Posted by Leong Nguk Foong > 2014-03-04 22:19 | Report Abuse

Thanks for the info. Totally agreed with your view.

Posted by kcchongnz > 2014-03-05 10:29 | Report Abuse

Posted by stockoperator > Mar 4, 2014 11:18 PM | Report Abuse

Well back to Pintaras/construction sector, the income is not recurring.Can the company grow in size in times to come? Business Yes. But can company grow in size? The only way company value will grow is the company becoming bigger and bigger and becoming more valuable.


Pintaras made 35 sen per share for the trailing twelve months, or an earnings yield of 12%. Its operation provided 24 sen per share in free cash flow last year. It distributed 15 sen per share (DY=5%) last year. Pintaras has been paying increasing dividends every year. With its huge amount of cash of RM1.00 per share, there is high likelihood that Pintaras will continue to pay higher dividend for the next few years.

So do I need Pintaras to grow its revenue and profit before I invest in it at the present price? I don't think so.

Not withstanding that, Pintaras is also likely to grow its revenue and net profit for the coming years with the buoyant construction industries. The growth will be a bonus. Best of all, we don't need to pay extra for this expected growth for a satisfactory return.

Hence for me the best thing in investing in a stock is its cheapness now but good, rather than its future outlook (growth expectation), which is unknowable and unpredictable.

Posted by kcchongnz > 2014-03-05 11:17 | Report Abuse

Posted by stockoperator > Mar 5, 2014 09:16 AM | Report Abuse

In that sense I would say I like your MFCB much more Only that I am pondering whether it is a low margin Business.

Is a business with operating and net profit margin of 22% and 17% respectively a low margin business? Please read again my post on MFCB below:

http://klse.i3investor.com/blogs/kcchongnz/47535.jsp

The more important metric you should care about is the return of equity. That is how much a business earned with the equity outlay. Even if a business is of low margin, ROE can be high too if it has high asset turnover, and/or high leverage. Harrison and DKSH has low margins in their business, but their ROEs are high and much more than the costs of capitals.

Posted by stockoperator > 2014-03-05 11:31 | Report Abuse

As you said earning yield 12% DY 5% retained earning/shareholder funds 7% good company/growth in near future/long term depends how business evolve, not bad not excellence either ya.

Posted by stockoperator > 2014-03-05 11:52 | Report Abuse

If we can ascertain with confidence and high percentage of accuracy of discounted future cash flow of certain durable business for the next 20-30 years we will know with more confidence then it is top priced or lower priced compared with other alternative investment/savings.

Posted by kcchongnz > 2014-03-05 12:00 | Report Abuse

Posted by stockoperator > Mar 5, 2014 11:31 AM | Report Abuse

As you said earning yield 12% DY 5% retained earning/shareholder funds 7% good company/growth in near future/long term depends how business evolve, not bad not excellence either ya.

You are right. Earnings yield (E/P) of 12% and a DY of 5% is nothing to shout about. But you have not considered the excess cash holding of RM1 per share which could be distributed all to shareholders without affecting the business, or invest in some other profitable ventures to earn more income for shareholders.

The business can theoretically borrow 160m and distribute another RM1 per share to shareholders to have a optimum capital structure of 64%:36% equity:debt, and still does not affect its earnings yield much.

That is the power of the cash it has.

Posted by kcchongnz > 2014-03-05 12:10 | Report Abuse

Posted by stockoperator > Mar 5, 2014 11:52 AM | Report Abuse

If we can ascertain with confidence and high percentage of accuracy of discounted future cash flow of certain durable business for the next 20-30 years we will know with more confidence then it is top priced or lower priced compared with other alternative investment/savings.

Who can "ascertain with confidence and high percentage of accuracy of discounted future cash flow of certain durable business for the next 20-30 years"? Definitely not me. And I don't think anybody can, not even for the next 5 years.

That is why it pays to be conservative. For example Pintaras net profit has been growing at a CAGR of 25% for the last 6 years, I only assume it grows at 5% for the next 10 years, and 3% thereafter. Even that it is just an assumption. It can grow higher or lower, but the important thing is must try to be conservative.

Posted by stockoperator > 2014-03-05 12:10 | Report Abuse

This investment game is best played out like this=Minority/A few have high confidence and majority have low confidence. Since majority have low confidence so the price would be stagnant for years while minority keeps accumulation. At the meantime company is growing from strength to strength until One day there is re-rating.

Posted by stockoperator > 2014-03-05 12:53 | Report Abuse

Fair enough that is your systemic approach. you keep on Buying undervalued stocks and sell it when it reached your intrinsic value and repeat that over. Fair enough. One question, how do you know when you are wrong? When the figure turns bad? Any exit strategy?

Posted by stockoperator > 2014-03-05 14:23 | Report Abuse

You said it well when you advocate 1)High DY/Net cash/FCF over Revenue as I believe Business is War time and Cash is War Chest for defense and attack. 2)Conservative Growth projection and Growth is a Bonus. Especially when you keep faith on Fima/Kfima business and remains unfazed while its cyclical plantation profit is on decline for past 2 years as you believe in its Business. 3) High return over Asset/Capital employed to prove that this is a high margin business.

So when time is bad figure is bad and business perspective is bad and market down 20% You have to exit the market right?

Posted by stockoperator > 2014-03-05 14:37 | Report Abuse

You start to have doubts over your company selection right? Or your answer is certain business Yes. Certain business No. Why our answer to certain business is No and in fact we are glad that price falls 20%. Our trust is like a religion pilgrimage.

Posted by stockoperator > 2014-03-05 14:48 | Report Abuse

With the trust in the Business Perspective itself dont you think you can Buy when price is reasonable, even when it is top priced? Or lower priced when market is bad. Even depressedly priced when company is in crisis/trouble.

Posted by stockoperator > 2014-03-05 15:00 | Report Abuse

Choose the company with your answer NO=I wont sell this one even when the figures are bad. this is our investment baptism. And keep doing what you are good at.

Posted by chunghiung > 2014-03-05 22:59 | Report Abuse

Where can buy the book of ValueGrowth investing strategy of Glen Arnold in Malaysia?

Posted by GenghisHoe > 2014-03-26 07:43 | Report Abuse

chunghiung I did find it through Popular, MPH, Borders but they didn't sell. Perhaps can grab one through Kinokuniya.

Or Mr.kcchongnz have a soft copy of ebook? ^^

Posted by OptimusX8 > 2014-03-26 07:45 | Report Abuse

All u need is only 1 book, reminiscences of a stock operator. Throw the rest into garbage bin.

Posted by GenghisHoe > 2014-03-26 08:48 | Report Abuse

Hey dude, knowledge is unlimited why do you wanna try to limit yourself? Nice to meet you.

Posted by kcchongnz > 2014-03-29 18:20 | Report Abuse

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.

Posted by Horsefield > 2014-03-30 13:23 | Report Abuse

I was told that the book is out of print (stop publishing) by Kinokuniya SG. I guess Amazon is the only option.

Posted by stockoperator > 2014-03-31 10:39 | Report Abuse

Investor should try to understand item 1 and 2 and 3 better with deep business sense and common sense. Item 4 and 5 and 6 is quite time testing and might change quarter to quarter and year to year sometimes because of market conditions. Item 1 and 2 and 3 will not change for long period of time as good management is in place and economy moats is there. My emphasize is always on 123 then 456 Not the other way around. TOO many people is doing 456 Only. Why? Speculation? Too hard to resist 456? Too difficult to understand 123? After 123 and then 456 there is only Not the company that we want? Foe me, if I cant understand 123 of a company, there is No need to go thru 456. Does not matter if profit soars, deeply undervalued, cash rich, high margin and so on as i cant understand 123.

Posted by stockoperator > 2014-03-31 10:47 | 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.

Posted by stockoperator > 2014-03-31 11:03 | Report Abuse

Ya 123 is too argumentative and boring and 456 is hard facts and figures and eye glaring. So we just to do 456, how can 123 be wrong if 456 is fantastic, right? Make money first and study later right?

Posted by kcchongnz > 2014-03-31 12:25 | Report Abuse

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.