With negative ROE for the past few years, this is a counter for the speculators

Hektar – declining dividends per unit for the long-term investor

Hektar is a Bursa shopping centre REIT with currently 5 properties with about 2 million sq ft of lettable area.

A long-term unit holder would have suffered during the past 15 years with declining Dividends per unit

While Revenue and FFO in 2022 were higher than those in 2007, PAT was lower. We can trace the financial performance to the declining tenancy performance.

The number of units in Hektar increased from 320 million units in 2007 to 469 million units in 2022 while the financial performance deteriorated. This meant that on a per unit basis, unitholders were worse off in 2022 compared to 2007. Earnings per unit and FFO per unit declined. This then led to a declining Dividend per unit. Refer to the infographics https://i.postimg.cc/bYBGQT8x/Hektar.png

When hunting for REIT, don’t look at current dividend yield. Look at its history of how it grew. Growth may not benefit you.

For more insights of Bursa companies and stock tips, refer to https://www.youtube.com/watch?v=B8jucWeYbR0

CBIP has about 20,000 ha of planted palm oil through its associates and JV. Given the acquisition of Boustead Plantation at RM 48,000 per ha, does it mean that the market has not recognized the true value of CBIP.

Price going up but its ROE over the past few years have been coming down. I also don't see anything in its quarterly performance. Goreng?

Plantations saved MKH.

Many know MKH as a property developer. But the Malaysia property sector had been so over the past 6 to 8 years. Fortunately for MKH it ventured into oil palm plantations in mid 2000s.

If you look at the chart (refer to https://i.postimg.cc/vZWWskv4/MKH-EBIT.png) you can see that while the EBIT contribution from the property development segment had been declining since 2016, that from the plantation segment had been growing. In 2022, the plantation segment accounted for about half of MKH’s EBIT.

So, what does it mean for an investor?
• When the property sector recovers, we can expect better overall profit.
• Property and oil palm sectors are cyclical but they are affected by different factors. So MKH performance will be less cyclical.

For more insights into the Bursa plantation sector, refer to https://www.youtube.com/watch?v=9KhboTCMdEg

Except for one year, the ROE of HengYuan Refining over the past 5 years is nothing to shout about. Last year was negative ROE Refinery don't seem to benefit from the high oil prices. Now why would you expect the share price to move from a fundamental perspective?

Would shareholders be better off if TH Plantations sell its assets like Boustead Plantation?

TH Plantations has about 55,000 of planted land compared to Boustead Plantations which has about 70,000 ha.
The shareholders of Boustead have decided that they can derive better value if it was part of KLK rather than operate it on their own.
If you compare the ROE of KLK (shown in green in the chart) over the past 9 years with those of BPlant (shown in black), you can see the economic rational. Refer here for the chart. https://i.postimg.cc/63zsdSZG/TH-vs-Boustead.png

When you look at TH ROE over the same period (shown in blue), it is worse than that of BPlant.
I know TH has its Transformation plan to turn deliver better returns. But wouldn’t it be easier for TH to take the BPlant route and then put the money into better use?
The plantation sector seems to be dependent on size. Look at Sime Plantations and IOI and you will know what I mean. For more insights into the Bursa plantation sector, go to https://www.youtube.com/watch?v=9KhboTCMdEg

Business has its ups and downs so I look at performance over several years to get a better sense of its earnings potential. The sad thing is that over the past 10 years, the ROE has been declining. Unless you have a strong knowledge about how the company is going to turnaround, there are easier companies to look at from a fundamental angle.

When you look at Versatl ROE over the past 10 years, I could only find one year with positive ROE. I thought that my reference packaging company New Toyo was facing challenging performance. But Versatl was even more challenging. For more insights into New Toyo refer to https://www.youtube.com/watch?v=zuL2PB7Kwkg

Genting ROE had declined from its peak of 16% in 2011 to breakeven last year. The stock price direction had followed suit. Sure its gaming business has been affected by Covid-19. But it also has plantation and other businesses. Its performance will eventually recover as these are not sunset sectors and are not facing digital disruption.

AmFirst is a Bursa Malaysia mix-sector REIT that has seen declining occupancy despite a growth in the leasable area.

AmFirst failed in its mission to deliver sustainable long-term income distribution and investment performance:

• The annual dividend had declined from an average of RM 0.09 per unit (2008 to 2010) to an average of RM 0.03 per unit (2020 to 2022).

• The Book Value had grown by a 1.0 % CAGR from 2007 to 2022.

• The average FFO per unit had declined from an average of RM 0.11 per unit (2008 to 2010) to an average of RM 0.08 per unit (2020 to 2022).


From a unitholder’s perspective, from 2011 to 2022, I achieved a gain of 0.9 % CAGR. Not exactly great compared to the returns from keeping the money with the EPF. I would conclude that my investment in AmFirst was a mistake. It may previously have been a good Bursa stock. But I am not sure this is still the case. For an infographics of this stock, refer to https://i.postimg.cc/FzsZ10cW/AmFirst.png

For snapshots of AmFirst or other Bursa companies refer to my blog article “Are these outstanding stocks - what to consider? (Bursa Malaysia)”

ROE has been declining since 2017. Now why would you expect the share price to be up-trending?

Did KLK overpay for Boustead Plantation?

KLK acquired Boustead Plantation for RM 1.55 per share. This is valuing the whole of BPlant at RM 3.47 b. Given that BPlant has 73,200 ha of planted land, this works out to be about RM 48,000 per ha.

Now if you look at KLK, it has about 297,983 ha of planted land. Its plantation segment net assets work out to be about RM 9.87 b. This is equivalent to RM 33,000 per ha.
Now why would KLK pay RM 48,000 per ha when its own plantation only has a book value of RM 33,000 per ha?

I am of course illustrating the danger of looking at one point estimate when analysing companies. No two companies are the same and in the context of KLK and BPlant there are differences not only in where the estates are located, but also operating efficiencies.

As a retail investor, you can only rely on the annual reports and other industry reports for your fundamental analysis. That is why margins of safety and having a sense of the sector performance is important.

To help in my analysis, I compile the base rates for many sectors that I invest in. For the base rates of plantation companies refer to the video “How the Malaysian plantation sector performed over the past 10 years” https://www.youtube.com/watch?v=9KhboTCMdEg

From a ROE perspective, this has been trending up since 2020, but so has the market price. It is now trading at more than 3 times its book value. I would consider this high for a brick-and-mortar company.

When you look at Tomypak 2023 performance, don't be misled by the high profits. This was due to a one-off insurance claims. Excluding these, on an operating level, its past decade returns is just abou the same as those of my reference packaging companies - New Toyo and Canone. I would not be excited by this stock from a fundamental perspective. For insights into New Toyo go to https://www.malaysiastock.biz/Blog/BlogArticle.aspx?tid=26870

The Bursa property companies are finding that the recovery of the residential market is taking longer than expected. So some thinks that going into industrial land development may be an answer. But this will depend on where you develop.

How to ensure you are realistic when analysing plantation companies?
I do a lot of fundamental analysis and to ensure that I am not carried away by optimistic or even pessimistic thinking, I follow Daniel Kahneman’s inside and outside view, from his book “Thinking Fast and Slow” The inside view generally refers to a conclusion reached using an individual own experience and reasoning. It is the perspective of someone looking at the problem from “the inside”. The focus is on the specific situation rather than looking at a broader class of similar situations.
In contrast, the outside view refers to the perspective of someone looking at the problem "from the outside". It is the view taking into consideration the actual experience of other people.
When you analyze a company, the inside view may lead to unrealistic expectations. To counter this, you need an outside view.
This is where base rates come in. The performance of the industry would give you a basis to check on your analysis and projections.
I have updated my base rates for the Bursa plantation sector as per my blog article “How the Malaysian plantation sector performed over the past 10 years”

Over the past 3 years, the stock price of SLP has been cyclical. It appears that we are now at the bottom of the latest cycle. The cyclical stock price pattern seems to be at odds with the fundamental performance as can be seen from the chart https://i.postimg.cc/Gtm3mTM0/SLP-vs-New-Toyo.png
You can see that its ROE has been quite stable and even better when compared to my reference companies - New Toyo and Canone. https://www.moomoo.com/community/feed/110845519265798?global_content=%7B%22promote_id%22%3A14079%2C%22sub_promote_id%22%3A47%7D

Like all Bursa property counters, this company performance has been deteriorating since 2017/18. The key question is whether the company has the financial resources to withstand a few more years of a poor property market

Over the past 5 years, the stock price have gone through several cycles. It currently seems to be at the bottom of the cycle. While stock prices were cyclical, its ROE have been steady. A comparison of its ROE over the past 10 years compared to my reference companies - New Toyo and Canone - showed that SCIPACK was the best. Is this an investment opportunity to go in at the bottom of the price cycle knowing that the fundamentals have not changed? For an overview of New Toyo https://www.youtube.com/watch?v=zuL2PB7Kwkg

"New" listed companies tend to have a few good years post IPO followed by more "realistic" returns. I think we are just seeing this pattern. If you are a fundamental investor, wait for a bit more history before making any analysis

Post removed.Why?

When screening for stocks, I some times do a scattergram of the PE and PBV. I then look for those with both low values for both. There are about 20 odd Bursa companies under the packaging sector. The PE: PBV scattergram of them as of Sep 2023 is shown in the chart below. Note that I have excluded those whose PE < negative 20 for the purpose of this chart. https://i.postimg.cc/90C1kzPw/Packaging-PE-PBV.png
You can see that there are 2 companies as circled in red that have the lowest PE : PBV values. They are KYM and PPHB. Note that a cheap stock does not necessarily mean a good investment ie one that can enable you to make money. As a value investor, I use these in conjunction with some other fundamental metric eg ROE to narrow the screen.
In my ROE screens, I not only look at the historical ROE but also compare them to my reference – New Toyo and Canone – where I have detailed analysis https://www.youtube.com/watch?v=zuL2PB7Kwkg

From a ROE perspective, the performance has been declining since 2019. I am not sure we will see better results for the next few years given the current economic situation

Stock price over the long term reflects the business performance. I would rate this company performance as good. From a global perspective, the company pass my screen test. My test is to compare the past 10 years ROE with my reference companies - New Toyo and Canone. For details of New Toyo go to https://www.moomoo.com/community/feed/110845519265798?global_content=%7B%22promote_id%22%3A14079%2C%22sub_promote_id%22%3A25%7D

The company has a very volatile ROE. This is makes it challenging to determine its fundamental value for a long term fundamental investor

My thesis is that with the rise of online sales of physical goods, the demand for packaging materials would be better. That is why I am screening for companies in this sector to dig deeper. My screening process involves looking at the historical ROE relative to my references - New Toyo and Canone. Relative to these 2, PPHB ROE was more stable. For details of New Toyo go to https://www.malaysiastock.biz/Blog/BlogArticle.aspx?tid=26870

A lot of property developers in Malaysia has tons of land bank. The issue is whether they have the financial resources to see through the challenges few years ahead. At this stage look for financial resilience rather than development potential

If you have a comparative ROE that does not show a clear winner (as per the link https://i.postimg.cc/XvtJhw9P/ORNA-New-Toyo.png), would by consider ORNA as a company for further investigation? My screening process is to compare the historical ROE with those of my reference companies. The reference companies are those that I have done detailed analysis. I figured that if a target company ROE does better than my reference, it is worth a deeper look. But what happens if it looks like the ORNA case? I have shared the details of one of my references – New Toyo but have not done so for Canone. For an overview of New Toyo go to https://www.youtube.com/watch?v=zuL2PB7Kwkg

Over the past few years, the ROE of this company has gone below 10% despite growing revenue. Has it lost control of its gross margins? Not a good sign

Master perforance has been improving and over the past few years its ROE have gone beyond 10% and even surpassed my two reference packaging companies - New Toyo and Canone. You should not be surprised by the up-trending share price. As a fundamental investor, the question is whether you have missed the boat. For details of New Toyo refer to https://seedly.sg/posts/new-toyo-international-a-cigar-butt-investment-opportunity?utm_source=question_share&utm_medium=internal

If you are a long term fundamental investor, you would be looking at the performance over the decade as the results for a particular year can be misleading. Those who went into this company because of its Covid-19 results will know what I mean. So the question is whether last year returns is just another bad blip or a reflection of its future?

I would give this counter a thumbs down as its ROE over the past decade is not as good as my reference companies. In the packaging sector, companies differ by products and the industry they serve. So no 2 companies are alike. So when I screen for companies, I look at ROE with reference to some based companies that I have analyzed in detail. Then when I do the screening, I have a better feel of whether the target company is a better choice than my base. In the case of the packaging sector, by bases are Canone and New Toyo https://www.youtube.com/watch?v=zuL2PB7Kwkg

From a fundamental perspective the returns of the company has been pretty decent post Covid-19. But I think this is more of a commodity price play than a stock price play

This counter is classified as part of the packaging sector. Unfortunately its past few years ROE is worst compared to my base case of New Toyo and Canone. Actually its ROE has been negative for the past 5 years. You should not be surprised by its share price performance. For details of New Toyo go to https://www.moomoo.com/community/feed/110845519265798?global_content=%7B%22promote_id%22%3A14079%2C%22sub_promote_id%22%3A25%7D

I think the whole idea of privatizing is that it is a private company ie no longer listed.

This is a relatively new packaging company in that it has only about 4 years of history as a listed company. It started with a high ROE which has been declining since then. While its ROE was higher than those of New Toyo (https://www.malaysiastock.biz/Blog/BlogArticle.aspx?tid=26870) or Canone, I wonder how it would perform in 5 years time.

If you track YTLPOWER return (ROE) over the decade, you will find that it was declining from 2014 (Jun) to 2021 (Jun). But since then it has been up-trending so that for Jun 2023, it was a record high for the decade. Are you surprised that its stock price has been going up?

No two companies are alike. Even if they are classified into the same sector, there are differences in products and markets. That is why I avoid relative valuation using PE or other multiples as it can give a wrong picture. If you are going to compare companies then compare business performance. When I compared IQZAN with my packaging benchmark such as New Toyo or Canone, I found that IQZAN performance was the worst. Not exactly a good picture from a fundamental perspective. For a quick video take of New Toyo go to https://www.youtube.com/watch?v=zuL2PB7Kwkg

Is something happening in the packaging sector? I have been posting comments on a number of Bursa Malaysia packaging companies recently and noticed that these articles received very much more views than normal. For those of you who are speculation, maybe this is some input you can use. Anyway to continue with my screening of packaging companies, I found the DNOUNCE does not meet my criteria is its past 10 years of ROE was lower than that of New Toyo or Canone. For a quick overview of New Toyo go to https://www.youtube.com/watch?v=zuL2PB7Kwkg

From a fundamental perspective the ROE of the company has been up-trending for many years. The issue is not whether this is a fundamentally sound company. It is. The more important question is whether the stock price is trading higher than its intrinsic value. If it is then it is not an investment opportunity. Of course it boils down to valuation but this is a another story.

We now know why the price spiked recently. It was related to the quarterly results that showed sustained earnings. Of course the negative part was that the announcement also said that the next quarter results may not be so good as there are no longer festive seasons. The more important point is whether the results point to improved performance from China. Are we seeing the light at the end of the tunnel?

The acquisition of BPlant by KLK suggests that the value of plantation companies lie in the assets rather than the earnings power. By this metric, TDM is undervalued. But to realize its true value it has to dispose of the estates. Irony?

Is the value of plantations companies in its assets or its earnings power? The acquisition by KLK suggest that we should pay more attention to the assets. The sad new is that I have left lots of money on the table for this company. Go to https://www.moomoo.com/community/feed/110947456516102?global_content=%7B%22promote_id%22%3A14079%2C%22sub_promote_id%22%3A25%7D

It is sad but while oil prices have been high, the Bursa oil and gas services companies have not really benefited from it

I am using the same approach for all the packaging companies I am screening ie look at the ROE relative to those of New Toyo and Canone. I have a chart that shows the ROE of CYL relative to the 2 reference companies. You can see why I don't think it passes my screen test. https://i.postimg.cc/htF80nY6/CYL-vs-New-Toyo.png

If you look at the ROE it has been fantastic for last year with 73%. With such a return why is it facing its current problems? Are the numbers not real?

Check out this YouTube analysis of the furniture sector https://www.youtube.com/watch?v=J--jjPbrc6I

Over the past 10 years, TGUAN delivered an average ROE of 10%. A valuation also showed that there is some margin of safety. Moral of story? Worth digging further. For more insights go to https://www.moomoo.com/community/feed/110935999512582?global_content=%7B%22promote_id%22%3A14079%2C%22sub_promote_id%22%3A25%7D

You would have thought that the company would have done some due diligence before buying Pestech. So are there more to the Pestech story? If there is not and is a failure of due diligence, we should be wary of further acquisitions