@dragon328, thank you again for sharing your detailed analysis. It's a very good learning for me. It's obvious that you've done a lot of homework!

I've also commented on several other stocks discussed earlier, and left a message on your i3 Messenger. Feel free to respond at your convenience.

Chairman Datuk Ng has disclosed on Friday that his spouse Mdm. Tan Geok Lan holds several million shares.

https://www.bursamalaysia.com/market_information/announcements/company_announcement/announcement_details?ann_id=3237074

In the past annual reports, the director shareholding section shows that Chairman Ng holds zero share in the company (refer page 131 of 2021 Annual Report). Rightfully the disclosure should have extended to his immediate family.

Madam Tan Geok Lan was actually the no. 16 shareholder as of 31 Dec 2021 (refer page 132). In fact her name has been on the top 30 shareholding list since as far back as 2011.

An oversight?

https://www.bursamalaysia.com/market_information/announcements/company_announcement/announcement_details?ann_id=3227852

@DestinyL, can you elaborate on your comment "Management seems not interested to maintain good CG"?

@Jeffyap, how did you arrive at the conclusion that "pocket 70% money into the director pocket"?

Based on the latest Annual Report of 2020, Note 36 (page 134) on Related Parties Disclosures, the Group level directors' total benefits are RM4.796m in FY2020. The breakdown at company level is provided in Note 14 (page 44).

Set against 2020 annual profit after tax of RM28.452m, the FY2020 total directors' benefits to PAT is 16.7%.

Of course the ratio was high during earlier years when the company barely broke even. But can't ask them to forego salaries. RM4m+ a year doesn't seem excessive as compared to other listed companies.

Or have I missed out something?

https://www.bursamalaysia.com/market_information/announcements/company_announcement/announcement_details?ann_id=3160685

According to RHB, "The weak share price performance, in our view, reflects concerns on the Day 1 impact from Malaysian Financial Reporting Standard 17 implementation and lack of near-term catalysts."

But has the effect of new accounting standard been adequately priced in?

I don't know. But I keep an eye on insider selling.

STMB is notorious where principal officers keep selling their shares all year round. However the selling has come to almost a complete halt since late Oct last year. That was the point when share price dropped below RM4.

https://www.bursamalaysia.com/market_information/announcements/company_announcement?keyword=DEALINGS&cat=&sub_type=&company=6139&mkt=&alph=&sec=&subsec=&dt_ht=&dt_lt=&per_page=50&page=1

Another question. How do you calculate the free cash flow?

If I were to look at the CF statement at group level, Operating CF in FY20 and FY21 are RM1.1b and RM1.3. But PPE purchase were even larger at RM1.3b and RM1.7b in those two years. The resulting FCF will be negative.

Should the CF be measured from the parent company level instead? This is the level where dividends are received from the separate subsidiaries or associates. However operating CF at company level are only RM154m and RM126m in FY20 and FY21.

@dragon328, thank you again for the explanation. To better understand the case, I've extracted the paragraph below from 2021 AR

"Wessex Water’s regulatory capital value, for example, has grown from GBP1.3 billion (approximately RM7.0 billion) when it was acquired by YTL Power in 2002 to GBP3.36 billion (approximately RM19.31 billion) as at 30 June 2021, whilst ElectraNet’s regulatory asset base (RAB) has grown from AUD0.75 billion (approximately RM2.2 billion) since acquisition in 2000 to AUD2.96 billion (approximately RM9.25 billion) as at 30 June 2021."

Next I try to relate the RAB to potential market value (in a very rough way).

In ElectraNet's case, RAB is RM9.25billion. With 33.5% stake, YTL Power's share should be 9.25 * 0.335 = RM3.1b. It was sold at RM3.06b. However the sales proceed also include undisclosed amount of loan notes. So the equity amount should be less than RM3.06b. So in this case probably 1 dollar of RAB is sold for less than 1 dollar?

But if I were to take Tenaga example, RAB is about RM55b, and market cap is RM52b. It's about RM1 RAB for RM1 market value.

Applying 1 to 1 ratio, the 100% owned Wessex Water with about RM20b RAB may be worth RM20b?

Adding up all the RABs calculated this way, and subtract the parent co's net debt of RM7.4b, we get the theoretical "maximum" value?

How to value the individual parts of YTL Power?

All analysts use SOTP method. But while their TPs are not too far apart, the valuation they attach to each business varies enormously.

For example, in Maybank 26-Nov-2021 report, Wessex contributes 75% and Jawa Power 18% to the total equity valuation (before debts and discount applied)

In Kenanga 9-Feb-2022 report, Wessex is 77%, and Seraya 12%

In Hong Leong 9-Feb-2022 report, Wessex only 17%, Power Seraya 32%, Tanjung Jati each 17%.

In RHB 9-Feb-2022 report, Wessex is 54%, Power Seraya 25%

It seems there are a lot of guesswork.

@Exnstp, thanks. Yeah of course such rumors could not be verified. Else would have been published in the mainstream media. I just wonder how the various political connections may affect shareholders. This company used to be owned by UMNO, just like Star still being owned by MCA.

BTW after Syed Mokhtar and Johari, any idea who controls the third largest stake under Morgan Stanley?

https://www.theedgemarkets.com/article/frankly-speaking-trimming-media-prima-stake-loss

What are the potential risks you will watch out for given the shareholding structure?

@dragon328, thank you for the explanation.

The dividend is made up of 22 sen + 10 sen special dividend. The company should continue to pay special dividends in excess of earnings.

Right now it's in a net cash position, which is financially inefficient. PetGas could have taken on a lot more debt with very low interest rate, and return excess capital to shareholders. Just look at Tenaga's gearing level.

Debt servicing interests could be easily met by its stable cash flow.

PetGas business has limited growth prospect. As commented before, it will not benefit from the transition to cleaner fuel, at least not until 2030. The roadmap has already been laid down by the Energy Commission.

The only way to justify current share price is to become more efficient with capital by increasing the debt level.

@dragon328, yes, very strong set of results.

May I know your maintenance capex assumption?

I noted that Aeon has huge depreciation & amortization (RM464m) due to heavy investment in the past, which resulted in cash from operation of almost RM700m. Meanwhile the capex in recent years have been low, only RM67m and RM46m respectively in 2021 and 2020.

I’m not sure whether current capex level is too low and therefore unsustainable.

Shown below were the PPE acquisition over the last decade.

2021 RM67m
2020 RM46m
2019 RM271m
2018 RM519m
2017 RM369m
2016 RM704m
2015 RM700m
2014 RM671m
2013 RM522m
2012 RM199m
2011 RM315m

Surely the maintenance capex level would not reach the RM600-700m range as recorded in 2014-16. Those were probably the time when they were building new malls.

But could a long run maintenance capex be very substantial still, like the level seen in 2019 just before Covid?

I'm thinking that it has to be a substantial fraction of annual depreciation of RM464m.

Based on Annual Report note on PPE, the largest category of depreciation came from machinery and equipment, which are estimated to have useful life of 3 to 10 years. Let’s assume the actual life is double of the accounting life, and therefore fully depreciate assets can be used for 6 to 20 years.

Then the maintenance capex should be set at 50% depreciation, which is RM464m * 0.5 = RM232m.

The resulting free cash flow = RM699m – RM159m (payment of lease liabilities) – RM129m (interest paid) – RM232m = RM179m. This number will be substantially lower than your calculation.

Any thought on this point?

@wsb_investor,

This is from Affin

"SOTP valuation of 1x P/BV on the General operations’ 2023E BV and assuming a 20% reduction in the EV of RM3bn of its Life business (with transition to MFRS 17)."

May I confirm that while MFRS 17 may shuffle annual profits to earlier/ later years, it should not have any impact on EV, which is the present value of all future profits?

Unless the underlying assumptions to calculate the EV has changed...

Management has updated the status of AMG gloves during 2020 AGM
“The AMG glove contribution as a percentage of total sales expected to remain small until relevant FDA and EN approvals are obtained.”

… and during 2021 AGM
“We have yet to receive the FDA approval for the product. Due to the pandemic, the company has shifted its attention to delivering mainstream examination gloves due to the surge in demand and market is indifferent towards differentiated products like AMG.”

Update on COATS during 2021 AGM
“What would you think of the contribution from COATS and MDG in 3-5 years?”
“We expect these products to take up less than 10% of our future sales volume in the next 3-5 years.”

They may grow into substantial business one day. But not yet.

_______________________________________________________________________________

JN88 Kossan Boss Lim Kuam Sia is a Engineer... He can produce high quality of gloves but not able to produce gloves v high techology..... Harta cooperate v UK scientist produce high techology gloves such as antimicrobial gloves which selling in very high asp.... Other than this gloves anotger type of gloves is Oatmeal gloves special for Eczema.... This oatmeal gloves contribute 20% from total revenue

@dragon328, notice it starts paying dividend again. But it's only 1.5sen or less than RM17m as compared with the full year operating cash flow of RM200+ million? Not sure its capex need.

@sslee, fair point. Agree there is a risk of getting stuck in a value trap. That's why net-net method relies on a portfolio approach and deep discount to compensate for duds.

@Johnzhang also has a good point of using dividend history to examine management.

In Supermax case, the core business is in a secular growth industry. Pre-Covid it returned above 10% ROE for most of the years, and also paid yearly dividend albeit at a lower payout.

If share price were to go below 2/3 of net-net, or 85 sen for current quarter, to me the downside will be quite limited.

This is not to say it's better than the other three, which enjoy higher valuation for a reason. But worth keeping an eye on.

Supermax net cash is RM3,150m, or 120 sen per share. RM1,390m has been earmarked to build 5 new factories in Malaysia.

If the two-phase US expansion costing USD300m and USD250m are added, the cash will be gone. But this may or may not take place, and is a long time away.

Market cap of RM2,853m is 85% of Current Asset - Total Liabilities (=RM3,346m).

Ben Graham's net net method calls for investment in a basket of stocks sold at 2/3 of this value. The threshold will be reached should Supermax drops below 85 sen.

I got this from Internet:

In life insurance, new business value is the present value of the future profits associated with new business written during the year.

It's calculated by the insurer. I have no idea how it's worked out. I just take their numbers.

Extracted from Supermax quarterly report published today:

"Many of the large buyers seen at the height of the pandemic, such as the governments and large hospital chains are full or near full in terms of their PPE stocks after a period of aggressive sourcing and buying."

@dragon328, thanks for the sharing again. You've mentioned DKSH and Media before. The other two are new.

I don't know them in depth. But as you said, each has issue of its own. My first thought about Media is its major shareholder, where my impression isn't positive (but same can be said about Berjaya).

As for Aeon, based on the little I know, its share price was on downtrend for several years as then key shareholder Aberdeen continued to sell, though this was already past. I believe post Covid malls could reinvent themselves and co-exist in the era of e-commerce. My impression is mall business is asset heavy. Since you've mention I want to make sure to check their cash flows.

YTLP is interesting. The excitement of ElectraNet disposal seems to be waning. Simple comparison of the SOP value calculated by analysts, updated with the disposal gain, seems to indicate current market cap is rather low. However, a lot of its value come from Wessex Water and Power Seraya. It also has a lot of debt. I'm not sure how to estimate values of Wessex and Seraya with reasonable accuracy, such that after deducting the huge debt, the remaining value still indicate good bargain.

The flood related claims seem to have limited impact on the General Insurance business. GI profit before tax in 4Q21 is RM114.5m (4Q20 RM130.5m, 3Q21 RM115.1m)

Earlier an analyst put the flood gross and net exposure at RM300m and RM50m respectively. Perhaps the impact was much smaller than expected.

For life, ANP resumes its growth (slide 23). There is a heavy concentration of investment linked policies with protection riders (slide 24, 25), which is said to be more profitable. But I have no idea how profitable it is.

Slide 21 mentions "ANP increased by 32.9% ... out pacing industry growth of 13.1%. Market share 12M2021 increased to 9.0% (12M2020: 7.7%)"

12M 21 NBV is RM275.2m (12M 20 RM239m). It has been increasing at a rate of about RM60m to RM80m every quarter for the past 6 quarters.

Don't be taken aback by the 4Q basic EPS of only 15.3 sen.

The basic EPS is derived after deducting the once a year preference dividend (refer Note 12a). Basic EPS always appears low during 4Q.

https://www.bursamalaysia.com/market_information/announcements/company_announcement/announcement_details?ann_id=3234942

4QFY21 results can be found here

https://www.allianz.com.my/content/dam/onemarketing/azmb/wwwallianzcommy/pdf/investor-updates/2022/2021_Q4AMBAnalystBriefing.pdf

@dragon328, your explanation is clear. I gain much better understanding now. Your focus on cash flow is a very powerful technique!

@pjseow, yes, part of the inventory is FG not shipped due to shipping disruption. However the inventory is valued at cost. The changing ASP does not affect the inventory value.

Company uses common shareholders' fund to buy back shares. Not when share price was RM2, but only when it was above RM3....

Meanwhile director/ major shareholder, who appointed the management, are taking opportunity to dispose at higher prices, partly thanks to the shareholders' funded buyback.

Company's image is tarnished from the eyes of institutions. Otherwise it could have deserved a higher valuation at this era of ESG.

Any shareholder should rightfully be concerned. And judge they should.

Of course punters who only look at the price chart don't care, and likely fail to see the connection too...

______________________________________________________________________________
donnybelowski Who cares? Kakakaka. TSVT is also selling. Honest transaction. Who are u to judge?

I fully support shares buy back if company has excess cash and the share price has been undervalued.

What I don't understand is the timing of current buy back.

The management would have already known the impressive results of 2QFY22 by Dec last year. Why didn't they do a buy back then at around RM2 instead of buying now at RM3?

Besides the current share buyback that coincides director selling gives a bad impression.

https://www.bursamalaysia.com/market_information/announcements/company_announcement?keyword=Shares%20Buy%20Back&cat=&sub_type=&company=5196&mkt=&alph=&sec=&subsec=&dt_ht=&dt_lt=&per_page=50&page=1

Your comment on optimal debt level also prompted me to do some calculation.

If lease liabilities are ignored, total borrowings will be only RM106.419m + RM85.713 = RM192m. The gross debt to GDP is 192/426 = 45%, which seems reasonable given this is a business with strong cash generation.

However, if lease liabilities are added, the total borrowings will increase to RM561m. Gross debt to GDP becomes 561/426 = 132%, which seems a bit high to me.

I also extrapolate 1HFY22 results to calculate the interest coverage ratio.

Interest coverage ratio = EBIT / interest = (PBT + Interest)/ Interest = (RM79.289m + RM13.665m)/ RM13.665m = 6.8 times. This is above my rule of thumb of borderline at 5 times, although not much higher.

Any comment on that?

@dragon328,

It's nice to hear from you too. First I have to thank you for previously mentioning the FCF of BJFood. It prompted me to study and invest before current price run-up.

Thanks also for the further sharing.

May I clarify on your free cash flow calculation above? The way I understand is FCF is defined as the leftover of operating cash flow after capex. For BJFood, we need to consider the effect of MFRS16.

The operating cash flow for the 1HFY22 was RM165.355m. The figure was derived after adding back the depreciation of right-of-use assets of RM17.550m.

Therefore, when calculating FCF, the operating cash flow should be net off not just against capex, but also payment of the lease liabilities. The principal portion of lease liabilities was RM34.57m. But how to work out the interest portion of the lease liabilities? The financial statement only discloses the total interest paid which is RM13.543m. The amount is made up of both interests for operating lease and bank borrowings.

How did you arrive at 1HFY22 free cash flows (before capex) of RM116m? Did you make the conservative assumption that the entire RM13.543m of interest paid was for operating lease, and therefore the full amount was to be deducted from operating CF?

BTW refer to AGM minutes Q2, the annual capex will be about RM90m.

Based on your estimate of full year cash flow (before capex) of RM230m, netting of RM90m capex, it still leaves RM140m or 36 sen FCF, about 10% to 11% yield at prevailing price.

@Sslee, as you're probably well aware, historically Harta has been priced at a premium over other glove producers.

Pre-Covid Harta's operating margin was about 20%, versus Kossan at 12% to 13%.

Given their management, company culture, financial health and so on remain the same, it's reasonable to expect Harta to continue trade at a premium over Kossan.

Whether Harta's premium should be as high as RM17.2b for 43b piece nitrile capacity, versus Kossan's RM4.4b for 32b mixed capacity, is subjective. But a premium is deserved.

@csan, thanks for your great analysis!

I'm pleasantly surprised, but still puzzled over the 3.5X 1Q22 net profit (RM38 million) as compaed to 1Q21 (RM11 million). The net profit increase came mainly from operating leverage. A 50% increase in quarterly revenue spread over a fixed cost base has boosted operating income, which then leads to 3.5X net profit.

The quarterly P&L does not disclose cost of sales nor gross profit. But from the FY2021 full year P&L, gross profit margin was about 50%. Other operating costs, mainly admin expenses + S&D expenses, were about RM270m per annum, or about RM68m per quarter. Lets assume these figures remain unchanged in 1QFY22 and 2QFY22.

For 1QFY22, revenue was RM188m. Apply a GP margin of 50%, gross profit was RM94m. Deduct quarterly fixed cost RM68m yields quarterly operating profit of RM26m, which exactly matched the reported operating profit.

For 2QFY22, revenue was RM273m. Apply a GP margin of 50%, gross profit was RM137m. Deduct quarterly fixed cost RM68m yields quarterly operating profit of RM69m, which is very close to reported operating profit of RM67m. Most likely fixed cost increased slightly due to continuous expansion.

Given financing cost and tax rate are constant over the short term, the entire 3.5X net profit of 2QFY22 can therefore be explained away with the operating leverage thanks to 2Q revenue increase.

So the key is to understand why revenue has increased sharply; and can the revenue increase be sustained.

Looking at the quarterly results over the last 6 quarters, we can find that quarterly revenues had been very stable around at RM180 million per quarter from 1QFY21 to 1QFY22, and it suddenly jumped 50% to about RM270 million in 2QFY22.

Recall during those 18 months (Jun 2020 to Dec 2021) there had been several rounds of lockdowns and opening ups. But revenue were mostly stable for the first 5 quarters. It shows the business has been greatly successful in tapping the delivery and drive through demands. There has been limited impact from lockdowns. As such, the 50% step increase in 2QFY22 revenue cannot be entirely attributed to opening up or festive seasons.

It cannot be attributed to new store opening either. Starbucks already have 300+ stores. FY2022 plan was to add about 35. On average only about 10 stores could be added per quarter. Almost all contribution must have come from sharp increase in same store sales growth.

Could it be due to menu price increase while cost remained stable? While there has been price hikes (can't recall since when), the magnitude couldn't be that large.

Better menu mix? Yes, but again doubt the effect is could be so drastic.

From the turnaround KKR and Jollibeans? I doubt so as their sizes are relatively small.

Of course, the 50% revenue increase must have come from a combination of all factors. But until we can find the deciding factors, it's hard to judge whether the 50% revenue increase could sustain or even increase from this higher base of RM270 million in the rest of FY22.

Without sustained high revenue, the 3.5X net profit will not sustain as costs will be catching up.

Any view on this?

Cash Flow Statement shows minimal change in PPE, but about RM700 million built up in capital work in progress. The capital WIP is most likely for NGC1.5.

Adding capital WIP RM700m to the "approved and contracted for" of RM1.1 billion, the total is about RM1.8billion. The sum matches previous announcement RM1.7 billion capex for NGC 1.5.

@pjseow, thanks for the info. 80% is very high indeed

80% utilization implies (32/4 billion pieces) * 0.8 = 6.4 billion pieces. With some simplified assumptions, revenue RM925m / 6.4b = RM145 per 1,000 of blended ASP, or about USD35 as you've pointed out.

Based on my record, during 3Q21 Maybank estimated blended ASP USD66-70 per 1,000. Given that 4Q ASP declines 35% to 40% QoQ, the 4Q ASP should have been higher at 68 * (1 - 0.4) = USD41, which contradicts our calculation.

One reason could be due to large difference between production (which affects utilization) and shipment (which affects revenue).

There is another possibility. RHB report says "Currently, Kossan’s utilization rate is at 80%." it may mean utilization as of Feb 2022 is at 80%. However the average 4Q utilization could be much lower (and ASP higher).

Either way, it's good to know they operated/ is now operating at a normal level.

@tonypang01, I already responded to your similar question in Harta forum.

Based on reports I read, analysts mentioned 4Q volume grew 13% to 18% as compared to 3Q due to low base effects. Does anyone read about actual sales quantity or utilization?

My own estimate is about 66% utilization. It's higher than Harta 52% in 4Q.

Management used shareholders' fund to buy back shares. And company director took opportunity to dispose his shares.

https://www.bursamalaysia.com/market_information/announcements/company_announcement/announcement_details?ann_id=3233784

What kind of corporate governance image they try to create?

Intco Medical has diverted some capital by participating in two limited partnerships. Maybe it has also figured out that it's eaiser to make money in the financial market than in the glove market :)

http://static.cninfo.com.cn/finalpage/2022-02-07/1212317976.PDF

http://static.cninfo.com.cn/finalpage/2022-02-11/1212350487.PDF

Current capacity remains at 45 billion nitrile gloves + 30 billion PVC gloves per annum. If no further capacity comes online, and if next quarterly results show it also struggles to fully utilize its capacity, then a turning point may have been reached.

Sukuks are just Syariah compliant bonds. Net cash = cash + cash like instruments (e.g. unit trusts) - interest bearing debts (e.g. bank borrowings, bonds). Suggest to track every quarter.

As mentioned earlier, I have no idea which stocks offer better value. There is a tradeoff between perceived quality and valuation. If not sure, split the investment.

But prices may not bottom until there are greater clarities on competition, industry capacity and impact on margin. So this is a time to continue doing homework if you believe the sector could regain its secular growth.

@tonypang01, Top Glove pre-pandemic earnings was above RM400m per year. The company has since expanded its capacity by nearly half. Let's assume upon normalization, sales can keep up and margin remains like pre-Covid. So earning increases proportionally, say reaching RM700m. With current market cap is RM17.7b, implied forward PE is 25 times.

But Top Glove has almost zero net cash now (after deducting perpetual sukuk). It may manage to raise cash via HK listing but at the expense of equity dilution. The plus is being the largest producer may confer advantages.

With this naïve calculation, the forward PE of Harta at 34X > Top Glove 25X > Supermax & Kossan at about 20X.

Net cash consideration: Harta ~15% market cap, Top Glove zero, Kossan 40%, Supermax 100% (but watch out whether Supermax may squander its cash in US, not to mention we have no idea when sanctions will be lifted)

Based on the relative track records of these firms, the market seems to have priced them in the right sequence. I have no idea which one offers a better tradeoff.

Maybe split the bet? Maybe wait until there is more clarity on future normalization path?

@tonypang01, I owned glove stocks before the pandemic, but sold them down as price went crazy in 2020. I've started to add back, including Harta. But I won't be in a hurry.

One quick and dirty way to value the stocks, as I've written above, is to assume pre-pandemic level of net profit in the near future, and work out the forward PE. However this method will underestimate companies which have expanded capacities enormously, or those with very high net cash versus market cap.

For example, Kossan annual net profit before pandemic was slightly over RM200m. Assume RM250m net profit in the near future. Current market cap RM4.4 billion. PE is about 18 times. However, Kossan has a net cash of RM1,638m, or close to 40% of market cap. While I won't value the cash fully, it should be worth something.

Supermax pre-pandemic annual earning was above RM100m. Assume RM150m in the near term. Current market cap RM3.2 billion. PE about 21 times. However, Supermax has a net cash of RM3,187m, or about 100% of market cap! But consider the cash will be used for major capacity expansion including in the US, and consider it's currently under sanction, what should be the value?

Undoubtedly Harta is the best managed among them, as evident in the past growth, higher operating margin, higher ROE and ROIC, and generous dividend payout. But its valuation is also higher.
https://financials.morningstar.com/ratios/r.html?t=0P0000JD97&culture=en&platform=sal

On Chinese competition again.

As mentioned earlier, one of the top players there, Blue Sail Medical, lost money in third quarter 2021. Note this was the quarter where Malaysian players were hit with 2 week EMCO closure and subsequent partial operations. It was China's opportunity to expand. But Blue Sail still lost money. Operating margin was a mere 4%. After financing cost, it was in red.

Of course Intco Medical will be a far more formidable rival. But the lesson here is China's manufacturing prowess doesn't necessarily mean Chinese glove makers are better and will crush Malaysian producers.

However, they can be the spoiler. Even if they are less competitive (not sure about Intco yet), they may be bent on expanding market share with little regard on profitability. Flush with cash, Intco could fight a war of attrition if it chooses to.

We have to see whether Malaysian advantages are overwhelming enough such as Liu Fangyi, an industry veteran, knows he has no chance of supplanting Malaysian producers as he has vowed earlier.

Note Liu Fangyi divested some shares last year, purportedly to pay of his earlier borrowing which he invested into the company for expansion.

On EPF. I feel that there is little value for long term shareholders to follow EPF trading. Shareholding changes by EPF are the probably the most common announcements in Bursa. Sometimes for the same company, one manager for EPF will sell and another will buy, all in the same day! It only serves to create liquidity and generate some incomes for Bursa and the government.

Among local investors, Cold Eye deserves much respect. He is righteous and humble. He also embodies life long learning. Chinese readers should check out his autobiography on how he overcame childhood poverty to achieve late success.

Former (?) i3 forumer kcchong's books are also recommended. @Sslee may be in a better position to comment since his kind words are also included in the book!

@rl68, I read quite widely. Over the years my readings have shaped the way I look at investing. Instead of three books, I suggest anyone interested in stock investing to focus on these three areas, in the sequence shown below:

1. Passive investing - First learn to respect the market. While we need not subscribe to the Efficient Market Hypothesis, we should have the humility to know it's difficult to outperform the market consistently, especially in the short term games where the element of luck outweighs skill. Check out John Bogle, Charles Ellis, William Bernstein, Burton Malkiel.

2. General stock investing - There are various investing methods like statistical value investing, growth value investing, momentum, technical, quantitative. My focus is on value investing. Read about stock market history and human behavior from Warren Buffett, Howard Marks, Jeremy Siegel, Daniel Kahneman.

3. Stock valuation - I believe value investing is the most dependable way to grow wealth in stock market. Valuation skill is integral to value investing because we have to estimate the intrinsic value before deciding to buy, hold or sell. Check out Pat Dorsey, Joel Greenblatt, Benjamin Graham, Bruce Greenwald, Aswath Damodaran.

You may first check out their book reviews and listen to their talks in YouTube. Then decide whether they are for you.

Disposal by key shareholder. Although it's insignificant to its total 238 million shareholding, I wonder why.

https://www.bursamalaysia.com/market_information/announcements/company_announcement/announcement_details?ann_id=3232124

@Anxious,

The stock market is a good vehicle to grow wealth for the long term. Over the long run, stock market return > bond market return > cash/FD return.

However, the key is in the long run, preferably over at least one business cycle (5 to 10 years). Another key is stock "market", i.e. a portfolio of stocks, not just a few individual hot stocks.

At the risk of sounding like a broken record, it's crucial to get the mindset and priority right:

1. Set investment objectives - e.g. funding children education; 30 years of retirement in x years with a certain lifestyle; and so on

2. Understand one's risk profile. The profile can change with more understanding through reading, especially reading the stock market history since past patterns keep repeating

3. Set aside emergency fund. Assess the need for insurance

4. Liquid and safe assets (cash, FDs, low risk bond funds) sufficient to cover 3, 5 or 7 years of expenses depending on risk profile (after factoring in other dependable incomes like from stable employment).

5. The remaining in risk assets of varying liquidity, like stocks/ equity, property, and even low correlation assets like precious metals.

But for step 4 and 5, some financial planners advocate risk assets allocation % = 100 - age , or even 120 - age for those with higher risk appetite.

Only at step 5 one considers how much to allocate into stock market, and then the choice of investment vehicles:

a) individual stocks, for people who like hands on; have time; have interest; believe in ability to beat the market
b) equity unit trusts - choose established fund houses; reasonable fund size and expenses; decide domestic versus foreign allocation; don't chase after hot funds
c) low cost ETFs to get exposure to major foreign markets (US, Europe, Asia Pacific)

A simple and good strategy for unit trust and ETFs is to do dollar cost averaging. Alternatively, use reversion to means for long term advantage.

After going through the steps, for many people, individual stock investment should only be a small percentage of total wealth. It's also best to start small. Only increase if there is track records to back up.

If a promoter predicts a stock to lose 40%, and another to gain 300% to 500% in a year, stay away. No one has such predictive power.

Checking his track records in his past comments, just 3 months ago he advised people to sell DNEX (!) to buy VIS, exactly when VIS share price peaked. VIS price has since lost 40%

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Stock: [DNEX]: DAGANG NEXCHANGE BHD

Sep 25, 2021 10:33 AM | Report Abuse

@autoven this stock wont go limit even QR is good....
VIS is different...it can go limit up ....but not for QR....think wisely.....

This kind of small NOSH easily conered all by sharks n bilis , if u are early birds u lucky , if u are late comers then u prepare slaughteted by sharks , a fast up stock will also fast drop if they font have FUTURE PLAN !


TO HOTSTUFF:

BETTER SELL OFF YOUR 1 M TICKETS TO ALL PEOPLE WHO ARE DESIRE TO DNEX , I BELIEVE U REALLY HAVE 1M TICKETS ON HAND NOW , I REALLY TRUST U MAN !

@jolnce, the use of historical or even current dividend yield can be misleading when profit trend is unstable.

Harta's dividend policy is to distribute 60% net profit as dividend. When profit normalizes, future dividends will normalize too.

Using my above example (just a wild guess) of RM500m annual normalized profit. Divided by 3,428m share base, normalized earning per share is about 500/3,428 = RM0.146 or 14.6 sen. A 60% distribution yields about 8.8 sen per year. The projected dividend yield is less than 2% at current share price of RM5.

Of course, the normalized annual profit could be higher and hence higher DY. But this is still guesswork.

While Harta share price looks under pressure in the near term, I'm skeptical of anyone's ability to predict 40% drop. Why not 20% or 60% drop. How are the predicted number derived?

China's competitions and coming quarterly loss are well known to the fund managers, whom collectively set the share price due to their large volume. These known facts are by and alrge already reflected in the current weak share price. What's important is whether they will turn out to be better or worse than average market expectation.

I agree short term investors should stay away. Even long term investors who have too much exposure may consider using each rebound to cut holding down to the level that they can sleep well. But for patient investors with little exposure, continuous share price decline for a well managed company means should start doing more homework.

The one time hit due to prosperity tax should not be a big concern now (unless more "one time" taxes are coming!) The assumed RM350-400m tax hit is about 6% of equity of about RM6 billion. Painful, but is expected since the budget announcement, and the hit is well defined.

The biggest uncertainty is about Harta's future margin due to ongoing competitions.

Harta's annual net profit for FY18, FY19 and FY20, i.e. the pre-Covid time, was over RM400m a year. Assuming the normalized net profit in FY23 is RM500m, the current market cap of RM17 billion implies a forward PE of 34 times.

The market accepted such high multiple in the past as the company was seen as a high growth stock. But if competitions proven to have erode this advantage (yet to be seen), then Harta's future margin could be much compressed, and a lower multiple is deserved.

Of course, the RM500m annual profit is just a wild guess without much evidence. One may adjust the number and multiple accordingly to get a different answer.

The key is to continue tracking the competition, especially foreign players' margin and expansion plan, and then project at what level Harta's margin will eventually settle.

GST (with suitable exemption) makes sense. This was one of the few thoughtful policies introduced by the then Najib's government. Of course Najib was also forced by circumstances, which were the deteriorating fiscal situation, collapsing oil price, and the big hole from 1MDB!

Unfortunately his GST implementation was poor. And the dissatisfaction was exploited by the opposition. In fact I suspect more people voted for PH for lower prices through GST abolishment, free toll and so on, all populist measures, rather than the more abstract issue of abuse of powers, corruptions or 1MDB scandal.

After all, GST is regressive. Although higher income families pay more GST due to higher consumption, as a proportion of income they pay relatively less. Besides they are mostly net savers. On the other hand, lower income families usually consume all they earn, and sometimes over. So they will only pay proportionately more tax if GST is introduced.

Given only about 1 in 6 Malaysian wage earners pay income tax, given a choice I bet the 5 non-income tax paying person would rather the sixth person, and corporations too, to continue paying the tax. And more if necessary. Politicians from every single party will pander to this majority group. Who care about the long term economic consequences or loss of competitiveness?

Many urgent reforms are needed in Malaysia. The other is to streamline the size of public sector workforce that I mentioned earlier. About half of the Malaysian government revenue collected are now spent on civil servant emolument and pension. And the spending continues to grow fast! This is a ticking time bomb. The government can tax the corporations and high income earners till they run away from this country and it will still not be enough to meet the growing appetite.

But who has the political courage to advocate for painful reform? Do you think they will get the votes? Expect complacency to continue until it develops into a crisis!