Very informative analysis. Better than investment banks' analysts. Brilliant.
Thanks David Lim.

Malaysia segment has improved a lot due to the commercial run of new particle board plant in Segamat. I expect next Q4's performance should be better when the utilisation rate of new plant increases.
Thailand segment's performance deteriorates in this quarter and dragged down earning..this was due to one line stoppage in Thailand plant and that incurred repair & upgrade costs + no revenue generated from stoppage line. But Q4 should see recovery of Thailand segment since no line stoppage problem liao.
In coming Q4, do not forget the refurbished MDF line would start commercial run and that should boost the earning further. The capex in this quarter is very high.
There are many positives I can see in Evergreen's future. The only worry is the log supply issue, if it does not become a severe problem, we expect to see improving performance in quarters to come.

Felicity gives fair opinion on Media, there is always things to learn from his article, and he is not in the position to push up or down stock price to benefit himself. Like.

The management also claimed in quarterly report that the Group performance for the forthcoming year is expected to be "stable".
The earning should back on track until improvement is seen when the new plants start their contribution.
Logically, Prolexus' stock price should also come back to RM1.40 to RM1.50 range which is the price range before the previous quarter's poor performance. But, market is not rational most of the time, so its stock price can go anywhere.

@Nikicheong, the deconsolidation of subsidiaries are explained as below :

"When a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary be initially measured at fair value. The gain or loss on the deconsolidation of the subsidiary is measured using the fair value of any noncontrolling equity investment rather than the carrying amount of that retained investment."

It is an one-off item.

Yeah, the revenue YoY decreased but core earning YoY can improve slightly, mainly due to higher gross profit margin and higher PBT margin.
If you check and compare the profit margin in past 2 years, u would find that this quarter's margin is the highest.

I am not sure how market will react on next Mon on its stock price, but I do see earning improvement in this quarter and am expecting the contribution of its new plants in quarters to come.

The capex is as high as RM22mil in Apr-July'17 quarter.

The not-so-good news is the new Vietnam garment plant is delayed due to re-application of construction permit.
The good news is the management claimed they plan to fast track the fabric mill.

Its stock price has been beaten down after previous quarter's poor result because people worried about fundamental change in Prolexus' business. This quarter's earning should prove otherwise.

The EPS has improved a lot QoQ.
In term of YoY, the reported EPS was lower, but the core EPS (after excluding the RM4.17mil loss on consolidation of subsidiaries + other one-off loss), is actually slightly higher YoY.
Thus, the earning is considered good and I wonder why some i3 people react negatively to this quarter's earning (??). Maybe, they do not read the quarterly report in detail..

This quarter's earning is good actually.

Thanks Herbert for your good intention !
Hope to hear from you again.

Herbert's article uses "another way" to warn people about the danger of following the advice of an old man who called himself an intelligent super-investor. I believe Herbert has a good intention, albeit a new-comer to i3 may may-understand that his article is ridiculous.

Haha, thanks for the joke.
Hope to hear more.

Hi Edward & Leo Ting,
I got to know electric-arc furnace steel producers are facing graphite electrode shortage nowadays. Do you know how much that would affect the production output and cost to SSteel ?
Tq.

@Leothing, can I know what do you think about the graphite electrode shortage problem ? How much that would adversely impact SSteel's production output and costs ?

I believe Icon8888 is meant for good to highlight the -ve elements that he found after studying Ekovest. It would be good for the existing investors to be open and see the +ve and -ve sides of Ekovest, and make your own judgment.
It is meaningless to listen and accept only the +ve points, in the end if Ekovest earning is bad and stock price comes down, it is your money to lose.
If you still think Icon's findings is not correct, you can just ignore it. My point is be open and think and make your own judgment, ultimately, it is your hard earn money.

Congrats sifu Icon8888!

I think that's why EG management is currently looking for ways to raise money. I worry they may call for right issue. Even if they do private placement, that will also cause the dilution of shares..
I believe EG's revenue will increase when the capacity of the new plant is being filled up, but the potential share dilution may drag down the EPS, and everything back to square one.

Although Evolve mall losses dragged down Jaks' profit, but the Vietnam and domestic construction are doing better and better. Can construction segment's +ve element out-weight the -ve element came from Evolve mall ?

Hi koko888 sifu, pls email me to let me know how to become your member. Tq.

stewe2011@gmail.com

The loading will increase in 2H 2016 and new sensor products will also be launched in 2H 2016.
The subsequent Q3 and Q4 will see better result. This info can be easily found in the "Prospects" of recent quarterly report. So, why sell now ?

The profitability of MFlour is very much dependant on :
I) Forex gain/loss
ii) Future/option gain/loss
iii) Indonesian operation

The I) and ii) above I can't really see their correlation with the strengthening or weakening of RM...so they are difficult to predict what will they like in coming quarters.
For iii), we can see turnaround in Q1 but that is only one quarter so whether MFlour can do well in coming quarters will need to see if the turnaround of Indonesian operation is sustainable.
Anyone has more info on my above uncertainty, kindly share. Tq.

MFlour should be a beneficiary of strong RM. In Q1'16, RM was actually strengthen, but the forex loss magnified to ~RM17mil compared to forex losses of RM1mil to RM3.4mil in last 3 quarters when RM weaken. I wonder how this could happen, anyone knows why ?

Great article analysing and explaining boom & bust cycle of an industry.

The grove demand is world-wide so it may not has the sudden surprise like dry bulk industry when a single country, i.e. China, slows down. However, I do agree the coming supply is greater than predicted annual demand growth rate, so yes, the profit margin will be squeezed and we will see grove companies not doing as well in coming 2-3 years.

Quote from recent Bornoil's quarterly report "..the Board is optimistic of much better and improved performance in the coming quarters.." unquote.

I noticed it is seldom for a management to make such statement saying next few quarters will have much better performance, unless they are really confident that it would happen.
That reminds me of Geshen's management whom also claimed the same thing in it's Q2 FY15 quarterly report. Quote " The Group envisages improved performance over the next quarter" unquote. It's EPS really rose significantly from 2.99sen to 9.6sen in subsequent quarter and it's stock price shot up after Q3 result.

Bornoil's reporting is not transparent and hence we can't really do a good valuation based on the available info, but if hanging on the management's confident statement above, it may worth to consider to bet small on this counter.

My opinions are as follows :
- Prolexus' earning will grow upon the completion of Vietnam plant and Johor plant next year.
- The warrant is likely to be converted into mother shares since it is already in-the-money. It's expiry date is in 2021, it is still 5 more years, normally, people do not convert the warrant too early, thus the warrant dilution effect will not be significant in next one to three/four years.

- What we can't be certain is how much the earning will grow when the two new factories are in full operating mode, if at that time, the company can achieve higher EPS after taking into account the dilution effect from RI as well as warrant conversion, it's stock price should follow. Otherwise, the expansion will not benefit the company. I suppose the management must have thought they can achieve higher EPS upon expansion, otherwise, no reason for them to do so.

- In short, Prolexus is a growing company and worth to invest in it's future. However, the earning will be diluted by the RI in several Qs to come until the new factories can start to contribute to top & bottom lines. This means it's stock price may be stagnant from now till the new earnings kick-in. For me, I may want to wait till early next year to invest into this stock to avoid my money sitting idle there.

Quote "I undertook the study to find out whether his method is different from mine, and if different, in what way. I want to find out whether there is anything I can borrow or adopt, if not the entire package, at least some useful parts that can augment my own strategy." Unquote.

The above is what I meant by "flexible" in our investment strategy. We should stick to our winning strategy and fine tune our skills from time to time by learning from other successful people. It would be a waste of time if we just boost our own strategy and criticise on others. We gain nothing if we do so. As what Icon8888 mentioned before, our ultimate aim is to make money from the market and improve our family life financially.

Great article. It is one of the best I ever read so far in i3. It combines both knowledge and experience to write such article, and it's very practical.
I particularly like the valuation multiples expansion portion and the example quoted, I learn useful new things from there. I should re-read this article from time to time.
To predict future earning, if we can translate the macro or catalytic factors into financial figures like Icon8888 did for AirAsia, we can even come out a predicted EPS and arrive at a targeted fair value to help our investment decision.

I agree with Icon8888's opinions above. I have both growth stocks and value stocks in my portfolio albeit the proportion may not be 70%/30%.
I think being flexible (but must be right) can maximise the return for our investment. For example, if we are rigid and follow strictly to some investment guru to avoid airline stock, we would have missed Asia Asia this year.
Both growth and value stocks are good investment choice, and the best is undervalued growth stocks.

ROE = 13.68, PTBV = 0.8 only, PE = 6, net cash presently. The figure shows this is definitely an undervalued and under-noticed stock.
It's earning has been quite stable, and doesn't fluctuate much.
It's daily trading volume is low.
The question is how and when it can trigger market's attention..

Hi Icon8888, yes, your understanding is same as mine. In overall (including both components), Thong Guan is still beneficiary of weak RM.

Cephasyu, I seldom see article like yours as the above, many thanks for your honesty and sharing. I believe you will get better and better in stock investment with your right attitude and learning passion. I would like to encourage you that all people make mistakes in stock market now and then (of course including me), but only few people learn from mistake and grow to become a successful value investor. I can see one here. Keep up to write good article for our learning ya :)

The doubt is if the new factory has really completed in this Q4 ? and the high operating cost in this Q4 was due to the initial cost (setup cost) incurred for the new factory ?
The answer for the above is important to determine if to hold or sell Johotin.

In last quarterly reports, the management kept mentioning the new factory/warehouse were to complete and would contribute positively to top/bottom lines. However, in this recent Q4 report, the management doesn't mention anything about the new factory/warehouse.. I wonder what does that mean.. anyone has any idea ?

I would like to highlight a few points i noticed from quarterly report for discussion here :
I) The revenue in this quarter is at record high - RM114.3mil (a positive sign)
ii) The Capex is RM25.5mil compared to RM8.6m in preceding quarter, it increased significantly and I think this is part of the reasons why higher debt recorded in this Q.
iii) Referring to historical record, the inventory in Q1 FY15 shot up high to RM148.2mil, and the subsequent Q2 recorded highest EPS. Will the high inventory in this Q4 result in high EPS in next Q1FY16 ?
iv) The culprit for bad Q4 result is F&B segment, and it's profit margin came down to as low as 0.6% compared to 5.4%, 7.8%, 7.4% in last 3 Qs. The margin is "abnormally" low and the management simply explained this was due to high operating cost.. not clear how come the operating cost could be that high.

The quarterly report also didn't mention the progress of new factory and warehouse which are supposed to complete by the end of 2015. Can all the above findings are related to the setting up of new factory/warehouse in this Q4 ?
For example, the new factory would need high Capex for new equipments, which led to higher debt, and incurred higher operating cost in commissioning, new hiring and etc.

I am just trying to find out the reason for abnormally low margin in F&B segment in this Q4. If the reason is really related to setting up of new factory/warehouse, the next Q result should see improvement. Otherwise, it is inefficiency of the management of Johotin and we should abandon this company.

Pls share your opinion.

Congratulation Icon. If your blog is a stock, I surely invest as it is a super growth stock: The number of months shortened from 15 to 1.5, and the number of articles required reduced from 147 to 27 to achieve one million page-view.
Your article can move stock price in retail market now, based on 20,497 average readership per article.

Just ignore the one who blame you and enjoy your afternoon nap.
Pls remember to write the part 2 of Punting Stocks in the Information Age after your nap.

The debt denominated in RM and USD are 171M and 174M respectively. Can the high USD denominated debt be a concern ?

Before we get all the doubts answered on the significant increase of EBIT for steam/power segment, we can't really depend on the 11.4M figure as the actual EBIT in quarters to come may be very differ from that figure.

Icon8888, can i know why the steam/power segment has zero revenue but EBIT of 11.4M as stated in your article ?

Murali, the other income of RM12.34M could be from forex gain.
From Q report, the gain on forex is 12mil, I wonder how come so much...anyone has any idea ?

Logically, furniture industry links to property industry. So if property industry is cyclical (I believe all agree so), so as the furniture industry.
The property market in US is improving, more properties are purchased, more home owners need to furnish their homes, and therefore, Latitude can sell more of it's furniture to US.
I suppose this explains furniture industry is cyclical, no ?

Val-Elta, your info pertaining to Notion are very helpful, you have been speaking the facts and sharing what you know about this company. I suggest you ignore the rude people, there are many such people in this cyber-world.
The only thing I concern about Notion is it's HDD business, I am not sure if the prospect of HDD will still be good in quarter(s) to come, do you have any idea on this aspect ?

YiStock, in Busy Weekly article that you showed, it says the casino industry is in the down trend, expect to last till 2017. This hints that RGB who is the equipment supplier for those casinos will also be affected in years to come. Doesn't this tell it's future prospect is not bright, at least till 2017 ?
The years 2009 to 2014 were the boom years for casino industry, this may explain RGB's recovery since 2012.

Hi Icon8888,
You mentioned target price is RM2, can I know what valuation method you used to come to this target price ? Tq.

Hi KC, what about the net-net stocks, do they work in Bursa ?
People invest in net-net stocks with the "hope" that something good will happen in near future so that their asset value can be realised. But the "hope" may not realise in Bursa or takes too long until the return is minimized. Although net-net stocks work for Walter Schloss in USA many years ago, I wonder can it work in Bursa in present years ?

The logo shown in the article above belong to Fututech :)
RicheHo is sharing his knowledge with us, I wonder why there are people still could come out harsh words after receiving his sharing..
RicheHo, don't get frustrated ya, keep up your good work.

Very good points spotted by you, we need more people and article like this to point out the mis-leading facts reported by media or analyst.

I think Fiamma is a good company, but the short term prospect is not good due to the weakening of RM for their trading segment, and now depending only on single property dev project, i.e. Vida Heights, for their property dev segment.
The other 2 property dev projects will launch in end of 2015 and early 2016. Thus, if invest into Fiamma, a person must be willing to hold 1 year or more to see the profit and stock price improvement.

One good sign is the company starts to buyback share at RM1.5X. They have not done so since year 2007.