Ben,

I know you through your blog and you told me you were from Bentong there.

Mr Koon,
What I mean is there is no difference whether a pizza is cut in 6, 12 or 20 pieces.

What I mean by using behavioral finance for investing is like this.
Let's imagine that we have advanced information that MFCB is going to propose to give a "free" warrant for every share held. Let's further assume that RM2.30 is the true value (not price) of MFCB.

We will buy MFCB say at RM2.40 knowing that punters will chase the price up when this "free" warrants is announced, say up to RM3.00. Let say when the warrants is listed, and say it is traded at 50 sen, while mother share dropped to RM2.80. The combined price is RM3.30. We will sell them all at those prices and make a profit of 90 sen.

Do you think those price of MFCB at RM2.80 and warrant at 50 sen can sustain, knowing that the "true" value of the company is only worth RM2.30 per share? Of course unless MFCB is actually way undervalued in the first place when it was trading at RM2.30 last time.

What happened to XDL, Instacom etc with those freebies after the completion of the exercises?

If MFCB is undervalued, share buyback is the best capital allocation for the management. MFCB's management has been doing it all this while.

Bonus issue, "free" warrants, share split etc have no shareholder value enhancing effect, absolutely none theoretically. Just like that day when I was in an Italian restaurant and somebody ordered a pizza.

Customer: Give me a Wood-fired pizza please.
Waiter: How to you like to cut it, 6 or 12 pieces?
Customer: 20 pieces please, I am hungry.

However, do not forget about psychology of investing. In this aspect, I think it is good for existing shareholders, if you know how to play the game. The mentality is that when "free" warrants are declared to be given, punters will bid up the stock price. When the whole exercise are completed, existing major shareholders will pump up the price of the "free" warrants further. However, they will throw their "free" warrants like nobody's business shortly after that. Because it is give "free", they will gain big time.

This type of thingy there must always winners and losers. You should know who will be the losers. Hence you must utilize behavioral finance to win this speculative endeavor, not an investing endeavor though.

Thanks Ben. Ever go back to Bentong?

I didn't know this Dato Tan Kok Ping at all. Is he related to Vincent Tan as BJtoto seems to be a major shareholder of magni?

"In investing money, the amount of interest you want should depend on whether you want to eat well or sleep well."
J. Kenfield Morley, Some Things I Believe.

Posted by jj888 > May 3, 2014 10:59 PM | Report Abuse
Thanks KC. Can I echo CCCL's request on looking into Prlexus. I thought in most valuation yardsticks above, Prlexus is as good as Magni, except that Magni's growth has been more steady.

jj888, I agree with you that Prolexus is good. You can say it is even better than Magni in terms of operational performance. It is even cheaper than Magni in term of valuation.

Again, you are right to the point. Prolexus has not shown it's consistent operational performance. I don't care much of growth, especially what growth you are talking about is the past. In the future, I don't buy any rosy forecast too.

The type of company I like is it should do well in the good time, but not losing money in the bad.

However, this post written by me is not for recommendation of buying Magni. The main purpose it was written is for educational if you read and digest it again.

“The further backward you can look, the farther forward you are likely to see” Winston Churchill

"History doesn’t repeat but it does rhyme" Mark Twain

bsngpg,

ROA is return of asset = Net Income/Total assets

ROIC is return of invested capital = NOPAT/IC
IC invested capital = fixed asset + net working capital
NOPAT = Ebit*(1-tax rate)

They are totally different

Posted by AyamTua > May 2, 2014 09:33 PM | Report Abuse
kcchongnz: ok noted is there any good stock recommendation below $1.00? like ntpm and hexza? cannot afford more $1.00 :-) let me know ok .. thanks! :-)

AyamTua,

One very important point you must know, and I must point it out to you.

A 40 sen stock, stock A, is not cheap if it earns 1 sen per share a year. Likewise a RM20 stock, stock B, is not expensive, or rather damn cheap if it earns RM5 a year.

Well, instead of buying 10,000 shares of stock A with RM4000, you could use the same amount of money to buy 200 shares of Stock B.

AyamTua,
I no more own any of those stocks. I have sold them, not because they are no good, but because i need money to buy other stocks which i thought have better potential to make more money.

Both the stocks are good. Hexza a safe Graham net net stock with the potential of privatization, I think. NTPM is a long term growth stock.

coolio, and also Miketyu, houseofordos, nice to see all of you here. And hope you all have bought Latitude at RM2.57 then.

Posted by AyamTua > May 2, 2014 02:22 AM | Report Abuse
when kcchongnz speaks the world stop and listen!


Haha, AyamTua, you are the biggest joker here. good to have friend who has a great sense of humour.

But seriously, if I can guide some newbies from peeing on the electric fence when dabble in the stock market, that will be a great achievement for me. But sad to say, very few people bother about this type of boring advice. Everyone likes action filled advice; like what can give them multi-baggers return, 700% in a month.

Looks like investors start to see the cash in Latitude Tree already.

Hi inwest88,
Long time no hear. You must been in holidays somewhere for so long.

You know I have passion in this thingy. Bty, it is a course of fundamental investing, not a trading course. I know nuts about trading.

My email address

ckc13invest@gmail.com

Posted by shareinformation > Apr 28, 2014 07:02 AM | Report Abuse
Hi KC,do you acknowledge request via email? Because i haven"t and I am not sure if i am already included in your list.

Yes, I will accept keen learner. But please do it now as the course has started.

Posted by johnny cash > Apr 27, 2014 06:26 PM | Report Abuse

please give a list of this value stocks? is it pintaras only?? do you have other picks? thanks

I wrote a lot about Pintaras Jaya. Seriously I am not peddling the stock. Few see my real intention of trying to educate the fundamentals about true investing here.

What will be my purpose of giving a list of value stocks here? Again not many will understand my real intention of educating people about investing in the psychological aspect. Few bother about the message in the article.

Yes, agree with Trade Zignals that one can be a full time trader.

However, he must first have say a few millions. I am sure it can sustain losing for a couple of years mainly due to transaction costs.

After that find a few million somewhere and start again.

Jackson,
You can see a great company many others can't. You have future in investing.

SpeedyBoy,
Thank you very much for the invitation. Hope to meet you.

upupup,
Yes, the best siew yoke in KL. thanks for posting the link too.

I have done a lot of work on Pintaras Jaya, valuations and all that. You can go here:

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

Posted by upsidedown119 > Apr 24, 2014 10:50 AM | Report Abuse
@kcchongnz. For profit maximisation, companies will borrow until Marginal ROI = Marginal Weighted Average cost of borrowings. In your example above, the borrowing company will make a loss of -3% on their borrowing. But London Biscuits has been increasing profit quarter on quarter in the first 2 quarters. So your scenario do not apply to London Biscuit, otherwise its profit will decrease. In fact its profit jumped 82% in the last quarter as compared with the corresponding quarter the previous year. Please correct me if I am wrong.

What is its marginal return for the cost of borrowings? What is its ROE and ROIC for all these years?

The same question here. If you borrow 1m, but it only make 20,000, or 2%, is it a good deal?

Chyi Thong

Yeah, I know you well in i3. I must have missed your query. I have sent you a mail.

"Growth" is an overrated term in company business and investment. Growth results in higher sales, more profit. It is understandable that most managers love it. Every investor loves it. I too love it but with some caveats.

However few realize that for many companies in Bursa, growth often result in shareholder value destroyer. Many of them have their return of invested capital way below the costs of capital. For example borrow huge amount of money say at 5% interest and earn a marginal return of 2% from it. Investors place their money at high risk but only return 3%.

Is that kind of growth appealing? Go check many of those "growth" companies, KNM. GCB, London Biscuits included, in the past and see how they ended now?

A store in Pudu sells the best roast pork. So many people drive a long distance just to eat the roast pork there. As the demand is increasing, the owner sells a lot more, increasing his asset turnover, and he also slowly raise his price and increases his profit margin. Still more and more people go. His return of investment keeps on increasing.

Some stores start to mushroom in KL selling roast pork because of the increasing demand. Yes, if that store can do it, why can't we? They even sell much cheaper in order to attract business. However they can't produce the same quality roast pork, not even close to it. Few are able to make it. Some have to close shop due to heavy losses.

Posted by francis5269 > Apr 22, 2014 01:58 PM | Report Abuse
hi kc, i also haven't receive ur email.can send to me again?
yuna6186@outlook.com

I have answered your mail regarding some of your concerns quite a while ago but you haven't come back to me yet.

Please act as we are starting very soon.

yf,
Got it. Previously you put the extra .my behind your email address and that was why my emails to you all failed to deliver.

Is the following email yours? I copied and pasted it in my list and all mails to this address failed to deliver.

The response is good. We are starting our course very soon. If interested please email me at asap.

ckc13invest@gmail.com

Posted by ccs999 > Apr 21, 2014 11:02 PM | Report Abuse

Hi boss kcchongnz, would you consider to invest/top up kfima/cenbond at this moment/current price as many ppl think market is crash soon. Thanks.

Market crashing? How they know? Base on what? Is the whole market (Bursa) seriously over-valued now?

This thingy is very very hard to predict. For example icap has been holding huge amount of cash since 5 years ago as the oracle has been anticipating the market will crash. But has it?

Sure when the market is too high, it eventually will go down, but when?

Kfima forms a major part of my portfolio. I follow the principle of diversification. And also resources is limited, not buying more.

Posted by KinSoon Kok > Apr 21, 2014 09:01 PM | Report Abuse
I have read plenty of Warren Buffett books. If I apply his teaching, it seems impossible to buy any share in KLSE? Somebody told me that his teaching is only applicable in efficient market, but not in KLSE. Since your investment rate of return exceeds 50%, I believe your approaches are much more suitable in KLSE.

I have never read any book from Warren Buffet. Has he ever written any book?

I think you could have read books written by others about him. I think again you got his ideas completely wrong from your statements above.


Posted by KinSoon Kok > Apr 21, 2014 08:13 PM | Report Abuse
Sir, u mentioned about your fee-based course. Can u give more infor.

Give me your email address here if you are interested asap. We are starting soon. I myself am excited about it.

Posted by houseofordos > Apr 20, 2014 10:41 PM | Report Abuse

KC, thank you for the many analysis and valuable knowledge you have imparted selflessly here. My thought is that a company like Pintars with supernormal ROIC and ROE will definitely invite more competition in the future. No business can maintain this kind of ROE/ROIC for long periods as high margin business will invite more competition. In your article here,

http://klse.i3investor.com/blogs/kcchongnz/46430.jsp

you have explained some of the moats of Pintaras that allowed it to sustain its margin. How long do you think Pintaras can maintain this edge ? Perhaps lets say in worst case
1. Key management leaves the company.
2. A competitor company recreating the "specialized plant and equipment" that Pintaras has and encroaching their market share. How long do you think this would take ?


Yes, the article cited by you has explained what I think about Pintaras moat. There is nothing much i can add if you still think its ROE and ROIC is unbelievable.

One thing the management of the company is the major shareholder. Dr Chiu holds about 60% of the shares, I think. So there is the perfect alignment of the interest of management and shareholders. So if Dr Chiu sells off the company, it will be a complete different story for Pintaras Jaya. He is still young, <60? Will he cash out? I don't think so in the near or mid-term basis.

Yes, high ROE business will certainly attract competitions. But heavy foundation is not an easy construction works. But I think more important is there is plenty of work in the next few years and there is simply not enough resources in the market, and hence its high price demanded. the other thing is even if you have good managers, but if they are not owners and there is no alignment of interest, it is totally different.

Posted by ksng0307 > Apr 20, 2014 09:43 PM | Report Abuse
kcchongnz, just to get a little bit of advice from u. I am using the projection of future eps growth rate to calculate my intrinsic value and i find this method at times is not workable on certain counters as this calculation requires consistently growing company which make the eps growth rate more predictable. I tried to learn the DCF method but is quite uncomfortable with this method as you are required to predict the cash flow growth rate. Maybe you can share once again your spreadsheet as I really keen to pick up some valuable knowledge from you, thanks.

I got no idea of how you calculate your intrinsic value and hence not in the position to comment.

I have many spreadsheets but they are not user-friendly. I have previously sent out to many i3 forumers, but very very few used them. So I don't think you can get anything out of them.

Why don't you join my fee-based web course on investment.

Posted by digiuser016 > Apr 21, 2014 06:46 PM | Report Abuse
hi kcchong,
Do you have the report that contains "all three methods above give a fair value of Pintaras in excess of RM3.35"

OOp, send you the wrong report which was in November 2012, not the first report which was on August 2010.

Here is the one in your email.

Really cannot bluff you.

digiuser016,

I may be joking here. But in the www, there are all kinds of people. A few months ago I was accused of not only bluffing, but cheating, pusing, copy and paste,etc. This thing is real.

digiuser016,

As a record here, I just sent you that report as requested. Just to record here that I didn't bluff. Cheers.

Posted by digiuser016 > Apr 20, 2014 09:10 PM | Report Abuse
Can you evaluate one company? EUPE?
My opinion,
Cons
1:From my perspective, its earning capabilities do not meet my requirement at all. Its ROIC,ROE,FCF for the last 5 years do not meet my requirement .
2:Have not been giving dividends for 10 years.
Pros
1: Expanding footprint in KL. Launching three projects and two of the projects worth 720m that contribute to its bottom line significantly.
2: There might be a sign of a change in divdiend policy (gave dividend in 2013)
3: Graham net net= RM1.28 intrinsic value

By looking what you have given here, for sure I am not interested in this company. Sorry I won't spend time on this in this forum.

However, you may be right looking at the future, as the future is more important. But to me, the future projection, if you have any, is only an expectation.

And for me, “I know of no way of judging of the future but by the past” Patrick Henry

Posted by ksng0307 > Apr 20, 2014 10:34 PM | Report Abuse

kcchongnz, i am using the PE of 6 too because that is their actual average PE, but i m using a projected eps growth rate of 15%, just wonder how u got 16.7%, i got it more, maybe i am wrong somewhere, hope to learn more from u. (I only started trading for 2 years, still consider newbies)

Finance and investment is an art, far away as a science. It is the judgement which is important. This can be achieved from some education through reading widely, experience and practice.

Posted by SpeedyBoy > Apr 20, 2014 10:46 PM | Report Abuse
hi kcchong, from what I read you are not too keen to invest in knm. But the hype over this counter is so strong that everyone is start to believe in the counter and has forgotten its history. What do you think based on the current financial situation of the company. Quite a number of institutions have some holding in this company. Appreciate your opinion.

I am written a number of comments on the fundamentals about KNM in i3, some of them are very detailed. My view about KNM has never changed. I have no interest of its share price movement.

Even institutional investors were fooled many years ago. What chance do the retail investors/punters has?

Posted by digiuser016 > Apr 20, 2014 08:32 PM | Report Abuse
HiKcchong,
Mind to give me your report? My concluding statement was “all three methods above give a fair value of Pintaras in excess of RM3.35” (or an adjusted price now of RM1.68). That was less than 4 years ago.
I tried to search your posts but could not get it.
Thanks.

digiuser016, thanks for your interest in my valuation report for Pintaras. You are really detailed from all the posts I read by you. Can't bluff you.

That report is a very old report, 4 years ago? Pintaras's fundamentals has changed dramatically since then. Revenue and earnings has improved from 106m and 20.7m to 184.4m and 55.4m respectively. And its expected revenue for the coming 12 months could be more than 300m now.

So it is the present and the future which is important.

I haven't join the forum yet 4 years ago and hence I did not post it in i3, but distributed to my friends then. If you are interested (it is really outdated), give me your email address here.

KC

Posted by KinSoon Kok > Apr 20, 2014 04:34 PM | Report Abuse

All we need 2know is at wat price u sell 4profit taking, sir.

Kin Soon,
You may have missed the point. For sure I am at profit for investing in Pintaras Jaya since I started buying it 4-5 years ago. But when to sell? This I have deliberated in the article. Hope you can read it again.

Your question of "when to sell for profit" is not appropriate for value investing. The article has explained that I will sell if the price exceeds the intrinsic value of the stock, not just for any profit. This you must spend a little effort to learn how to estimate the intrinsic value of a stock.

Without having a feel of what the intrinsic value of a stock is, it is hard for me to decide when to sell or whether to buy.

I suggest you read what I think you should do here:

http://klse.i3investor.com/blogs/kcchongnz/50550.jsp

Your question may be more appropriately directed to technical analysts.

Posted by carson > Apr 20, 2014 04:19 PM | Report Abuse

hi kcchongnz, what do you think of wct, another const. mid cap, please give your views on its fundamentals and any upside in 2014 and are we facing another financial meltdown or just a mild corrections going forward

I am not a know-all person. As am individual I have my limit; limit of knowledge, time, capability etc, especially if you talk about macro thingy and predicting what will happen in the future. I don't know about the future, and I don't know about every stock, not even 5% (may be 1%) of stocks in Bursa.

I did make a comparison of some construction companies in term of efficiencies which include WCT. It is not bad a company. Most of all, it is inexpensive. Please refer to the following link:

http://klse.i3investor.com/blogs/kcchongnz/46573.jsp

Posted by bintang21 > Apr 20, 2014 09:37 AM | Report Abuse

TQ Mr kcchongnz, I got what you mean. I had read your writing about intrinsic value calculation. Frankly speaking, it is not simple and easy for me, do you mind to share with me any application that can help us to get the intrinsic value of a stock. in fact, I follow most of your recommendation in i3. TQ

Application? What application? I do have a spreadsheet which is not user friendly. But valuation is an art. It is not that simple as putting in some numbers in the spreadsheet or application(?).

You need to understand and interpret financial statements, know the art of valuations. There are scores of valuation methods, each suitable for a particular situation.

Warren Buffet said before that if he were to conduct an investment course in a university, he will only teach two things; read and interpret financial statements, and the art of valuation.

Posted by bintang21 > Apr 20, 2014 12:43 AM | Report Abuse

Mr kcchongnz, TQ for you reply, at the moment when the overall sentiment of the market is bad, thing may be getting worst. Is it advisible to sell part of our core stocks so that we can lower the cost price. What do you think of the training loss strategy to safeguard our capital. Pls kindly advise.TQ

Why do you think the market sentiment is bad at the moment? How do you know it is getting worse? Why sell core stocks and not others? What do you mean by "core stocks"?

I may reduce my stock holding if the overall market is too overvalued and may even get out of the market. This is because when the overall market drops badly, few stocks are spared. If I am jittery of the market, I may reduce my holding too. It is important to be able to sleep well.

But generally my previous opinion below still holds:

Posted by kcchongnz > Apr 19, 2014 08:06 PM | Report Abuse X

Investors basing on fundamental analysis do not sell a stock because it drops 15%, and then buy back when it drop further 15%. Or sell when it rises 15%, and then buy back when it goes up further 15%. They don't see the logic of doing so.

Investors based on fundamental only buys a stock if it is trading at a safety margin below its intrinsic value; and sell only when the stock price has risen close to its intrinsic value, unless the fundamentals of the company changes. Or if they need money to buy a better value stock. They don't buy and sell just because the price has risen or fallen by x%

Posted by yungshen1 > Apr 19, 2014 08:14 PM | Report Abuse

kchongnz might to share knm reduction par value from 1 to 0.50 sen.beacase need money to do big project in pengarang (rapid).tq

Companies such as Datasonic, Jobstreet etc went for stock split and their share prices skyrocketed. Par value reduction is the opposite of it. So how can you view par value reduction as a good thing?

yungshen1, congratulation for keeping KNM despite my all negative comments of KNM. In my opinion, the fundamentals of KNM as well as my view on it has not changed a bit. The runup of its stock price is purely due to the stock price manipulation and syndicate play. Some punters will make money but a lot more will get burned.

Investors basing on fundamental analysis do not sell a stock because it drops 15%, and then buy back when it drop further 15%. Or sell when it rises 15%, and then buy back when it goes up further 15%. They don't see the logic of doing so.

Investors based on fundamental only buys a stock if it is trading at a safety margin below its intrinsic value; and sell only when the stock price has risen close to its intrinsic value, unless the fundamentals of the company changes. Or if they need money to buy a better value stock. They don't buy and sell just because the price has risen or fallen by x%.

How to improve your margin of safety in your investment?

First you must understand what "margin of safety" means, and how to estimate the intrinsic value of a company and hence its stock.

KinSoon Kok,

You don't seem to understand that valuation is an art, and not a maths or science.

Excellent comments from Pak Lah. That is one of the pitfalls in investing in Bursa.

However, i won't use Parkson as an example as I think Parkson is truly undervalued. It has quality assets, and plenty of cash flows, even though their earnings were not good last couple of years.

I will use lemon examples like KNM, Guan Chong, London Biscuits etc which fit in your view perfectly.

nokenzo, I won't leave you out from my course. I am still in the planning and design stage.

I intend to make it a comprehensive course with full support. Yes, there will be fees.

Posted by KinSoon Kok > Apr 18, 2014 10:13 PM | Report Abuse
After 1:1 share bonus, the NTA diluted to 1.7. At current price of 3.95 it seems 2expensive. However, since it's a professional firm, and it's asset is the people, we ignore NTA and focus on earning.
Dividing the current EPS 0.33 (after dilution) by 3.95, we get initial rate of reture 8.35%. Sounds good.
Looking at the historical EPS 4the past 5yrs, I get an EPS growth rate of 16.7%pa. Assume it can sustain the same EPS growth rate, the projected EPS 5yrs from now is 0.70. Multiply the projected EPS of 0.70 to average PE for the past 5yrs, which is 6, we get future share price (yr2019) = $4.20
What did i miss? Pls correct me if my study sounds illogical.

Your reasoning is fundamentally sound. Yes, valuation of Pintaras should be based on earnings, not asset. The assets in its balance sheet does not include its growth assets.

Do you think a PE ratio of 6 is reasonable, or a little too low for Pintaras in view of its high margin, ROE, ROIC, dividend, cash flows etc? And also its high cash level? And also the bullish prospect of the construction industry in the next few years?

My opinion of Pintaras fair PE ratio is as followed link:

http://klse.i3investor.com/blogs/kcchongnz/46422.jsp

Posted by miketyu > Apr 18, 2014 10:47 PM | Report Abuse

Mr Kcchongz,
About KFIMA, any worries about it giving 52% of its earning to the minority interest?
What is biological expenses in the cash flow? why it has been so high every year

Fima corp is a subsidiary company of Kumpulan Fima. In accordance to the rules of accounting, Kfima can "consolidate" Fima's financial statements into its own. This means every items of both these companies are added up and appears in Kfima's FS.

So you can see not all assets and income belongs to Kfima in its FS. At the end, those belong to the "minority interest", ie other shareholders of Fima Corp has to be netted out from Kfima' FS. The amount is not 52%, but 26% for last FY.

So the important thing is if you are a shareholder of Kfima, you should be concern of the assets and profit attributed to the common shareholders of Kfima. No worries about the minority interest.

One of the major business of Kfima is palm oil plantation. All expenses on palm oil trees are biological expenses. Expenses on animals are also biological expenses. It is high because huge amount is required for this major business.

Dear shareholders of ifc88,

Recently, Pintaras share price has increased sharply to close at RM3.95 today compared to our purchase price of RM2.95. Prestariang, our heaviest weighting stock in the portfolio, continues to rise to RM4.01 today. The other stocks like Padini and Kumpulan Fima also rose in price since three weeks ago.

I am pleased to report that the gain in the portfolio has exceeded 20% now since we started our fund less than 5 months ago, compared to the return of the broad market of 3.2%.

Attached is the latest financial report for your information.

Posted by houseofordos > Apr 18, 2014 05:57 PM | Report Abuse

KC what does your updated valuation look like ? Ptaras already doubled their order book valuation wise should be much higher now


houseofordos, my opinion is expressed in the following thread:

http://klse.i3investor.com/blogs/kcchongnz/46864.jsp

What is yours?