beyond and adventurous feeling/

I read constantly about these figures you have. But till today, i have not seen any figures, assumptions or projections for the profitability of the power plant.

There is a somewhat decent probablity that it will be a good out come. But that was far from properly renumerated at RM1.2 when you started recommending it.

The plant cost USD2.25bil minimum. Its financed 75% by debt. That is USD1.68bil in borrowings. That is RM7 billion.

Just 5% interest, which is lower than the usual rate of 7% in vietnam, and does not take into account forex changes. 5% is also lower than the rate charged by the chinese govt in the one belt one road projects.

Is RM350 million a year. The PBT, needs to beat this minimum.

This also assumes that there is no need for further capex etc etc.

Lets just take EVN the largest power producer in vietnam. They have 25,884MW installed capacity. Its a mix of difference sources, but coal is the largest. If you need higher precision, it would be obvious that its not that good of an investment, espeacially given the other opportunities.

Anyway, back to topic.

EVN, made PBT of 27,524,822,000,000 VND BEFORE tax and interest expense. That is RM4.9bil.

Prorated over 25,884MW, and extrapolated to the 1.2MW plant being built by Jaks, thats Operating Profit, before tax and interest expense of RM227M.

So assuming that JAKS plant, from the get go, is just as efficient as the average of EVN's, and have 5% interest cost, will be losing RM123mil per year.

This is unless you take the mindset that the cashflow is likely larger than that, due to depreciation and amortization being non cash items. And so they can still give out divs

But, depreciation etc, is the worst kind of expense, you incur it upfront, and you lose all opportunity cost. It only makes sense, in most cases, to buy a share in these kind of businesses at far below book.

At RM0.5, it below book, but even then i'm not even sure yet, given all the other business is crap and there is a wealth of other opportunities around. And the probabiities for right issues etc etc.

Btw, JAKS will be paying book value at an individual level.

Now those are my figures. Show me yours.

Yeah,

In general, a drop will definitelly cost a little on a net basis. Because derivatives do not cover with perfection. They usually aim to cover most, but not all. (if a company covers way more than the inventory etc, chances are they are now speculating on them, and its not just for the operations of the business.

There may be a slight timelag in crack, but this is really just conjecture.

At the end of the day, the above statements have very little bearing on the long term economic power of the company. They just need to be done right. If not done properly, we get that 900m stockholding loss in hy in 2014.

Having said that, the absolute best refineries are those that have the financial strength to never need to hedge. At the end of the day, the results from hedging over the long term is a negative. Hedging cost more than 4% of the underlying inventories per year, easily.

But very few can do that, due to the strong dividend payouts. Except for the ones under berkshire hathaway.

There's this thing called mathematics.

====
SarifahSelinder Sslee

U know Koon suffered big losses in JAKS as a matter of fact or jz hearsay?
06/12/2018 09:16

Yeap.