JCY's appeal lies in its free cash flow as its annual depreciation is large (close to net profit), making EPS relevant mainly for estimate of dividend potential per share.

In FYE 2014, its FCF was RM180m (=220m from operation - roughly estimated required capex of 40m a year - roughly estimated annual income tax of 15m). It has income tax exemption in certain subsidiaries and some remaining tax losses to utilize against future taxable profits given its high capital allowance from capex investment. So, I think 15m is a rather fair annual estimate in next few years.

For prudence's sake, we use 2.067b enlarged share base (including all dilutive ESOS). This will translate into 8 sen FCF per share. At 68.5sen, this will translate into 8.6 FCF multiple.

HDD (mechanical parts) industry consolidation has taken place 1 year back and it is unclear how much JCF may be able to improve it FCF in FYE 2015. If it improves by say 15% (aided by USD strength), FCF per share will improve to 9.2sen per share.

For a company that produces the bulk of all HDD (mechanical parts) in the world, I think a FCF multiple of 10 is inexpensive. This then translates into a fair value of 92sen per share.

Other favourable factors are its big net cash position which is set to increase every year given the strong FCF (provided capex and acquisition of potential biz is well managed and not overly done). This then makes it possible to declare most or all its current earnings as dividend. I think it is reasonable to expect a dividend of 5sen a share in FYE 2015, which is 7.2% dividend yield at current price- very high.

All the best.

P/FCF and dividend yields of Liihen as stated by you are incorrect or inappropriate for reference.

Liihen's dividend yield is 6.48%(based on past 4 quarters' total dividend of 17sen/ current price).

For a company's with PE below 7, with capital expenditure not much higher than depreciation, P/FCF will not be much higher than 7 for valuation purposes. Increase in funds tied up in working capital such as stocks and receivables in recent 2 quarters of 2014 due to the increase in sales volume is one-off in nature as it will not happen each year, and thus it should be excluded for valuation purposes in a simple single-year calculation method.

Had you used a spreadsheet for DCF model, the increase in working capital would have hit just one out of the multiple-years time horizon which expand into perpetuity using a long-term growth rate. So, using a 23.5 times P/FCF for valuation of liihen is misleading.

Cheers.

Liihen's expected EPS is about 45sen for whole year of 2014, given the better biz volume, strong USD and after including the bonus provision for staff in Q4 2014. This translate into 6.2 PE multiple.

But one of the pluses of holding Liihen is also that it gives 5 times of dividend a year and gave all its last quarter profit as dividend last year. There is a chance that it may give in the coming quarter dividend higher than last year's 6.5sen (final plus special dividends), given the much improved profits in 2014. That means dividend yield would be at least 6% if the estimate materializes.

Also, the revaluation of its property will also be reflected in Q4 2014, and this is expected to result in a NTA of close to Rm3 a share.

Based on latest annual report, a fund and Mr Ng Ah Chai (A major shareholder in Incken, SYF, etc) have bought in and that explained the steady increase in the share price of Liihen over the last 12 months.

These are the specifics of Liihen. Not sure of specifics of other furniture companies.

The biggest pitfall in investment is misplaced self-confidence and lack of knowledge. Lack of discipline is merely an excuse used invariably for failure resulting from insufficient insight and analyses. Which is a manifestation of lack of objectivity, also a big no-no.

Knowledge separates winners from losers in the long run.

QE was a clear game changer in that the global economy would be pump-primed back into health artificially. TTB wrongly believed Jim Roger who bashed central bankers and grossly underestimated what FED could do.

This is what it seems to an clear-eyed investor:

At this rate, it can go debt free in 7 to 8 years. But there is no guarantee the boss will not spend another RM200m on "capacity upgrade" in coming years which likely means a big hole is again created only to be filled up slowly via endless overpriced private placement. So much money went out (not leak out)publicly from fixed asset and a small portion of the same money comes back in as paid up share capital via private placements. RM500m fixed asset is such a blatant fraud.

However, the above needs to be confirmed by a site visit by investors to see for themselves how the RM500m fixed assets look like and whether they bear scrutiny. Take photos and ask experts how much similar fixed assets cost in new conditions.

The best thing to do is to learn what TTB has done right in 2005 to 2007 and so wrong thereafter. And then, you apply those lessons on your future investment selection. Icap has never been a buy for so long. Those who still hold icap should just sell and close the chapter.

His failings include failure to understand what QE meant from beginning to the end, how L shape recovery would play out, inability to anticipate China's slowdown, "parkson" disaster, etc. He opined on many macro trends that sound knowledgable and respectable but he drew wrong conclusions on the net effects of the interplay of all these trends, especially when it comes to decisions on his stock-picking. Hence his disastrous performance.

Rising cost of living, stagnant income, runaway property prices and financially savvier generations the world over mean Genting Bhd has a intrinsic value of less than RM5 a share. Casino biz is no longer a money-printing machine everywhere in the world as more people have waken up to the fact that statistically and in probability's terms, it is unwinnable against bankers. Within next few years, Genting Bhd will gravitate towards RM5 a share and below as its profits will only trend lower each year. Does anyone know if there exists any put warrant on Genting Bhd as I would like to short it over long term?

Intrinsic value of Genting Bhd is RM5 a share.

I am not a shareholder of icap. All t best to u all.

Boo him down. The last 5 years have been relatively easy for investors as low-hanging fruits were aplenty. His performance is a disgrace by many standards. It is a great deal tougher to make money for the next 5 years to put it mildly.

A poor set of results for the latest quarter was announced.

Many very rich businessmen in Malaysia run their listed companies to serve solely or mainly their own interests. They are rich enough to take the company private anytime with their private wealth. So, they together with all their family members take fat pay each year. If that pisses minority shareholders off, so be it. And when share prices of their companies drop to ridiculous levels, they take it private, wait for a few years and then relist it when markets are good. VT, Khoo Kay Peng, Genting Family, Country Height family, Mulpha, etc are among them, sadly.

Intrinsic value of Genting Bhd: RM5 a share.

TTB has been so wrong for the past 5 years. With his reputation, I-capital should have made lots of profits in the past 5 years and be trading around RM8 a share. Look at the share price of I-Capital now. He should be fired, by all standards.

Calvin said once he had no more money to buy more of these shares, and a few months later changed his words to say he only invested his profits into these shares when these shares fell in price. Where is his capital? His MO is to project an image of and prescience and infallibility and one who has purchased many stocks in advance before they rose 200% or more to try to gain confidence from others that his picks will bear fruit- eventually. Why would one person write thousands of comments just to put in his profits into these shares that he said are ridiculously cheap.

I have warned him against promoting Mulpha when it was 50sen a year ago. He is still promoting it today as it is his MO. Typing the same stuff day in day out thinking majority of others are innocent enough to believe him. A pathetic guy indeed.

Interest paid is added back as it is considered as financing expense, not investing expense.

FCF to equity is what we should look at mainly as small equity investors but should guard against positive FCF to equity that results primarily from positive financing CF (i.e especially increased borrowings from banks).

This is the same principle as making sure working capital management is sound to ensure no fictitious or unrealizable receivables and stocks.

Lastly, it is important to identify and exclude non-recurring items in our assessment of fair or intrinsic value of a company.

Calvin invariably said in his comments that he bought many shares at 20% to 30% of their current prices years ago. This is then used to justify his recommendations, repeated thousands of times (why does he still need to do so when he is supposed to have already made 200% to 400% gain from his investment in not too long a period), for others to buy shares still trading at discount to their NTA. It is absurd, laughable and over-simplifying the art of investing as each company's risk and reward profile is vastly different.

For every gem, there are 2 also-rans and 7 lemons on KLSE. We all should have known by now.

Fidelity drove up KNM's share price beyond recognition since listing in early 2000s, with Maybank being the cheerleader and back-stopper.

All hells broke loose when KNM used its hard-earned profit, equity and Maybank loan to make an outsize acquisition of Borsig at the height of the oil price boom. Fidelity did very well by cashing (almost) all out before the share price started to crash from RM8.30 to now current level.

KNM needs continual innovation in products, better cost control, and rediscovering of its niche in what has become a too-competitive market fought for by a surfeit of suppliers chasing orders by bidding at unprofitable prices.

Once a darling, KNM will need to reinvent itself. Good luck to Mr Lee.

The boom and bust is part of an economic cycle of allocating resources efficiently. With QE, first introduced in 2008, the rules of the game changed forever as a floor could be artificially and promptly inserted by FED whenever needed, and a L shape recovery was then easy to envisage. And so it turned out to be and we did not see any major correction in the past 5 years. What we have seen since is manufactured inflation (to avoid deflation) that causes stagflation as economic excesses were not quickly pared back, rising risk appetite, soaring asset prices and the resultant social inequality on a world-wide basis. Euro will pump enough money to avoid deflation and China will stage a managed property price reduction, while Russia has been and will likely be set back financially seriously for a long time. As for Malaysia, if economic reforms continue to be deferred, Ringgit will languish as the economy cannot take another interest rate hike by BNM. So, in short, stock picking skills will count more than ever as some share prices are now trading at lofty levels and would crash if earnings disappoint in the future. Companies that perform well in the past year mainly benefit from falling raw material prices while maintaining reasonable degree of pricing power. Interest is to risky assets what oil price is to raw material costs. In 2004 when interest rate rose, equity corrected 20% but then was a conventional time. With QE-forever, a severe correction of say 40% is really unlikely and rebound will come faster if it happens.

The recent correction is a result of re-pricing of risks in all risky asset classes including equity market, stemming from the spectre of rising interest rate pursued by FED which douses valuation. In valuation exercises of any kind for biz, companies, assets, financial instruments, etc, higher interest rate means lower fair value.

Expected Return on shares which comprises capital gain and dividend yield is rising in tandem with cost of borrowing (i.e. interest). Dividend remains as relevant as ever no matter what the investment climate we are in.

It is relative.

For companies experiencing and projecting high growth in profits and has big economic moats, investors should tolerate a lower dividend yield. E.g. >3.5%

For companies with rather more volatile earnings, investors normally demand a "dividend premium". E.g. > 5%

The mechanism should be this:

One looks at dividend yield, ratio and policy for past few years to establish if the management believes in paying out good dividend on a sustainable basis throughout the period. Importantly, one should prefer a company that pays high dividend yield and yet maintains a low dividend over profit after tax ratio, which represents a potential higher dividend payout in future and current low PE.

Once shortlisted, one buy stocks based on the companies' projected profitability which determines both future the share price and dividend.

Subsequent years from 2009, not from 2014. Typo. I don't have much patience to make presentation like you kcchongnz.:d

It is simplistic n not meaningful as the criteria for both dividend paying company identification (a few years to 2009) n subsequent comparison (a few years from 2014) should be made for a period of time to examine any causation or correlation. All variables are dynamic n should be examined as such.

Analysis of relationship between share price performance over 5 years should be made against dividend yield over the same period, not against dividend yield in just 2009.

For companies paying dividends, their profitability (current and projected) is a key driver of both their share price performance and dividend amounts which should move in a same direction over a period of time- except for cases like cash preservation for expansion plans.

Mulpha is a classic example of value trap.

I know the history of Mulpha quite well including Mr Lee (having taken the helm at so young an age, skipped AGM, no urgency or skill to turn around so-called world renowned assets), his father (politically connected back then, venturing big into OZ, having a big credit company listed in HK, his mother having bulk of the shares) and details of all their assets including those in OZ.

The Lee family is too rich to care about minority shareholders. Many years ago, Mr Lee said he would continue to buy shares using company money as long as market price is below NTA. But there you go, the share price continues to languish. There is nothing new from him.

I am just giving you a word of caution. Countless small players have been buying Mulpha knowing limited downside but the upside continues to elude them and they ended up cutting it off at big losses.

In many projects, their issue is their high pricing and the too high end of their products. Mr Lee has changed many senior officers to help him run everything while he jets around enjoying life.

The share price performance tells it all and the recent issuance of debt securities at 8% is again proof that Mr lee keeps rolling over debt while sitting on a pile of seriously underperforming assets.

On the other side of the balance sheet, the biggest liability in Mulpha is its chairman, Mr Lee. Intangible liability if you will.

TTB failed to envisage in 2009 what L shape recovery would mean in many coming years ahead. From 2009 to 2014, it had been a golden period for stock-pickers. A person of his repute should have made at least 300% gain on the fund he managed in that 5 year-period. He failed miserably, and that is an understatement.

Hi kcchongnz:

Some additional points:

1) Liihen is in a net cash position. So, its leverage or net debt is nil.

2) The extra cash in hand Liihen holds provides liquidity safety in case of an economic downturn. Based on the formulas you use, this extra cash in hand has a punitive effect as it lowers ROE and ROA since it is a part of the denominators. As such, the picture is rather distorted unless some of the extra cash in hand is scaled down to industrial benchmark in calculating ROE and ROA for comparison with other players.

3) Some companies are already paying great dividend like Liihen but others still have to pay off its net debt for another 1 to 2 years before it can sell a good dividend story to the investors. Dividend yield is a big consideration for an investor.

Anyway, good luck and thanks for the write-up.

We benefit from each other by sharing the latest news concerning investment at large, our findings, views, past experience and future projection.

As it involves time and effort on the part of the writers, all should appreciate the contribution and pluses, and refrain from harping on perceived weaknesses or setbacks of others.

Diversity in opinion is inevitable and being argumentative or self-opinionated often times break down an otherwise very fruitful discussion. No one owes another a duty to debate till cows come home.

Take it easy. Winning on share market is all that matters. We should all filter the noise out there, and most importantly do not be the noise itself.

PE multiple is >20. Expensive unless growth trajectory is clear.

Q1 2014 contains a profit from log sales from extraction via open tender. It is something the company may do only once a while, provided the goal of forest sustainability is achieved. In theory, it can do many times within the concession period (renewable). This biz deals with perpetuity of forest managmeent and it is not realistic to expect RM20m from log sales from extraction via open tender every year. Maybe, once in a few years. Minus this gain, the operating performance of this company is just minimally profitable. That may explain why no dividend policy has been formulated as operating earnings is not consistent. As the company has no debt either, the current share price is roughly reflective of its fair value.

Bottom line is right at the bottom and means profit after tax, if taken literally.

India is fraught with corruption and red tape, which should explain part of the long delay in the power plant completion.

Shareholders of Mudajaya may take heart from the Modi's effects. Ever since he came into power, everything in India perks up, much like what Abe has helped Japan's economy.

Construction and infrastructure companies are capital intensive, would not be valued at high PE multiples, except for companies with good track record of securing big orders and sustainable earnings stream.

The income from India power plant will boost its EPS to around 30sen in the future. If that happens, the key therefore is what other projects will Mudajaya bank on to sustain the 30 EPS a year.

Mudajaya pays consistent dividend and is not highly geared. At RM2.40 to RM3, this share looks fairly valued.

Q1 2014 came in slightly better than expexted.

One may estimate that the land and buildings revaluation (due in June 2014) may result in at least say RM0.25-a-share surplus which translates to an increase in net assets in Q2 2014.

Due to the fire-destroyed assets being stated at low book values vis-a-vis replacement cost (new), the fire incident in Q2 should give arise to a decent gain per share too, a rise in EPS for Q2.

Q2 is a quarter when interim bonus provision is made for staff and management and the USD was also weaker in Q2 than Q1 2014. So, taking into account all the factors, EPS for Q2 should still be at least 8sen per share.

TSC is more ambitious, focused and bigger than LTKM. The latter does not invest in capacity expansion but instead has bought property investment and marketable securites with extra cash to earn interest income. LTKM's latest quarterly EPS include revaluation surplus of RM4m.

Higer egg prices and lower feed costs combined to drive the latest quarterly profits to record high for both companies. TSC has made good progress on feed management technology.

I note however that salaries of directors in TSC are high especially among the family members but they are more aggressive and likelier to deliver good results with economy of scale, which nonetheless also depends a lot on feed costs which are currently at depressed level, all said.

Another risk is that the egg business is all domestic, and it seems quite difficult to set up and manage foreign farms. So, the scope of business growth may seem capped.

I believe the egg producers, esp TSC, have good pricing power, limiting profit downside in case feed costs jump.

The great results in 2013 which continue into 2014 may or may not last. LTKM management feels the prospects of the industry are challenging while TSC thinks otherwise, provided selling price remains stable.

Congrat to all shareholders of TSC for the 50% gain in the past 1 month.

Thanks for the article. Always buy net cash companies with AR turnover of not more than 45 days.

Mulpha and PMCorp share the same problems. Controlling shareholders take undeserved RM'millions of remuneration yearly to sit on a diverse pool of low-yielding assets, and they are very rich personally such that they would not have any urgency to drive the biz and hold themselves accountable to any yearly profit-target.

Mulpha is a typical value trap, as is PMCorp. As it involves too high opportunity cost, I cut Mulpha off many years ago at a loss at 53sen.

RM1 NTA today is worth less than RM0.50 in 10 years time if a company produces flat results year in year out for a decade. Land will appreciate of course but the sales for so many years of Leisure Farm in the past years seem to be barely enough to pay for operating expenses of Mulpha.

MulphaLand though was a nice insider play to drive the price up by 200%, but that was not designed to benefit outsiders like us.

All should come out and discuss face to face. It is more meaningful that way. Make real friends, instead of virtual.

A company's intrinsic value is calculated using its DCF over long-term.

Some minuses of Pelangi which dissuaded me.

1) Students are going online for purchase of reading materials and this trend is set to continue inexorably.

2) Government has opined that the publishers in Malaysia work like a cartel on pricing their books making them out of reach of students from poor families, and may implement measures to promote or induce greater competition in the market.

Pelangi has great BS but its long term earnings prospect is clouded.

The real risks include strikes and labor likely demand higher wages for work resumption and the contagion effect of this human psychology across wider area cannot be discounted.

Still, Latitude's profitability will likely be very good for Jan-Mar 2014 after its buy-out of its Sg unit recently at a great price.

It is unclear if Latitude purchased business interrutpion insurance policies too, in addition to property all risks. Even if it did, the first loss limit may be high.

This is a political risk which I wrote earlier facing Latitude. China's stance on the oil-rig issue is firm and if this drags on, foreign-owned operations there may suffer to the benefits of local-owned companies.

Fingers cross for shareholders of Latitude.

USA has to exert its influence everywhere for greater world peace in the long run. What it fights and stands for on human rights, democracy, minority protection is noble and progressive universally that other countries should embrace. USA is by far the biggest military power in this world, followed by China.

Great summary. Thanks.

For a family of 4 to 5, RM10m is about enough for retirement before 50.

Thanks for sharing, Noby.

Sepiroth asked me quite long ago about fair value of Homeritz. To me, it is not undervalued. That is why I did not comment on it. Furniture shares to hold for me are just Liihen and Latitude.

Good margin, cash-rich, clean balance sheet (AR is a bit high though) and its share price has already gone up a lot in the past 3 months to reflect the value.

But revenue has been flat in the past 4 years. Reliance on distributorship may explain why it did not venture out too far beyond Sg successfully.

At a glance, it may be the mechanical equivalent of super-strong Pestech which sells cheaper electrical than dominant overseas players. But it is just a pump and compressor distributor.

5% growth every year for the next 10 years is too optimistic, unless one is convinced of its growth story and catalysts.

Not a buy for me at this price level.

The share price of the mother will be lower after warrant issuance, not higher.

I suppose the fair thing to do is for the CEO to pay down or off its debt using its big cash pile to save interest expense.

Then, the next wise thing to do is to compare earning yields (Profit after tax/market capitalisation) against required rate of return on equity of say 10%. If the former is higher than the latter, no shareholder will complain too much for not receiving good dividend or share buyback because the company is generating a higher return than the shareholders expect. In that case, shareholders should buy more of the shares till earnings yield equal the average required rate of return on equity, thereby pushing up the share price to its fair value.

Discrimination on any ground is wrong. Period.