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!

It is not my job and neither am I good at it to help newbies to make money in the stock market. I may be a bit busy body trying to highlight some pitfalls in the stock market. This is something that I feel I am not so bad at. Even that, I have made enough nuisance of myself, as you have felt before. I am sure many would think like you had. But that is not my problem.

I will look in more details about AsiaPac.

fortunebullz, happened to read some of your recent comments. Yes I don't think you hold any grudge against me. Neither do I have any ill feeling against you.

Don't know anything about AsianPac. Just peeped through AsianPac. Don't find any incentive nor motivation to spend my time on it.

Your future stock suggestion is always welcomed.

Sure or not? the last time I implied your Hibiscus and Asia Media are pieces of shit, you got damn angry fight with me!

KNM is a ultra high growth company. Its revenue grew from 1.23b to 2.0b now. Yes 2 followed by 9 zeros. Its CEO has been saying that the share price six years ago at the adjusted price of 7.00 was undervalued and he wanted to take it private because of its cheapness.

But if you buy 1,000 shares of KNM in March 2008 for seven thousand RM, you are less than a thousand-aire in 2014.

Yes, it is so important to invest wisely. Please buy good fundamental and undervalue stock.

Pintaras at RM3.13 now appears to be not cheap when compared with its adjusted price of about RM1.00 three years ago when I first wrote about it. Since then I still keep on writing about it.

Its dividend has grown by 50% from 10 sen to 15 sen now since three years ago. At this price its dividend yield is 4.8%, still much better than the bank FD rate. However the FD rate is not expected grow much for the next few years.

On the contrary, the dividend of Pintaras has been growing at 25% for the last 5 years and is expected to grow at least 10% for the next few years in my opinion. This is because the construction industry is expected to remain bullish until 2019 according to some analysts. Pintaras earnings and hence cash flows will grow at a reasonable rate of say 8% which will provide the cash required for a growing dividend payment. This is evidenced from its recent jobs secured. Furthermore, it has RM1.00 cash or cash equivalent in its balance sheet which will provide sustainable dividend payment for its shareholders.

I in fact expect the capital gain from its growth in earnings and expansion of the PE ratio will outpace the return from its dividend payment by a wide margin.

I have some friends who are very well to do. One of them is a doctor in Australia. He loves and has a lot of passions in his work. Many of his patients told him not to retire before they die. For him, work is an enjoyment. Why retire and forfeit his enjoyment in life? What is going to do with his wealth? H is going to donate the major portion of his wealth to charity.

I had (not have) another accountant friend in NZ, 50+, and very wealthy. He got a few properties in Auckland as well as in Singapore, besides his investments here and there. He had his accounting firm in Auckland, earning some regular income. He dreaded to go to work and used to say he had had enough of the stressful life. However, his wife said he must worked and not touch any of the existing wealth they had, but only from regular income for daily household expenses. He died a couple of years ago with cancer. He had no chance to enjoy his fruits. All wealth was inherited to the wife and later the children. Their children would not have to work hard nor worry about money forever.

Who are the wise men in bursa? The following are definitely wise men.

Posted by Ntpboon > Apr 3, 2014 01:58 PM
办了教育没钱赚，
却要参股开餐馆。
又想渉足于赌档？
股民被耍团团转！
Bursa为何没监管？
箶籚到底卖何药。

Posted by ohy2012 > Apr 3, 2014 03:00 PM | Report Abuse
无需追问是何因，
投资股票要小心，
黑箱作业处处有，
Bursa无暇找原因。

Posted by ohy2012 > Apr 4, 2014 08:58 AM | Report Abuse
我买股票的原则是不借钱、不玩马孖（Ｍａｒｇｉｎ），量力而为，因为：
清晨晴丽日，
午后骤阴颜。
股市终难测，
盈亏一瞬间。

The “number” you get from the simplistic computation, the RM2m required for retirement is a very rough one. The real annual cash requirement is not a constant sum. It changes yearly according to your needs and wants. for example, just after your retirement, you may want to tour the world with your spouse every other year initially, and less later. You may still have mortgage to pay and one child still have three more years in University. You may want to buy a new car every 5 years etc. When you grow older, you may incur higher health care costs. Your may prefer to put your investment in safer instrument earnings lower but more stable return when you get older. In essence, the annual cash flow during retirement is not constant but can change significantly each year. So how do you know a fixed amount is adequate for you to get by your full retirement?

This can be done better using the annual cash flow analysis on a spreadsheet. The example given in the post for “Ah Meng” shows how, while still in employment can save and invest to build up their nest egg for retirement first with a base scenario, and then how retirement fund is being drawn down during retirement. Sensitivity analysis can then be carried out with different scenarios such as change in return of investment, different years of working before retirement, unforeseen circumstances such as death or disability of a spouse etc. Furthermore, this initial retirement plan can be monitored closely and altered easily as circumstances change.

Posted by yfchong > Jan 20, 2014 08:12 PM | Report Abuse

I could be wrong, based on their returns initial fees was not deducted. Need to take off 5.5 for hard cash EPF 3 percent. Also see which unit trust organization ?


Yes, the initial sales charge, whatever it is, is not taken into consideration yet. But looking at the performance of some top funds, that fee may be worth.

I am actually quite surprise with the good performance of some funds, notably Philip Capital, and I believe they can continue to out-perform the market. This is something which most funds can't do in view of the market being efficient to some extend.

Subject: Life Explained...by an MBA Graduate

A boat docked in a tiny Mexican fishing village.
A tourist complimented the local fishermen
on the quality of their fish and asked
how long it took him to catch them.

"Not very long." they answered in unison.

"Why didn't you stay out longer and catch more?"

The fishermen explained that their small catches were
sufficient to meet their needs and those of their families.

"But what do you do with the rest of your time?"

"We sleep late, fish a little, play with our children,
and take siestas with our wives.
In the evenings, we go into the village to see our friends,
have a few drinks, play the guitar, and sing a few songs.
We have a full life."

The tourist interrupted,
"I have an MBA from Harvard and I can help you!
You should start by fishing longer every day.
You can then sell the extra fish you catch.
With the extra revenue, you can buy a bigger boat."

"And after that?"

"With the extra money the larger boat will bring,
you can buy a second one and a third one
and so on until you have an entire fleet of trawlers.
Instead of selling your fish to a middle man,
you can then negotiate directly with the processing plants
and maybe even open your own plant.
You can then leave this little village and move to Mexico City ,
Los Angeles , or even New York City !
From there you can direct your huge new enterprise."

"How long would that take?"

"Twenty, perhaps twenty-five years." replied the tourist.

"And after that?"

"Afterwards? Well my friend, that's when it gets really interesting, "
answered the tourist, laughing. "When your business gets really big,
you can start buying and selling stocks and make millions!"

"Millions? Really? And after that?" asked the fishermen.

"After that you'll be able to retire,
live in a tiny village near the coast,
sleep late, play with your children,
catch a few fish, take a siesta with your wife
and spend your evenings drinking and enjoying your friends."

“That’s what we are doing now” Replied the fishermen

francis, you could just take the NI from the financial report. But be aware that you should ignore the one-off items such as gain in valuation of property, foreign exchange gain, gain in sales of assets. These items are non-recurring and would not project a true picture of a company's profitability.

You can't get ttm results from annual report. You may get this information in some websites. Somebody told me i could get it from i3 website too and i tried and got it. I am not sure how to get it now from i3.

I like to get it from the quarterly reports which i have to do a lot more work extracting and summarizing from them. However i got a lot more useful information by doing so for my valuation and financial interpretation purposes.

Hibiscus share price stays the same as RM1.90 when I wrote about it in this blog. Many second liners' share prices have gone up substantially. But at least there is no loss, unless you have bought it at the high of RM2.80 just before this blog was written last Christmas.

At today's close, Hibiscus and its Wa is trading at RM1.90 and RM1.35 respectively. With an exercise price of 50 sen, Wa is trading at a discount of 5 sen. There appears to be an arbitrage opportunity here as below:

Sell 10,000 shares of Hibiscus at 1.90 and get RM19000
Buy 10000 shares of Wa and pay RM13500
Sent for conversion at 50 sen and pay %M5000
Arbitrage profit is RM500

But why aren't there anybody doing this and cause the price of Wa to go up and Hibiscus price to go down as in normal circumstances?

First of all, Wa is expiring about 3 months time. There is not much time value for Wa to talk about.

Secondly the gearing is just 1.4 times, not much incentive to punt on it as there won't be much exaggeration of price of Wa.

Thirdly, the market does not believe there is much upside spike of Hibiscus's share price in the near future.

Fourthly manipulators may be trying to entice punters to buy Wa while they are unloading them. Insiders have heaps of this warrants.

Just some guesses.

The best investment.

So many people talking about buying this stock or that stock. Actually to me the best investment is yourself, and your career. Without excess income, how to talk about investing? Without the knowledge, how to ensure investment bears good return? With a gun but without any bullet, how to shoot?

Yes, focus on career, earn and safe, and invest in the right way. Like what Buffet said, "I never doubt I will be rich"

Saying is one thing, the right action is another.

Good, so many newbies (1-post or limited-post forumer) want to learn fundamental analysis.

Think about it, why not? When you want to fish in the rough sea with unpredictable weather, sharks infested, and the skill of using you fish rod.

Online course with continued personal support will be best, I think.

When evaluating construction companies, the order book may not be the most important criterion in deciding which construction company to invest in. On the contrary, i strongly believe it is the efficiency of the company; what are its margins, ROE and ROIC which are most important. These metrics determine if the bottom line will be good. As long as there are reasonable job order book (need not necessary the big magnitude of it), a highly efficient construction company will do very well.

Next consider which company sells cheaply with the metrics such as PE ratio. In actual fact as companies have different capital structure, excess cash etc, the enterprise value divided by ebit is a far superior metric.

Please refer to the following link for a comparison of some construction companies.

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

If you look at Ptaras annual report, the "profit for the financial year" for 2013 and 2012 is 52317 and 44897 respectively. I ignore those extra-ordinary gain/loss below this line.

So your figure for 2013 is the correct one. Your figure for 2012 of 35,826 you have taken into account of those items which I consider as extra-ordinary, which I always omit in the income statement for a true picture of its financial performance.

My figure for 2013 of 55438 in this post which I just checked is actually the trailing twelve month (TTM) "profit for the financial year" 2014. Maybe i should use the 2013 figure which is 52317, but many people use TTM results too.

What about my 42149 for 2012? I may have excluded some more items which I thought are one-off or non-recurring which I got it from the cash flow statement. Can't remember exact figure and items but I find it is unnecessary to spend time looking for them. After all how many times I have said, valuation is an art. And what is the difference between 42,149 and 44897 when the margin of error in financial interpretation and valuation is a very wide one?

Posted by Hulk > Apr 2, 2014 08:08 AM | Report Abuse

To have 2mil in 10years, first you need to have 150k cash and go invest by annual return of 30%, after 10years you will have 2mil. It sound like bull-shit, but this is what I am doing it right now. By the way this is only the master plan so called "Vision", if not reach target or 80% done you still have 1.6mil at that time.

Yes, you got the figure right. 150k will become 2m after 10 years with a return of 30%.

However, I think you may not get the mind set right. I am certain that nobody can get a CAGR of 30% investing in the share market from now for the next 10 years. The pendulum is now close to the top of its swing. If you say from 5 years ago you aim to make 30% for 10 years, you may have a chance, but not from now.

One has to be realistic about return from investment. Aiming too high and taking too much risk may be hazardous to your retirement planning.

frank, I am all out of words!

Posted by bracoli > Apr 2, 2014 07:51 AM | Report Abuse

this is a million dollar question to struggling working middle class.
At age of 30, after working for 7 years i can find myself stuck by paying debts, earnings by >RM8k per mth still not able to live comfortably. By deducting of house loan, daily expenses (petrol, toll, etc), still not having much savings left, probably around 2-2.5k per mth. i am single. Until we find effective plans for having money works for money, a real passive income for us, middle class.


I don't see you having the problem of getting a real amount of RM7000 a month at today's money when you retire as you are already earning RM8000 a month now at this age of 30. An available saving of 2-2.5k a month is a good number. Continue earning, your income will increase yearly. Continue saving, and invest wisely. A good retirement is not a problem for you, provided, of course you have a plan and stick to it.

francis,
Looking at your computation, why did you net off the "gain on disposal" and "interest income for your NI for 2013?

I said sometimes I net them off when computing operating income, not from net income, as these items are one-time off and not the "real" operating income in the actual sense for my valuation using FCF for the firm.

Most of my valuation methods start from operating income, not net income.

If you don't do that, then you will get the same NI of 52.3m as mine as mentioned in the post.

bsngpg,
The later you start to draw down your retirement fund, the lease the amount you are required to save up to. You are definitely right here. With the same assumptions, you only need an amount of RM1,656,000 at the age of 70.

FV= ROUND(PV(1.92,10,-183600,0),-3)

Your amount of draw-down is still at RM7000 a month in today's money, or RM15300 a month 20 years later.

One factor you may need to consider is when you are at 70 years old, preservation of capital is more important than return of capital. You may want to put all your money in fixed income earnings a nominal return of 4%, or a real return of zero. Then you may need a sum of RM1,836,000 then.

Paying any price for a growth company? Read this:

http://www.oldschoolvalue.com/blog/investing-perspective/microsoft-growth/

How to save a total of RM2 million in 10 years?

Saving RM2 million in 10 years is a daunting task for most people. However, most people would have some savings at the age of 50. There may be substantial EPF too. Besides they are still working with the building up of EPF money. So what they need to do is to top up any short fall from the return of their present investment and expected EPF amount.

Assuming a couple has a total investment of RM300,000 earning a nominal return of 8% per year in the equity market. This amount will accumulate to RM648,000 in ten years time.

Assuming the husband only is working with a salary of RM10,000 per year, and the total EPF contribution of 23%, a monthly contribution of RM2300 is made to EPF, or RM27600 a year. Further assume the couple has RM500,000 in their EPF now. The EPF will be accumulated to RM1160,000 in ten years time when he retires, at a dividend rate of 5%.

FV= FV(5,10,-27600,-500000,0), -3) = 1,160,000
Total = 648,000 + 1,160,000 = 1,1810,000

So the total retirement fund the couple have, without saving anything, would be RM1,810,000. The shortfall is expected to be just RM190,000. This shortfall can be met with a monthly saving of about RM1000 for the next ten years.

They will lead a happy retirement for the rest of their life.

A simple approach: How much do you need to save up for retirement?

Assumptions
Age now 50
Age to retire 60
Years to retirement 10
Age expected to die 80
Present value of retirement expenses per month RM7000 per month
Nominal return of investment during retirement, Rn 6%
Rate of inflation, i 4%
Future value of retirement fund 0

Future value of monthly expenses, FV = 7000*(1+4%)^10 = RM10,400.
Annual amount, PMT = 12*RM10,400 = RM125,000.
Real return of investment after retirement, Rr =(Rn-i)/(1+i) = 1.92%
Years in retirement, Y = 80-60 = 20
Amount required at retirement, S =ROUND(PV(Rr,Y,PMT,0),-3) = RM2,056,000.

Hence you need to save up to a total retirement fund of about RM2 million in 10 years time in order for you to retire with an inflation adjusted RM7000 a month at today’s Ringgit for another 20 years.

The table below shows the growth in NTA and dividend payment each year for Fimacorp:

Year 2013 2012 2011 2010 2009 2008 2007 2006
NTA 5.70 5.32 4.66 3.86 3.01 2.54 2.45 2.23
δBook Value 0.38 0.66 0.79 0.85 0.48 0.08 0.22 2.23
Dividend 0.40 0.35 0.30 0.20 0.17 0.16 0.15 0.15
δBook Value + Div 0.78 1.01 1.09 1.05 0.65 0.24 0.37 2.38

Imagine you bought Fimacorp about 4 years ago at less than RM5.00. You have been receiving a dividend and enjoying a growth in the book value of a total of about RM1 each year for the last 4 years. Isn’t that a fantastic investment?

Why is Fimacorp able to achieve this type of performance?
Yes, it has a durable business with moat in security printing and palm oil production. It earns a lot of money each year and paid out a dividend. Whatever earnings retained was reinvested (buying more plantation land?) with a return of capital of an average of more than 30%.

Imagine if all earnings were paid out, can the shareholder invests it himself wisely to earn that kind of return?

Fimacorp a no-growth company? What does the revenue of the last few years tell you?

Year 2013 2012 2011 2010 2009 2008 2007 2006
Revenue 305145 300174 298479 279110 223465 176788 157312 157190
Net income 61899 78917 84757 64570 59481 31372 27631 32208

No growth in profit from 2011 to 2013? Yes, of course. But which company with oil palm plantation as a major business has a growth in profit for the last couple of years when the palm oil price was in doldrums? Many in fact went into losses. At least Fimacorp still made very decent profit albeit a little drop.

From the table above, one can see that Fimacorp’s revenue and net income has been growing at a CAGR of about 10% a year from 2006 to 2013. That is a reasonable high and sustainable growth rate. I don’t know much about its future but I do read about Fimacorp has quite a lot of land in Indonesia which has not planted yet. I thought I also read that they have been buying plantation land too. And according to the article in Chinese, its FFB production has been increasing. Its margins are also much higher than many other plantations.

Fimacorp's share price has increased by 28% from RM6.40 since I commented in the post above three months ago to RM8.19 now.

I like and often quote this:


“What is a cynic? A man who knows the price of everything and the value of nothing."

― Oscar Wilde

Posted by houseofordos > Apr 1, 2014 12:16 AM | Report Abuse

KC, thanks for all your explanation. The idea is clearer to me now... Just to clarify then, how do you gauge if the 12.3% implied volatility is considered low ?

To me the most important factor for the expected price of an option such as a warrant is its volatility. The higher the statistical or historical volatility SV), the higher the value of a warrant. This is because there is a higher probability that the warrant has a chance to be in-the-money and gets a good payoff. Also note that different stock has different SV.

Implied volatility (IV) is a forward looking number by gauging the market expectation; with the price the market willing to pay now, what is the "implied volatility"? This is done by "forcing" the volatility to make the market price equals to the value computed with the option pricing model.

Hence if the implied volatility (12.3%)is much lower than the statistical volatility (29.5%) of BIMB Wa, then the warrant appears to be cheap. This is because if the volatility of BIMB suddenly increases, the warrant price will increase in tandem.

However, there's no guarantee the market will make a violent move anytime soon which will spike up the price of BIMB Wa. By incorporating into trading an awareness of IV and SV, which are important dimensions of pricing, you can gain a decisive edge as an options trader.

Posted by brendonyeap > Mar 30, 2014 04:03 PM | Report Abuse

Thanks KCHONG for ur analysis...whats the TP for it, mid to long term?

Interesting question. Never thought of "target price" for warrants. Let me try to answer you this question.

Warrant is a stock call option, a derivative deriving its value from something, that is the underlying share price. Meaning the value of BIMB Wa depends on what the price of BIMB share price is. I know many would disagree with me because they would opine that it depends on what price people are willing to sell, or buy. That would be very abstract for me because i won't be able to gauge what traders think about what they are willing to buy or sell a warrant.

So instead of "target price", I think in term of "intrinsic value". Yes warrant has an intrinsic value too just like common stocks. Its intrinsic value will depend what the underlying share price is.

The intrinsic value of BIMB Wa = Max[0, (stock price-exercise price)].

The table below shows the intrinsic value of BIMB Wa at various stock price of BIMB:

BIMB 4.00 4.33 4.50 5.00 5.50 6.00 6.50 7.00
IV BIMB Wa 0.00 0.00 0.00 0.28 0.78 1.28 1.78 2.28

So what would you think the possible prices of Wa could be within this 9 and a half years before it expires, when BIMB share price moves up and down? Mind you, this is only the intrinsic value. Wa also has valuable time value, which could be very valuable depending on the volatility and time to expiry.

In the above write-up, I used an option pricing to value Wa with all the data and assumptions (an artistic endeavor), and the fair value of Wa (intrinsic value+time value) is RM1.49.

So you notice I talk about intrinsic value and time value of warrant, not target price. Could you share with us your "target price"?

If I were to pick a plantation stock, I probably will pick this Kimloong Resources, a low risk investment. Why low risk?

Steady revenue and profit, healthy balance sheet, and yes, good cash flows, and most of all selling cheap. That is what i mean by low risk investment.

Am I looking at RM1.00 return? Not at all. If RM1.00 profit comes, I would be very happy. But at least the downside is limited.

Posted by stockoperator > Mar 31, 2014 10:47 AM | Report Abuse

Growth is Not a concern to me either. Cash is a concern. Why should we concern about growth as long as company has cash right? Here we should focus on good quality long term growth strategy without debt financing.

I like growth. A stock with higher growth is indisputably a better investment than another stock with low growth, provided everything else the same, especially the price to pay.

The problem with growth is it is a future expectation, a projection. How accurate is the growth projection? How is the growth expectation translated to the bottom line? And most of all, what is the price of this growth? Has the growth expectation been incorporated years ahead already with its present price? etc etc etc.

I seriously believe one should think about and fathom out those questions above, not just buy growth stock, at whatever growth projection, whether it is realistic or not? And at whatever price.

Posted by houseofordos > Mar 31, 2014 12:03 AM | Report Abuse

KC, I ran a similar exercise with PJDEV-WC with following conditions :-

Underlying price = RM1.45
Strike price = RM 1
Ex- ratio =1
Days to expiry = 2435
Annual volatility = 25.6%
Div yield = 3.4%

I was very surprised to find the black-schole intrinsic value for warrant to be only RM0.49 considering the significant time to expiry and only 15% premium. I found BSM valuation to be extremely sensitive to dividend yield input. A 0% DY assumption increased intrinsic value to RM0.74. Would PJDEV-WC still be a good investment in your opinion and why ?

A great analysis of option from you. You were using the Nobel price award winner Black-Scholes Option Pricing to value the PJD Wc.

Yes, cash dividends issued by stocks have big impact on their warrant prices. This is because the underlying stock price is expected to drop by the dividend amount on the ex-dividend date, the higher the dividend, the larger is the drop in the stock, and hence the lower the value of warrant. Share buyback has the opposite effect on option price.

Although option pricing is used widely in derivative markets, and the BS OPM won Nobel price award, it is not infallible. This is because the assumptions behind it, such as the log-normal behaviour of share price, which is far from reality.

the other factor for the price movement of warrant is the supply and demand in the market, just like normal stocks which doesn't follow price and value relationship.

No I won't buy PJD Wc at the present price of underlying share and warrant price. Like what you have analyzed, Wc is overvalued, at least theoretically. I am not a trader as you know.

Posted by ping > Mar 30, 2014 10:30 PM | Report Abuse

Why some people use EV/EBIT and some use EV/EBITDA?

The difference between ebit and ebitda is the previous takes into consideration of a relevant part of the cost of doing business, ie, depreciation and amortization; whereas the later doesn't. The latter is like earnings before all the bad stuff.

I guess you can use either as long as you are comparing apple with apple. I personally prefer ebit after reading too much of the internet companies using ebitda to justify their lofty valuations during the internet bubbles in the early 2000. This is because I prefer free cash flows, or the actual cash I receive after all costs of doing business plus any reinvestment cost.

Posted by houseofordos > Mar 30, 2014 11:14 PM | Report Abuse

KC, informative write up.

What is the purpose of looking at implied volatility instead of just premium to determine good entry price for warrant ? Would implied volatility of the option relative to the historical volatility provide any more useful information ? Hope you can enlighten. Thanks

Premium varies widely depending on the time to maturity, volatility and gearing etc. So it is not a good measure of if a warrant is expensive or cheap.

In practice, implied volatility (IV) is the most important factor in determining if a warrant is worth buying. Often options are traded based on implied volatility. Compared to historical, IV is forward looking and hence preferred. Read the article at the link appended below:

http://www.optionsplaybook.com/options-introduction/what-is-volatility/

Posted by francis5269 > Mar 31, 2014 01:08 AM | Report Abuse

Hi Mr.chong,

1)the 2013 CFFO is 46242?or other amount?

2)may i know how u calculate NI, can give 1 yr example?

3)the net cash per share...i use CASH AND CASH EQUIVALENTS/share... but still cant get the amount...may i know how i can get it?

1) Yes, from statement of cash flow from operating activities
2) NI is net income, the bottom line in the income statement. Sometimes I may have excluded one-off item, or income from investment funds. They are dependent on the equity market and hence are unstable. Again valuation, financial interpretation is an art.
3) Read my previous response as below:


francis5269 Hi mr.chong, your excess cash is from the formula "excess cash=total cash - max(0,current liabilities- current asset)". may i know how you classify the "total cash" from? i add up "Short-term deposits","Cash and bank balances", but cant get your amount Excess cash 155459.then i add up other asset also has variance of it... may i know what category should classified in "total cash"?
11/03/2014 22:58
X

kcchongnz francis5269, yes i use the formula mentioned by you. More specifically, it is:

Excess cash = Total cash or cash equivalent- max[0,current liabilities- (current asset-cash or cash equivalent)]

Don't forget that cash also include the 46.6m "available for sales investments" in the non-current asset which is quoted shares.
12/03/2014 04:56
francis5269 Hi

Horse field,
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.

You could use the daily data too and do the same to get the annual std. There will be some difference in the value obtained. But that is valuation, an art. Anyway, the option pricing is itself not an exact science.

Posted by houseofordos > Mar 29, 2014 02:19 PM | Report Abuse

KC, is this live session ? Can you send the info to me too. U got my email address.

This conversations started when some people asked me about if I can give a seminar on investing. I have been thinking about that too as finance and investing is my passion. Hence the plan is still at its infant stage.

What I intend to do is to give a proper two-day investment seminar (not stock tips session) which participants will have to pay a fee. The main topics of the talk will be financial statement analysis and valuation methods. To me these are the two most important quantitative matters about investing. Participants are then encouraged to practice these skills with continuous support from me, with a nominal monthly fees. I will guide them whatever I can and able to. Of course this is optional.

I will continue to send my analysis of stocks and finance articles to those participants, and endeavor to answer whatever query for those who are in the monthly list.

Again no stock tips are expected from me, but merely sharing of knowledge of investment ideas and the market.

I am gauging the response now.

Professor Glen Arnold in his book “Value Growth Investing” explains that if you invest in a stock, you are investing in part of the business of the company. He describes the key elements required when investing in a business as below:

1) A business you understand
2) A strong and durable economic franchise
3) Operated by honest and competent people
4) Know what the intrinsic value of the business.
5) Available at a very attractive price, or a high margin of safety.
6) Financial strength

Notice that none of the above emphasize on growth. Any growth is incorporated in the estimation of the intrinsic value of a company. Yes you must buy at a significant margin of safety to its intrinsic value which is the most important.

this is what Glen Arnold summarizes in his book about his ValueGrowth Strategy:

ValueGrowth Investing strategy
• An investor selecting a share for qualities of value should, as part of the assessment, analyze its growth potential.
• An investor judging a so-called growth approach will not pay any price, and so will look to purchase at a low price relative to its future prospects.
• The investment shown by the discounted-flows-of-cash calculation to be the cheapest is the one that the investors should purchase-irrespective of whether the business grows or doesn’t, displays volatility or smoothness in its earnings, or carries a high price of low in relation to its current earnings and book value.

Horsefield,

Thanks for your kind words.

A teacher's greatest reward is that his student excel in his future undertakings.

See what you have written just two months ago in one of my blogs:


Posted by Horsefield > Jan 26, 2014 02:20 PM | Report Abuse

i think its good time to "realize" the loss and ride the young energetic horse (ie ptaras, kfiama, presbhd etc) now..


Just two months past, your return in all the three stocks are all double digits, even in the twenties percent.

Stock 26/01/2014 28/03/2014 Gain
Pintaras 2.68 3.08 15%
Kfima 1.93 2.34 21%
Prestariang 3.10 3.78 22%

The blog you have commented is actually about avoiding the pitfalls in investing. And by taking care of your downside, the upside has taken care of itself, immensely.

Tis goeth down to a fundamental aspect that “An investment in knowledge pays the best interest”
- Benjamin Franklin

And after acquiring the knowledge, parctise, practise and practise.

Best if you can got someone to continuously guiding you.

Horsefield, you are very good in your valuation.

Arbitrage opportunity is the opportunity to buy an asset at a low price then immediately selling it on a different market for a higher price. If you can buy FACB at RM1.26, turn around and sell it for RM2.47, your net net value computed for FACB, you make RM1.21 per share, that is arbitrage. The RM1,21 you gain represents an arbitrage profit, or a risk free arbitrage profit. But can you? Where got big fat frog jumping around for you to catch?

But you may try to engage in a risk arbitrage due to the apparent price difference of the market and the real value of FACB. Do the following:

Borrow, million RM 107
Buy all shares at RM1.26 107
Clean the cash drawer 149
Pay bank -107
Pocket cash, m 42

Yes, you borrow 107m from the bank, buy up all shares of FACB at RM1.26 per share, take the cash and use part of it to pay back your loan. At the end you pocket 42m, and still own the whole company, debt free, and with a RM21m worth associates, some inventories and net receivables.

But can you do it? Can you get the money from the bank? Can you get all the shareholders to sell you? And many other questions. This is a risky arbitrage. If the shares are not tightly held, there may be a chance of a hostile takeover someday. It is still a risky arbitrage, not the normal risk free arbitrage per se.

But in my opinion, investing in FACB at RM1.26 has very little risk, if any. FACB is highly undervalued. It has a negative enterprise value as calculated by you, and I agree. Its cash alone of RM1.75 is higher than its market price. But what is the catch? You have no control if the cash eventually belong to you. Management may use the cash to do some stupid things etc.

However, looking at FACB, it is really worth a stock to invest in your Graham net net, or negative enterprise value portfolio. Very limited downside, and plenty of upside. It has positive ebitda, or even ebit. For the last two years, on average, there was positive cash flows from operations too. Hence it is not a cash burner.

If you know the management and trust the management, close one eye (or even both eyes) and invest in it.

Posted by kcchongnz > Mar 28, 2014 01:08 PM | Report Abuse X
Posted by Elwin Kai Kai > Mar 27, 2014 12:11 AM | Report Abuse

Mr.Kcchongnz thx for ur advice and post....Do you organize any talk or classes that teaches ppl on valuation....i would like to join if you does

Posted by David Mor > Mar 27, 2014 10:27 AM | Report Abuse

mr kcchong pls let me know too if u organising any class for val;uation right now i stil;l depend on the internet source to learn my valuation technic really wish to attend a class

Posted by brendonyeap > Mar 27, 2014 11:31 PM | Report Abuse

Pls do inform me too when u do hv a class on valuation. TQ

Posted by wayneyong > Mar 27, 2014 11:52 PM | Report Abuse

kcchongnz: Please do let me know too


There will be two major parts in the quantitative aspect of investing; financial statement analysis and interpretation, and valuation.


Interested please provide email address here and I will inform you when organized.

It will be a paid organized seminar and follow up educational programme in investment articles, continuous answering of investment queries, etc.

Oh yes, no punting tips. I have no crystal balls. Mainly teaching one to fish.

In theory, efficient frontier is in fact a pool of different asset classes.

Another example of the benefit of diversification here.

You must be often hearing that investing in plantation companies is a no-brainier, a sure make money one. So put all your money just in plantation companies.

Two to three years ago, besides Jayatiasa, there was another sure-win plantation company, Rimbunan Sawit. Here is an extract of an article written by a well known investor, one who I respect a lot because of his immense social contributions.

Quote: R. Sawit: In all my life, I have never been surer of making money than now in buying of R Sawit.

I have studied almost all the plantation stocks and in my opinion R. Sawit is the cheapest in terms of NTA and its profit growth prospect in the next few years. ……

Since the rights issues and the bonus issues were listed on 9th Nov, the daily volume traded has increased to a level that has not seen before. It closed at RM 0.83 on 9th Nov 2011. ……

As you know, I do not or very seldom recommend people to buy any share. But in this case, I am doing it because I strongly believe this share is the cheapest plantation company in terms of NTA and profit growth prospect in the next few years which is the single most important criterion in share selection.

Most of the palm trees are below 10 years old and their plan to continue planting on their remaining about 23,545 ha in the next 3 years. Imagine the increase value of this additional planted area?
………. Which business can give you more than 100% profit margin?

Total planted acreage is 49,300 ha. The cost per ha is 108672 million divided by 49,300 = Rm 21,756.

IOI announces about 3 months ago that they are buying about 11,900 ha of oil palm plantation from Dutaland Bhd for Rm 830 million cash = Rm 69,740 per ha. Unquote

Rimbunan Sawit’s share price has not changed a bit since two and a half year ago. It share price has in fact dropped by 50% from about the adjusted price of RM1.20 if one has chased the stock just before the right and bonus issues two and a half years ago. During the same period, KLSE has improved by 23%.

I must reiterate that I have the utmost respect of the writer, and the mentioning of his article here is just for the discussion of the benefit of diversification in my article here.

Imagine two to three years ago if one just concentrated in investing in plantation companies, a cyclical business with seemingly so much prospect then and so cheap in price per hectare basis. Instead of making so much money because of the growth in profit expectation, he would have lost considerable amount of money, besides the loss of opportunity in other companies.

It really pays to diversify. Don’t you agree?

Another real life example of swinging the fence (and not diversified)in investing.

Two years ago there is this article appeared in a very popular local financial blog.

Quote
Last train
"This will be the last time I post something on Jaya Tiasa until it goes to RM13.00 cum basis or RM4.50 on an ex-basis. ........

To me, this is the easiest, no-brainer, for an easy 50% within a short period of time. Possibly the best recommended stock in my 6 years of blogging."

"If you look at the plantation hectarage, IJM Plant's 30,528ha compared to Jaya Tiasa's 61,000ha. If you use that, Jaya Tiasa's valuation should be doubled that of IJM Plant alone. Mind you, that is on hectarage of palm oil, not even counting the 700,000ha of timber concessions under Jaya Tiasa. Of course Jaya Tiasa's plants are a lot more youthful, but it only takes another 3-4 years to catch up.

So, 2.65 x 2 = RM5.3bn
RM5.3bn / 2.7 = 1.96 x 9.56 = RM18.70 (or RM6.20 ex-bonus)

The figure RM18.70 is just on palm oil alone. We did not calculate the timber concessions which is almost 10x the size of Singapore." Unquote


So isn't it a no-brainer to place all your bet here?

Two years have passed and what happen now?

Its share price closed at RM2.75 on 26th March 2014, down from RM3.15 then for a loss of about 12.7%. Not much until you compare with the gain of 17.3%.

Haha, Frank, a seasoned investor in Bursa.

An excellent comment from you.

Posted by JaniceLove > Mar 24, 2014 05:18 PM | Report Abuse

Mr KC Chongnz..may i know what is your opinion that there was a private placement at RM1.00 for 20 million shares when the shares at that time was 0.65 as mentioned by Icon8888.


Who was that stupid "private investor"? Or was there something behind the scene which we didn't know?

Fundamentals of London Biscuits have changed for the better? Really?

I always say, in investing, it pays loads to be skeptical. But if he is still keen in investing in a particular stock in a similar situation, he has to do at least some analysis, something like what I did here. (Sorry, trying to entice people to read my posts)

http://klse.i3investor.com/blogs/kcchongnz/48584.jsp

Masterskill put and call option. Another peril or pitfall in investing.

http://nexttrade.blogspot.co.nz/

Real life example of the benefit of diversification.

A close friend of mine told me three years ago that another friend of us had sold off all his stocks and bought YTL Land. We are talking about millions here. Why YTL Land?

YTL Land has a lot of valuable land mostly next to the proposed LRT, MRT lines, I was told. The value and the land is expected to worth more than RM10 per share for YTL land shareholders, based on the projected value of the land per square unit. So why not?

I bought a little, 10 lots if i am not mistaken at about RM1.60 as I am in no position to value the land myself. Yes, I do follow some investment "gurus" when buying share. But I will not dare to buy much.

Its share price now is at 89 sen at the close of yesterday, for a loss of 45%, while the KLSE has risen by 15% during the same period.

Posted by Elwin Kai Kai > Mar 27, 2014 12:11 AM | Report Abuse

Mr.Kcchongnz thx for ur advice and post....Do you organize any talk or classes that teaches ppl on valuation....i would like to join if you does

Hard to find i3 forumer like you wishing to learn about valuation. Yes this is one of the two most important things to learn about fundamentals of investing; financial statement interpretation and valuations.

I will certainly let you know when I organize the talk.