Posted by kcchongnz > 2013-08-16 16:35 | Report Abuse

I have already described the great business Homeritz has. Can we use the 5 rules of cold Eye to evaluate if Homeritz is a good buy.

Homeriz 0.460 16/08/2013
1 ROE 20.2% >12% Yes
Net profit 14698
Equity 72785
2 Cash flows
CFFO 20071 203% Yes
FCF 18925 >NP Yes
3 PE ratio 6.3 <8 Yes
Price 0.460
EPS 0.07349
4 Dividend yield
Dividend , sen 0.030
Dividend yield 6.5% >3% Yes
5 Price/NTA 1.3 <1.5 ok
NTA 0.36


Yeah, semua lulus belaka.

Posted by Daniel Ck > 2013-08-16 17:24 | Report Abuse

helpful information...thanks
BTW long time didnt c Cold Eye blog...u know where can get his blog...

Posted by Daniel Ck > 2013-08-16 17:42 | Report Abuse

Hi KCchongnz,
I m new blood, could you please forward a copy of your FA analysis template to my email ckliew82@gmail.com to enlighten my path
Thanks

Posted by Ooi Teik Bee > 2013-08-16 18:22 | Report Abuse

Dear Mr Tan KW,

Please add a price chart in all my recommendation.

Thank you.
Ooi

Posted by kcchongnz > 2013-08-16 18:45 | Report Abuse

What is the intrinsic value of Homeritz?

Financial theory postulated by John Burr Williams in his “The theory of investment value” says that the value of a stock is worth all of the future cash flows expected to be generated by the firm, discounted by an appropriate risk-adjusted rate. This theory has since been extensively used in contemporary finance.

There are two major assumptions used in the computation for the intrinsic value, or the present value, of the expected future cash flows of a company; earnings growth rate and the discount rate. Slight deviations of the assumptions can yield a vast difference in the intrinsic value.

The discount rate is related to what is the required return by the equity and debt holders respectively; i.e. how much risk premium above the risk-free rate would be required. For most practical purpose, in contrast with the academic approach in capital asset pricing model, a risk premium applied is related to how stable the earnings and cash flow of the company and its financial health. The 10-year MGS rate at the moment is about 4%. Homeritz has a squeaky clean balance sheet. So it would be reasonable to apply a risk premium of 6% above the MGS rate, or a required return of 10% (4%+6%). Using a before-tax borrowing rate of 7%, it weighted average cost of capital is about 9.8%. This WACC will be used as the discount rate for the valuation of the firm.

The more difficult part is the assumption of future cash flows of the company which is related to its expected growth rate. A difference in assumption of growth of 5% will yield a completely different intrinsic value of the company.

When I carry out the computation of IV to decide whether to invest in a company, I would prefer to use conservative assumptions in its growth rate. In Homeritz’s case, how about the assumption that its business will be stagnant, and there is no further growth, not even grow with the rate of inflation? In this case I would use the Earnings Power Valuation popularized by Columbia University Professor Bruce Greenwald. For those who are interested, please refer to the following link:

http://www.scribd.com/doc/15987706/Greenwald-Earnings-Power-Value-EPV-lecture-slides

The intrinsic value of Homeritz using the EPV is 64 sen per share as shown below.

Revenue 2012 103246
Adjusted Ebit 17292
less income tax -2594
Net operating profit after tax 14699
Add average D&A 1389
Less average capex -3730
Normalized Ebit 12358
Cost of capital, R 9.8%
Capitalized earnings=Ad Ebit/R 125497
Add cash 24471
Other investments 0
Less debts -3054
EPV 146914
Less minority interest -17983
EPV to common shareholders 128931
Number of shares 200000
EPV/share 0.64

The margin of safety in investing in Homeritz at the present price of 46 sen is 28.6%. Note that this is assuming Homeritz business will not grow anymore from now, not even with the rate of inflation.

Posted by Ooi Teik Bee > 2013-08-16 20:38 | Report Abuse

Dear Mr Tan KW,

You just insert any price chart is good enough. Do you have any price chart ? If not, never mind.

Thank you.
Ooi

Posted by Ooi Teik Bee > 2013-08-16 20:47 | Report Abuse

Dear Mr Tan KW,

Ok. very good.

Thank you.
Ooi

Posted by shirley1 > 2013-08-16 20:47 | Report Abuse

tankw, i think you are a very kind person.. i do believe in real life you a good person too :)

Posted by shirley1 > 2013-08-16 20:56 | Report Abuse

Tankw, dont get me wrong, i sincerely feel you a good and helpful person :)

Posted by Lollipot Anison > 2013-08-16 20:57 | Report Abuse

Any new stock to recommend Mr. Ooi?

Posted by Ooi Teik Bee > 2013-08-16 21:00 | Report Abuse

None. I want the stock can go up by 50%. This is very difficult to find it now. Please be patience to wait. I have one in mind, but the buy sign is not out yet.

Thank you.
Ooi

Posted by inwest88 > 2013-08-16 21:05 | Report Abuse

otb, do you think that the non-stop uptrend of LBS WA is defying the logic of TA ?

Posted by Ooi Teik Bee > 2013-08-16 21:07 | Report Abuse

No. Please be patience, the price will correct. I will let you know what is the good price to enter.

Thank you.
Ooi

Posted by inwest88 > 2013-08-16 21:08 | Report Abuse

Thanks Ooi.

Posted by Daniel Ck > 2013-08-16 21:09 | Report Abuse

Tan...thanks for the cold eye blog...

Posted by Ooi Teik Bee > 2013-08-16 21:28 | Report Abuse

Dear Mr Tan KW,

Thank you for good job done.

Best regards always,
Ooi

Posted by money_lov3r > 2013-08-16 21:37 | Report Abuse

How normally mr.ooi inform his pick?

Posted by Ooi Teik Bee > 2013-08-16 21:42 |

Post removed.Why?

Posted by Ooi Teik Bee > 2013-08-16 21:54 | Report Abuse

Dear Mr Tan KW,

80% of the cash. Try to reduce number of stock to invest. I want to buy stock which I think can go up by 50%. If not, I am not interested.

Thank you.
Ooi

Posted by wm83 > 2013-08-16 22:06 | Report Abuse

by a month - although that's too good to be true, i'm happy to listen! :D

Posted by Ooi Teik Bee > 2013-08-16 22:16 | Report Abuse

I do not know when, I just follow my target price. I do not hold it very long, I hold them for about 3 to 4 months. I sell them when I feel that the price is too high. I will buy back when the price retraces back to a lower price. I do not put equal weight on all 9 stocks, I buy base on the best chart and ROI is the highest. Investment sum is adjusted according to ROI. Thank you.

Posted by 東风 > 2013-08-16 23:52 | Report Abuse

Mr Ooi, based on your buy high sell high experience, what is the successful rate?

Thanks

Posted by bigFAT > 2013-08-17 00:04 | Report Abuse

Posted by Ooi Teik Bee > Aug 16, 2013 09:54 PM | Report Abuse

Dear Mr Tan KW,

80% of the cash. Try to reduce number of stock to invest. I want to buy stock which I think can go up by 50%. If not, I am not interested.

Thank you.
Ooi
------------

u should have been so rich after these 10-20-30 years...apa lagi mau...if me i will retire...kubur panggil mali..so enjoy your money don't chase and chase-non-stop...no offence...enjoy your life...don't waste it after u have achieved it???
------
it seems u're very succesful...makes me envy of u...but my advice is sincere...enjoy your gains...bursa is not heaven for us to involved non-stop

Posted by Ooi Teik Bee > 2013-08-17 00:04 |

Post removed.Why?

Posted by bigFAT > 2013-08-17 00:24 | Report Abuse

sorry for my rudeness and inconsiderate...but u still have time to enjoy..life is out there..not bursa

Posted by bsngpg > 2013-08-17 10:14 | Report Abuse

Hi Tan KW: I perceive that you are a strong follower of Cold Eye, maybe I am wrong. I do not think Cold Eye encourages people to put 80% of fund into Bursa especially during the hot time as current. If it is a crisis time (=Christmas Sale), I will almost all in by stages. For this year, I almost do not put in any new fund except switching counters. Instead one dilemma is bothering me each day that if I should I sell now and wait for the next bear to go in back. I do not want to earn hot money as those technical players who earn by catching the flying bull and stay far away from drowning bear. Whereas I stupidly “TRY” very hard to be a contrarian to lend helpful hand to the poor bear and drowning along instead of fueling the up high bull. What do you think?

Posted by Ooi Teik Bee > 2013-08-17 11:45 | Report Abuse

It is a bull market, I want to invest to make fast money. When it is a bear market, I will got out from this bear market completely. There is no sign that bear market is coming.
A very good indicator whether market is bull or bear, 200 days SMA. Please get all out when 200 days SMA is broken.
Thank you.

Posted by nicholes > 2013-08-17 12:00 | Report Abuse

MR OOI can i know when is the right time to buy lbs-wa or teach me how to see??

Posted by choolooi > 2013-08-17 12:16 | Report Abuse

Mr Ooi, pls inform when the bear is approaching from your TA reading.

I believe many who follow u , TAn KW and Chongnz in the threads relating to the stock challenge would be grateful

Posted by faberlicious > 2013-08-17 12:44 | Report Abuse

Hi KC,I refer to Homeritz

How did u get the 203% in CFFO 20071 203% and 45% in "The quality of the business comes from its pricing power as shown by its high gross margin of 45%.

Posted by bsngpg > 2013-08-17 12:45 | Report Abuse

Thought sharing LIMITED to those who believe in Cold Eye: "if the market is predictable, there are no beggars on the street. and 《大時代丁蟹》劇集would not be interesting as the market is predictable”.

Posted by Ooi Teik Bee > 2013-08-17 12:49 | Report Abuse

Dear Mr Tan KW,

80% of the cash.
I do not put equal weight on all 9 stocks, I buy base on the best chart and ROI is the highest. Investment sum is adjusted according to ROI. Thank you.

Posted by Ooi Teik Bee > 2013-08-17 13:14 |

Post removed.Why?

Posted by kcchongnz > 2013-08-17 14:41 | Report Abuse

Posted by faberlicious > Aug 17, 2013 12:44 PM | Report Abuse
Hi KC,I refer to Homeritz
How did u get the 203% in CFFO 20071 203% and 45% in "The quality of the business comes from its pricing power as shown by its high gross margin of 45%.

Don't get your question on CFFO. Can you check and see what is your question again?

Regarding gross profit margin, not very sure if it is right as there is no item on "cost of goods sold" as a line in the income statement. I took the gross profit as the revenue less "change in inventories" and "raw materials used".

So gross margin is gross profit/revenue.

Posted by faberlicious > 2013-08-17 21:05 | Report Abuse

Ok.I paste here your posting

I have already described the great business Homeritz has. Can we use the 5 rules of cold Eye to evaluate if Homeritz is a good buy.

Homeriz 0.460 16/08/2013
1 ROE 20.2% >12% Yes
Net profit 14698
Equity 72785
2 Cash flows
(CFFO 20071 203% Yes)
FCF 18925 >NP Yes
3 PE ratio 6.3 <8 Yes
Price 0.460
EPS 0.07349
4 Dividend yield
Dividend , sen 0.030
Dividend yield 6.5% >3% Yes
5 Price/NTA 1.3 <1.5 ok
NTA 0.36

My question refers to that(in brackets).Macam mana u dapat itu 203%?

Posted by ladzatz > 2013-08-18 00:09 | Report Abuse

5 Price/NTA 1.3 <1.5 ok?

so
Price/NTA
= 0.46/0.38
= 1.21 ...which < 1.5 so ...ok?

so max price should be 0.38 x 1.5 = RM 0.57
so that
Price/NTA
= 0.57 / 0.38
(latest nta=0.38...not 0.36...based on quarterly)
so that
= 1.5...max ratio

kcchong u stated that :
The intrinsic value of Homeritz using the EPV is 64 sen per share

---however the 5 rules doesn't stated that...isn't it?

so the max price based on the 5th rules is now being maxed again???

=> 0.38 => 0.46 => 0.57 => 0.64
the 4th price doesn't follow the rules...

whatever it is called, if price = 0.64
...
Price/NTA

= now, Price/NTA NTA which is now still 38 cents
= 0.64/0.38
= 1.684 which is >1.5 which is not OK?

but if u simply change that NTA to NTA' where NTA'= 64 cents, then

Price/NTA
= New Price / NTA'
= New Price / 0.64

so to fullfill the 5th rules with max ratio = 1.5
we'll get this equation

New Price / 0.64 = 1.5
New Price = 1.5 x 0.64
= RM 0.96
New Price which is = max price = RM 0.96 ?

by the way 0.96/0.38 = 2.53


this means the 5th rule has changed from

Price/NTA < 1.5 is OK

into new rule which is

Price/NTA < 2.53 is OK ??????????????

this is too much kcchong...or should the nta in accounting be diminished and change into "net intrinsic value"

Posted by Ooi Teik Bee > 2013-08-18 00:12 | Report Abuse

Dear Mr Tan KW,

The chart for Homeriz is very good, the price is breaking new high if 0.46 is broken. There is a good chance the price can hit 0.68. I like this type of chart.

Thank you.
Ooi

Posted by ladzatz > 2013-08-18 00:34 | Report Abuse

2nd question kcchong is...fr your chart, what made it jump down from jan 2010 at about 65 cents to about 22 cents just few months before jan 2012?

Posted by ladzatz > 2013-08-18 00:51 | Report Abuse

well i think i answer mysel the 2nd question. After ichecked the no.of shares has increase 3 times which is from 67m to 193m (then few months latter into 200m)..may be that's why...
----
now this give rise to 3rd question...why it doesn't depreciate just after the increase in no of share 'immediately'???...why fr 65 to 22 cents in 2 years?
----
is it because the directors/major shareholders sell slowly? within 2 years with most approximately "uniformly" downward?
Doesn't this shows that the directors/majority shareholders are manipulative?
----
within 2 years falls almost uniformly...this is what u called

"slow torture" + "acute torment"
-----
buy but take profit not too much or u'll be tortured for long period
purposefully deliberately.

Posted by ladzatz > 2013-08-18 00:54 | Report Abuse

or just may be the price increases because promoted by kcchong and agreed by ooi??? if that's the case...no need to ask any knowledge fr them...just follow-lah...

Posted by ladzatz > 2013-08-18 01:02 | Report Abuse

by the way the daily volume is very thin for a penny stock with no of shares 200m...the major shareholder/directors may be waiting to repeat what they have done ...yes may be at 68 cents...then someone will suffer like before
----
buy buy but careful don't play2

Posted by kcchongnz > 2013-08-18 02:39 | Report Abuse

Posted by faberlicious > Aug 17, 2013 09:05 PM | Report Abuse
Ok.I paste here your posting

2 Cash flows
(CFFO 20071 203% Yes)
FCF 18925 >NP Yes

My question refers to that(in brackets).Macam mana u dapat itu 203%?


I also don't know how I got that. It should read:
CFFO/NI= 20071/16750=120%. Typing error in that percentage.

The conclusion remains as CFFO/NI>100%.

Posted by kcchongnz > 2013-08-18 02:55 | Report Abuse

Posted by ladzatz > Aug 18, 2013 12:34 AM | Report Abuse
2nd question kcchong is...fr your chart, what made it jump down from jan 2010 at about 65 cents to about 22 cents just few months before jan 2012?


DIDN'T I SAY A DROP OF ABOUT 50% OF ITS NET PROFIT?


Posted by ladzatz > Aug 18, 2013 12:51 AM | Report Abuse
well i think i answer mysel the 2nd question. After ichecked the no.of shares has increase 3 times which is from 67m to 193m (then few months latter into 200m)..may be that's why...

THE PRICE CHART FROM YAHOO FINANCE HAS ADJUSTED FOR BONUS, RIGHTS DIVIDEND ETC, I BELIEVE. DO YOU SEE ANY SUDDEN DROP IN PRICE FROM 65 SEN TO 22 SEN?
----
now this give rise to 3rd question...why it doesn't depreciate just after the increase in no of share 'immediately'???...why fr 65 to 22 cents in 2 years?

YOU ARE CONTRADICTING YOURSELF HERE, AREN'T YOU?
----
is it because the directors/major shareholders sell slowly? within 2 years with most approximately "uniformly" downward?
Doesn't this shows that the directors/majority shareholders are manipulative?

GOOD TO QUESTION YOURSELF BEFORE BUYING BUT DO YOU SEE THE CHANGE IN THEIR SHAREHOLDINGS?
----
within 2 years falls almost uniformly...this is what u called

"slow torture" + "acute torment"

YEAH BE CAREFUL OF GETTING YOURSELF INTO THIS SITUATION. BUT HAVE I ASKED YOU TO BUY HOMERITZ TO GET YOU INTO THIS SITUATION?
-----
buy but take profit not too much or u'll be tortured for long period
purposefully deliberately.


REGARDING YOUR OTHER QUESTIONS, OBVIOUSLY YOU ARE CONFUSED WITH WHAT "INTRINSIC VALUE" IS AND WHAT THE 5-YARDSTICKS OF COLDEYE TRYING TO MEASURE. GO GOOGLE WHAT IS "INTRINSIC VALUE" IS AND WHAT ARE THE WAYS OF TRYING TO GET THIS VALUE.

Posted by inwest88 > 2013-08-18 07:08 | Report Abuse

kc, i f you take a look at the Muhibbah thread, it seems that the price will jump following the announcement by the PM on a big job. What do you think ? Just to get your opinion. Normally I do not subscribe tot he herd mentality.

Posted by faberlicious > 2013-08-18 07:51 | Report Abuse

Ah,now the equation and percentage baru betul. KC,terima kasih.Btw,got another question, does 'purchase of intangible assets' included in capex calculation?

Posted by Robert123 > 2013-08-18 08:16 | Report Abuse

OTB, there is a strong resistance at 46.5 sen, expect to pull back before resume uptrend....

Posted by Robert123 > 2013-08-18 08:38 | Report Abuse

KCCHONGNZ,been following ur postings for few months, amaze at ur stock picks, will ask ur FA comments on SCGM and Kheesan.... No hurry, just to learn ....

Posted by kcchongnz > 2013-08-18 10:01 | Report Abuse

TanKW,
You are damn great!

Btw, TanKW posted so many good articles on FA. To me they are better than what we wrote about in our stock picks. Just wonder anybody interested in learning FA read them.

Posted by kcchongnz > 2013-08-18 10:04 | Report Abuse

Posted by inwest88 > Aug 18, 2013 07:08 AM | Report Abuse
kc, i f you take a look at the Muhibbah thread, it seems that the price will jump following the announcement by the PM on a big job. What do you think ? Just to get your opinion. Normally I do not subscribe tot he herd mentality.

inwest88, by now you should know about my investment philosophy, haven't you?

Tell you what, I would normally pay attention if just one of the forumer talks about it and nobody else pay attention. When everybody talks about it, I normally don't bother. It is just me.

Posted by bsngpg > 2013-08-18 10:08 | Report Abuse

Hi Tan KW and KC Chong: where did you read that Cold Eye mentions about the 5 yardsticks. Please post that article as I am very interested to read in detail. Thank you very much.