What is the “new” intrinsic value of Pintaras?

In the discount free cash flow analysis of Pintaras in this post, it was assumed that the FCF will grow at 5% for the next 10 years and subsequently 3% forever, even though it has been growing at a CAGR of 17% for since 2006. The intrinsic value is RM4.72.

It appears that this assumption is a little conservative. Many analysts are bullish about the construction industry for the next 5 years. This coming year, Pintaras has already secured RM303 m contracts to be completed in the next one year, as compared to the trailing twelve month revenue of RM184.4m. It does appear that Pintaras is one of the leading foundation contractors, if not the top foundation contractor. So what is the growth for next year, and the next 5 years? 64% (303/184.4-1)?

Of course FCF is very difficult, I would say impossible, to grow at 64% for another 5 years. I wouldn’t even assume half of that rate. But let us assume that it grows at a moderate rate of 10% for the next 5 years, 5% the subsequent 5 years, and then 3% forever. Are those assumptions too liberal? And what is the intrinsic value of Pintaras then?

With the new assumptions, the present value of all its future cash flows, or the intrinsic value is RM5.60. At the closing price today at RM3.95, the margin of safety investing in Pintaras is a comfortable 42%.

Posted by up_up_up > Apr 18, 2014 05:17 PM | Report Abuse
Need guidance from sifu KC

I fully agree with your statement below:

Posted by up_up_up > Apr 18, 2014 03:01 PM | Report Abuse
When I read back few articles comment about DSonic falls last two day while watching DSonic shooting up now, I realize there is really no expert in stock market. ;)

Nobody can predict the movement of share price correctly consistently, especially in a short term. That is a undeniable fact. If not there will be many people who get very rich doing so. In the long term, we can only gauge from the fundamentals of its business and make a view about its long term prospect. That is the only thing we have a higher probability, I said probability, of getting it right.

This forum is not about Kumpulan Fima, but about "What Gross Margins Can Tell You About a Company’s Economic Moat"

Posted by Elwin Kai Kai > Apr 17, 2014 10:35 PM | Report Abuse
btw mr. kcchongnz i saw your post, ppl said you got investment course is it true?

Yes. Since finance and investment is my passion, why don't I do something like that? This is in the planning and design stage. This is what I am going to do:

1) Write articles on fundamentals about stocks in Bursa with business analysis, financial statements interpretations, various valuation methods, all on stocks in Bursa.
2) Discuss it in a forum. Everyone in the group can participate, or just absorb what is discussed.
3) Answer all questions on the analysis and valuations, in the forum, or individual questions.
4) Learn at your own pace
5) Answer questions about your stock choice, according to what I am able to.
6) Provide individual a second opinion about certain stocks.
7) Also discuss and answer questions about derivatives such as loan stocks and warrants.
8) Sharing of knowledge and information among forumers here.

No, this is not a forum about stock tips, but about continuous learning how to fish, with the real examples of stocks from Bursa. I have got enough people who have expressed keen interest already. So this will go on, hopefully. The more the merrier.

Kumpulan Fima, a case study of gross margin

Let us look at a company in Bursa and see if it has moat according to this article.

Below is the gross margin of Kfima for the last 12 years.

Year 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002
Gross margin 44% 46% 47% 40% 39% 36% 34% 33% 44% 47% 38% 44%

The average gross margin is 41% with a standard deviation and a coefficient of variance of 12.6%.

1) Isn't the gross margin high?
2) Isn't the high gross margin consistent?
3) Isn't that the gross margin even a slight rising trend?

So in according to the article, what do you think of the moat of the business of Kfima?

Posted by kelvin_ik4u > Apr 17, 2014 10:30 AM | Report Abuse

My 2cents to ponder, I'm not sure if someone investigate onto it gross/profit margin fundamental. Quite risky for a company like this to hold long term. Even it has no borrowing, but for the last 3 Qtrs consecutive this ECS get ~3% gross margin from it revenue. it required every Qtr ~RM360M revenue, gross profit RM13M only. That way too low for a company to sustain. If there is a correction or business revenue not sustainable, the profit will direct impact, highly stock will go down the drain.


Good comments. But there are two ways of doing business; a business with high margin but low turnover, and one with high turnover but low margin.

Pintaras Jaya is the former model and ECT is the later. Wallmart, the biggest retailer in the world also follow the later model. Both can do very well.

Posted by Pak Lah > Apr 16, 2014 09:10 PM | Report Abuse

I'm in the construction industry, and I know ptaras very well. They have been making hefty margins because they now own a lot machineries (no need to rent), they have been able to deliver works ahead of schedules (save money on overheads), and they have successfully handed over every single job they have undertaken (no liability). Last but not least, they do not have issues in collecting receivables (retention sum collected). Like what kcchongnz pointed out, this group of people are genuine in doing business, and have been very competent during execution phase (less defects means more cream). Good luck folks!

Good to hear another person who knows Pintaras well. Just to add some more comments here.

Heavy foundation is a very unique construction segment. It requires specialized technical knowledge and experience, plant and equipment, the hands on approach and the full commitment of the key persons in the company. Heavy foundation is a complicated construction segment, involving doing things you can't see.

Most developers are very demanding. They want the jobs to be completed yesterday. So without the above, a contractor simply can't do it. But if you can, and if proven you have done it many times, the developers would pay whatever you want (almost) because they just can't find others to promise or have shown capability to do so.

So for a big foundation project like Wawasan Merdeka and the the other project of more than 70m to be completed in a year, it is very hard to find a good contractor which you have confident on, and you may pay whatever is asked if you find one. This is the scenario now for foundation works, I think, with all the LRT, MRT, and the developments around them.

That is why I believe the good time for Pintaras has just begun.

Posted by addylee > Apr 16, 2014 11:27 PM | Report Abuse
later like datasonic.. lol ..

Even a great company's stock can become very risky if it is chased up to very high price, and investors can lose money. But we must have a feel of its intrinsic value before we can conclude if the price is very high now.

The intrinsic value can only be estimated by examining the quality of its business in terms of its past and future expected performance, and knowing how to analyze and value its business.

Pintaras has elevated itself to another level with the recent procurement of projects. Its intrinsic value is no longer the same as what I have attempted to estimate a year or two ago. In my opinion. its share price now is still way below its intrinsic value.

I see no other short cut for a true investor to earn extra-ordinary return from the market, not only for Pintaras, but for all companies.

Posted by ccs999 > Apr 16, 2014 07:57 PM | Report Abuse

OK boss kcchongz.
You invest all of your money into datasonic?
Appreciate if you could add me chunsiong_85@yahoo.com into your investment group, I think is time to learn how to fish! Hopefully you can teach me! Thanks.
Regards, Chua

Invest all your money in Datasonic? That was a challenge in i3 initiated by Tan KW for fun, not real investing. It is not a wise thing to do to put all eggs into one basket, no matter how bullish you are about a company. It is also unwise to chase stock price. I think Datasonic has shown a good example. I urge you to read my post here:

http://klse.i3investor.com/blogs/kcchongnz/48946.jsp

Want to learn how to fish in the stock market? Good thinking. I promise that is the best thing you should do in order to get a reasonable return from the market. Most of all, you will avoid the pitfalls of the market here:

http://klse.i3investor.com/blogs/kcchongnz/45373.jsp

I see there are a lot of blind and risky punting on in Bursa, just by reading postings in i3.

I have recorded your name and get you posted.

Posted by ccs999 > Apr 16, 2014 06:02 PM | Report Abuse
Hi kcchongz, would you buy datasonic at this moment? Thanks.
Regards, Chua

When I first wanted to invest all my money in Datasonic six months ago in Tan KW's the stock pick challenge (It was not included in the challenge somehow), Datasonic was around RM3.15. This was before the 5:1 split. It went up more than RM4.00 (I think), even after the split. And this is just less than 6 months ago.

My opinion remains the same as posted below:

Posted by kcchongnz > Apr 16, 2014 11:11 AM | Report Abuse X
Datasonic is a good company in my opinion. However a good company is not necessary a good investment, provided it is selling at a fair price. A great company can be a terrible investment, if you pay too much. Risk comes because you pay too much.

On the other hand, a poor company can be a great investment, if it is selling dirt cheap.

So how do you know if a good or a bad company is a good investment? There is no short cut. Hoping others to give you the tips to make money is not a investment strategy. There is no tooth fairy in Bursa.

Learn how to fish, and know how to avoid falling into the ocean when fishing is the most dependable way of surviving and strive in the market.

Datasonic is a good company in my opinion. However a good company is not necessary a good investment, provided it is selling at a fair price. A great company can be a terrible investment, if you pay too much. Risk comes because you pay too much.

On the other hand, a poor company can be a great investment, if it is selling dirt cheap.

So how do you know if a good or a bad company is a good investment? There is no short cut. Hoping others to give you the tips to make money is not a investment strategy. There is no tooth fairy in Bursa.

Learn how to fish, and know how to avoid falling into the ocean when fishing is the most dependable way of surviving and strive in the market.

[Check These Three Rules of Thumb Next Time

1)Check to see Operating cash flow is at least 12% of the total capital invested. Rising consistently year over year.
2)Look for ROCE (Return on Capital Employed) above 10% as a benchmark. Anything above 15% consistently is spectacular. Also, smaller companies and companies from emerging markets should also exceed 15%.
3) FCF positive at least 5 out of the last 10 years]


A case for Kumpulan Fima

Why use Kfima?

1) This is the only few stocks I have been monitoring very closely and have all the financials.
2) Many of my other stocks do not have a history of more than 10 years public listing.
3) Please note that as Kfima has a cyclical major business in palm oil plantation, there won't be continued improving results year after year. What we can see is the trend; does the trend tell us the performance is rising, and hence a strong business?

Let us see how Kfima fits in this article.

Metric/Year 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 Average
CFFO/TC 6.2% 17.1% 19.3% 18.8% 10.5% 12.4% 3.0% 9.3% 8.3% 14.7% 12.0%
FCF + + + + + + + + + + +
ROCE 12% 15% 15% 14% 13% 9% 10% 12% 8% 5% 11.4%

Item 1, it meets the requirement with an average CFFO 12% of total capital employed for the last 10 years. There is evidence of rising number. Average CFFO/TC was about 15% for the last 5 years.

Item 2, average return of total capital is 11.4%, above the 10% requirement. The ROCE has been rising and the average for the last 5 years is about 14%.

Item 3, FCF has been positive, not only 5 of the last 10 years, but all the past 10 years.

So can we conclude that Kumpulan Fima has a strong business according to the rules in this article?

What other company do you have which meets the requirement of this article? Please share.

If one invests in a stock with the mind of focusing on the company's business, instead of hoping others to fry the stocks for them to make money, it will never go wrong.

On the other hand, he may be right that some good fellows may fry the share price up soon to profit him. However the chance is very slim, very slim indeed in my opinion.

Posted by thwalim > Apr 13, 2014 09:31 AM | Report Abuse
Kc, need to check with you about IC's formula.Some using IC = (Total Assets) - (Excess Cash) - (Non-Interest-Bearing Current Liabilities, some using Total Equity + debts. May i know what is the pros and cons using each formula ? Thanks

All the formulas mentioned by you will give the same IC, provided that they are all simple balance sheets without items like "Investment in associates/JV", "deferred tax", "Ready-for-sale financial assets" etc. If they have any of these "non-conventional" items in a "standard" balance sheet, then they will be different. In that case, the formula suggested by me is simpler and easier to understand as "Invested capital", ie capital invested in an ordinary business.

Join my forthcoming online investment course and I would answer all questions online.

Posted by RonnieKimLondon > Apr 12, 2014 12:55 AM | Report Abuse
Mr Chong. You are indeed right on the PER of 18x for Boilermech. HLG in its recent report has PER of 24x for FY15F.

Ronnie, in order to have a better chance of earning higher return from the market, one needs to learn some basics in investments. Things like PE ratio and ROE are some of the most important things he should know.

If you don't, I don't expect you to know as you must in another profession, try to learn slowly, step by step, preferably with some guidance. It is not that hard at all.

Just my thought.

"Investment is associates" is an investment, not part of the ordinary business of the company. Its account is not consolidated into the account of the parent company.

Invested capital and FCF is about the activities of the ordinary business of a parent company

Simple and good. Focus on the business. Why buy a deteriorating business?

Posted by Tan KW > Apr 11, 2014 08:06 PM | Report Abuse

i think this link is your blog dashboard that you perform the blog posting.... are you referring to http://klse.i3investor.com/blogs/kcchongnz/blidx.jsp instead?

Yeah, TanKW, your link is the one I referred to.

Seems like many people are interested in fundamental investing.

It is a big failure for market timers for the last 5 years. It has been proven again and again, it is hard to predict the macroeconomic and political thingies.

Posted by ccs999 > Apr 12, 2014 12:08 AM | Report Abuse

Hi boss kcchongz, would you consider destini-wa as your warrant profolio? Please advise. Thanks. Regards, Chua


ccs999. have you worked under me before?

The share price movement of Destini warrant depends on the share price movement of Destini more than the true value of Destini. At 21 sen when Destini is at 57sen, the implied volatility is 21%, not high at all, and hence not expensive for Destini warrant. So if you believe Destini share price will go up in the future, good to invest in its warrant. It gives a gearing of 2.7 times.

Is the fundamental of the business of Destini important? It is in a long term. It made profit for the last two years. But I don't like the quality of its earnings. There is no cash flows from operating activities at all, not good in my opinion.

So for me I won't invest in the warrant. But as i have said, the share price movement of Destini is more important than its value when investing, especially punting, in warrant.

Posted by Tan KW > Apr 11, 2014 05:44 PM | Report Abuse
@kcchongnz, mind to share what is the other stock that have better value?

"Beauty is in the eye of the beholder". there are hundreds of stocks in Bursa and I am sure there are many better stocks than mine.

Just for sharing purpose, I have concentrated my portfolio to a few stocks; Pintaras, Kfima, and Prestariang in that order since a few months ago. Other than that, i have another 7 stocks to make up a diversified portfolio of about 10 stocks, plus a few of company warrants and call warrants.

If you read my blogs summarize in the appended link below, although they are more for educational purpose, you will know my investing philosophies and preference.

http://klse.i3investor.com/jsp/blog/blallpost.jsp?blid=1286

I have written many articles on Pintaras below:

http://klse.i3investor.com/jsp/blog/blallpost.jsp?blid=1286

If you are interested, go read. And if you have any concern about the industry, don't get near it. It is a dog-eat-dog world.

There are so many choices to invest in Bursa. Invest in your zone of comfort.

Posted by wongkok > Apr 11, 2014 03:36 PM | Report Abuse

Went through Econpile's prospectus and found out they have a bigger market share and order book. Sifu KCCHONG have you compare Econpile's result againts Ptaras?

Good suggestion. But are you more interested in order book, or the bottom line, or the efficiency in terms of ROE, and ROIC, balance sheet and cash flow?

By the way Econpile is not listed yet. You can look at its performance and compare with Pintaras from its prospectus. This is quite an apple to apple comparison.

I do not have the prospectus. But just read about the news below, I think Econpile can't smell the fart of Pintaras. A net profit margin of 7.2%? How to compare with the 30% of Pintaras? What about cash position? Public listed money part to pay debt, while Pintaras has RM1 per share of cash?

"For the financial year ended June 30, 2013 (FY13), Econpile’s profit after tax surged 61.74% to RM27.87mil from RM17.23mil in the year before, while turnover leapt 26.25% to RM386.07mil versus RM305.78mil previously."

http://www.thestar.com.my/Business/Business-News/2013/11/18/Econpile-plans-to-list-on-Main-Market.aspx/

Posted by Kevin Tan > Apr 10, 2014 05:33 PM | Report Abuse
holding at 2.68 sice aug 2013, incurring losses 10%, should i cut loss?

Posted by ccs999 > Apr 10, 2014 07:43 PM | Report Abuse
may be kcchongz can advise here. Thanks.

Posted by ccs999 > Apr 10, 2014 07:44 PM | Report Abuse
I am believe he still holding haio unless he sold already. Thanks.

If you are interested, please read my comments here.

http://klse.i3investor.com/servlets/pfs/21089.jsp

Haio, what happened?

Posted by Kevin Tan > Apr 10, 2014 05:33 PM | Report Abuse
holding at 2.68 sice aug 2013, incurring losses 10%, should i cut loss?

Posted by ccs999 > Apr 10, 2014 07:43 PM | Report Abuse
may be kcchongz can advise here. Thanks.


All the 11 stocks in this portfolio, except for Haio, made positive return in this 10-month period. The other under-performer is Tien Wah which made a return of only 3%, below the return of the broad market. The return of the portfolio is 73.5% as shown.

Yes, the reason that Haio's share price under-performed is due to its financial results of the last twelve months. But is there anything seriously wrong about its results? I don't think so.

Its trailing twelve month revenue remains largely unchanged, but a drop of profits of just about 7%. With the focus on small ticket items, I believe its MLM will continue to do ok in the future.

At RM2.43, it is inexpensive with a prospective PE of just about 12 and 8 times ebit. Don't forget it is an asset light business with high return of capitals of about 40%.

I have sold all my Haio shares though quite some time ago. This is not because I have negative outlook for Haio, but for fund for other stocks which I think may be better value. It just happened that I have made a right decision

No, there is nothing wrong with Haio absolutely, in my opinion.

Boilermech certainly is great company with its efficiencies and growth, much better than its competitors.

However, as an ordinary person, would you pay RM1m for a new BMW 5-Series 535i, which is retailed at about RM600,000; or RM50,000 for a new Honda Accord 2.4 which is retailed at about RM170k?

Also check how you get a PE ratio of 18 with a share price of BoilerMech at RM3.05 a piece.

That formula is good for banks and other financial institutions. Everything hinges on your assumptions, ie what would you expect its future earnings per share? Not the EPS in the past.

For me I have no knowledge of it except some analysts are bullish about its Takaful business, and its prospective income form Bank Islam.

I invest in its company warrants basing on the assumptions that the share price of BIMB has incorporated all information and expectation of the company, ie relying on its implied volatility against the historical volatility.

Avacado, try use this valuation method for BIMB.

P=ROE/Required return * Book value

ROE is the expected future Return of equity

avacado, the formulation of the option pricing by Black and Scholes was based purely the share price of the underlying stock. Yes, it is the price, not the value. The underlying assumption is the efficient market, ie the value equals the price, and that share price moves in like the Brownian Motion, and the distribution of the stock price is lognormal, etc etc. This is especially true for short duration option, where stock price is the determining factor, rather than the value.

In BIMB warrant which is a long duration option, I would agree with you the fundamentals of the company is important, but that is not in the assumption of the model.

BIMB's PE is high mainly because of its poorer performance for its final quarter result ended 31st December 2013 resulting from a one-off tax charge of dividend income, I think.

However it is the future expectation which is important for the share price performance. With its recent acquisition of 49% equity interest in Bank Islam, it is expected that there will be substantial increase in earnings in the future.

Posted by Overweight > Apr 8, 2014 10:21 AM | Report Abuse

How you think about this performance :)

7 Apr 2014 AWARD OF CONTRACT FOR PILING AND PILE CAP WORKS - RM71 million.
12 Mar 2014 AWARD OF CONTRACT FOR FOUNDATION WORKS (DIAPHRAGM WALL, PILING AND EXCAVATION) - RM74 million.
3 Mar 2014 AWARD OF CONTRACT FOR BORED PILING WORKS - RM24 million.

19 Dec 2013 AWARD OF CONTRACT FOR PILING AND BASEMENT CONSTRUCTION WORKS - RM24 million.
29 Oct 2013 AWARD OF CONTRACT FOR PILING WORKS - RM59 million.
25 Apr 2013 AWARD OF CONTRACT FOR EARTHWORKS, PILING WORKS AND RETAINING WALLS - RM36 million
15 Apr 2013 AWARD OF CONTRACT FOR BORED PILING WORKS FOR MRT - RM20.06 million.
20 Mar 2013 AWARD OF CONTRACT FOR PILING, DIAPHRAGM WALL AND BASEMENT EXCAVATION WORKS - RM30 million.
5 Mar 2013 AWARD OF CONTRACT FOR BORED PILING WORKS - RM47.5 million.


Getting jobs is not the end of the story. Working in a public listed company before, I know many companies got big jobs but at the end lost a lot of money. It is the bottom line which matters.

Pintaras has been improving its operating margin more than double from 15% 5 years ago to 32% last year. That is the metric investors should pay more attention to.

With its job orders increase by so many recently, I can see its rosy future ahead. Moreover, the construction industry remains bullish for the next few years.

Posted by fortunebullz > Apr 7, 2014 08:01 PM | Report Abuse

I did asked one senior here to valuate Asiapac, he gave a thumb down and fail to see the billion market value of Imago mall! Fail to see RM70 millions recurring income yearly! Fail to see half billion unbilled sales not including unsold units! If you only see debts which are part of construction cost, if you only see thin margin due to uncomplete projects then you don't see what you should see! You must see VALUE! If you fail to see VALUE then you fail!

"If you fail to see VALUE then you fail!"

Who failed and why?

How does this foretasted "70m" (if it is true) transmit into the bottom line?

How does this forecasted half a billion "unbilled sales", if it is true, converted to the bottom line?

If you have a good apple, you know it is good because you have examined it in detail, tasted it before. And someone tell you to throw away your apple and buy his. He said his apple is damn good but you have to pay more, because he said it is damn good. And you look at it and it doesn't appear to be that damn good. Would you throw away yours and buy his apple?

Posted by up_up_up > Apr 8, 2014 03:50 PM | Report Abuse

Any clue why PTARAS volume is still low although many projects has been awarded from time to time? It seems like public don't have much interest in this counter.

With the kind of stellar performance of Pintaras, and its highly visible future income, the present price is a steal.

If you want to wait for the public to start to have interest in this company, its price cannot be at the present price, can it?

Early birds catch the worms.

The stocks were picked with financial risk management as the goal, ie take care of the downside by buying good companies at reasonable or low price. The upside will take care of itself. It works most of the time. But don't forget diversify, and not over-diversified.

Posted by sleeplessguy > Apr 8, 2014 10:49 PM | Report Abuse

Hi KC, some parameter inquiry of option pricing, is the dividend yield is refer to its mother BIMB? Besides the risk free rate 4% where could we get this information(try to search but couldn't find)?

Yes, dividend yield refers to the underlying share. Risk free rate means what it meant. You can use the short term MGS rate as risk free rate.

Posted by francis5269 > Apr 8, 2014 04:56 PM | Report Abuse

FCF(year 11)/(R-g)=57282/(10%-g),rite?
how get the, g ,terminal growth rate ?

Another assumption. Company's growth rate will eventually drop to a long term rate approximate the growth of GDP, inflation rate, or even stagnant. I normally use 3%.

Are you interested to follow my web-based course in investment? I will guide you all the way for various valuation methods, including this one, with actual company results from Bursa. There will be a fee charge though.

ok recorded. Please delete your email address from above here

This young man always does thorough analysis. Article is supported by good information, future projections with detailed justifications and detail analysis. I have no doubt he will be a very successful investor. Like what Buffet said, "I never doubt that I will be rich". This can be applied to him.

Just a little comment here. PE ratio is very useful for valuation, a ballpark to check if a stock is worth buying. But it can be a little simplistic. A company can make the PE ratio great by heavy borrowing, by what we call leverage. The more important metric is enterprise value where all costs of capitals are considered. And of course the other is Ebit.

Borrowing and make money is good provided that the return of this capital is higher than its cost. And do not forget that heavy leverage cuts both ways; in good time, and if their bet goes in their favour, the company can make a lot of money. The reverse is also true. So important thing is what is the return of capital, I mean for all capitals?

The Greenblatt magic formula emphasize on buying stocks with high ROIC, and at a low EV compared to its Ebit. This is intuitive.

Can you consider a stock selling at a ROIC of 5%, but a prospective EV/Ebit of 12 a good investment?

Terminal FCF at end of year 10 (for all FCF after year 11)
= FCF(year 11)/(R-g)

R is the discount rate, g the terminal growth rate

Then discount this value back 10 years to present value

Add the present value of FCF from year 1 to 10, and that of the above to get the total present value of FCF

Posted by shareinformation > Apr 8, 2014 09:00 AM | Report Abuse

Hi KC, hope i am not too late to join your web-based investment training. kkpsk2011@gmail.com


No you aren't. I am getting serious now. Still collecting names and preparing for my course.

"“You are neither right nor wrong because the crowd disagrees with you. You are right because your data and reasoning are right.”"
— Ben Graham

Posted by sleeplessguy > Apr 7, 2014 10:47 PM | Report Abuse

Hi KC,as known intrinsic value = max (0,Underlying(4.23) - exercise price(4.72) )= 0
but how could I know the time value and how could it be the fair value 1.49?


Use option pricing to find the value of a warrant (Wp).

Wp = intrinsic value + time value

1.49 = 0 + time value
time value = 1.49

You must know how to use the option pricing to find Wp. To explain the theory will take pages and it is that easy to truly understand just by reading. There are plenty of resources in the web and you have to have the patience to try understand it, and practice. No short cut.

I can see your keenness. Very very few are interested in the theory and it is doubtful if it is that useful. But in my opinion, there is plenty of intuition in the theory.

Anybody interested if I include this in my web-based investment training?

Don't you see the same story?

Good cash flow from operations with CFFO/IC>12%
Good free cash flows
High return of invested capital > 10%

Like Buffet says, "I always know that I will be rich"

Wow, another award of piling and basement project of 71m, as big as the Merdeka Square! Nowadays, foundation projects are huge.

Must go back and ask Dr Chiu if there is any vacancy for job or not. Ah think about it, I don't think he wants to employ somebody who has left the industry for so long already. But think about it, I got scared seeing the earth and mud each time I am near a construction site.

The table below summarizes the existing jobs for Pintaras Jaya.

Date Amount, m Commencement Period, months
22/04/2013 36 30/04/2013 13
15/04/2013 20 2/05/2013 12
7/10/2013 59 Nov-13 14
19/12/2013 24 Jan-14 12
3/03/2014 24 10/03/2014 6
12/03/2014 74 17/03/2014 12
7/04/2014 71 1/05/2014 16
Total 308

Diversification and my portfolio return (7/4/14)

My diversified portfolio of 10 stocks named “GE 13 Watch” in the appendix was set in i3investor on 21/1/2013. Please see the link below which has adjusted for dividends, share split and bonus issues if any:

http://klse.i3investor.com/servlets/pfs/13147.jsp

The portfolio returns a total of 70% in the fifteen months period compared to the 17% of both the KLSE and FTSE Midcap70 as shown in the table below. Would I be better if I were to have a concentrated portfolio of just a few stocks?

My favourite stocks in the portfolio are Kumpulan Fima, Pintaras Jaya and Prestariang. These stocks still the major holdings in my present portfolio, whereas the rest were all sold long ago. So if I were to just hold these three stocks, my average return would be 123%, much better than the return of the portfolio of the 10 stocks. Did portfolio diversification fail me?

Talking about retrospective event is easy. What if instead I am holding the worst three stocks, Kfima, ECS and SkpReources? The average return is only 17%, just matching the return of the market.

So I still believe in diversification, the only free lunch in investing.

Date 21/01/2013 7/04/2014
Stock Name Ref Price Price now Dividend Gain % gain
Kfima 2.02 2.42 0.08 0.480 23.8%
Pintaras 1.56 3.16 0.125 1.725 111%
ECS 1.06 1.27 0.08 0.290 27.4%
Plenitude 1.85 2.59 0.06 0.800 43.2%
Jobstreest 1.20 2.39 0.06 1.250 104%
Pantech 0.78 0.95 0.07 0.240 30.8%
SKPRes 0.34 0.315 0.025 0.000 0.0%
NTPM 0.47 0.85 0.05 0.430 91.5%
Kimlun 1.25 1.65 0.05 0.450 36.0%
Prestariang 1.21 3.92 0.13 2.840 235%

Average 70.2%
FTSE Mid70 12294 14037 369 2112 17.2%
KLSE 1632 1863 49 280 17.2%

Posted by houseofordos > Apr 7, 2014 03:54 PM | Report Abuse

KC what is your opinion on YTLPOWR-WB ? Gearing about 3x. Premium is only about 12% with 4 years to expiry. The good thing is that this company very aggressive in share buy back.


YTL Warrant was trading at a discount a few months ago when its underlying share gone up to 1.80+ when the company aggressively buying back shares. Since then the underlying share dropped to now at 1.60, and its warrant price retreated in tandem. That is the peril of playing derivatives. The same thing I can see happening to many other warrants. You are at the mercy of someone else.

Forgetting the above, at 53.5 now when the underlying share is at 1.60, it is a good bet as you have my spreadsheet to do evaluation yourself. This is especially true the company is continuing to buy back share continuously, according to your perception, and especially the shares bought back are cancelled off. And also provided you are not trading and hope for short term gain.

Posted by sleeplessguy > Apr 7, 2014 04:54 PM | Report Abuse

Hi kcchongnz, iam interested in your study of warrant. I understood the intrinsic value, premium%, gearing etc but confuse on implied volatility.

"What I did was I used the weekly price from yahoo finance, obtain the weekly return, and compute the standard deviation of the weekly return. Then I convert that to annual std by multiplying sqrt (52). That is the volatility of bimb."

Can you advise an example of the calculation of the BIMB-WA ( 29.5%)?



That is exactly how I obtained the historical volatility of BIMB.

For implied volatility, you have to understand Black-Scholes Option Pricing. I have explained what implied volatility means in the article.

Posted by fortunebullz > Apr 5, 2014 06:40 PM | Report Abuse

KCChongnz! Please peep further with Asiapac! Its truly undervalue! My hope more credible seniors will highlight and help newbies make money! Cheers!

AsianPac does have something which disqualify it as a piece of shit, or lemon. It did not make any losses for the last 5 years. Earnings trend appears to be up. For the last three quarters, earnings improved It also has reasonable cash flow too. But is it truly undervalued as you proclaimed?

Not in my opinion.

Lets first look at if its business in property development outshines others or not.

In my opinion, far from it. Its return of equity of only 5% is not good. Do you want to put in money in a business which give you a return of 5%? Not for me.

Its balance sheet is not strong. Debts keeps on increasing. Lat year it jumped by almost 3 times more to 334m. Yes, good to borrow money to do business, but not borrow money to invest and get a return of just 5%.

Yeah yeah I know, this is all history. AsianPac has great future, the Imago Mall and whatnot. See link below:

http://klse.i3investor.com/blogs/icon8888/49645.jsp

But how is this transform to the bottom line? And what next? this is beyond what i can fathom about AsianPac.

Am I interested then? No. There are so many other property companies, why AsianPac? That is the view of an armchair analyst. What do you expect?

Benjamin Franklin — 'If you fail to plan, you are planning to fail!'

That is the whole point about capitalism, issue equities and debts for doing business. Debt is much cheaper than equity as the cost of debt is low at about 5%(?) now whereas the required return from shareholder is much higher than that (10%-15%). Hence it is better to borrow a lot of money to do business, so long as it doesn't cause the risk of bankruptcy when the economy turns for the worse. An optimal capital structure could be about 40% debt and 60% equity. That is perfectly alright. For this, look at those companies which provide ample free cash flows such as Nestle, BAT, Carlsberg, etc.

You may be mistaken that I shun debt, not at all. It is only when I compare two similar companies like the link below:

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

Company A and B both are in the similar business, having the same ROE, and both trading at the same PE ratio. Here it is very clear that company B with less debt and more excess cash is better than A which has less excess cash but more debt.

In Pintaras case, I prefer the management to pay out all cash and cash equivalent (RM1 per share)to shareholders, and even borrow some money and return this borrowing to shareholders. Pintaras can do it as it has the cash and the capability to borrow, and alter its capital structure, and yet would not affect its profitability, ROE etc significantly, and hence its share price. And that is the beauty of it having a lot of excess cash. Again, that is theory. There may be plausible reasons why Pintaras need to keep that cash. May be impending expansion. Need to buy more plant and equipment for more profitable jobs?

If a company has a lot of debt, how to do what Pintaras can do above?

Posted by sunztzhe > Apr 5, 2014 11:28 PM | Report Abuse

The issue at hand is not whether dividends matter...the real issue at hand is to ask whether that particular company is well managed and is capable of growing its EPS and is in a growth industry for a certain period of time.


Excellent comment. If a company like Pintaras can earn a marginal return of capital of 19.4% each year, isn't it more sensible to leave the money in the company to continue earning that return, rather than withdrawing the dividend and spend it, if you trust the management? And where else can you get a return of 19.4% with the money you withdraw as dividend?

Need income? Why can't you sell part of the holding to get the income you need?

However, it is a positive signalling effect in good and growing dividend payment, showing the company is doing well in its business. A growing business will continue to grow its earnings and hence shareholder maximizing with the capital growth of its stock price.

For some companies with good earnings but little or no dividend, and questionable management capability and trustworthiness, it is good to have the dividend, rather than leaving all the money there for the management to manipulate, and engaging in shareholder value destroying such as wasting the cash in poor acquisition and hanky-panky business etc.