AyamTua my good friend,
Since you like to gamble, I introduce you this Kelly formula:

f* = {bp - q}/{b} = {p(b + 1) - 1}/{b}

where:

f* is the fraction of the current bankroll to wager;
b is the net odds received on the wager ("b to 1"); that is, you could win $b (and get a return of your $1 wagered) for a $1 bet
p is the probability of winning;
q is the probability of losing, which is 1 − p.

If say you think you have 80% chance of winning by buying company B share (p = 0.80, q = 0.20), and you reckon that you will make 50% on it in a year(b = 0.5), then you should bet 40% of all your money (f* = 0.40), in order to maximize the long-run growth rate of your money.

But bear in mind that I never imply that you should buy company B, but on the contrary. If you go to Holland doing that, please don't blame me.

I am really curious how RHB carry out their valuation. For example, JayaTiasa made 0.84 sen per share the third quarter of 2014. For the 2014 cumulative three quarters, it only made 4.87 sen. So what kind of profit RHB is expecting JayaTiasa to make the last quarter of 2014 for the PE to be just 15.5? Jayatiasa is about 2.50 now. Note that the financial year 2014 is ending this month.

Yes, in fact small and mid cap have potential of higher gain simply because of the size factor.

However, Emily's investing strategy has lower risk as small cap may not be able to withstand a major economic downturn. So Emily's strategy suits most people in my opinion.

Buying big cap with long history of return is especially better to do when there is a major crisis when stock prices are beaten down.

Risk and return in investment is inseparable.

This one a bit complicated.

We have to guess what the big boys think, and do, and when they will do it?

We have to guess when are they going to fry the stock? Are they really frying? When they stop frying? To what level? When are they selling? When they stop selling? What is their target high price, target low price etc?

Guessing what they think? Wow, very tough for me. I rather follow Emily here. More straightforward. No guessing what big boys think or do:

http://klse.i3investor.com/blogs/intelligent_investor_notes/54641.jsp

coolio,
Good on you. You have the spirit of Cold Eye, one of the most successful individual investors in Bursa.

Your yardsticks to me are similar to Emily below, even better with your considerations on cash flow as one of the criteria.

http://klse.i3investor.com/servlets/forum/600054641.jsp

NOBY, you are right

GENERAL MEETINGS: NOTICE OF MEETING
PERAK CORPORATION BERHAD

Type of Meeting AGM
Indicator Notice of Meeting
Description Notice of Twenty-third Annual General Meeting of Perak Corporation Berhad
Date of Meeting 27/06/2014
Time 09:30 AM
Venue AmanJaya Convention Centre
Casuarina @ Meru Hotel
No. 1-C, Jalan Meru Casuarina
Bandar Meru Raya
30020 Ipoh, Perak
Date of General Meeting Record of Depositors 20/06/2014

The revenue of Econplies is 386m, more than double that of Pintaras, whereas net profit of Econpiles is only 28m, half of that Pintaras. Net profit margin of Econpiles is only 7% compared to the 30% of Pintaras. Why the difference?

My take is this is because Pintaras is smart and not greedy. It only take good projects with easier foundation, such as in the area where the soil is of Kenny Hill Formation type. That is also because of the close relationship of the management with the developers which was built up from years ago that Pintaras is able to cheery pick projects.

The management of Pintaras are not greedy, and simply grab projects in questionable foundation soil such as limestone areas, residual granite with boulders etc. Developers can sought Pintaras's advice on those difficult foundation, but Pintaras always declines to take up those jobs, politely. Because if you encounter those foundation soil, you are in big trouble.

A review of risk arbitrage of Prkcorp

As the SCR date is getting closer, it is a surprise that the share price of Prkcorp is not converging to the offered SCR price. Why?

As it likely that the exercise would not be carried out? I don't see why not because it was proposed by the major shareholders, and I don't see why the minority shareholders do not take it up.

As Prkcorp reported a loss in the last quarter of 2m, could it be the reason why the share price not going up? But the investment thesis of Prkcorp is the SCR; you are going to be paid RM3.90, not how much earnings it makes. Only this time it is more likely minority shareholders will take up because of the loss.

Let us revised a little on probabilistic estimate of the price for the selective capital reduction exercise as shown below:

Value based on Per share Probability Wt Price
Re-valued tangible asset 12.0 0% 0
Net asset backing 5.14 15% 0.771
Offer Price of SCR 3.90 65% 2.535
Present price 3.64 10% 0.364
Before announcement 3.00 10% 0.300
Expected outcome xxxx 100% 3.97

The likely outcome of the SCR is RM3.97 per share as shown in the above table. This offers a 7% upside in two months, or an annualized expected return of 41%. So why not?

coolio, well done.

You are right. KSL is in positive cash flow from operations every year. It spends a lot of money for buying and development of land. Hence its free cash flow over the last few years on average is slightly negative. That could explain why it did not pay dividend for 2-3 years already.

But I think buying and development of land is a good asset allocation for the management to do. After all KSL is a property development company. Do not pay dividend is not such a bad thing as long as the money spend on better thing like buying and development of land, and yield return higher than marginal cost of capital, paying down debt (you can see debt net debt decreasing last three years). It is better than many companies because of following institutional imperatives, borrow and pay dividend, and embark on acquisition outside its business.

Posted by screwdriver > Jun 14, 2014 10:27 PM | Report Abuse

kc, I would like to ask, under what circumstances that a company may have negative cash from operations in cashflow statement but at the same time shows a net profit in a financial year? My question may sounds silly, sorry for that, but thank you in advance for willing to help me =D

A contractor has claimed he has done 100m of work last year. Part of it he claimed that 10m is additional work or what he called variation order.

However he received only 50m cash for the year. 20m is still under certification from consultants, the 10m he claimed is disputed by the client. On top of that, the consultant slaps a 20m fine for liquidated and ascertained damages for delay.

Sounds familiar? This is very common for construction work and contract disputes.

I was just basing on the past capital expenses and depreciation and made an assumption that the net capex, or capex less depreciation is 5m a year in the future. Capex is purchasing of property, plant and equipment in the cash flow from investing activities.

Many people asked me, "Shall I subscribe to Econpile IPO?". My answer is, if you can prove to me Econpile is a better company than Pintaras, why not? They are in exactly the same business, piling and basement work, exactly, although Pintaras has metal can manufacturing, but that is a small part of its business.

Econpile has been in the market longer than Pintaras Jaya in piling works. It has its activities in Singapore initially. So we can say Econpile is not a new kid in the block. It is just that now it is going public listed in Malaysia.

But just look at its performance as compared to Pintaras:

Company Pintaras Econpile
Revenue 172845 386066
Net profit 52317 27,865
Gross margin 34.7% 14.9%
Operating margin 31.9% 10.3%
Net profit margin 30.3% 7.2%

Econpile's sales is more than twice that of Pintaras Jaya. However, its net profit is just half of that of Pintaras. Pintaras's net profit margin at 30.3% is more than 4 times that of Econpile. These difference in results were consistent over the last few years. So it is clear which is a better company.

Of course good company is one thing, if a not so good company is selling very cheap, then it is another story. Isn't Econpile selling cheap at an IPO of just 54 sen, compared to Pintaras's market price of RM4.35? Of course if you look at that way, 54 sen compared to RM4.35.

But PE wise, Econpile before the IPO is at a PE ratio of 10.4 only compared to 13.3 of Pintaras. Certainly cheaper looking at this way too. But taking the whole thing together, which company do you prefer to buy?

I will start with the first one, Pelangi Publishing Group

Yardstick 1: ROE
PPG reported net profit of 6.6m last year. With its equity of 90m, ROE is about 7.4%. this is below 10%, not so good. But bear in mind that it has excess cash of 30 sen per share.

Yardstick 2: Cash flow and free cash flow
The average cash flow from operations (CFFO) for the last two years was 13.4m. This is 203% of its earnings of 6.6m. This shows its good quality of the earnings. After spending in capital expenses, there is a free cash flow (FCF) of 7.9m left. This FCF is high at 12% (>>5%) of its revenue.

Yardstick 3: PER
PPG is trading at 58.5 sen now. With EPS of 6.4 sen, the PE ratio is 9.2, or less than 10. Bear in mind again that there is an excess cash of 30 sen per share.

Yardstick 4: Dividend yield
PPG paid a dividend of 2 sen for the last financial year, or a dividend yield of 3.4%, about the same as the FD rate which is good.

Yardstick 5: NTA
The net asset backing per share of PPG is 90 sen compared to its price of 58.5. Price-to-book is at 0.65, much less than 1 which is cheap.

PPG seems to meet all the criteria of Cold Eye as an investment except for a lower ROE.

PPG 0.585 13/06/2014
Revenue 66421
1 ROE 7.4% <10% Good
Net profit 6591
Equity 89672
2 Cash flows
Av CFFO 13386 203% Good
FCF 7894 11.9% Good
3 PE ratio 9.2 <10 Good
Price 0.585
EPS 0.06383 0.1065
4 Dividend yield
Dividend , sen 0.02
Dividend yield 3.4% <3.5% ok
5 Price/NTA 0.65 <1 Good
NTA 0.90

Pak Lah,

The computation part is easy and most of them will give you the same results if you use the same data and assumptions. That is mathematics.

So the important thing are the data and assumptions you use. Assumptions are yeah assumptions. Are they realistic? That is the question and that is an art.

Notice I use quite high growth assumption for the next three years of 15% which I seldom do. But knowing the near term future prospects of Pintaras now, I think that assumption is not too liberal.

Howard Marks on Macro

So anyway, it was very refreshing to hear Marks talk about the macro. He was asked about how macro is getting to be more important in investing in these volatile times. He said that most people think macro will determine investment results (so they pay a lot of attention to it). But he points out that in investing, there is always another side to it.

Of course, it's desirable to be able to forecast the macro to improve your investment results, but the big question is can you do it? Can it be done? Marks said that he personally doesn't believe that you can be consistently superior in macro judgements. The two key words are consistently superior.

He also noted that the smartest investors from Buffett on down don't make macro judgements; they find great values to invest in.

He was asked what he thought will happen in Europe (just after telling them that forecasting macro can't be done consistently). He said that it is a complex situation but he is sure of three things:

1. He doesn't know what will happen in Europe
2. Nobody knows what will happen in Europe
3. If you ask an expert what they think and take their advice, you're making a mistake.

He quoted Mark Twain: "It's not what you don't know that gets you into trouble, it's what you know for certain that just ain't true".

Can you know more than others? That's the real question.

stockraider, that is what I consider "Short and sweet". Right to the point.

You need 9 years for company B to catch up in EPS. 9 years with an expected growth of 20% per year!

In 9 years time, shareholders of company A would have received 90 sen in dividend, whereas shareholders of company B only receive 50 sen.

So is a company with expected high growth in EPS always be a better investment? Is high growth in EPS holy grail in investing?

No other factors required?

"Company B - Start from EPS 0.02 with compound growth 20% to year 10th, at year 10th, EPS = 0.1238, and the NPV for these 10yrs is 0.48. Growth stagnant thereafter, means terminal value = 0.1238 / 4% = 3.10. Total present value 3.58."

My comments are:
1) That 3.10 you get is the terminal value at year 10, not now as what you get for company A. There is time value involves.
2) Using a fD rate to discount equity investment return may be a little liberal.
3) If you really want to use discount cash flow model, you may need to also discount all the years dividends to the present value.
4) But comparison need not be complicated, I think the comparison is very simple, just add a little addition and multiplication, no need complicated model.

Did I miss something here?

Posted by sunztzhe > Jun 9, 2014 11:33 AM | Report Abuse

Wow I am really impressed with the length and depth of your thoughts on Value investment but I will keep it short and sweet!!

My sole objective in investment is I want Good capital Gains over a certain period of time but certainly not eternity.

The most important criteria to realize capital gain is to look for companies which has the Prospect of INCREASING EPS Growth over a time period.

If EPS keep on increasing, I hold.
If EPS plateaus, I sell 50%
If EPS dips, I sell out completely.

Why? It is very simple. As EPS grows so will its share price. If EPS drops, its share price will also drop.

So you are not buying stock B with a very high growth rate of 20%. But I thought profit growth stock price will rise?

Dividend payout is mentioned. All dividends are paid out every year. Shareholder of company A receives 10 sen, or 10%, dividend yield every year. Pay 1000, get 100 every year, also no good?

Shareholder of B receives 2 sen dividend the first year and grow by 20% every year in dividend. Sure good what? 20% growth rate you know.

But the question is which do you prefer if you were to choose one?

"But let us forget about borrowing. Two stocks A and B, similar kind of business. Company A earns 10 sen this year and it is expected that there will be no growth of its earnings. Company B earns 2 sen this year and it is expected that its earnings will grow at 20% a year for the next 10 years. Both pay out all their dividends every year.

Both are selling at RM1 a piece. Which company stock will you buy, the no growth A or high growth B?"

What else is not clear about the question above? Dividend payout is mentioned. What else? Just make things simple.

Posted by sunztzhe > Jun 10, 2014 02:43 PM | Report Abuse
Well I will sell off the condos with rentals inclusive , pocket the money and relax comfortably at the beach front. LONG TERM Gearing is not good for you kcchong!! HAHAHAHA

Good one. but you haven't answered my simple question yet, which company's stock would you buy , A or B?

I borrow 100%.

Everything the same except the growth rate and price. KISS

Make it simple, both companies are debt free.

Posted by sunztzhe > Jun 9, 2014 11:33 AM | Report Abuse
Why? It is very simple. As EPS grows so will its share price. If EPS drops, its share price will also drop.

Posted by kcchongnz > Jun 9, 2014 12:17 PM | Report Abuse X
A company with $10 million in net income takes on $1 billion in debt and, after interest costs, earns an additional $10 million, that will increase earnings by 100%, big jump in EPS.
The following year, borrow another 2b and double the EPS again.
So would you think the share price will grow?
Posted by sunztzhe > Jun 9, 2014 12:27 PM | Report Abuse
I will be wary of companies with excessive gearing which exceed equity capital by 2.5 X.
Besides EPS growth , increasing ROCE is also a critical info to monitor to factor in the returns from the use of debt financing.


Well at least you acknowledged that it is not as simple as just because of EPS grows, the share price will grow and vice versa.
The above example is akin to saying oh I borrow RM1m to buy a condo and I rent out for RM10,000, and I have created RM10000 extra profit from thin air. Next year I borrow another RM2m and do the same thing and I double my profit again. So my value has gone up.

Yes, it is the marginal return of capital which is important. Borrowing at 5% cost and making additional profit of 1% cannot be enhancing the value of the company and hence the stock.

But let us forget about borrowing. Two stocks A and B, similar kind of business. Company A earns 10 sen this year and it is expected that there will be no growth of its earnings. Company B earns 2 sen this year and it is expected that its earnings will grow at 20% a year for the next 10 years. Both pay out all their dividends every year.

Both are selling at RM1 a piece. Which company stock will you buy, the no growth A or high growth B?

Chin Yong,
Thanks for your comments. Just a couple of points here.

Owner earnings is definitely related to equity holder and so FCFE will be the closest resemblance of owner earnings.

Your equation of (initiated by Michael Jensen?)

FCFE is Net Income - (Capex + Depreciation) - (Working capital Changes) - (Debt payment) + (New Debt Issued)

to me is a little academic. Yeah I know people are taught this way when they take their CFA certificate. But when I investigate an investment thesis, I dare not take the last two terms into consideration.

I can't swallow the notion that a firm takes in more and more debts, and in the process endanger its risk of bankruptcy, can benefit its equity shareholders by increasing their FCF.

luzeeker,
Hope I have the chance to continue to exchange ideas with you.

What about China Stationery Limited? I can't even find its financial results ended 31/3/14? What happen? This is the announcement:

"Reference is made to our announcement made on 30 April 2014 in relation to the approval granted by Bursa Malaysia Securities Berhad (“Bursa Securities”) via its approval letter dated 30 April 2014, an extension of time for the Company to announce its Audited Financial Statements for the financial year ended 31 December 2013 ("AFS") and the unaudited first quarterly report for the financial period ended 31 March 2014 ("1st Quarterly Report").

The Board of Directors of CSL wishes to announce the monthly updates on the progress of the police investigation report and the steps taken or proposed to be taken to issue the AFS and 1st 1st Quarterly Report."

Its share price slipped further from 19.5 sen last Christmas to close at 12 sen today, another 40% drop. I thought it has 75 sen cash and no debt in its balance sheet just a few months ago?

Really no eyes see.

Actually a lot of Buffet's thoughts were articulated in his shareholders' letter. He never show how to calculate them. Hence there are inevitably many interpretations.

I have tried including to include this change in working capitals throughout the years after your query. Yes, there is some reduction in owner earnings, but it has not affected the conclusion for Pintaras I had in my article in any significant way.

I always follow this principle of "It is better to be roughly right than precisely wrong" in my finance and investment.

luzeeker,
You brought up a good point and made me ponder quite a while. Obviously if you look at the formula I used to calculate Buffett's "owner earnings", it does not include the change in working capital into consideration. This is what Buffett said:

“If we think through these questions, we can gain some insights about what may be called “owner earnings.” These represent (a) reported earnings plus (b) depreciation, depletion, amortization, and certain other non-cash charges such as Company N’s items (1) and (4) less ( c) the average annual amount of capitalized expenditures for plant and equipment, etc. that the business requires to fully maintain its long-term competitive position and its unit volume. (If the business requires additional working capital to maintain its competitive position and unit volume, the increment also should be included in ( c) . However, businesses following the LIFO inventory method usually do not require additional working capital if unit volume does not change.)” – 1986 Berkshire letter

My calculation of OE as you can see is a rough one. I didn't include any "other non-cash charges". On one hand I didn't include the additional working capital, but on the other I used the full capital expenses, rather than just the maintenance capex "to maintain its competitive position and unit volume".

If you search through the website there are different opinions on what owner earnings include. It seems more follow my way of determination of Owner earnings.

So what is your view?

Posted by sunztzhe > Jun 9, 2014 11:33 AM | Report Abuse

Why? It is very simple. As EPS grows so will its share price. If EPS drops, its share price will also drop.

A company with $10 million in net income takes on $1 billion in debt and, after interest costs, earns an additional $10 million, that will increase earnings by 100%, big jump in EPS.

The following year, borrow another 2b and double the EPS again.

So would you think the share price will grow?

sunztzhe, you advocate about growth of EPS so much, can you provide me with a satisfactory answer to my question below?

A company with $10 million in net income takes on $1 billion in debt and, after interest costs, earns an additional $10 million, that will increase earnings by 100%, big jump in EPS.

But do you think its share price should jump too? Would you chase the share price of that stock?

In my opinion, if a retail investor can identify and avoid lemons, he will be ahead of others 80% of the time in his investment experience. But how many care to learn how to do that?

Amedia, another lemon in my list here, just announced its first quarter 2014 results ended 31 May 2013. The EPS is 0.03 sen. So if we annualized the EPS, it would be 0.12 sen per year. So what do you think Amedia’s PE ratio should be? 10? Then it is worth 1.2 sen per share.

But it can’t be, it net asset per share is already worth 13.7 sen per share. However, few care about the bulk of this NTA of 77% is made up of “Properties, plant and equipment” in the amount of 110m, which we won’t know what is the actual realizable value. The other 13% is made up of receivables. It has a net cash position of 17.5m. This is because of money from new issues and additional bank borrowings for the last few year.

Now Amedia’s share price has plummeted further to just at a price of 8 sen, the lowest since listing.

The cash flow from operations (CFFO) last two years was negative 2.2m and 4.6m respectively. Last year, further 5.6m receivables were tied up. Just wonder what these receivables are, and are they collectible.

No cash from CFFO? Yes, but got cash to invest 46.5m in additional PPE last year with the result of producing 0.03 sen a share?

So where did the money come from. Yeah, the shareholders of Amedia have plenty of money to subscribe to right issues again soon.

What about the hype of that custom projects of tracking all the containers in the country we hear it from 4-5 years ago? When is this $$$ coming in?

Posted by digiuser016 > Jun 7, 2014 08:31 PM | Report Abuse
Hi Kcchong,

I have never recommended anyone to buy them, knowing that it is extremely difficult to gauge the short-term movement of share prices. Many of them I do not own any more now, even though they are still way below my intrinsic values computations

What factors that affect you to sell the stocks?
If They are still way below your Intrinsic value, the quality of the business does not deteriorate( i assume), why did you sell the stocks?


I don't know about you, my financial resources is limited. I can't own hundreds of shares, and I won't just own a couple. I am also limited in my knowledge about so many shares in Bursa. So what I did was buy a share when it is way below its intrinsic value, sell it when it rises close to the intrinsic value. But often it was more of I thought i have found another better value stock to buy and as I have said, my capital is limited.

If you are interested in my thought of "when to sell", you can refer to the link here and here:

http://klse.i3investor.com/blogs/kianweiaritcles/43016.jsp
http://klse.i3investor.com/blogs/kcchongnz/53034.jsp

I agree with stockraider that PPG is a deep value stock compared to its share price. Steady earnings and cash flows too. However it won't appeal to growth investor.

For me its current value Vs price attracts me and it is in my value portfolio. If the dividend yields is 4%, I don't see why not.

Posted by youlee > Jun 7, 2014 12:17 PM | Report Abuse

Kcchongnz, did you invest in nz shares during the 1988 period when prices of many stocks were like cents? Tks.

In 1988, I was still a young engineer in DID. With housing loan, car loan, co-op loan etc, my take home pay was negative. Where got money to invest?

Even now I don't invest in NZ shares. I looked at them once and they were fully valued. Bursa got a lot more opportunities.

The grass on the other side is not necessary to be greener.

Posted by stockoperator > Jun 7, 2014 12:20 PM | Report Abuse
Aiyo, KC, Sunztzhe is making comment to Calvin ideas of Net net asset investing lah. You know how to read business but not reading people mind ke?

yeah lah, I don't know how to read people's mind for sure.

I thought of deleting my comments. but I think an apology to Sunztzhe is more appropriate.

Sorry my fault.

Posted by sunztzhe > Jun 7, 2014 09:47 AM | Report Abuse
What is the rationale for owning stocks which has "intrinsic value" but it hardly moves and one has to hold it for years expecting it to move up and in the process test one's patience to the limit? What is the opportunity cost of invested capital then?

ME: THAT IS WHY VALUE INVESTING IS DIFFICULT AS EXPLAINED CLEARLY IN THE ARTICLE.
• You need to have patience, and a lot of it
• You must be disciplined
• You must mind your behaviour
• You must know when to go against the crowd
• You must read a lot (annual reports, investing books etc.)
SO DO YOU THINK YOU HAVE ALL THOSE ABOVE?

Wouldn't it be better to focus on stocks that has "reasonable intrinsic value" but it has strategic minded management and a business model that drives UP value of its share price??

Moreover an investor must be able to realize value, free up capital and look for another investment opportunity. As such the prospect of increasing profit growth over several years is the most important criteria for me.

ME: JUST TALK NO POINT. LET US GET SOME DATA. I AM SURE YOU WOULD RANK GAMUGDA’ MANAGEMENT AS “STRATEGIC MINDED”, AND WITH “A BUSINESS MODEL THAT DRIVES UP VALUE OF ITS SHARE PRICE” COMPARED TO PINTARAS 5 YEARS AGO. YOU CAN ALSO “ABLE TO REALIZE VALUE, FREE UP CAPITAL AND LOOK FOR ANOTHER INVESTMENT OPPORTUNITY”

EXACTLY 5 YEARS AGO THE ADJUSTED SHARE PRICE OF GAMUDA AND PINTARAS WAS RM2.80 AND 63 SEN RESPECTIVELY. TODAY, THEIR ADJUSTED PRICES ARE RM4.56 AND RM4.11 RESPECTIVELY.

THAT WAS BECAUSE PINTARAS WAS DEEPLY UNDERVALUED WITH INTRINSIC VALUE WAY ABOVE ITS STOCK PRICE THEN, ITS INTRINSIC VALUE KEEPS ON INCREASING EVERY YEAR. AND GAMUDA, EVERY FUND OWNS GAMUDA AND ITS PRICE WAS NO DIFFERENT FROM ITS INTRINSIC VALUE 5 YEARS AGO, AND ALSO NOW.

SO WHAT IS YOUR “LOSS IN OPPORTUNITY COST” OF YOUR INVESTED CAPITAL IF YOU INVEST IN SUCH A “USELESS DEEP INTRINSIC VALUE” STOCK OF PINTARAS COMPARED TO YOUR “REASONABLE INTRINSIC VALUE BUT STRATEGIC MINDED MANAGEMENT” COMPANY OF GAMUDA?

It is pointless to own an intrinsic value stocks that has no profit growth, no prospect of increasing profit growth or for that matter decreasing profit prospects or uncertain profit prospects.

ME: HAVE YOU MISSED SOMETHING ABOUT WHAT INTRINSIC VALUE IS AND HOW IS IT DERIVED?

The invested capital has to give reasonable expected returns for any investor within a certain time frame but certainly not years of waiting. If not I will cut out and seek another investment opportunity.

ME:ARE WE TALKING ABOUT VALUE INVESTING OR TRADING IN THE STOCK MARKET HERE? I THOUGHT MY ARTICLE IS ABOUT INVESTING.

Parkson's share price dropped unabated due to its worsening quarterly reports. This is probably due to the bad economic situation in China where it has the most presence. What is it future like, like its foray to Indonesia and other Southeast Asian countries, I have no idea and I don't follow the company.

Earnings down is one thing. You have to look at its cash flows. It may have a lot of cash flows and free cash flows as it own a lot of properties which may have a lot of depreciation which is non cash. Another thing at its present price which has been beaten down a lot, is it worth buying? Then you must have a feel of its value.

Value investing is not know all. It is also staying within its circle of competence.

Well done Intelligent Investors. More people seem to pay attention to value investing now.

The quality asset of Insas in cash and cash equivalent, ignoring others, is already worth RM1.44 per share, in book value.

I just like to add that the value of its associate companies is taken as the book value of just 134m as its balance sheet as at 31st March 2014. At RM2.77 on 6th June 2014 and its 36.44% holding in Inari alone is worth a market value of 500m, or a difference in value of 54 sen per Insas share. What about its 20% stake in Gleneagles Medical Center SB and 43.4% Melium Group. What are their market value?

I don't know but it does show that Insas is really undervalued, isn't it?

wt222,

At least you realize that Mr Koon's social status is high. I respect a senior person, more so of someone who has contributed immensely to the society very much. A good heart person usually behaves the same manner in what ever he does. I believe you are also a senior person already, and I also respect you.

In investing, I think Mr Koon has his own finesse, prowess and his own philosophies which he truly believe in, although they may differ from others. He appears to be very successful in his investments, many of us, even the best funds, can't even get close to.

It must be the responsibility of each investor to evaluate himself any recommendation coming out from sincerity.

In a poker game, if you don't know who is the patsy, then you are the one. Warren buffet.

And you can't blame anyone.

I really don't see how Mr KOON owes anybody explanation for selling part of his JT holding. If there is any comment, it should be from those who have profited from his recent recommendations of buying JT. Most of them would have made some decent profits and realize them now if they wish, although I believe very few would have bought it at its lowest price around RM2.10 a few months ago. Buying and selling shares is each individual’s own responsibilities.

I personally have written about, in my personal opinion, many good companies in i3 although I have never recommended anyone to buy them, knowing that it is extremely difficult to gauge the short-term movement of share prices. Many of them I do not own any more now, even though they are still way below my intrinsic values computations. Some forumers here followed me, but do I have the responsibility to hold these shares until I tell them I am going to sell them? I have all kinds of reasons why I sell them, so does Mr Koon. Yes, the valid point brought out by Mr Koon is what if the share price continues to move up after I tell you to sell? Of course, I am not a heavy weight like Mr Koon and can’t compare with him, I am a nobody, but the principle is the same.

Yes, Mr Koon has been writing about JT, not only now, but even a couple of years ago when it was more than RM3.00 adjusted price. But in my opinion, he genuinely thinks that JT is worth much more than that. Whether he is right or not is highly debatable. And each investor should have the ability to evaluate himself before buying, if not, he only has himself to blame, not others.

There ain't tooth fairies in Bursa.

As far as I know, there is no investment without risk. the closest risk-free investment for us is probably Malaysian Government Securities. Even that i don't know if it is really "risk-free". For example, any chance that the government has no money to pay us? It could be a six-sigma event but is it really impossible? What about the devaluation of Ringgit in a big way? Not possible? I do know that even US government default in its Treasury Bill before during Ronald Reagan's time.

Yes, investment risk can be greatly reduced if you are in for a long haul, for example investment in plantation companies, or any good companies with credible management. That is also provided that you don't buy it too expensive and that you don't borrow and invest with margins, because even a two sigma events are so common now and when they come, you could lose everything as explained in my article here:

http://klse.i3investor.com/blogs/kcchongnz/44344.jsp

Projecting the growth of palm oil output and its growth may not be that difficult as you have the acreage and age profiles, but projecting profit can be very difficult and unreliable. As far as I know, academic research has shown that no one can predict commodity price correctly consistently, including palm oil future prices. Yes, no one.

There are also a lot of other factors which make one's projection of future profit growth at best a guess, if ever you have a projection.

Plantation companies certainly look good as a long-term investment.

But I didn't know there is such thing as "No risk" investment.

Take for example, a retail investor though that investing in another plantation company, Jaya Tiasa in April 16 2012, that it was a risk-free investment, after reading an article from a very popular finance blog. He borrow 1m with a margin account to buy the share at the adjusted price then at RM3.32 as there is no possibility of losing anything.

Less than one year later on March 18 2013, the share price dropped to RM1.78, or about 45%+. What would have the lender done to his share which were pledged? What would be the well financial well being of this retail investor who thought there was this thing as risk-free investment?

In investing in the stock market, risk generally comes from buying the stocks at high prices. There will be less risk if buying stocks at low prices.

Does anyone think that the stock market is so low that there is little, or even no risk at all?

Recalled GCB was making profit every year and paid good dividends. However there was hardly any cash flows from operations. Finally the straw broke the camel’s back. Its quarterly results ending 30/9/13 finally showed a first loss of 12m followed by 8.3m the next quarter.
GCB announced its latest quarterly result ending 31/3/14 with 5.44m net profit at a revenue of 480m. Another turnaround story?

A 1.1% net profit margin of 480m turnover? Profit of 1.1 sen a share with an exposure of 480m? ROE of 6% with a huge financial leverage of 4.5 times? Sure, a big achievement.

However, this is again just a small woe (小巫). The big woe (大巫) is again the cash flow. The cash flow from operations is a negative (again) of a whopping 62m! Very consistent. No wonder the story goes on, the total borrowings have increased again from 942m to 1.03b Ringgit now!

Yes, again a big achievement, a billion ringgit borrowings round table club! A turnaround. Another lemon becomes abalone!

Somebody posted this great news about KNM in that thread.

Posted by gymkhana > Jun 1, 2014 11:54 AM | Report Abuse
Notice of Shares Buy Back - Immediate Announcement
http://www.bursamalaysia.com/market/listed-companies/company-announcements/1642565

You know my limited understanding about company is share buyback will only carried out if:

1) The share price of KNM is grossly undervalued in relation to its value?
2) When company has excess cash, I mean hard cash, plenty of free cash flow from operations.
3) Company has limited debt, or even no debts at all

Anyone can tell me in affirmative "yes" for the three questions above, or just don't know, or a resounding "no"?

Why am I so kepoh about KNM? I simply find it ultra amusing and KNM management is alien from another planet. Gosh!!!

What about our high flier Hibiscus?

Hibiscus share price was chased up by 80% from RM1.50 to RM2.70 in just four months from August to December 2013 just because of rumours that when or when the drilling machine would reach the destination, and when start drilling. The first drilling didn’t yield any positive results and its share price plummeted to RM1.72 end of the last year.

The euphoria started again when the second drilling appeared to yield very encouraging result, note the word “encouraging”. Its share price jumped up again to RM2.19, or about 28% from its low in three months. What happened then? Its share price slide and close at RM1.58 on 30th May 2014, or a plunge of about 28% from the recent high, in just 2 months.

This is extremely exciting, of course not for those who bought it at RM2.70 and sold it at RM1.72, or bought it at RM2.19 and sold it at RM1.58 just two days ago.

Hibiscus released its latest first quarter 2014 result a few days ago. It just lost a nominal 156,000. It is peanut and as expected. After all there is no oil extracting yet after just a few years only of listing. But this compared to its previous quarter results ending 31 December 2013 is horrific because the last quarter they made 9.4m!

But they had no extraction of oil from anywhere yet and how come there was such profit. This is very important for any aspiring potential accountants, you have to learn from the accounting prowess of Hibiscus. The accountants of Hibiscus can book the following items as “profit” and “pooh”, made the share price galloping:

1. Gain in dilution of interest in a joint venture of 13.5m. That was selling shares in a J/V at a premium over its par value can generate “profit”.

2. Reversal of discovery bonus payable, 15.8m as profit.

Oh, those were the reasons “investors” chased its share price up from RM1.72 to RM2.19 previously, and of course the seemingly discovery of huge oil in the second exploration.

But what happen now? How are the test results? When is the extraction of oil? How come so quiet now? When is the next good news coming so that I can buy at the right time and become billionaire?

Yeah revenue growth, earnings growth,the only holy grails in investing.

But allow me to pose some questions here:

A company with $100m revenue and $10 million in net income takes on an additional $1 billion in debt and grow its revenue to $500m, after interest costs, earns an additional $10 million, that will increase revenue and earnings by 500% and 100% respectively the following year.

Isn't that a high growth in revenue and earnings? But more importantly, is that growth good or not good, or so so lah?

Please give your substantiations to your answers.