FCF is a lumpy thing, I was referring to previous 2 financial years and it looked healthy, Its hard to draw conclusion from 2 quarters of cash flow statement.

The point you mention is perfectly normal. The cash is not there yet as the receivables may be >6 months old. You are right as it is still stuck in receivables. But they can book it as accounting profit.

can u elaborate more on the cashflow ?

paper plane,

I looked at IQ group over the weekend, it has a good turn around story (Pitroski score 7-8 for the past 2 years) and might be the right play in 2015 due to its export exposure and positive net impact from strengthening USD. But my numbers are lower than yours based on TTM:-

@RM1.6
EV/EBIT = 6.3x
ROIC = 21.4%

As for cashflow the previous 2 years (2013 and 2014) was postive free cashflow.

A few concerns I have are:-
1. 90% held by top 30 shareholders. Only a 10% free float. This makes the share easily manipulated.
2. Director made some disposals around the RM1.80 price range.

These are not major concerns but something to ponder about.

Hi II nice portfolio. I m curious if you ve done a comparison between Chinwel vs Tong Her before since their business is quite similar

KC, when you are good, there are bound to be those who are jealous... just ignore them and keep up the good work.

Actually looking at the portfolio again if I were to put them in buckets, I would say the portfolio is a mix of graham net net, magic formula and potential growth types:-

Adventa :- A healthcare stock towards the end of its gestation period awaiting revenue contributions from Lucenxia. This is the type of business with very huge moat and barrier of entry.
FACBIND and KUCHAI - Deep value negative enterprise value stocks trading at discount to net cash.
PRKCORP :- Graham net net
JOHOTIN :- One of those possible turn around stories as the recent earnings have been affected by one-off non-recurring type incidents, otherwise a good magic formula stock
FLBHD :- Export based derives most revenue in USD, EV/EBIT ~4x with ROIC >15%. Can consider magic formula type with the added plus of super high dividend yield of >7%
LTKM :- Very undervalued company with EV/EBIT ~3.x and ROIC in the 30s mainly due to low feed costs due to collapse in soy bean and corn prices. Decent dividend yield.
LBICAP-WA :- Insider buying actively, the valuations are not too expensive

Yea.. these are mostly graham net net types. No doibt magic formula stocks hv a role to play in the portfolio and I do own others in real life. However, my view is that these are stocks where less expectations are built into them, hence the lower downside. Of course market down all can go down, safest ia to hold cash but if I had to pick stocks based on my bearish view of next year, these would be the ones I m comfortable to hold based on tht investment horizon.

I definitely own all above stocks in real life but not in the same allocations. There are others I hold but the above are more of the beaten down ones this past year that I think hv less downside. I believe value investing is the way to go in the long term. Not sure wht u mean by efficiency...

Haha.. KC how nice if tht was really your only pick in real life

Mr TanKW,

I would like to join in this year. Stock picks below

JOHOTIN - 10%
PRKCORP - 20%
FACBIND - 10%
KUCHAI - 10%
LBICAP-WA - 10%
ADVENTA - 20%
LTKM - 10%
FLBHD - 10%

Thanks

May not benefit from the strengthening USD as a large portion of its debts are denominated in USD. Take a look at the sensitivity analysis from the previous annual report you ll know what I mean.

Posted by milopanas > Dec 30, 2014 07:42 PM | Report Abuse

cukupla kcchongnz lu sendiri tak mau join.kata ni game tak penting tapi cakap banyak sekarang.tengok lu punya stock analysis cenbond, padini,kuchai sudah tau lu koyak.

jgn kata market tak bagus.adakah growthinvestor,ooi teik bee,hjey,skyland tau market koyak dari oktober?top 4 ini ialah stockpicker terbaik di i3.mereka yg patut cakap sekarang.



What is a cynic? A man who knows the price of everything and the value of nothing. OscarvWilde

Haha... ks55, looking forward to see your picks for 2015 which shoukd be a difficult year to make money...

Ine of the best performing stock in the 3 portfolios is Hapseng and its warrants. I believe this was due to the management good capital allocations on terms of enhancing shareholder value through buy backs. If only alll those numerous companies on Bursa with tons of cash would do the same..

Sigh.... I m negative for this year because of over trading and selling winners too early. Just looking back at my transactions shows tht just buying and holding will do well instead of trying to time the in and outs. As Peter Lynch said, you only need a few multi baggers in your lifetime to outperform the market but the key is to let your winners ride....

KC, you can find those information in the prospectus on bursa website, as you correctly pointed out, Homeritz profit margins are superior to the rest as their products are higher end upholstered furniture and have their own branding.

Basically for upholstered furniture the main raw materials are leather and wood. The leather is mostly imported from italy, US or China while the wood is sourced locally. It can be rubberwood, plywood or tropical wood.

Nice write up and fully concur with your points. My only concern is the disposal of the major shareholders which seems to have subsided in Dec. I couldnt find log prices history online perhaps because it is not traded at spot prices. Their logs are mainly sourced on short term from Innoprise Corp S/B a Sabah state owned body.It would be interesting to see if the net effect of weakening USD and increasing log prices would impact its bottom line. If you read the initial coverage report by Hwang or TA, their market in the US is mainly the RV segment. This segment has been showing impressive growth for the past 4 years since the financial crisis, on average >10%.

it seems the discussion in this thread has been led astray to totally unrelated topics...

It is important to do your own analysis and have the conviction when making your stock picks. Write down the reasons you bought a stock and write down your exit plan. You can only do this by understanding the business and proper valuation techniques... If you simply bought following others, you will not go far...

haha tj, are you the big buyer today ? lolz

very strange, why they have to go through all this hassle, if you look at similar SCR exercise by Delloyd, they were able to increase the offer price of the SCR immediately from 4.80 to 5.20... no need to go through all this withdrawal etc....

ladahitam, thanks for the info... its a super long way from RM 4 now

II, I m considering the opportunity cost of holding this stock.... per my understanding wont be till 6 months before any new offer is tabled... there are a lot more other undervalued stocks out there..

Btw, it may make sense that some major shareholder is accumulating, the volume is very high today. Yea ladahitam seem to have some inside info... care to share ? Sime Darby going to privatize ? haha

hopefully its stopping volume today.... no eye to see already this stock....

Correct me if I m wrong but per my understanding, as the offer is not yet unconditional, there is still a chance that OLH can either withdraw the offer or even put a lower offer price citing weakening property outlook etc ? The offer will only become unconditional once it has satisfied all the conditions in the voluntary offer such as the minimum acceptance conditions...

I dont know but the steep discount also doesnt make sense to me.

Turbo is not really considered direct O&G play and could be a key beneficiary of the stronger USD and weaker yen.

1. Turbo is in the business of providing maintenance services to its O&G customers. Maintenance expenditure is expected to remain strong as O&G players will want to improve their efficiency and focus less on expansion. It's customers are mainly in the downstream and O&G services industry

2. Mainly export oriented company with most of its cash and receivables in SGD or USD. Being an authorized distributor for Shin Nippon machinery, Sundyne Nikiso, weaker yen will increase profit margin.

3. Attractive dividend yield of >5% at current price.

Rights issue coming up

I think it is good to reserve some cash for momentum play to combine with value investing, as some of these value stocks take a very long time to get discovered. Perhaps invest 50%-70% first of the intended allocation and put the rest in to average up once the momentum builds up.

Also, when you look at the portfolio, it tends to be 1 or 2 winners that make the difference to outperformance vs underperformance which underlines the importance of diversification. But this may only be the case, if you hold on to the winners. Sometimes, if strictly following value investing, you tend to sell out too early and buy other undervalued counters causing the portfolio to suffer. I suffer this fate for KSL when I sold too early to switch to Plenitude which appeared to be a better bargain. But I underestimated the qualitative factors that propelled KSL share price higher such as bonus issue, DRP and increased openess by the management. The result of this decision cost me dearly at least in the short term.

Frankly speaking, I feel that number crunching alone, tons of analysis looking at financial statements etc is important but not enough to earn above average returns. Combining this knowledge with momentum can enhance the portfolio returns.

http://www.investingdaily.com/16052/the-holy-grail-of-investing-combining-value-and-momentum/

When you say you dont average down your counters, do you put a cap on the maximum exposure of your portfolio to a certain stock ? I m sure that in practice, you are not equally weighted in all the stocks above ?

Posted by andychucky28 > Dec 9, 2014 11:00 AM | Report Abuse

I would say those support by the gov institutional fund counters drop lesser.

Agree. What those 3 stocks that in positive territory have in common is decent market cap and support by either local or foreign institutions.

PMCORP now trading below cash level...

Abcb fully agree with your points. ECS is a classic magic formula srock with ROIC of 17pct and EV/EBIT of only 4x. As reported by Kenanga and historically q4 us the best quarter this year is exceptional due to ppl may rush for gst spending... the highest margins are in the enterprise segment and MD has voiced out intention to make some acquisitions to boost the business in this segment...

"Uncle" Kian Leong. This is your investing style but not mine. I would say just agree to disagree as I have had my own success with my own investing style. I do not wish to take it further. End of discussion.

Magni, homeriz, Latitud hv poor balance sheet ? You sure or not ? Dun simply whackla... check your facts man. . Show some figures... mr value investor !

You talk about share price rising for past 5 yrs but how comè u dont chk if the earnings also went up ? If a stock earn 5cents 5 years ago at RM1 and now earning 50cents but share price is RM5 is it consider more expensive now ?

Better stop ridiculing others and brush up on your investment knowledge la...

Not all are loss making but the PAT are pretty low from what I see for most of them... No where near what CCMDBIO margins are today.

Refer here
http://www.bursamalaysia.com/market/listed-companies/company-announcements/1808521

Page 2 and Appendix II

Jian Bin I was looking at the circular on the proposed acqusition and most of the target companies are loss making... not sure where u get that info

I was seriously considering to invest in this company before this news came out, high ROIC, fair EV/EBIT and good yield... I think I will wait and see now...

I have some doubt about this M&A, the rights issue is being done without much incentive like free warrants or bonus issue, perhaps they know that it will go through due to the large institutional ownership by the parent company (>73%)

The acquired companies are also not doing well, and most of them loss making, it is not clear if/how they will immediately contribute to the bottom line. CCMDBIO is paying more than P/B of 1 for these companies

I also wonder CCMDBIO will continue their dividend payment as well since this acquisition will drain up their cash...

Kian Leong, the article here is not suggesting that one invest in ICAP due to the great management... I think you miss the point... rest my case...

Kian Leong, I guess you miss the point of this article and keep harping on the earnings etc. Btw, I m not a shareholder of ICAP but just an observer giving some comments. The catalyst for the share price here comes in the form of activist investors like Laxey partners with the hope that they can force the fund manager to act to narrow the fund NAV... this is possible due to fragmented nature of the fund, there are no major / controlling shareholders.... so I would say possibility of NAV discount narrowing is higher the those other example you give like SBAGAN where the shares are too tightly held.

Kian Leong, do you realize that earnings based valuation is not the only approach to valuation ? Furthermore, an asset based valuation for a close ended fund is appropriate as the assets are highly liquid... I ve never seen someone value a close ended fund based on PE...

Yea I have some Evergrn as well but mostly underwater.... i saw the turn around in Evergrn recently....

smart move sunztzhe.... your timing is very good... i got in too early at around 1.15 - 1.20 a few months back.... better early than never...

Haha... you should learn from all but eventually trust yourself

Posted by miketyu > Nov 18, 2014 10:09 PM | Report Abuse

Uncle Koon Yew Yin bought more than 2 million shares into latittude. Surprise !

From Annual report 2014, a lot more than 2m shares... he split it to a few accounts probably to stay below the 5% threshold to avoid having to declare disposal...

Dont just buy based on PE. Research the reason for the low PE, it was due to a one off RM11m gain due to disposal of one of its PPE... it is not recurring...Excluding this gain, the TTM PE is more like 18x.. not undervalued at all....

KC, any reason you are expecting the discount to NAV to narrow anytime soon ? Actually there are quite a lot of close ended funds in the US also trading at a discount to NAV.

http://online.wsj.com/mdc/public/page/2_3040-CEF33.html

I would admit In ICAP's case the discount is very high though... however, the shareholding structure is very fragmented as a listed close ended fund is not allowed to have a controlling shareholder...

http://www.malaysia-chronicle.com/index.php?option=com_k2&view=item&id=401172:minority-shareholders-oppress-majority-shareholders-of-icap&Itemid=3#axzz3JPkdLAhz

wonghk, 2014 annual report not out yet and he is still shareholder as of 2013 AR. So where are you getting this information ?

This article shows another simple way of applying a PE investment strategy by Peter Lynch. In this method, a max ceiling of P/E of 15x is applied and the stock is bought whenever the price drops below that P/E. The method may only apply to blue chips tough which have stable earnings.

http://www.nasdaq.com/article/how-to-construct-peter-lynchs-valuation-charts-with-gurufocus-financials-charts-in-three-clicks-cm249355