Most of these EMH proponents will advise you to invest in index link funds which just track market performance since they believe u cant beat the market. On the plus side its hassle free n if u can live with these type of returns n still meet ur goals then its still ok.

Calvin, although I agree with you that PMCORP is undervalued and I have made money from it as well, please check the facts below on PRKCORP before you pass judgement its overvalued.

PRKcorp is an asset rich company, applying a graham net net valuation method as a most conservative way of valuation as described by KC still presents a huge margin of safety

Graham net-net BS value Wt Liq value Per share
Cash and cash equivalent 208122 100% 208122 2.08
Property development costs 132434 100% 132434 1.32
Land held for development 14658 100% 14658 0.15
Investment Properties 5107 100% 5107 0.05
*Other investments 76231 80% 60985 0.61
Inventories 6410 50% 3205 0.03
Trade Account Receivables 129945 75% 97459 0.97
Property, plant and equipment 85483 0% 0 0
Port facilities 86320 80% 69056 0.69
Intangible assets/tax recoverable 25267 0% 0 0
Total assets 769977
Total liabilities 189876 100% 591026 1.9
Total equity 580101 0
Number of shares 100000
Net tangible asset per share 5.8 4.00

*These are available for sale financial assets (quoted shares in Malaysia). Mostly held in Integrax shares

Closing price 2.79
MOS 30.26%

kc, my opinion is that some markets are more efficient than others. I suppose in US market is more mature and there is information readily available everywhere market becomes more efficient. However I agree with you that in general there is always some inefficiency which we retailers could benefit from. The inefficiency I m talking about will mainly exist in the smaller cap stocks which go unnoticed by the fund managers due to restrictions for them to invest in such low cap stocks.

break RM1.10 already... here we go...

I have a fixed amount of money invested in the stocks. So if I have found some more very good stocks to invest in, I can get money “outside” of this invested sum to buy it.

KC, from this statement sounds like you have a bottomless pit of cash to always able to take advantage of market :) haha... just kidding... unfortunately my situation is not the same and I m struggling to decide how much I should stay invested due to my limited resources... ideally want to be like Seth Klarman who can garner 20% return annually even while holding 50% cash haha...

sephiroth, you are really fast :)

GMUTUAL Graham net net
Cash & equivalent 27993 100% 27993
Land held for property development 161498 100% 161498
Investment properties 83479 100% 83479
Land development expenditure 39246 100% 39246
Receivables 36060 75% 27045
Inventories 2502 50% 1251
PPE 1958 0% 0
Other assets 626 0% 0
Total assets 353362 xxxx 340512
Total liabilities 65810 100% 65810
Net assets 287552 xxxx 274,702

No. of shares 375776 xxxx 375,776
NAB 0.77 xxxx 0.73

Gmutual... wow what a superb company trading at a cheap price ! the cashflow for this year is simply superb and its cash position has strengthen greatly compared to last year.... with its property/land bank mostly in Melaka, I m sure the growth will be good as properties in Melaka should be in affordable price range which would appeal more to the masses...

kc I am curious if you constantly maintain 100% invested in stock market ? How much cash do you reserve in case the market turns and you want to take oppurtunity to buy on weakness ? Surely some market timing element is involved here in planning the allocation of cash to stocks ?

I have a reliable source that confirms exit from PN17 by Jan 7th... buy at your own risk

all, thanks for the feedback. Actually my concern is similar as mentioned by tsurukame. Low liquidity small caps could suffer more when forced selling begins. The problem with bursa is that retail participation makes up only 20 % of market volume... the big boys institutional investors still run the show.... so there tends to be low liquidity in small cap stocks that are not in the instituional funds radar... anyway your points are also valid KC, but one would really need to take a long term view when investing in small caps if market turns out bearish in next few years...

KC good job on your picks. What is ur view on holding small caps in a bear market ? Would the portfolio be as resilient ? It s been sometime since we ve seen one. I believe that small caps tend to outperform in bull market and get beaten down more in bear market.

It is hard nowadays to find Graham net net in the stock market. It is even harder to find a net net with consistent earnings and cash flows, albeit not that high. It is extremely difficult to find a Graham net net which pays high dividend, sustainable dividend payment due to its consistent positive cash flows from operations and free cash flow and high cash holding. That is Hexza.

Totally agree with this statement from KC.

Posted by kcchongnz > Nov 28, 2013 09:09 AM | Report Abuse

If Benjamin Graham is still alive today, he will definitely invest in FACB. He is the pioneer is valuing company basing on balance sheet.

The quality of assets of FACB is excellent, mostly in cash and cash equivalent. That alone and after net off all liabilities, is still much more than the present share price.


Problem is assessing whether management is willing to share that cash with shareholders. FACB industries does not have a good track record in that sense. I invested in FACB before in anticipation of cash payout after they dispose some assets. Even after disposing some of their land and factories earlier this year there was no special dividend or payout announced. I have since sold the stock I am also uncomfortable with the links of FACB with KBUNAI a loss making company with mega projects in Sabah. Just concerned on RPTs involving these 2 companies where FACB cash could be used to finance KBUNAI... just my 2 cents view, no need to take seriously...

KC AWC cash is high but so is the debts.. I asked u b4 bout this stock in the graham net net thread...

calvin, already saw your reply to my question in previous post. I dont know accounting but Mui equity portion shows -ve reserves, does this mean they hv to do same exercise like pmcorp ie capital reduction in order to wipe out these losses before distribute cash to shareholders ?

calvin, you are definitely more knowledgeable than me when it comes to paying site visit and talking to management...on this I dont doubt your info....question is for pmcorp there was a catalyst of capital repayment..... for muiind, can you tell me how will shareholder value be realized from its valuable assets ?

Just a different point of view, if I look an MUI purely as an asset play it wouldnt qualify due to its high debt. Please feel free to disagree with me. Here is a Graham net net valuation on its assets,

Graham net-net BS value Wt Liq value Per share
Cash and cash equivalent345347 100% 345347 0.12
Investment properties 78787 400% 315148 0.11
Investment in associates409223 100% 409223 0.14
Other investments 11261 100% 11261 0.00
Land held for property 35263 100% 35263 0.01
Property development costs80782 100% 80782 0.03
Inventories 104260 50% 52130 0.02
Trade Account Receivables250143 75% 187607.25 0.06
PPE 607108 50% 303554 0.10
Tax assets/goodwill 181340 0% 0 0.00
Total assets 2103514
Total liabilities 1137433 100% 1137433 0.39
Total equity 974624 0
Number of shares 2932561 100000
NTA per share 0.33 0.21

Here I am assuming that its investment properties value is 400% higher than book value (assuming it hasnt been revalued for a long time) and assumed that its PPE is worth at least 50% of book value and still come up with only RM0.21 per share. This hasnt taken into account minority interests which is quite substantial and need to be subtracted out from the valuation value as well. Perhaps KC Chong is more qualified to provide us his view on the valuation as well.

Outsource the printing function due to it being less profitable ? Yea maybe. But that doesnt mean the company doing the outsourcing job cant make good profit. Maybe not as high margins as BAT's tobocco making business, but are we comparing apple to apple here ?

Sometimes ppl outsource the job simply because they dont have the expertise or its not their core competency which is why its less profitable in the first place. In this case, Tien Wah specializes in printing business, past data has shown they have taken up this task from BAT well.

Ever since they took the contract with BAT, and even after BAT impose all the stringent demands on them, causing them to incur high capex to purchase new machines, they still able to make money, good ROI and steadily reducing their debt. All this can be seen if you just go and study their past financial results.

http://www.valuebuddies.com/archive/index.php?thread-638-53.html

Amcor's M&A in the tobacco packaging sector might be "moderated" by the big tobacco players who do not want to see Amcor's monopolising all the tobacco-related printing and packaging...

Would Amcor appear to look silly to sell off its stake in Tien Wah to New Toyo few years ago, and come back now to buy it back from New Toyo?

Your points ought to be assessed carefully by investors.
I may add New Toyo got out of the unprofitable corrugated carton box business several years ago. Its existing specialty paper business is also not faring that well. Your have surmised that New Toyo ended up with the 7+3-year BAT supply contract because Amcor opted out. One may also conjecture that Amcor competed with New Toyo, but lost out. Amcor used to be a shareholder of Tien Wah, but sold its stake to New Toyo, enabling the latter to gain control of Tien Wah several years ago. Was Tien Wah such a marginal packaging company that did not excite Amcor?
It may not be true that cigarette packaging is characterised by low profitability. Amvig (which prints cigarette cartons in China) enjoys a high gross profit margin of around 33%. Tien Wah did not fare that badly; last year its gross profit margin was 21%, and may rise as the company scales its learning curve, and as some jobs are channeled to lower-cost Vietnam. Tien Wah's reasonable margin and strong profit are after depreciating the equipment that were bought after the BAT supply contract.

Robert Love, I appreciate your opposite views on Tien Wah, in fact you have brought up some good points to watch out for in Tien Wah. However for me, I would just disagree with u that it is overvalued. All its metrics are telling me this is a good and well managed company. So I ll just leave it at that.

Posted by Robert Love > Nov 23, 2013 09:02 AM | Report Abuse

A good comparator for Tien Wah is Amvig (listed in Hong Kong).

a. Amvig gross profit margin is the region of 30% while that for Tien Wah is barely 20%.
I DONT THINK THIS IS BIG ISSUE.IMPORTANT THING IS THAT IT IS TRANSLATING ITS EARNINGS INTO FREE CASHFLOW. NOT SAYING AMVIG IS BAD THOUGH.

b. Amvig is constantly undertaking printing capacity expansion for future growth while Tien Wah has already stopped installing new capacity since 2011. This is because demand for Tien Wah’s printing has already stagnated while Amvig is still growing its market share in China.
PRINTINIG CAPACITY EXPANSION DOESNT ALWAYS TRANSLATE TO FUTURE GROWTH. WHAT IF DEMAND DROPS, THEN THERE WILL BE UNDER-UTILIZATION AND HIGHER OPERATING COSTS. WELL AFTER THE BIG EXPANSION IN 2011, TIEN WAH IS FOCUSSING TO PARE DOWN ITS DEBT. ITS D/E RATIO IS STEADILY DECREASING FROM 0.93 IN 2009 TO 0.2 IN THE LATEST QUARTERLY REPORT. AT THE SAME TIME IT IS ABLE TO PAY DECENT DIVIDENDS. IT CAN ONLY DO THIS THROUGH ITS ABUNDANT FREE CASHFLOWS.

c. With much better GPM than Tien Wah, Amvig’s P/E is only 8. Should Tien Wah trade above this P/E level? I think not likely. If I am investor, I would rather buy Amvig than Tien Wah. Amcor has a big stake in Amvig but sold off its stake in Tien Wah many years ago.
AGAIN, YOU RE ONLY FOCUSSING ON 1 ASPECT IN THE COMPARISON. IS TIEN WAH AND AMVIG HAVING THE SAME MARKET CAP, WHAT ABOUT ITS DEBTS ? A COMPANY WITH HIGH DEBTS CAN LOOK CHEAP FROM P/E STANDPOINT IF ITS GENERATING MOST OF ITS EARNINGS USING DEBT.

Mr Robert Love, I see you are talking a lot of negatives about TienWah but mostly your comments are qualitative, can you share some quantitative analysis in terms of numbers like P/E, EV/EBIT/, ROIC, DCF analysis that shows Tien Wah is so overvalued ?

KC,

Many thanks for the explanation.

KC,

With regards to your post on SHL, I have a few questions :-

1. How did you get earnings yield=18%. Did you also exclude investment properties besides the cash in the EV calculation ? At least that s what it took for me to get similar earnings yield as you.
2. Do you have any concern on the lower property development costs shown in the balance sheet for Q2 ? It seems like cashflow is high cause they already billed all their sales. The property development costs is the lowest for 3-4 years. Could mean slowdown in development ?
3. When you do graham net net and say that its net net value is close to RM2, I m assuming you put a high pecentage in its PPE which are mostly vacant land with appreciating value ?
4. I find ROIC is not good metric to evaluate property companies with high land bank / assets. Unless we exclude non-business related assets in the IC calculation to see the true operational efficiency.

haha... kc can see you are having a busy time these few days as more and more ppl start to seek your advice.... good to see you continue sharing and imparting knowledge.... you are the most qualified one to give the advice...

Posted by iafx > Nov 20, 2013 04:45 PM | Report Abuse

eh? where is the 5 years 5 chopsticks? where is the famous FCF? no balls to list down here? hahahhahahaaa... pmcorp make losses since 2008 (heavy) till 2010, so this is the standard of so call FA stock. hahahhaahaaa... bias bias bias


iafx... cool down la.... there are many FA angles la... not just 5 yardsticks...FCF...

For PMCORP its purely asset play or Graham net net. Its simple concept where you buy companies that are trading below net cash / cash equivalent, some percentage of PPE and receivables also included. No complicated formula at all ! This valuation is already super conservative when compared to 5 yardsticks,FCF, you will definitely get lower intrinsic value. So if the company is trading below this value, not burning cash, management can be trusted, then I think its already a pretty good deal.

faberlicious, that post from nexttrade is from way back in 2010

exchange rate would work both ways... USD denominated loan, so higher finance costs if USD strengthens, but better revenue for export oriented biz...the good thing bout hevea is that its steadily reducing its debts year on year... this was made possible by its abundant cashflows

the pbt margins are razor thin for particlboard... their RTA business seems to be supporting earnings

kc, thanks for the explanation. So if there is significant minority interests means that i should shave off that percentage from the Net net value right ?

Minority interest = 25%
Net net value = (1-25%) * 0.23 = RM0.17

you are right..not a graham net net play... I think only qualify as high dividend yield play.

kc that is what i did... graham net net is 23 sen... see my analysis above

kc, u re assuming. that only cash can be used to pay liabilities... that may be bit conservative... receivables do have some value as it is part of working capital

KC, please take a look at AWC. (found this out courtesy of faberlicious)


Graham net net valuation for AWC
Graham net-net BS value Wt Liq value Per share
Cash and cash equivalent 63766 100% 63766 0.28
*Other investments 2061 100% 2061 0.01
Inventories 11341 50% 5670.5 0.03
Trade Account Receivables 52986 75% 39739.5 0.18
Property, plant and equipment 8700 0% 0 0.00
Intangible assets/tax recoverable16477 0% 0 0.00
Total assets 155331
Total liabilities 60087 100% 60087 0.27
Total equity 95244 0
Number of shares 225352 100000
Net tangible asset per share 0.42 0.23

At a price 0.265, we re only paying 0.035 for its business assuming net-net. Most of their assets are in hard cash with RM0.28 per share. The earnings are not great, earnings and FCF are lumpy. However, 80% of their income is derived from facilities management in Malaysia which is recorded strong growth last year due to revision in the concession rates. This division is also expanding into the biomedical maintainence services segment to reduce dependance on concession based income. The slowdown in middle east adversely impact earnigs from environment business Loss making technology segment was disposed in 1Q13.

The dividend payout historically has been between 1.5 to 2.5 sen and they have the cash to continue supporting this payment. This translates to a dividend yield between 5.7 to 9.4% which is great.

ok thanks inwest88. realistically, these penny stocks are going up mainly due to sentiment is good now... i personally keeping high % in cash right now...

kcchongnz, not sure if this is a myth, but is there any study done to show that when smallcaps start to rise really fast like what we have seen recently then it is a signal that it is close to end of bull market... From my observation, this last 2 months, a lot of the small caps have been moving and there are fewer and fewer undervalued companies.. even those mediocre ones that I mentioned to you before like OPENSYS, REXIT already move up so much....

they have not been issuing dividends in the past but using the free cashflow to pare down debt. Their debt has reduced substantially from 1x in 2009 to 0.55 in latest Q2 report...

Gross margins seems to have improved looking at this year;s first 2 Q

"My opinion is that one shouldn’t be sentimental about a stock. If you think its price has run up too fast and beyond its intrinsic value, sell it and move on. A great company doesn't mean it is a great investment, if the price is not right. Agree? "

Couldnt agree more on this statement...but hard to practice.. once a lot of time n effort been spent on researching the company... its hard not to be biasesd or sentimental... to move on and look for another gem is not easy even though the stock researched earlier is almost fully valued...

kc, maybe cause u wrote in upper caps. That can be interpreted as shouting by some...
anyway, for me, there is a large margin of safety holding these type of small caps if u hv a long investment horizon... in the short run, these stocks may be speculated n manipulated due to their low liquidity.. it goes up very fast over short period n could be sold down just as fast... Not for reasons due to fundamentals...

The warrant is expiring on 30/1/14 currently trading at a premium of 5%. Mother share looks like retracing with next support at RM2.8. Might be a good chance to re-enter the warrants at around 11.5 to 12.5sen which is the price it should be trading at if mother can be supported at RM2.8

Gross margins improved Q-on-Q for 2013, last Q gross margin was 14%, if they can improve their operating margins and cost of materials, a turn around should be coming soon... Looking at Q3-2012, they were still making profit with 18% gross margins.,, think they were hit bad by the raw material costs last few q

kcchongnz... thanks for this recommendation... i scooped this at 0.395 2 months back... sitting on a nice profit now

bsngpg, if one has done the intrinsic value calculation of the stock targetted and knows the margin of safety when purchasing, then whether the stock moves up to that value in 1 day or 1 year , you would know when to take profit and sell.. my 2 cents view...

Posted by kcchongnz > Oct 28, 2013 05:53 PM | Report Abuse

Just reiterate that the pick of Fibon is by houseofordos. I just wrote up the analysis. I must thank him too. I must also thank him for alerting Hexza to me a few days ago. Hope house you also make money from Hexza.

KC, regarding Hexza, very regret that I did not buy at the time I recommended to you.. was hoping to get a few sen cheaper... a bit late now

kc, i think your stock pick challenge portfolio is moving up very nicely today... haha

kc, what is your TP ?

unbelievable !

finally you are moving !

this website oldschool value is a gold mine of great investment articles ! thanks to Tan KW for introducing it

wow... FIBON.. you rock !