But that is only 51.55%. The portfolio in this article is 120%.

Or are you implying 6 months 51%, so two and a half year 51%*5 = 255%?


Posted by Ooi Teik Bee > Jun 6, 2015 09:26 PM | Report Abuse

http://klse.i3investor.com/blogs/stock_pick_2015/77687.jsp

To me, this is called win big.

Thank you.

Posted by Ooi Teik Bee > Jun 6, 2015 06:18 PM | Report Abuse

I do not want people to twist my facts, please note the change.
To win big in stock market, FA alone will not work. You need a combination of market psychology, TA, FA and sectors to focus.


But this portfolio posted here did win big, didn't it?

I guess your acvice is very inspiring. I better shut up.

Posted by Sunkist118 > Jun 5, 2015 06:50 PM | Report Abuse
Ha lar KC Chong very Cheong hei....Sir OTB alredi said mah how he play margin

Posted by Sunkist118 > Jun 5, 2015 06:57 PM | Report Abuse
Yay Sir OTB logic prevail again

Posted by Sunkist118 > Jun 5, 2015 07:19 PM | Report Abuse
That's why I differentiate Sir and Sifu. One stone throw many sifu but Sir very little hor


Posted by AzmiMerican > Jun 6, 2015 07:13 PM | Report Abuse
Is it all about managing risk la
Kc siang malam do calculations buat apa?? To manage risk la to reduce risk la
Kalau OTB can manage risk reduce risk bila guna margin financing I dont see what is wrong with using margin


Posted by AzmiMerican > Jun 6, 2015 07:15 PM | Report Abuse
Terima kasih la OTB for sharing on margin financing

Mr. Ooi,

Advising investors not to use margin financing to speculate in the Chinese market "stupid"?

These are some of the share price movement in the Chinese market.

• ChiNext, a Chinese stock exchange frequently compared to America's tech-heavy Nasdaq, is already up 165% just this year.
• The average stock on the ChiNext exchange has a P/E of 140. Even after a six-year rally, the average P/E for American stocks is closer to 20.
• There have been 144 IPOs in China so far this year. On average, they've jumped 539%!
• One Chinese company (China National Nuclear Power) wanted to raise $2 billion in an IPO. Investors tried pouring $273 billion into it!

"The Economist told the story of Chinese company Kemian Wood Industry, a wood flooring company that had seen double-digit growth for "much of the past decade."

Looking to cash in on the mania surrounding tech stocks, it re-branded itself as Zeus Entertainment and changed its focus to online gaming.

It should be noted, making wood flooring and online video games... have very little in common.

Yet, investors doubled its share price after the name change!


Shanghai Duolun Industry specialized in real estate, but rebranded itself a tech company overnight.

How did it become a tech company? Well, it bought a website.

Mind you, it didn't do anything with this website. It simply bought the domain name (www.p2p.com), and put it up for sale for $100 million.

The only thing on the site is a number to call if you're interested in paying $100 million for the domain name.

The day after this tech rebranding, the company's stock soared so high that Chinese rules limiting daily price gains forced trading to stop!

Mr Ooi,

Thanks for your response. Discussion on different ideas is good.

As you know very well that I advocate all the participants of my course to focus on their career, and save money and invest. Only invest with the money they save, and not money they need to use for the next few months, or a year. This is far cry of the advice of using margin finance as you can see. So sorry, I need to clarify your statement below.

"To me, it is a wrong strategy not to use margin financing if the market condition is very bullish. Opportunity hits but once, I will make full use of this good opportunity. In Shanghai stock market now, the rapid rise is because most investors use margin financing. You tell the investors in China now, using margin financing is very bad, I believe many investors will scold you that you are a stupid investor."

Shanghai market is very bullish now as you have said. So it is "stupid" to tell people not to use margin finance as this opportunity only knocks once? And that the crowd is right?

Mr Ooi,

As I can see you are extremely bullish about V.S now. Would you advise your son/daughter to take margin finance in a big way and whack V.S? Those who do not take margin finance to buy V.S are stupid investors?

Dear Mr Ooi,

This is kiasu1 statement, a general statement to all those reading i3investors. So those who do not follow the advice below are "stupid investors"?

"Mr Koon also encourage others to use leverage as the rate of interest is so low and if one did choose a good fundamental stock with good future prospects, even the dividends are able to repay the loan interest. Remember the interest cover ratio? The EBIT is your earnings before interest and tax."


This is my quiz

I have an interesting quiz for you. Your son is consulting you.

Son: Dad, I want to invest in the stock market. I have only RM5000 now. What do you suggest?

Objective answers:

1) Son, go and get margin finance from the bank at 6%, you always earn more than that. Don't worry. No problem one!

2) Son, RM5000 keep it as an emergency fund. Focus on your job, earn and save, and only invest with the money you have saved and don't need to use in the near term.

3) Any other answers

Your answer please

Posted by ks55 > Jun 6, 2015 03:50 PM | Report Abuse
When you are young, using a bit of OPM is ok. Afterall, those youngster who lost everything in 97/98 still have opportunity to take revenge.

ks55,

I have an interesting quiz for you. Your son is consulting you.

Son: Dad, I want to invest in the stock market. I have only RM5000 now. What do you suggest?

Objective answers:

1) Son, go and get margin finance from the bank at 6%, you always earn more than that. Don't worry. No problem one!

2) Son, RM5000 keep it as an emergency fund. Focus on your job, earn and save, and only invest with the money you have saved and don't need to use in the near term.

3) Any other answers.

OTB,

When you are successful in using margin finance and some others also and made big money in your 23 years in Bursa doesn't mean the following statement by kiasu1 is good advice, does it?

"Mr Koon also encourage others to use leverage as the rate of interest is so low and if one did choose a good fundamental stock with good future prospects, even the dividends are able to repay the loan interest. Remember the interest cover ratio? The EBIT is your earnings before interest and tax."

Posted by duitKWSPkita > Jun 6, 2015 10:09 AM | Report Abuse
Mr Ooi and KC chong,
Good day to you. When free can take a look on UCHITEC. I am still half way on analysis. It has several similarities like VS. Good thing is still belum "digoreng". Mean least risk to get con .
Enjor ur day gentlemen.


duitKWSPkita,

You are welcome to read this:

http://klse.i3investor.com/blogs/kcchongnz/62058.jsp

Uchitech is a great company, in my opinion.

Chartist and short-term traders won't like it because the chart doesn't look good (or is it? not sure.), and there is not big profit growth these few years. But it is a very safe company, I think.

Take care of the downside and let the upside takes care of itself.

This is what we call humility.

From a young man in this blog

http://klse.i3investor.com/blogs/kianweiaritcles/78048.jsp

"我不會讓自己處於最危險的位置，隨時有機會回到原點。我都驚死，怕一個浪打過來無晒錢。有一部分人會覺得自己玩股票叻，就專注炒股，但我不會把所有錢投放在同一投資上。"

Posted by bracoli > Jun 6, 2015 07:45 AM | Report Abuse
Try read the most important thing iluminated, then ull understand the power and reason behind FA


Yes, one of the best investment books if not the best. There are little numbers in the whole book.

Posted by Ooi Teik Bee > Jun 5, 2015 06:46 PM | Report Abuse

I also want to add, borrowing is not always bad. Let us look at VS, the EPS is 0.491, the interest rate charged by the bank is around 6%. It is nothing wrong to borrow at the rate of 6% to generate an income of 49%. In actual fact there is a gain of 43% if you borrow. Of course you need to control your debt, it is nothing wrong in good time, you will suffer during bad time to pay interest charged.

Great comparison!

OTB,

The statement was made by kiasu1 and the question was hence directed to kiasu1

"Mr Koon also encourage others to use leverage as the rate of interest is so low and if one did choose a good fundamental stock with good future prospects, even the dividends are able to repay the loan interest. Remember the interest cover ratio? The EBIT is your earnings before interest and tax."

So you have been his strong supporter on this encouragement of others to use margin financing in stock trading? You have you pros, any cons?

Thank you very much Ooi for your posting, and your frankness. To me you are always my good friend. We have met and we have talked about working together. I still hope I can work with you but it is not possible now as I am not in Malaysia most of the time. We do have some differences in investing. But that could make us perfect match in a collaboration, in my opinion.

Mr. Koon doesn't like the word "Sayonara"? And many too, including you? But did you read the content of the post? That was the most positive post I have written about V.S. Go read again. I have explained why I used the word "sayonara" as my last post because I have written too many posts on it. But did I really have to explain that? I would definite explain that if someone asked me why I use that word in my thread.

V.S is definitely not a useless stock. there is nowhere I have implicated that in any of my posts. but I just raised some concerns about it looking at its financial statements. To me there are real problems; look at how inventories increased in relation to revenue, and think back some information of what is happening to its major client of its coffee making machines. I am not basing on wild accusation. Well, I could be wrong, of course. In investing, it is full of uncertainties and there is no such thing as sure thing.

Actually I expect people holding V.S stocks in large quantities would thank me for putting so much effort to provide this opposite view, whether I am right or wrong, instead of taking swipe on me. It is a noble intention, isn't that?

Also remember the market is a voting machine in the short term, but a weighing machine in the long term. Many value investors have said that.

The business of Globtronics is definitely way better than V.S. There is no comparison. Globtronics's business is far ahead of V.S. There is not a single doubt in my mind. Compare their business model, return on capitals, cash flow, health of balance sheet, practically in every aspect. You have rightly quoted what I say here:

"The above is just the first level of thinking. You need a second level thinking; i.e. is the price right?

Investment is not only about buying good companies, buy buying them at the right price. The price you pay determines your return."

You have mixed up what is a good business and what is a good price. Price is not value, remember? Value is what a company is worth, but price is what one is willing to pay. Price is a total different thing than value and it is not factored into the business. A good company has good return on equity, or invested capital, good cash flow, consistent free cash flows, a healthy balance sheet. No price has incorporated there.

Price is only relevant when you decide to pay for the business, how much are you willing to pay.

I didn't go into the valuation of Globtronics because I have no interest in it too. I think it is too expensive just looking at the quick and dirty metric of PE ratio. But that doesn't make it a poor business. It is still a good business,but the price is not right at the moment. Actually it may depending on its expected growth, which I have no idea of as a small time retail investor.

By the way, PE ratio is too simplistic to use in valuation. You should know very well why I think so. There are simply too many problems with it. Analysts use that it, is not because they don't know it is not good, but they have their own agenda. I seldom read analyst reports.

Posted by Icon8888 > Jun 4, 2015 10:02 PM | Report Abuse

Kc, I read in one of your earlier articles that furniture industry is cyclical. Mind to elaborate ? Thank you


Icon888, to me just about everything is cyclical. Oil price goes up and it must come down, so does palm oil price, construction industry, properties, etc. There’s little we are certain of, but cycles always prevail eventually.

Nothing goes in one direction forever. Trees don’t grow to the sky. Few things go to zero.

So do furniture stocks. Stock prices too.

murali KC, though I enjoy seeing your guys exchanging ideas here on VS. But till now you have opened 6 threads on VS..why??

Just like when some of us questioned the motive of Koon Koon acted like a broken records to promote VS n Latitude in I3 again n again..Meanwhile somebody questioned my motive of whacking Koon Koon here again n again... I think you have said enough on VS, those who support VS will continue to support and those who dont support VS will continue to do so...U have done a lot of your analysis on VS. Let go on VS n let go the old man...


Do you see any problem of my articles in V.S? Do you see me attacking anybody personally? Or anyone making personal attack on me when I present arguments about investment in V.S? You have a totally wrong perception of my relationship with KKY which I thought you should know when I gave it to you when you kept on making personal attack on him.

http://klse.i3investor.com/servlets/forum/600076875.jsp?ftp=3

I sure learned from the feedback on my threads on V.S; from kiasu1, OTB, Soojinhou, Noby, JTYeo, Probability, bcllct, FMHSTOCK, sense maker etc.

Deliberations of opposite views are very good as it curbs overconfidence in us in investing, which can be very deadly to our outcome. Perhaps those who hold V.S share should thanks us for that, whether they want to accept or not.

There is a question sent to my email address appended below.

"Name deleted>
1:26 AM (9 hours ago)
to me
Dear CKC
What price is resonable for VS to buy in?
Tq"

The answer is I don't know.

There are a number of threads in i3investor talking about this stock; KYY a few of them, Ooi Teik Bee and kiasutrader1, and surprisingly I managed to write a few too. Mine is the only different opinion about it.

However, the one who seems to know the least is me, as I don't invest in and have no interest in V.S and hence have no deep insights as the others.

Having said that, I think there are a number of concerns you need to consider, and a lot of information has been put up. The person who can help you to decide, I am afraid, is you.

The evidence on price patterns of the stock market in general and a stock in particular, in the short and long term suggests that there is much about markets that we cannot explain.

This is the first time someone owning a stock which I didn't write good about it, thank me. Umm.


Posted by chonghai > Jun 3, 2015 06:41 PM | Report Abuse

Kcchongnz, I own VS share.I believe I never attack or insult your analysis, partly because I am still trying to comprehend your analysis. I bought VS for the recently surge in revenue due to keurig. No matter what is your analysis, I will be holding on my VS for 6 more months, because I believe the jump in revenue could be different from before. However, I still really appreciate your analysis because that allow me to have a good understanding of VS. Thank you very much.

Posted by SUMATECRM1 > Jun 3, 2015 07:54 PM | Report Abuse
whats the intrinsic value of C.IHOLDINGS?


Very good question but I have no answer, until I look at its business and make some analysis and valuation exercise. It will take a couple of days.

Anyone interested in this type of service for a fee? Please contact me at ckc14invest@gmail.com

Sorry ah for making use of this as an advertisement.

Two companies, A and B in exactly the same industry have the same number of shares with the same share price, and hence the same market capitalization of 100m.

A has a total debt of 50 million and an excess cash of 10m, whereas B has a total debt of 10m but an excess cash of 20m.

Both companies make a net income of 10m. Hence both A and B is selling at a price-earnings ratio of 10 (100m/10m). But are they having the same value? If not, which company would you prefer to invest in?

Please view their simplified income statement in the link below:

http://klse.i3investor.com/blogs/kcchongnz/49016.jsp

Posted by soojinhou > Jun 1, 2015 07:39 PM | Report Abuse
KC, very interesting that most people only want to read stuff to affirm their opinions, they simply cannot accept opposing opinions, no matter how good are the underlying reasons. Well, I think we both welcome opposing views, because groupthink is very dangerous in investment. Young man if you don't know what it is you should look it up because it almost triggered a nuclear holocaust in the Bay of Pigs incident. Always seek opposing views, you may have overlooked something and it may save you from very grave mistakes.

"groupthink is very dangerous in investment"

This is very very true. I once was invited to be a contributor of a private website three years ago. The participants there are very united. They give full "support" to shares promoting in the forum, practically hugging each other, cheering together for the share price to go up. They behave like a cult. Two shares which were promoted heavily were Asia Media and Smartag. There were a number of analysts promoting them too then. When I told them different stories after looking at their business, I was sort of like an enemy.

The adjusted price of Amedia was 11.5 sen, and Smartag about 23 sen then. Today they closed at 5 sen and 15.5 sen respectively.

Interview with Jae Jun continues:


http://klse.i3investor.com/blogs/kianweiaritcles/77803.jsp


SN: What’s your two-minute advice to new investors or students interested in a career in investing?

JJ: Become an expert in accounting. The language of business and investing is accounting. But don’t just end there. Learn to understand, speak and interpret the language instead of just knowing the alphabets.

Masuk kandang kambing mengembek, masuk kandang kerbau menguak.

"We are not alone."

June 1, 2015 by Vishal Khandelwal

This interview was part of the May 2015 issue of my premium newsletter on value investing, behavioural finance, and business analysis – Value Investing Almanack (VIA).

http://klse.i3investor.com/blogs/kianweiaritcles/77803.jsp

SN: What are some of the characteristics you look for in a high-quality business?

JJ: Moat is very high on the list but the thing is that most companies don’t have one. So it’s important to check that the numbers from the financial statements confirm that a moat exists. Some rules of thumb for a high quality business are – return on invested capital above 15%, free cash flow growth with a low level of capex needed, and a consistent or improving cash conversion cycle.

Posted by vsstaff > Jun 1, 2015 01:28 PM | Report Abuse
There would be new project For vs and new model launched for keurig for next 3 to 6 month, if u think current price is overrated,i wont blame u, bcos when the price shoot up again, i will tell u what is mean by hater gonna hate, loser gonna lose and winner gonna win..... how far vs can go???let see
Last thing, invest is about prediction of future, don't talk shit about past history la please...


Young man, cool down. If I were you, I would thank the one who tell you a story different from what you have heard before, instead of saying this.

"don't talk shit about past history la please... "

You get a balance view and then you evaluate, research about the view and make a more unbiased judgement, all by yourself.

Overconfidence is a very dangerous cognitive bias in investing. Unlike doing work which we should be confident of ourselves. Overconfidence in investing kills a lot of speculators and investors alike.

"There would be new project For vs and new model launched for keurig for next 3 to 6 month"

Just what project is it? What will it bring to V.S?

I did read something about it in a very popular and credible value investing website called "gurufucus" on a recent related article. i would suggest you look at it in details, seek advice if you can't comprehend. Think about it why such a spurt in sales in V.S the first quarter 2015, and think about why the high receivables.

But of course i don't know about the share price performance of V.S in the near future. It could go to RM7, RM10, RM20. I am not that surprised too. I just don't know.

Please note I hate nobody, andI ain't loser too.

This is not a fair statement.

Posted by bracoli > May 31, 2015 06:26 PM | Report Abuse
Wahhhh die... All kena con by otb and koon... Kikiki

As far as the share price of V.S is concerned. It has been doing well, very well indeed.

Note my article is for sharing if V.S is such a great company, from its past performance. Like its future share price, I have no idea if the company will be doing well in the future either. I am no good in predicting the future, especially the kind of business V.S is in. I would say it is highly uncertain. Granted, some people may be better to "predict" the future better, or can see the future better. Not me.

My evaluation of Globtronics is about its business. I see its business model and performance is much better than that of V.S. I don't just simply say, but provide you with analysis. You may not agree, that is fine with me. I talk nothing about price.

The above is just the first level of thinking. You need a second level thinking; i.e. is the price right?

Investment is not only about buying good companies, buy buying them at the right price. The price you pay determines your return.

Posted by YiStock > May 31, 2015 06:40 PM | Report Abuse

Hi mr kcchong, how adviseble if can we safely ignore PE or give higher tolerance when a good company like gtronic constantly gives high ROIC?

PE ratio valuation is just a relative valuation. It is good to give a quick and dirty ballpark number though.

A way to do see what price is good to buy is to make use of a discount cash flow analysis by incorporating the expected growth rate into it to find the intrinsic value due to the firm, and then the equity shareholders, and only buy when there is a reasonable margin of safety.

All other valuation methods are distant substitute. Seth Klarman.

adCool,

You appear to be a financially sound youngster, knowing the importance of saving.

Good to go buy a house and treat it as a form of forced saving and a roof of your own over you, especially if you are married. It is perfectly alright to borrow money from bank for a house. House price won't go up and down 20%,30% in a month. But even if it does, bank won't force sell your house just because house price has dropped by 30%. Travel but try travel cheap. Invest but invest with your own money.

Never never use margin finance in investing as a youngster. That is no more investing but gambling. The knife of leverage cuts both way, only when you use this knife for investing, the side which cuts you is much sharper. It can ruin your life if you are not careful, and unable to control your greed.

“Investing should be more like watching paint dry or watching grass grows. If you want excitement, take $800 and go to Las Vegas.”
– Paul Samuelson

And not like trying to make a baby in one month by making 9 women pregnant at the same time. Warren Buffet

Posted by Ntpboon > May 27, 2015 10:10 PM | Report Abuse
谢谢分享！
我见议新的bursa投资者应该把KC Chong 127 篇的Blog 读完。
它不但能使投资者的投资技能有所提高，还能使投资者具有正確的投资心态。
古人说：“书中自有黄金屋”
说不定投资者也有可能从Blog中找到你的“黄金屋”。

Boon, thanks for your kind words. I always like your Chinese poems in Tang Sze or Sung che. there is one which describes the sunken brave heros during the wars. Could you give me that? Or anyone can help me?

Posted by leno > May 28, 2015 01:32 PM | Report Abuse
youngster and newbies plus oldbies must always listen to super-investor leno the most panlai tips ... like buying PRKCorp, MNRB, PMCOrp and EFORCe today.


Youngsters, what did you read in the article?

"Don’t get greedy. There is no free lunch in this world."

"Put down your phone when the other side keeps on telling you to buy this stock, or whatever investment which would double in a year. It won’t happen."

Perhaps these youngsters also need to learn from personal financial planning from me.

The age of low hanging fruits in Malaysia may be over.

“Your future is always more valuable than today, the sooner you realise that the better”
― Steve Douglas, The Aussie Expat: The Luckiest Person on Earth


Posted by speakup > May 28, 2015 11:34 AM | Report Abuse

nowadays youngsters buy car taking 9 year loan, buy house taking 30 year loan. they look short term, not long term.

Posted by speakup > May 28, 2015 11:35 AM | Report Abuse

to youngsters, image now is everything. they dont look far ahead for their future

Posted by GoodCompanies > May 28, 2015 10:42 AM | Report Abuse
Ya...buy good companies :)

Yes buy shares of good companies. But that is only the first level of thinking.

The success of investment outcome doesn't come from buying good things, but buying things cheap.

So you must know what does it mean by cheap.

Alphabeta,

Very detail analysis.

So that RM28.45m of "Effect of acquisition of a subsidiary" is how it comes about. Something like "releasing the negative goodwill", "expense" it in the income statement, oop, "profit" it in the income statement? Wow, that is very interesting accounting practice. But that RM28.45m "profit" is a huge amount equivalent to 70% of the net income.

Yeah you are right. The above none cash item is taken out from the cash flow from operating activities.

V.S consolidated financial statement seems complicated. But never mind, for retail investor like us, just follow the cash.

Is there any cash the business owner can extract out from the ordinary operations, last year, the last few years?

CFFO?
Capex?
FCF?

That is the important question.

KC

Posted by mahorse > May 28, 2015 10:32 AM | Report Abuse
Dear KC, in the case of property stocks, do you mark down "Property Development Costs" which is classified under Current Assets. Thank you.

All depend if the property development can sell well or not. If it can, then it may even worth more than its book value; otherwise it may not worth much at all.

Posted by contemplator > May 28, 2015 10:59 AM | Report Abuse

闕又上搬出巴菲特的名言說：

投資人若無法承受股價下跌50%，

根本就不適合投資股票。

volatility is far from synonymous with risk-- Warren Buffett


If you buy shares with 50% margin finance, how can you stand a drop of 50%? You just have no chance to recover as you have lost everything, and more.

根本無法翻身

OTB,

Thanks very much for your kind words. You are a well respected forumer here with proven records. yes, you record can be seen in i3investor this few years. Nobody can dispute it.

I hope with your post here, everyone should view the importance of having some knowledge and skills when foraying into this jungle out there in Bursa; be it FA or TA. And you have rightly said, TA + FA would be the best combination.

With your good recommendations here, hopefully it would attract keen learners to learn from me through my online investment course which I have been organizing for more than a year already.

With this may be I can do some noble work by teaching fundamentals of investing to whoever interested in order to improve their investing experience.

No lah, I can also earn some money also. You know everybody needs to eat and survive what. Not that I am a multimillionaire. Btw the fee is peanut compared to the stakes you have in the market.

And I also hope that those who are interested in TA can also learn from OTB, And you know he is good, and he has proven to be good.

But remember what OTB said, TA alone won't work. You must combine TA and FA, then only it works, beautifully.



Posted by Ooi Teik Bee > May 26, 2015 07:36 PM | Report Abuse

I had spent a lot of money to learn FA, at the end I learn the most is still from KC Chong. I had repeated this sentence many times in I3. I did not say KC Chong is not good, I copy the best from KC Chong to use them in my FA report. Certain parts I disagree, I just avoid them.

I am a remisier, I have many stocks to take care, I cannot be so details on one stock. Hence I have to balance my act to get the best out of them. I had tried many methods to make money from stock market. I regret to say that I wasted many good years. If I know KC Chong earlier, I should have done very well in my investment. I did very well in last 7 years after I learn TA. TA alone will not work, you need to combine TA and FA. To me, TA comes first, FA comes second. I had tested this combination many years, I want to say it is still the best method for me.

I had shown this combination skill in my stock pick in 2013, 2014 and 2015. All of you should know the results.

I have a pool of subscribers, they pay me the money or subscription. I have to take care of them first, this is a business I run. Many of them will be very unhappy if I post my buy recommendation in I3. If I want to sell the stocks, I have to inform them first so that they can cut loss fast at a better price. Please understand this, I have a business to run. Do not blame me if I did not tell you to cut loss. I cannot do that because I am answerable to my subscribers first.

I stop here, I am not challenging KC Chong that I am better than him. I just express my opinion on my strategy. If you think KC Chong's method is better, go ahead to follow him. Please do not be so personal in writing here.
Thank you.

Posted by Shum Chang Loon > May 27, 2015 06:52 PM | Report Abuse

How to get the figure of net Capital expenses and free cash flow in vs ? From statements of cash flows ? Thanks.

Yes, from cash flow statement. Do a little addition and subtraction.

Posted by tianjin > May 27, 2015 07:34 AM | Report Abuse
Thanks a lot KC for your well define analysis on VS , would very much appreciate if you could take another look at ELSOFT post Q1 2015 quarterly result. Please do continue your very kind effort for guiding fresh newbies investors .

I have written something on Elsoft based on whatever I can see from the past performance in the link here for sharing of knowledge only:

http://klse.i3investor.com/blogs/kcchongnz/74663.jsp

I as a small retail investor and also not in the industry, have no other insights, insider information, never talk to the management, no crystal ball etc. So read with cautions.

Looking at its latest financial results, it doesn't change my view as written in the article.

Posted by contemplator > May 27, 2015 12:27 AM | Report Abuse
Good analysis Mr KC!


contemplator, thanks.

I read a posting you shared on bonus issues, share split, etc below:

http://klse.i3investor.com/blogs/contemplator_bursamalaysia/77059.jsp

It is an excellent post which I recommend everyone to read.

I would like to add that these stuff like share split, "free" warrant, bonus issues can at times be very dangerous for retail investors in Bursa, where major shareholders get these "free" stuff and unload into the market with lofty prices to ignorant small time retail investors, causing the share price to plummet and hefty losses for existing shareholders.

InstaCom came straight into my mind. There are many more are in the process.

So for true investors, not traders or speculators, don't focus so much about asking the company to give bonus issues, share split, "free" warrants etc. A cake cut into 10 pieces, 20 pieces has no difference in value. This is a very simple logic. In fact for many poor performance companies, this stuff eats further into their pocket by paying investment bankers to do this stuff, and the fees is not cheap.

Liquidity from share split? A few years ago Bursa already made the "shares split" for all companies in Bursa by 10:1 by reducing the lot size from 1000 shares to 100 shares. Still not split enough? You want to invest in Nestle with RM7200? No problem, you can buy 100 shares at RM71.56. Any problem? Want to invest in Pintaras with just RM2000+? Can, just buy 500 shares.

So for real investors, don't need to tell the management to do bonus issues, share split, give free warrants etc. They know what to do best for the company, or at least suppose to. If they aren't, tell them to focus on how to improve the business of the company, how to improve margin, increase sales, collect debts, manage inventories well, etc. These are the important stuff about business.

bintang21,

I guess you are a young man, still learning about the reality of life, and investing. How many times do you notice I have said,

"In Bursa, there ain't no tooth fairy".

In trading in the stock market, it is a zero sum game (and how many times I have said that too). You win from someone who loses to you. Your loss is someone's gain.

So someone who is also doing trading on the same stock as you won't help you to make money trading in the stock market, because your gain is his loss, or less gain for him, in general. You will behave the same because you are also human. So you have to always take care of yourself first.

A noble person may help the poor people, give them some money if they have none to eat. There is no noble person who will help you to make money from share trading in the stock market. That is not a noble act, helping people to make money from the stock market is not a noble act anyway in my opinion. And don't take his word if he tell you.

I also write about good companies worthy of investing and publish in i3investor, if you notice. Most of the time I have bought already before I publish them. That is also a selfish act of me. I am human too.

But one thing you should be quite comfortable if you wish to follow what I write, I mean if you trust me, that I am writing how good a company is, it is not with the intention to sell to you. That is not good, morally. By the way, if ever I publish a good company stock, I won't sell even if it has gone up by 10%, or even 20%, because I am an investor, a long-term one, and the stocks I buy and writ about generally have a wide margin of safety and hence i generally won't sell so fast unless the share price has gone up close to the intrinsic value which I have estimated, or I need money to buy better stocks.

Of course I can be wrong too in my analysis, quite often too. If I realize I am wrong, then I won't hesitate to sell it. And also as human as I am, I won't tell you to sell first before I sell.

So you can't fault anyone not helping you to make money trading in the stock market.

Posted by bintang21 > May 26, 2015 08:01 PM | Report Abuse

KC

please be brave with your view. as you had said and it is an undeniable fact that future is full of uncertainties, no one know what is going to happen tomorrow , what more a month or a year later

Me: Yes, the future is unknowable and unpredictable, you are right. So how to be "brave" to say if a share's price will go up or go down in the future? Yes, one can base on some analysis and educated judgment, but that still won't ensure he will be right, or wrong, in his educated judgment, especially in the short term.

now many may laugh I talk nonsense to say you have saved us losing our hard earned money in investing into a not so worthy company based on its performance, who know ,one day, these are the people who are cursing themselves for not have taken your view in a positive manner.
can you dare say it won't happen?

Me: But it is true that I didn't save anyone from losing money in V.S as it is now. Have I? Whether a company is worthy of investing or not is also a matter of judgment and opinion. My judgment is I don't view it worthy of investing in V.S at this price after quite thorough analysis and feedback. Others have their opinion too. Some of them are so bullish that they think V.S will go up in price a lot more, and they seem to know a lot more of V.S than I do. As you have agreed that the future is full of uncertainties, and I have seem rubbish stocks go up like no tomorrow. So how can I be certain that V.S will not do the same thing, although I think otherwise?

KC

please be brave with your view. God has given you the knowledge to share the truth. Please continue to share with us. it is not the matter to save anyone but to tell the truth. this is what this forum is created for, isn't it ?

Me: There is one thing in investing that one must be aware of. There is no such thing as I am very "brave" about a stock, or very confident that this stock will go up by 100%,or go down by 50% in a year, say. The market may be efficient in the long run, it can go hare-wire in the short-term.

Have some humility, and not be too overconfident as far as investing is concern.

There is no "truth" what the future share price will be.

Posted by murali > May 25, 2015 04:42 PM | Report Abuse
You wouldnt be very rich eventually, but u can always sleep peacefully, with no guilt and no shame...



“On matters of style, swim with the current, on matters of principle, stand like a rock.”
― Thomas Jefferson

bintang 21,

Thank you very much for your kind words. This type of comments motivates me to continue sharing the little knowledge and opinion I have. However, I need to correct one thing about your post.

V.S share price has been rising for the last few months. If someone asks me if I would invest in V.S a few months ago. I would have said the same thing, and the result would be many people who choose to follow my comments would curse me from stopping them from making money, although I don't really tell them to buy or not, but merely my take on the company's performance. Now, V.S share price appears to be still in demand. Nobody can argue about that.

So your statement that "I think your effort have saved many investors losing their hard earned money from investing into a company with picturesque future but low cash return, negative cash flow , huge debt that need PP and ESOS to save its cash position" is not correct, at least for now. In fact as I have always said, nobody can predict the future correctly and consistently, and the performance of the share price in the future. V.S share price could very well keep on rising in the near future, or it may drop.

So I have never said V.S share price will drop, or continue to rise. Never. I don't know.

One persistent criticism of my way of analysis is I am basing on past financial statements, not emphasizing on future high growth. Thank you very much, that is a valid criticism and I get it again.

Yes, I fully agree that in investing in a company, it is the future which matters, not the past. But I have said this numerous times. It is just that I as a small time retail investor, does not have the additional information, like the future share price movement, the chance to talk to the management to tell us their big plan in the future, and the ability to forecast the future, like some of them do. I did say those investors who possess the above abilities make big money in the market.

So for those who wish to follow what I write, beware of this limitation of mine. I did justify why I need, or need not to have these things in the article.

I am also aware that there are criticisms that I use complicated ratios in the analysis. Thanks for the reminder. I didn’t know that cash flow, free cash flow, enterprise value, invested capital, return of capital, cost of capital are that complicated and as if they are useless to be used in investment analysis.

Just to share a comment from a participant from my course today below.


Hi KC,
After reading through your article on VS Industry, I felt obliged to share some thought as someone whom has worked in this industry for close to a decade. The company I am working for is the top 10 EMS company in the globe by revenue. This is a highly competitive industry and most if not all, operating at single digit net profit margin. Though the industry is still growing along with the growth in outsourcing trend, not all EMS companies are doing well. Top line are always challenged by low customer loyalty (remember OEMs will not outsource their core technology, there is low barrier to move to another EMS) or missed order forecast. Bottom line are always squeezed with customer demanding annual cost reduction, yield issues and etc. Hence, every companies employed various business strategy to overcome these challenges, it is hard for outsider to assess the quality of these companies, but the financial statement indeed provide a glimpse if not the full picture of how well they are being managed.

Revenue growth shouldn't be the only yardstick, there is once we have a big customer pulled out from our company to our competitor without warning, it came as a surprise, our company share dropped by 20-30% in a week. All you need is just one event like this and investor could lose money instantly. It took us two years to return to our previous revenue level. Of course our share price return to the previous level and in fact, higher than before :). Looking back, I believe having the right metrics in place to drive focus and business strategy really help my company to recover from the slump and regain the growth the momentum. My company has been able to consistently generate positive cash flow, positive economic return (ROIC > WACC) and has good interest coverage with single digit net profit margin. All these helps to build a strong financial fundamental to weather through any unexpected events. Having this metrics in place drive business strategy that focus on creating shareholder value, one good example is that my company have been focusing on high complexity low volume products, these products command higher margin and higher barrier of entry such as healthcare and life sciences products. We also have strong R&D team (sometimes outsider mix manufacturing = R&D) that contributes to sustaining bottom line as R&D business normally commands higher margin (20-30%).

Thanks for your good teaching, I am able to appreciate the metrics that my company leaders have put in place. Like you said, growth can be deceiving if it is destroying shareholder value over the long term. I am not here to challenge on others approach in be successful in stock market as everyone has their own strategy and timing certainly is one of the factor. I am just wary of VS Industry for now (from an industry insider) unless their financial data improve and prove otherwise.

By the way, I sold my Jtiasa at a loss, it certainly took me some courage to do so ( eat up loss!) but after going through your course, I really certain that this is the right thing to do. I am more confident now in making an investment, and has been making good gains through pintaras jaya, latitud and skpres.

Thanks KC. I hope that we are able to catch up :).

Posted by murali > May 24, 2015 09:05 PM | Report Abuse

Kc,do u think we screw the old man coz we followed his calls n lose money?

No, the "You" in my comment is not you. I do think you have made some good comments. but I think you are out of way condemning a man who has contributed a lot to the society.

As your previous comment that I don't bodek Mr. Koon, you are right as I have my own philosophy which is totally different from Mr. Koon. You can read and understand my philosophy which I have expressed in my 125 postings in my blog in i3investor, and many more before those.

Posted by JT Yeo > May 24, 2015 06:45 PM | Report Abuse
obviously VS didnt have the capability to generate higher return than WACC


The return on capital is the thing to look at, not growth in profit. Imagine this, a company can keep on borrow money by issuing bonds or bank loans, say RM1 billion and invest in something which earns RM10m extra for the year. There is still growth in profit, isn't it? But what is the return of this marginal capital? 1%. What is the cost of this debt? 5%?

Is it shareholder value enhancing, or a shareholder wealth destroying?

Mind you, the cost of debt say 5% is cheap and if you can't beat that in your return, you are likely to grow yourself to bankruptcy as mentioned by a commentator here. The weighted average cost of capital which includes the required return of the equity shareholder is much higher than the cost of debts.

There are many people here promoting their shares too by just shouting buy buy buy, up up up, why can't Mr Koon writes about his philosophy and method of investing?

Reading Mr. Koon's posts on V.S and Latitude, I don't see anything wrong with the posts.

He has his way in investing and he put forward it with his reasoning and intuition, though you may not agree, but actually critics didn't say why they dislike so much.

He told people in his talk, for example V.S and Latitude were good buys and their share prices did go up, a lot. Those people who have bought basing on that recommendations should be very thankful to him for the recommendations, shouldn't they?

Compare to other promotions here:

“Go..go..go.....tp 20c ...tomolo “
“13cents maybe will consider, 0.155 i don't dare to pick up”
“vsolar broke 0.165 strong support will extended drop to 0.10 “
“0.175 block sudah hilang..but 0.165 still makan tak habis.. “
“0.17 now... unload while u still can before drops to 0.15-0.16 “
“When is a good time to buy? @ 0.2? 0.18? 0.15? “
“Rebound! Rebound! Rebound”
“TA also weekly chart also shooting star and bearish engulfing,,that mean next week will extended drop...”

So I actually don't see any problem with Mr Koon's postings on V.S and Latitude telling his reason why they are good buys. Actually with so many people criticizing, it is the right way to tell them that "I was right, and why you keep on abusing me?"

Mr Koon trying to promote and sell you V.S and Latitude expensive? I doubt there are enough clout here to influence the share price. And don't you have a mind of your mind to judge what he said is true? If you don't, is it his fault?

What about his writeup on Mudajaya, JayaTiasa as claimed by others that they made people lose money?

If Mr Koon said they are undervalued and you bought them but the outcomes were otherwise, whose fault is that? You have chosen to follow him at your own free will and is it right to blame on him?

That is the problem with people, you make money you keep quiet, never even say a word of gratitude. But when you lose money, you blame others, even curse others, condemn others.

Misleading newbies? First thing if one wants to speculate in the share market, he must know, there is a jungle out there in Bursa. If you are misled, you have yourself to blame, for not willing to spend time, effort, and even some money to learn about art and science of investing, read some good investment books, stand behind the giants, some real giants I mean. If you refuse to learn and choose to be a sucker, nobody can pull you out from the pit, and you only have yourself to blame, period.

Yeah, I always believe there ain't no tooth fairy in Bursa.

OTB,
Thanks for the information you have posted here. It is very useful to give a different view about what I have written. That is what a constructive, informative and supported with relevant information.

It certainly also gives a view point by different businessman. Yeah even businessmen think differently. My business point of view is cash, cash and cash. Your business point of view is future, insights, prospect. Nothing wrong with your view. In fact big money is made that way; have a good insight and foresight, insider information, scuttle butting etc.

Your post gives readers an excellent alternative view here to decide if they were to buy, buy more of V.S shares.

Your excellent post is unlike what are the normal unproductive, opposing view like below:

Posted by bigheadsheng > May 20, 2015 12:39 PM | Report Abuse
very obvious, KC Chong is jealous that he missed the boat, dun have any VS shares on hand. those info are misleading :)

Me: Me jealous, so obvious? Jealousy is one of the most dreadful sicknesses in investing. Don't be. Misleading? What is misleading? Show me what is misleading.


Posted by kakashit > May 22, 2015 04:46 PM | Report Abuse
i though KC should be able to pull down the price of VS, or Koonkoon supporting it? lol

Me: Pull down the price? For what? To short sell it? To pull down so that I can buy cheap? Or you want to pit me against Mr. Koon, a great social contributor which I respect of?


And also try understand what this post is about. A No-Brainer Investment, and how do I define a NBI? Is V.S a NBI in the context of my definition, in my context of a businessman point of view.


Posted by Probability > May 20, 2015 02:59 PM | Report Abuse
"A NBI is something you don’t need to calculate so much, think so much. It just jumps out at you."
please spent some time to understand this..dont get carried away with emotions...its that simple ;)

This is the 100th comment in this thread. The question is; Is V.S a No-Brained Investment, or NBI as described in the thread here:

http://klse.i3investor.com/blogs/kcchongnz/76694.jsp

"A NBI is one which provides you with a cash yield of double, triple, or more the cash you can get from a bank fixed deposit interest, in a consistent manner."

The key phase is "in a consistent manner". If past three years of negative free cash flow, and hence negative cash yield, it doesn't fit into the definition above, does it?

Its FCF seems to be positive for the coming year, but few here care about this FCF anyway. But that is what the article of NBI is about; "cash yield in a consistent manner".

Even positive FCF the coming year, which I believe it will. Does it fit into the above definition of NBI which requires "consistent manner"?

Some argue about its profit growth, its qualitative aspects, its PE valuation etc. But what is my post about? What is my context of a NBI? It is again consistent FCF with a good cash yield. Well your context of a NBI is obviously different from mine. That is not an issue for me.

It is just that I do not agree with you. Sure, investing is about the future, but I do not agree with you extreme high growth should be extrapolated into the future. I do not agree that you have the ability to project such rosy future. I do not agree with your comparison with Amazon.

I also do not not agree with your valuation basing on PE that it is cheap, as I don't agree that is the right valuation metric.

So even based on your context of growth, valuation, exceptional management, global player etc, it is still not a NBI for me.

Many accuse me of misleading information, that I am jealous that they made so much money for buying V.S, but I don't. Congratulation. No, "when everyone makes money in V.S, and I don't, it is ok.". I have qualified that in the post. Meanwhile, enjoy your gain.

And there is no reason that I should talk down on V.S. I can't short sell it. And no, I have no intention to buy it cheap by talking down on the stock.