Uncle Koon, i did some research on construction costs of Coal fire power plant in India, the cost of construction per kw (1 mw = 1,000 kw) is around USD 1,500 to USD 1,800. The RM5billion for a 1440 mw worked out to be around USD 1,085 per kw USD([RM5b/3.2)/1440*1000].

Is the RM 5b the original estimate or the revised estimate taking into consideration of the delay?

Selling pressure is off today, don't have the opportunity to accumulate at the price i wanted.

For your information, Dato' Mark Yeoh Seok Kah, the Executive Director of Pintar Projek Sdn Bhd, has personally acquired 1,000,000 shares at an average price of 95.82 sen per unit on 21/2/14.

The price fixing date for the placement has yet to be determine. SC approval was give on 30/12/13 and management has six months to complete the placement exercise. Normally the placement price will be based on 5 days volume weighted average price prior to price fixing date.

I agreed with your recommendation and indeed it is a company which can manage its capex and borrowings well to sustain earning growth in the long run and deliver reasonable dividend payment.

What i admired most about the management is their courage to sink and swim with their customers. That is a plus point for long term support from loyal customers.

Dear Mr Koon, i understand that you have recommended to invest in Coastal Contracts a few years back but sold all your stake after the company earning growth suffer a beating when the company gave one off discount to loyal customers due to poor charter rate and intense competition.

Its order books then did not expand fast enough to feed rising revenue which have expanded in the region of 34% from 2008 to 2009 and 45% from 2009 to 2010. Its after tax profit for the same periods also grew 68% and 24% respectively. After that it was downhill all the way until recently.

Knowing Petronas is investing RM300bil in the next 5 years and Coastal will benefit from increasing order books for OSV in future once the marginal oil fields are operational.

The question i wanted to post here is why you decided to sell Coastal Contract. Is it because it suffered temporary setback on profit growth or there is no prospect to grow in the industry it is serving?

Since YTLREIT earning is falling behind income distribution, new investors definitely required better yield for their buck for the risk of having lower yield if distribution not sustainable.

Based on last year distribution per unit of 7.38 sen, should the placement be make at 90 sen, the after tax yield will be 7.4%.

the management needs to:
a> regularize its debts level, by doing so it reduces interest costs and restructure its debts in future for better rate.
b> improve earning from its Australia and Malaysia Hotels in future.
c> potential revaluation gain for its investment properties and recovering some of the forex translation loss to improve its NAV position.

Though cash flow wise it can sustain the current distribution, for longer term perspective and to be sustainable, the earning has to be higher or at least equal to the distribution.

Now it is a question of what is the placement price which will affect the total new units in circulation. Whether YTL management able to turn around hotel earning in future to make the distribution sustainable.

Mr Koon, agreed with you 100%. Live within your mean based on needs not wants, strive for healthy body and sound mind. Be thankful of what you have, adopt give and take attitude. Stay humble as you cannot be right all the time. Another take away is, if one cannot control his/her ego, it is difficult to stay humble. The illiterates are those who cannot learn from past mistakes or from other mistakes.

Price will get back to normal after placement and next quarter they will announce some good news. ha ha ... seen it many times...

I have entered at 91 sen, the lowest recorded two years back in 2011 is 83 sen. The placement represent almost 37% of the enlarge capital. It is possible that there will be a selling pressure from interest parties to keep the price low.

At 90 sen, it is already 7% below the NAV. I will buy more only if it drop to 87 sen. At 87 sen the expected net after tax yield will be 7.5%, a gross dividend yield of 8.4%. Very attractive investment. It is part of the corporate game they play to entice investors.

Looks like the placement exercise will be coming soon, strong selling pressure with unusual volume to keep the price low.

Dear Tigerz67, correct me if I ma wrong. There are two aspects here when we look at YTLREIT. First is profit attributable to unit holders and second is cash flow.

Based on the current result as per the Q2 ended 31-12-13, the profit after tax of RM 33.38 million (33.38/1,324 mil units = 2.52 per unit) is insufficient to pay the RM 51.60 million dividend (51.60/1,324 mil units = 3.89 per unit).

However, if you take the depreciation provision of RM 28.65 mil (2.16 per unit) which is a non-cash item, the income available for distribution will increase to 4.68 per unit. An excess of 0.79 per unit, of course it is not wise to use depreciation provision to paid income distribution.

However, further improvement in profit (50% more, 1.37 per unit) is needed to cover this shortfall. The pass profit reserve (back up by cash balance) from sale of properties in the past can be utilized for upgrading if necessary. The important thing is the current cash flow can sustain the payment and maintain the income distribution.

Next, what happen if the unit placement of RM 800 million is used to repay loans and enlarge the share base? Will there be a dilution in earning? Yes and No, it depend on first any improvement in earning in the second half and how much is the saving in interest after the repayment of loans (RM 1,576 mil – RM 800 mil = 776 mil).

Assuming the placement is done at RM 1.00 per unit towards the end of Q2 (just assume, not happened yet) after the 2nd dividend payment. The number of units will increase from 1,324 mil to 2,125 mil.

If there is no improvement in PAT in the 2nd half and remained at RM 33.38 mil. The saving in interest will be RM 18.66 mil [18.38 x 2 - (RM 18.38 mil x 2 x 776/1576=18.10)]. The revised PAT per unit will be 2.45 per unit, slightly less than the 2.52 per unit in the 1st half. An improvement of RM 1.5 mil (2,125 mil x 0.07 sen) in profit will equal the 1st half performance. Please take note that there is an improvement of RM 4.8 mil profit after tax between Q2 and Q1. Though this is a marginal improvement,

In term of cash flow, the total income available for 2nd half distribution will be RM 80.69 mil (33.38 PAT+18.66 Int Save +28.65 (Dep Prov) which represent 3.80 per unit based on the enlarge base.
This is more than sufficient to pay for the remaining dividend distribution of 3.11 sen per unit.
Assuming the total distribution is 7 sen per unit. This work out to a net after tax dividend yield of 6.77% (7 x 0.9/ 93) based on the price of 93 sen per share.

Based on the above calculation on the 2nd half, there is a cash flow surplus after distribution of RM 14.66 mil [(3.80 sen – 3.11 sen) x 2,125 mil], the annual surplus will be RM 29.32 mil. This will improve the current cash holdings RM 140 mil.

As for the NAV, the 31/12/13 stands at 97.15 sen per unit (RM 1.287 bil/1.324 bil units). After placement, it should stay around the same but will continue to drop if the PAT falls behind the Income distribution.

However, it can be increased by:
a> By assets revaluation which can improve its unrealized income which currently stand at RM 43.4 mil or 2.8% of the investment properties value at RM 1.543 bil, or
b> Future forex gain as Aussie dollar strengthen against the ringgit, at the moment the total unrealized translation loss in the forex reserve is RM 160 mil. Since the Australia hotels are long term investment, the loss position can improve over time.

The distribution policy can be sustainable after placement exercise unless management decides otherwise.

I understand a lot plantation companies are on an expansion trail beside JTIASA. Can anyone provide a statistic on the total planted acreage in the past few years and if all these excess capacity (palm trees matured) come to the market at the same time.

What is the impact on the CPO price?
a> in term of supply and demand equation,
b> the price of competing vegetable oils,
c> unpredictable weather patterns,
d> import policies of consumer countries, and
e> changes in taxation and import duty.

Unless we have answers to the above, we cannot predict for sure the bumper harvest will translate into record profit for JTIASA.

I will buy this for its attractive dividend yield and upside income potential. Thanks Liew....

The Q2 income distribution of 1.9786 sen per unit ex-date is on 5th of March 2014. Payment date is 27/3/2014.

YTLREIT Q2 result is out and the management has declared a higher interim income distribution of 1.9786 sen per unit. The Australia Hotels Q2 PBIT result has improved by 62% from RM 8.673 mil to RM 14.089 mil compared to Q1 ended 30/9/13. Profit before tax overall has improved by 32% from RM 14.83 mil to RM 19.52 mil.

The good news is, in term of cash flow, its YTD net operating cash less depreciation is RM 61.81 mil (RM 90.46 mil - Depn RM 28.65 mil) is more than sufficient to pay for the income distribution of RM 51.6 mil ( RM 25.4 mil 1.92 sen per unit for Q1 and RM 26.2 mil 1.98 sen per unit for Q2).

However, its NAV will drop from RM 1.011 to RM 0.972 per unit after the income distribution. If the Australia Hotels result continue to improve in the next two quarters, its NAV should increase.

At current price of 94.5 sen, its gross dividend yield should be 7.81%, a net after tax yield of 7%.

The management intention to pay dividend quarterly is to facilitate the placement exercise so that unit holders of the new placement will not have the unfair advantage of getting the dividends when they subscribe and get their units just before the ex-date. Spreading the dividends over four quarters will reduce these unfair advantage.

The transaction forex gain or loss will be a realized gain/loss. The other two are unrealized until you need to repay the foreign loan or disposed off the foreign entity.

Hope the above explanation will help you to understand and evaluate REIT performance. I think Liew has put in a lot of effort in assessing YTLREIT current pros and cons. .

It is not a good practice to pay dividends using non-cash provision like Depreciation which is meant for future upgrading purpose. Else it will have to borrow or dig into its pass reserve.

If i am not wrong, the normal practice to determine the placement price is based on the 5 days volume weighted average price (VWAP) prior to the entitlement. With depressed market price, those being offer for the new placement will be getting a price below the NAV, it could much more than the 3.8 sen (99.8 - 96) especially if the Hotels are worth more than the current book value.

The drawback is the below par performance of its Australia Hotels, the equation could be better if these are improving in the next few quarters compared to the 1st Q. If net profit not improving and YTLREIT continue to maintain the same dividend policy, though cash flow wise it can sustain but its NAV will continue to slide unless beside realized net profit, there is revaluation upward on properties value or regain its lost ground on earlier forex losses. If Aussie dollar continue to strengthen, the forex translation gain can also improve the NAV as the cumulative forex losses will be reduced.

Forex gain/loss can come from three areas;

1> one is due to valuation, for example if a company home currency is in RM and it has a USD loan (with lower interest rate compared to RM loans), strengthening of USD against RM will cause a valuation loss in forex. In YTLREIT case, its loan is in RM, not to worry on this.

2> second is translation loss, when a company consolidation an accounts denominated in foreign currency, in YTLREIT case, it is in Aussie Dollar. Translating the AUD to RM will have a forex translation gain or loss. In this case, it is taken up in Balance Sheet as forex translation gain/loss reserve.

3> transaction loss, if there is a payment transaction in AUD and already converted and paid for using RM. Then the different between the book in rate for liability and payment rate will be a forex transaction loss and will be recorded in P/L.

In REIT, there is also a fair value adjustment arising from revaluation of investment properties. An increase in value will be recorded in P/L as fair value gain. It is an unrealized gain unless the property is disposed off.

Any gain in these two areas will improve the NAV and the reverse is true if there is a loss in value.

The optimists will always look at the positive signs and feel better days are ahead. The pessimists will look at the other way round to justify for their actions.

Whatever is your outlook, unless you have a crystal ball that allow you to gaze at the future, nobody can tell for sure what will happen next, its pure guessing game.

Everyone agreed with me that we have experienced crisis after crisis and each time the story is different. With so many uncertainties and risks around us, whether it is due to war, banking defaults etc. can destabilize the fragile system. The world is so wired up that huge block of funds can be mobilized with a "click of a button".

I think it will be a bad decision to chase after risky assets now especially under conditions that may have the potential to trigger dismal forward looking returns. My personal opinion is to get your exit plan ready to guide your capital. I may sound conservative but it is better to be safe then to be sorry later.

You can never avoid risks in investment, you can minimize the risks by selecting businesses where the management focus on managing the capital expenditures for sustainable earning growth, improve productivity, controlling operating costs & working capital and deliver a stable DPS.

Dear Up_down you have said the magic word. How to control your emotion?

If the business you are investing in is creating value to shareholders. Then you will not panic when market moved adversely against you. You can hold or buy more to average down as the company will not become PN17.

One of the most challenging tasks for management of any business is capital allocations (shareholders’ equities + interest bearing loans). If fund is channeled to productive assets which the company is confident to generate return over and above the weighted average cost of capital (WACC). Then the business is adding value to shareholders, called economic value added (EVA).

For example, if a total capital deployed in a business is RM 1,000 in which RM 600 is equity and RM 400 is loan. The debt to equity structure is 40:60, if the cost of debts is 5% and the cost of equity is 10% (expected return of capital in that industry).

WACC = 5% x 40% + 10% x 60% = 2% + 6% = 8%

If the Return of total capital [PATAMI/(Equity + Loans)] is more than 8%, then the management is adding value by generating a return over and above of the WACC, the higher the EVA the greater the safety margin.

The next question is whether the company is able and intent to pay regular dividends to reward shareholders. The answer to this is Free Cash Flow (FCF) position of the company (Net operating cash flow minus Capex). If a company has negative FCF, it will either; a> Raise more funds from shareholders, or
b> Borrow from commercial banks, or c> Divest non-core assets to plug this gap.

Dividend payment will be slim if FCF is negative year after year due to continuous stream of capex and the investments have long gestation period before profit & cash flow can roll in.

I would prefer a more balance approach in term of capital allocations. One “Should not bite more than you can chew”. If stretch too thin without reserve, then any adverse market conditions will hit the company in all directions; drop in price & volume, cost push, bad collection etc. When the time come, it will be tough to restructure to meet your obligations. Opportunists will come and press your assets prices, lender will asked for more collateral to back up the loans. Then finally, the shareholders will be required to take hair-cut or take total loss when the company went into liquidation.

Total shareholder return (TSR) involved regular dividend payment plus capital gain over the holding period which can only realize if you sell. You need to monitor the news and quarterly performance to gauge whether it is still worthwhile to hold. In view of this, it is better not hold more than 10 stocks and focus on industries you are familiar with, especially investment is not your full time job.

You need to breakdown the return on shareholders’ equity into three components.

ROE = PATAMI/Revenue x Revenue/Net Assets x Net Assets/Equity
(Net assets = Non-current assets + Current Assets – Borrowings)
For example:
Co A ROE = 10% x 1.00 x 1.2 = 12%
Co B ROE = 20% x 0.50 x 1.2 = 12%

Both company gave same ROE, the only difference is Co A assets are more productive and able generate revenue to turn around once every year whereas its profit margin is half that of B. Both companies have the same level of ratio in term of using equity funding its net assets.

If Co A is able to improve its use of trade credit instead of relying on loans without affecting its input cost adversely, then its profit margin will be better due to lesser interest charge from commercial banks.

Co B will need to evaluate whether its portfolio of assets that generating sub-par growth in term of revenue and profit. One example is holding too much cash in FD and not paying out enough dividends if there is no opportunity to invest. Another possibility is deteriorating debtors or increasing inventories or both.

If you benchmark the target against other similar top industry players, you will know its strength and weaknesses.

The computation of Intrinsic Value of stock depends on the Projected Share Price which depends on sustainable earning growth rate [ROEx(1-Div Payout)] x current EPS x perspective P/E. Adding this to dividend payout policy x EPS will yield total shareholder return. By discounting the future TSR with your expected return will give the entry price.

Quantitative analysis does matter but attention to the qualitative aspect of the business is vital as well. Continuous reading on relevant news and figuring out the potential impact of such news on the profitability and cash flow on the businesses are critical.

That's my personal experience which have served me quite well. Always remember - whether it is for trading or longer term hold, there is no free lunch, you need to work for it.

A word of caution with this stock, its share price has increased from RM3 in Apr'13 to around RM6 in early Dec'13 before the 1 for 1 bonus in Dec'13. At current price level, a 10% return per annum should not be an issue unless there is a delay on rolling out the infrastructure works and a slow down in launching of high-rise building works. Its near term growth could be lackluster.

The 2nd quarter ended Dec'13 YTD result showed a slight dropped in after tax profit margin by 2% from 28% to 26% compared to last year. Its YTD revenue growth is 14.5% while profit growth is only 7.7%.

Its current P/E of 9 is low in comparison to other construction counter but this is to be expected as its earning visibility is low due to short contract period of 6 months to a year as compared to normal construction period of 3-4 years.

Though the founder has started to groom his son as his successor, the succession plan of CEO minus 1 level is an unknown. These are key issue to sustain execution capability in future.

Great stuff KC Chong, agreed with your assessment but I have a few comments to make.

In construction industry, earthwork & piling work started first with fast turnaround time especially for building and collect their due in the early stage of the construction cycle. This is good for cash flow with minimum risk of bad debts.

Since the founder and MD, Dr Chiu is 58 years of age, from the board line up, I presumed he is grooming their son Chiu Wei Wen, age 28 to succeed him. His son was major in IT with a diploma in management and already on board slightly more than two years. It will take quite a while before his son can be in the driving seat.

Looking at the past five years Y-O-Y growth trend from 6/09 to 6/13 in term of revenue and profit, the high growth rate achieved in the FY 6/11and 6/12 are accompanied with RM 30 million and RM 20mil capital expenditure. The 6/13 the growth rate has slowed down substantially with better profit margin and accompanied with a low RM 8 million capex. Instead of comparing quarter to quarter growth which can represent a slow start of works in one quarter and completion of more works in another quarter. For Y-OY high growth, there is a co-relationship between capex and growth. For Pintaras to have the Y-O-Y high growth rate it needs to secure higher order books compared to previous year and more investments in PPE to execute increase work load.
As at 6/13 YE it is sitting on a big cash pile of RM 155 million, out of which RM 30 million in investment in quoted securities in Malaysia and Oversea (mainly Hong Kong) which gave comparable return and the balance in cash & short-term deposit which is earning below par income. Despite better net profit margin in 6/13, its ROE could be much better if not due to the drag by higher low productive assets and shareholders’ equity. It should improve its dividend payout policy as it cash position is able to fund growth and better dividend payment.

In view of the oversupply of commercial space and head winds in residential property development, the prospect of growth will come from industrial buildings, MRT2 roll-out and WCE etc. One of its strong competitors is Sunway Geotechnics.

I fully agreed with you that this is a growth stock with decent dividend payment (but could be better), its long-term sustainable growth rate should be in the region of 15% per annum due to the high base factor.

We are in the same page in term of stock selection. Good works, KC Chong…Thanks for sharing.

Since i preferred regular income stream and sustainable earning growth, I would look at equities in IPC, consumer, REITs, trading & services sectors.

In early 2009, i have bought into YTL power at an average cost of 1.86 and dividend yield then was 6% and above. Sometime in early 2011, YTL wanted to use YTL Power cash pile to venture into 4G Broadband. Telecommunication business required huge capex. The moment I have read the news, I have sold my holdings at 2.40 in anticipation of declining dividend payment. This was pure reaction to change of business model by YTL Power that will affect my objective. My annual TSR (capital gain plus dividend) was 19%.

After that i entered Zhulian in March 2011 at 1.68, the reason is again due to strong earning and dividend yield. Its strong agencies and products created demand in Malaysia and Thailand. I have sold Zhulian in Nov after a sharp price hike (almost RM 2 in two months) of more than 60%. I must admit this is purely a decision to take profit due to unusual speculation on the counter.

These kind of opportunities does not come often and most of the time you will get around 5%-8% per annum from dividend yield.

Of course before entering a counter, I need to spend almost 2 days (normally during weekend to read annual & analyst reports. Spend 2 hours analyzing its financial performance for the past five years minimum.

If you wanted a decent recurring income with upside potential, check out SUNREIT. Its price has dropped back to a sensible level and its re-opening of its Putra Mall in Penang around 2015 will improve its earning and dividend yield.

Yes, you are right ICON8888. I am not an active trader and i don't intend to be one.

I do not look at the screen every minutes. A sizeable portion of my monies is on equities giving recurring income stream. It is only logical for me to take profit if the price move too far ahead to a level when the earning cannot catch up.

In this manner i can work and sleep peacefully.

Wishing you well in your investment style.

kcchongnz: Thanks for your kind comments.

Yes, it is not wise to borrow and take risk on potential growth stock like JTIASA at the moment for a few good reasons. Possible hike in interest rate, tightening of margin due to worsening market condition etc. but can consider Mr Koon assessment method on companies which practicing more balance approach in capital allocation.

Warren Buffette is smarter, he "leverages" on insurance premium which form bulk of Berkshire Hathaway investment capital.

I do not know Mr Koon personally but from the ways he shared his wisdom in a transparent manner, his arguments and conviction on his assessment of JTIASA does carry weight for its future earning prospect. Most important of all, he put monies where his mouth is.

I do respect his entrepreneur spirit which I am lack of, he is an innovator of new ideas (strategy) and has the skill and initiative to make them profitable (execution). The reward for the risks taken is the potential profits he earns. It is also possible that a good strategy with wrong execution will end up making losses.

If you wanted to have super return, you may need to change your thinking cap as entrepreneur and take calculated risks. A good strategy must complement with good execution in order to earn better return. You do have to pay tuition fees along the way to horn your execution skills. I have paid mine in my early stage of investment. we must learn from past mistakes and the best is to learn them from others.

I may consider allocating some risk capital in future in my portfolio. I admit it will be a big mental block I need to overcome from my current objective.

Thanks Mr Koon for sharing your thought generously, it has definitely given me a fresh perspective in scouting for investment targets later.

Let me shared with you the little knowledge and experience that I have gained on margin financing and the sort of return achieved by top fund manager and promises by conservative financial planner.

A portfolio that generates 20% or more CAGR on capital invested consistently year after year is only possible through margin financing. The risk-reward ratio which is a comparison of expected returns on an investment to the amount of risk undertaken to capture these return will determine the stop loss of each trade.

Assuming you intend to put in RM50 as seed capital and borrowed another RM50 with 4% interest. You invested on 100 shares of X at a price of RM 1 and intend to stop loss at RM 0.95 to ensure your losses will not exceed RM 5 which represents 10% of your seed capital. If after closing your position, you expect a return of 12% which represent an amount of RM 12. Then your risk-reward ratio is 5/12, the higher the ratio the more risky will be the venture. You need to gauge the volatility of the stock to gauge the stop loss (max loss allowed by financier without risking default on margin call), some trial and error is necessary to determine which ratio is best for a given trading strategy.

In the above example, the RM 12 return less RM 2 interest (RM 50x4%) will yield RM10 net profit after interest which represent 20% return on your RM 50 seed capital. The risk is loosing 10% of your capital if the share price will not go below 95 cent, any price below that may risk margin call. It will be more complicated with more open trading positions.

One of the well known fund manager, Mr.Tan Teng Poh - MD of Capital Dynamics Asset Management has achieved around 14.73% CAGR with its RM 140 million Closed-end fund since inception (19/10/05) til now in term of NAV. 11.44% CAGR in term of share price over same period (approximate 9 years). The CAGR was much better until he decided to hold more cash.

Right now its share price is RM 2.38 and its NAV as at 15 Jan 2014 is RM 3.00, a discount of 20%. If he decided to sell everything and return the monies to shareholders, you will get 20% extra for your investment.

Does that sound logical as an investment to you? Well it depends on what you want. The fund does not pay regular dividends and if you do not mind to lock in your capital for a long period of time for the 14% CAGR capital appreciation. In this case, the fund has proven track record unlike SPAC and JTIASA. The reward is good if you can afford to wait with minimum downside risk.

I am not promoting Capital Dynamics Fund nor do I hold any of its shares because as an investor I prefer a combination of regular cash dividend plus capital appreciation over time. If the overall market valuation looks lofty, I prefer to liquidate and hold more cash. In other words, I will rebalance my portfolio if the price moves too far from fundamental, meaning P/E & PBV up substantially with flat or declining earnings and dividend payout. As what is happening now, earnings and dividends payout of many companies are either flattish or declining.

One wealth management guru (a certified financial planner) told me that he can manage to give a return of 6%-9% consistently with minimum risks on client’s capital. However, if you dared to pick up undervalue stocks with strong fundamental during crisis period like the 1998 Asia meltdown and 2008 global financial crisis. My experience concurred with Mr Koon that you will have very good chance of doubling your monies in three years time.

Investing is a risk but not knowing what you are doing is a greater risk. Every investor has his or her own investing style. No matter what strategy you use, just make sure you know what you are doing.

You need to be focused, Donald Trump focused on real estate, Jim Rogers on commodities future and Warren Buffett on stocks. You need to be a voracious reader and have a solid financial foundation moulded on the streets.

Like Mr Koon said, you learned from your own experience or from a network of friends with similar interest. Never jump from one strategy to another and always looking for the next hot tip.

Always have an exit strategy before entering an investment, equity price should stay within a permission limit relative to earning growth. I would sell on strength if there is a wide divergence between price and fundamental. Must have patience to wait for your plan to materialize, fear and greed are the causes of declines and surges at market place. Like what is happening at the moment. It is only through market fluctuation that a successful investor makes his or her money. Winning or losing are just part of the game.

Crisis always present opportunities to cherry pick undervalue stocks, as long as the company has strong balance sheet, sustainable cash flow and earning growth prospect. Just remember that you can never sell at the highest nor can you buy at the lowest. Just stick to your plan. Good luck to all,cheers....

If you are a risk taker like Mr Koon, who has the intention to leverage to make "big buck". You need to convince yourself before convincing others that the bet has a higher probability of success. That's what he meant by calculated risk. You cannot blame him to take profit out of your greed and fear.

Since he is the deal maker in the game, he will always had an "ACE" in his hand over others. He didn't pointed a gun at your head to take up the offer. He merely offer a way to take calculated risk and make monies along the way.

He has been quite transparent on his methodology and sharing his success story. So it is up to you to decide whether you wanted to follow or choose "your way". Growth based on leverage create illusion of wealth, it is over-leverage by US Banking Institutions that create the 2008 financial crisis.

Never forget the key factor that has always sustained prudent investors through thick and thin - SAFETY. Always favor lower risk investments, taking bigger risks strictly with money you can afford to lose.

What Mr Koon is trying to tell you in plain simple English, don't be the "bigger fool" in the zero sum game. Jtiasa at the moment has nothing to show to deserve the high valuation. It is pure P/E multiple revaluation based on the rosy picture painted for unknown future performance which have yet to realize. If you jump in after 20% increased in price after Mr Koon's recommendation, then you are the bigger fool. You will be lucky to make some monies if there are more bigger fools in the market.

Mr Koon's style of trading may not be suitable for everyone, especially if you don't have a system to take profit or cut loss to protect your capital to enable you to come back for another deal.

Good luck and happy new year to all.

The toughest challenges in managing businesses successfully across a range of time frames are achieving performance and health. It is especially hard recently in turbulent economic conditions; we must give JTIASA management the credit to have the courage to create longer term value at the expense of short-term performance.

So the question is whether the JTIASA management has laid a sound foundation today for consistent and resilient growth in years to come.

As a listed entity, JTIASA management cannot afford to ignore near-term demands by investors to build confidence in its ability to realize longer term goals. Hence, a risk-adjusted balance approach is required for capital allocations to establish relationships and growth prospects into future cash flows. Deliberately ignoring current performance for long term health or vice-versa will underpin healthy growth.

The key is not to put too much into future and expose to risk of failure with high debt burden. In adverse scenario, all factors like sale volume, price, costs, asset valuation etc. will be against you. A lot of companies facing short-term financing difficulties will default and went under.

I remember during the 1998 Asia financial crisis, prior to that a lot of up and coming companies set their eyes on IPO. Majority of them borrow to expand their capacity. When the Financial Storm hit the shore, one by one went into tailspin and become part of PN17 statistic and many have liquidated.

Under the current economic and regulatory environment, a focus on short-term performance is inevitable and companies must learn how to meet next year's earnings expectations while at the same time implementing the platforms needed to deliver strong and sustainable earnings growth year after year.

Valuation of oil palm plantation land has to take into consideration of many factors including its biological assets maturity profile, else we are comparing apple with orange. It takes a lot of capex to plant and wait for 4 years for the palm tree to mature.

When we invest in a business, the investment return include dividend yield for the price we paid and capital gain which depends very much on sustainable earning growth. Though JTIASA has a cash cow (timber segment) to feed its oil palm plantation expansion plan. It still need to borrow annually for its capex requirements.

There are a lot of risks involved in commodity business, risk of unfavourable weather, risk of regulatory changes, risk of competing products, financial risk etc.. to name a few. JTIASA management still need to clear a lot of hurdles before we can see the potential (as Mr Koon's see it) into reality. It all depend on your risk appetite in stock selection and whether you can afford to loose if things turn ugly especially on cyclical growth stock like JTIASA expanding with borrow monies.

I prefer stock with proven business model with sustainable earning growth (PE multiple should not run too far from earning growth), positive free cash flow (preferably using internal funds to fuel capex), low gearing, positive EVA and most important of all a dividend payout policy.

Hubline is the turnaround story after a series of painful cuts and impairments after 2008 global financial crisis. In FY ended 30 Sept 13, it has written off close to RM 200mil resulting an after tax loss of RM 190 mil. Its current NTA is around RM 14 cent.

If you believe that the world economy is prospering and global trade is on the upswing again in 2014, then it will be a good omen for shipping company like Hubline, at least there is hope of recovery. Its CEO has proclaimed that there will not be anymore scrapping of vessels after FY13 and all inefficient ships already out of the way. The costly write-off will not repeat in FY 2014.

Its core shipping businesses comprised on dry bulk and container shipping. The average ageing of its fleet is around 10 years, 28 of its current 30 vessels are wholly-owned. Two are rented from third party. Half of its fleet is used for dry bulk and the rest for container shipping. All its current profit is from dry bulk and all dry bulk vessels are fully utilised. It may need to buy 2 dry bulk ships with the next 12 months. Another round of borrowings is required. Its dry bulk operations deliver a gross profit margin of about 20%. In contrast, the container shipping side is just breaking even.

The strategy is deliberate – while all of its dry bulk vessels are fully-owned, Hubline will stick to chartering additional container ships so that it isn’t tied down in case the market takes a dive.

In order to improve its top-line growth and start making profit again, it intends to restart its Oil & Gas support division. Though it has ready operational and technical teams but need to borrow for capex investment - a mid-size AHTS will cost RM 60mil each. The current charter rate is improving and such venture should be bankable. There will be a surge in demand for Oil & Gas support services due to Petronas’ five years RM 300bil investment in Crude production. Hubline is looking for potential JV partners in this business.

As of 30 Sept 2013, its gearing level is 55% (RM 93 mil short-term loans and RM 154 mil long-term loans). Chance of gearing shooting up to 100% is high.

Given Hubline’s aggressive write-offs this year, industry watchers say the firm will close FY13 in the red but see it returning to profitability in FY14. If we take its last quarter result in FY ended 30/09/13, its PATAMI is RM 2.5 mil. If we assumed this continue into FY 2014 without the expansion plan, the best guesstimate will be RM 10 mil profit for the year.

Another risk factor is its operating cash flow not able to support its repayment of bank loan falling due. Either the loans need to be restructure or another round of corporate exercise to raise fund is required.

To cut the story short, investing in Hubline is a high risk venture with potential upside. With inflation raring its ugly head in year 2014 and imminent hike in interest rate, borrow more to expand will put further pressure on its profitability and cash flow.

Mr. Koon was right about the improved FFB production, Jtiasa 1QFY14 result showed a 42% improvement in production volume and contributed to a lower production cost.

However its FFB Sales & average CPO price has dropped by 22% and 17% respectively. Its logs and plywood sales volume also reduced by 29% and 15% respectively. These reduction in sales volume of its products and fall in CPO price contributed to its lower quarter revenue compared to previous quarter.

In term of Gross profit, it has improved by 8.9% from RM 59.9mil to RM 65.2 mil. This was due to lower FFB production costs and increased logs and plywood average selling prices by 17% and 12% respectively.

Although profit has improved, Jtiasa lower sales volume has resulted in higher inventory. An increased of RM 29 mil. This has resulted a lower operating cash flow.

Its high capex payment and repayment of short term bank borrowings have reduced its cash holding substantially. As of 31/9/13, its still has a capex commitment of RM 103 mil and RM 391 mil short term loan. Its has another RM 451 mil as long term bank borrowings.

In the year 2014, CPO price will be higher compared to 2013. Hence, its sales volume of its products need to improve drastically in order to address its Achilles heel - cash flow.