heath care is resilient. it's less impacted by trade war or economic cylicality and more influenced by secular growth

Have you heard of REGRESSION TO THE MEAN?

over time, business fundamentals would eventually revert to their mean


Posted by stockraider > Nov 3, 2019 1:01 PM | Report Abuse

What 3iii says is correctloh....but the devil is in its details implementation loh....!!

If u buy into very overvalue stock like Nestle, Dlady and Petdag with sometime PE even exceeding 50x, how could u expect outperformance leh ?

In order to make very big monies, u need to buy into earning recovering on a very battered down undervalue stock that give u both upside in share price upgrade in undervalue rerating plus strong earnings rerating in earnings recovery loh.....!!

Armada is a clear example here loh....!!

1Q results should be out within this week

Book Value BV Growth
Q319 10.97 3.98%
2018 10.55 8.99%
2017 9.68 9.26%
2016 8.86 9.52%
2015 8.09 11.43%
2014 7.26

P/BV FV
Y1 10.9746 2.0 21.95
2.1 23.05
2.2 24.14
2.3 25.24
2.4 26.34
2.5 27.44

Assume to grow at GDP 4.5%
P/BV FV
Y2 11.4685 2.0 22.94
2.1 24.08
2.2 25.23
2.3 26.38
2.4 27.52
2.5 28.67

Y3 11.9845 P/BV FV
2.0 23.97
2.1 25.17
2.2 26.37
2.3 27.56
2.4 28.76
2.5 29.96

Possible range of FV depending on P/BV multiple
P/BV = market psychology

Very stable performance. ROE remains good at 13%.

Let’s get the expectations right. In investing for assets play, you MAY or MAY NOT enjoy the benefits of realization of its hidden value. The MAY NOT is the risk of value trap. On the other hand, in the MAY scenario (of which no one knows when), you will win big (because of the narrowing of huge discount between price and value), and that big win will provide a very good average return (despite of many years of no return). Hence, in employing investing strategy based on assets, to minimize your duration risk (since we do not know when the catalyst emerge or will it ever crystalize), it is better to have a diversified portfolio.

The nature of their earnings, being an investment holding, tend to be erratic or lumpy

Their investments in inari alone, if to be realised, is far exceeded the entire company enterprise value

when the risk reward profile is so favourable, i see very little risk in investing in Insas. a case of limited downside, huge upside



3iii Return on Assets 3.59
Return on Equity 4.83
Return on Total Capital 2.26
Return on Invested Capital 4.46

even at very conservative growth assumptions of 1-3%, HLI is worth at least RM15

The only way to create value is to distribute the excess cash to shareholders.

perhaps i have too much faith in our economy so much so that i wallop all the big banks

bought CIMB, Maybank, Hong Leong and Public Bank at the beginning of the month. lol

No need to crack your head. Other Banks may face possibility of asset quality erosion but not Public Bank.

I bought at 19.10. During bad times, capital flight to quality.

No one interested in Kawan? It's creeping up nicely

ROE of 9%-10%. we should be looking at min 1x book value.

BV projected at RM6 per share.

TP is RM6.

Let's say 50% discount instead, to be conservative, you are looking at RM2.06

Extracted from Annual Report. Lol

RM1 coming

I like free cash flows

From CIMB estimates

FCF
2018: 9.18m
2019: 0.16m
2021: 26.74m
2022: 31.90m

massive FCF growth in 2021 onwards. forward P/FCF is below 15x.

I am long on SKP Resources.

Prefer SKP over VS for 2 reasons
1) VS exposure to China
2) Divergence in valuation between these 2

Any earnings growth would translate into FCF growth, considering of their low capex requirement.

Their return on capital has been consistently high, at or above 25%

Near term catalyst sharp rebound in Q3. watch this space.

EMS counters - SKP Resources, PIE

RM2

PE 20x is fair price to pay

In essence, investing is centred on the relationship between price and value. “Price is what you pay, value is what you get.”

When the price of a stock is so out of line in relation to the company’s intrinsic worth, value emerges. That’s where the bargain lies.

Armada at below 20sen was a bargain

Affin Hwang Capital starts coverage on Electronics Manufacturing Services sector

Affin Hwang Capital Research has initiatiated coverage on the Electronics Manufacturing Services (EMS) sector with an “Overweight” rating.

In a note today, the research house said the sector is not merely a beneficiary from the trade diversion but also set to ride on the rapid expansion of their common key customer - a global renowned household appliances brand.

“ATA IMS Bhd (Buy, TP: RM1.80), is our preferred sector pick, as we expect the group to continue charting strong growth on the back of capacity expansion coupled with margin enhancement from further vertical integration.

“We also initiate coverage on V.S. Industry Bhd (Buy, TP: RM1.60) given the group’s diversified customer mix and strong ability in securing new contracts, which makes it a prime beneficiary of trade diversion.

“Elsewhere, we highlight 3 other companies, namely SKP Resources Bhd (Non-rated, RM1.08), i-Stone Group Bhd (Non-rated, RM0.18) and MTAG Group Bhd(Non-rated, RM0.42), which form part of the "D" ecosystem,” it said.

on what basis you think it's super undervalued?

wow how low can BAT go?

1 year low

P/BV 1.9x

As far as stock selection criteria are concerned, which create long-term value, there are five simple ideas, which I regard as material. One, Size of Opportunity is a mother idea. It is less about how big a business was or is. It is virtually all about how big it can get from where it is. It dwells almost entirely in future rather than in the past or present. It is more about the size of a pond rather than the size of a fish. Pond has to be large so that there is headroom for a capable fish to grow.

Two, Management Quality is far more tangible than is believed to be. In the buoyant phase of markets, this truth is conveniently ignored but at one's investment peril. This can hardly be over-emphasized. Capital allocation and capital distribution skills are the hallmarks of a good management. Integrity, vision and execution are the defining attributes of a quality management. It is only when a large size of opportunity meets with quality management, that the outcome is gratifying.

Three, the union of the above two results in the Earnings Growth. This is key because the absence of growth or its materiality reduces equities to bonds. The growth doesn't necessarily have to be dazzling. What's more important for the growth is to be long-term, relatively predictable and consistent. Such growth creates compounding machines.

Four, while growth is essential, it is not enough by itself. It needs to be Quality Growth for it to create value. Quality comes from the ability of the underlying business to create rising economic value. That can happen only when business generates not only superior but also durable, predictable and consistent ROCE. Quality of business is at a heart of good stock picking for outstanding long-term value creation. Again, it is only when a reasonable growth cohabits with high quality of growth, that great economic value is created.

Five, an investor in a (such) business can create investment returns only if the underlying business can create economic value. Ultimately, investing is nothing if not business like. It is a myth to believe that one can earn investment returns even if the underlying business has inferior economic value creation; or, that a business creates outstanding economic value but somehow does not get reflected in investment returns. Neither can happen. Certainly, not over a long enough period of time. An investor can generate investment returns, even superior to the underlying economic returns if he can buy such a business at a Margin of Safety (or, Price-Value Gap) to its intrinsic worth. In essence, the science and art of investing lies in the above, rather, simple ideas. However, investing is simple but not easy.

One, certainty of growth of earnings (even if somewhat modest) is far more valuable than a dazzling growth but which is one time, uncertain or indeterminate.

Two, quality of growth (as represented by capital efficiency) adds far more to long-term value creation than just the earnings growth.

Three, it is important to buy only quality at as good a margin of safety as one can get, rather than buying inferiority but justifying that with arithmetical "cheapness", which more often than not is a "honey trap".

FCF/share range based on above assumptions:
15.12 - 15.96

my estimates based on very conservative assumptions of minimal growth and high discount rate of 10%

your conservative estimates kind of converge with mine as well.
Conservative -> FV = 350 / (7.7%-1%) = 5224 mio ->RM 15.93 / share

Recent FCF already above 400mil (u can cross check from annual reports)

2013 - 158m
2014 - 148m
2015 - 182m
2016 - 280m
2017 - 344m
2018 - 452m
2019 - 481m

take latest 5 year average = 348m

P/(5 year average FCF) = 9.3 times or cash flow yield of 10.75%

share buy back 0.92-0.935

i had backed up the truck at 1.02

if i can recall correctly, when they used to do margin of 6-8% their PE hovers around 9-10x

anyway, what is important is forward looking, management is continuously investing in R&D to improve its profit margin.

last 2 years, despite top line growth, bottom line was affected due to margin compression.

assuming mean PE of 8x on lowest end earnings estimates 22sen = 1.76
plus net cash of 34sen, you should be looking at least 2.10

yes agreed the management has been overly optimistic in the past. they should have learned from their past mistakes. the restaurant business has been a drag. i never understood the rationale for this venture.

whether market gives PE of 8x, 10x or 15x is beyond their control. they just need to focus in increasing their ROE and let the market do its work.

Tguan is the survival of the fittest. as the industry consolidates, only the best, efficient and well-managed, will survive. due to its small size, tguan unable to expand as in Scientex through acquisitions , but there's potential for the company to achieve that scale.

don't get me excited.

i will collect below 1.

good to collect at this price

basically, i keep 2 portfolios la. A and B

B is concentrated. just 5 stocks. comprising of big blue chips. defensive portfolio, passive investing

it's like following Benjamin Graham advice la.
A is portfolio for enterprising investor...comprised of many small mid cap stocks, rebalance every half yearly

hmmm, i'm more of Peter Lynch style. many small positions in what he himself termed it as "tune in later" stocks, so that i keep it in view and follow their story. skin in the game, yo!

Forgot to update latest net cash position. Was using 800mil. Latest net cash is whopping RM1bil.

FCF/share range based on above assumptions:
15.12 - 15.96

Just updated based on latest annual report

HLIND analysis

Price 10.30
Latest earnings 1.042
Average 5 years earnings 0.7367
NTA 5.18
Revenue growth 9.65%
Earnings down 3.31%
Profit margin 15%
EBIT margin 18%
ROE 25%
ROIC 62%
DPS 50sen
Dividend yield 4.85%
Net cash 3.19 (30% of market cap)
Latest FCF 481mil (6% growth)
Average 5 years FCF 348mil

Valuation
PER 9.88
Ex cash PER 6.83
P/BV 1.99x (ROE consistently around 25%, implied P/BV should be 2.5x)
P/FCF 9.30x
Cash yield 10.75% (triple of risk free rate)

Conservative estimates:
Assumed FCF Growth
Year 1-3 2%
Year 4-6 1%
Year 7-10 0%
Discount Rate 10%
FCF/share 14.48 (40% upside)


Assumed FCF Growth
Year 1-3 3%
Year 4-6 2%
Year 7-10 1%
Discount Rate 10%
FCF/share 15.32 (50% upside)

just take the company private. such a small company, market cap less than 500mil. its at big discount v. NTA. net cash is >50% of market cap.

on the surface, P/BV seems super cheap. what they need to do is increase their ROE and the P/BV discount would narrow.

good promotion though. the blog itself is called investment theme of OSK. lol

good try. but can do better, strip out exceptional one off items and re-assess based on core earnings.

didn't know Magni benefits from trade war. though i know Nike is doing well.

what i know of trade war beneficiaries are furniture companies and EMS or contract manufacturers