Posted by sunztzhe > 2014-06-09 11:18 | Report Abuse

Wow I am really impressed with the length and depth of your thoughts on Value investment.

My sole objective in investment is I want Good capital Gains over a certain period of time but certainly not eternity.

The most important criteria to realize capital gain is to look for companies which has the Prospect of INCREASING EPS Growth over a time period.

Why? It is very simple. As EPS grows so will its share price.

Posted by kcchongnz > 2014-06-09 11:31 | Report Abuse

sunztzhe, you advocate about growth of EPS so much, can you provide me with a satisfactory answer to my question below?

A company with $10 million in net income takes on $1 billion in debt and, after interest costs, earns an additional $10 million, that will increase earnings by 100%, big jump in EPS.

But do you think its share price should jump too? Would you chase the share price of that stock?

Posted by sunztzhe > 2014-06-09 11:33 | Report Abuse

Wow I am really impressed with the length and depth of your thoughts on Value investment but I will keep it short and sweet!!

My sole objective in investment is I want Good capital Gains over a certain period of time but certainly not eternity.

The most important criteria to realize capital gain is to look for companies which has the Prospect of INCREASING EPS Growth over a time period.

If EPS keep on increasing, I hold.
If EPS plateaus, I sell 50%
If EPS dips, I sell out completely.

Why? It is very simple. As EPS grows so will its share price. If EPS drops, its share price will also drop.

Posted by sunztzhe > 2014-06-09 11:40 | Report Abuse

I will buy in when the share price is at the bottom or just coming off the bottom. I depend on TA for a confirmation on when to buy in. No, I shall not chase the share price of any company no matter how good the perception is.

Posted by stockoperator > 2014-06-09 11:47 | Report Abuse

Dear Raider,

You have good definition.

What if i pay a fair value NOW instead of Margin of Safety according to your definition, and years later the company grows in size and revenue and profit. So can i say i am paying a very good discounted cheap price TODAY?

What does it matter if you pay Rm11, 12, 13, 14 or Rm15 for Public right? Now is RM20. One day it does not matter also if you pay RM20 for Public as it is already RM25, fair?

You can opt to Buy anything at fair price, But if there is Discount then you Buy more loh! IF there is No discount, you buy a bit loh, fair?

Posted by stockraider > 2014-06-09 11:47 | Report Abuse

Raider think valuation is not so simple it consist many facets mah..!!

1) Sustainable Earning yield....like PE
2) Grows in Earnings
3) High NTA agst share price
4) Breakout value agst share price
5) Strong maintainable Dividend yield
6) Big Strong prospect

Basically value investor looks....for big margin of safety v share price loh....!!

For earning growth approach.....it actually fall in one area of the growth investment mah....!

Posted by sunztzhe > 2014-06-09 11:47 | Report Abuse

I will focus on companies that generate increasing EPS from its core business operations.

Posted by stockraider > 2014-06-09 11:54 | Report Abuse

What is fair value ?

Take Pbank...Rm 20.8
Dividend yield 3% pa
PE 17.8......!!

I think Pbank already fair value....!!
If it Grows 10%....PE still 16x .....dividend yield 3.3% pa.

A risk adverse investor.....willing to settle for 3% to 8% pa....can settle for Pbank loh....!!

IF u a Discount rate 10% pa....PBank at Rm 20.8....is definitely overvalue loh....!!

If u use a Discount rate 3% pa....Pbank is undervalue mah....!!

Posted by stockoperator > 2014-06-09 11:59 | Report Abuse

Dear Calvin,

Your son's Singapore conference is the proof that in the short term, market is a voting machine. That is all ya.

Learn to Respect the Market. Price going down for Good Reason. Price going up for Good Reasons as well. Never jump to Conclusion that You are Right and Market is Wrong all the time, ya.

I am not saying you are wrong. Judge the MISPRICING more Intelligently ya.

Posted by sunztzhe > 2014-06-09 11:59 | Report Abuse

huh..Why use a discount rate of 3% when the real inflation rate is already hitting 7% to 8%??

Posted by leno > 2014-06-09 11:59 | Report Abuse

kekekekek ... so much CRAP here. SO SIMPLE yet wan to make it DIFFICULT ... that's what make Super Intelligent Investor like LENO the Most Panlai laughing KEKEKEKEKEK ...KEKEKEKEKEKKEK

Posted by stockoperator > 2014-06-09 12:03 | Report Abuse

Dear Raider, you will be doing very well ya.

Posted by stockoperator > 2014-06-09 12:08 | Report Abuse

Suntzthe, Public is at fair value according to lots of standards and model of Valuation. I am just making a point of Buy and Holding on to your investment even at fair Value.

Posted by stockraider > 2014-06-09 12:08 | Report Abuse

Why 3% discount rate ?

Lets face the fact loh....70% of people in msia use....this rate ...by putting their monies in the fixed deposits mah....!!
This is despite...inflation rate is higher....but this is due to the risk...adverse nature mah....!!

So...if they step fwd n they put monies...in Pbank share....instead....of fixed deposits...they can justify for a slightly higher return mah...!!

Posted by sunztzhe > 2014-06-09 12:14 | Report Abuse

stockraider,
FD is not inflation hedge lah. Real inflation of 8% will over time eat up your FD purchasing power lah. So the discount rate must be much higher or at least be equal to the real inflation rate lah.

Posted by kcchongnz > 2014-06-09 12:17 | Report Abuse

Posted by sunztzhe > Jun 9, 2014 11:33 AM | Report Abuse

Why? It is very simple. As EPS grows so will its share price. If EPS drops, its share price will also drop.

A company with $10 million in net income takes on $1 billion in debt and, after interest costs, earns an additional $10 million, that will increase earnings by 100%, big jump in EPS.

The following year, borrow another 2b and double the EPS again.

So would you think the share price will grow?

Posted by sunztzhe > 2014-06-09 12:18 | Report Abuse

stockoperator,
Is Public Bank Malaysia connected in any way connected with the Public Financial Group that is listed on the HKSE?

Posted by calvintaneng > 2014-06-09 12:19 | Report Abuse

Leno,

Ha!Ha!Ha!

Not everyone so clever like you. Need to learn more stuff every day. Life is really is learning journey. Life is not static. If we rest we will rust soon.

Posted by leno > 2014-06-09 12:22 | Report Abuse

inflation rise , FD also rise mar .. economy for dummies also got teach lor ... kekekekek ... and wat is inflation? inflation same to everi one meh ? U drive car 2-3 hours everi day to work, i sit at home drink ribena for fuel ... got same or not ? So, between FD and inflation ..of course take FD as simple bench mark mar. KEKEKEKEK .. got correct or not leno say ? Sure Correct wan.

Posted by stockoperator > 2014-06-09 12:25 | Report Abuse

Suntzthe,

Raider has good presentation:

If your expectation is low and long term, Public is could be considered.

So if you have high expectation of return and in fact, cost of capital is much higher, then Public is expensive.

Posted by sunztzhe > 2014-06-09 12:27 | Report Abuse

I will be wary of companies with excessive gearing which exceed equity capital by 2.5 X.

Besides EPS growth , increasing ROCE is also a critical info to monitor to factor in the returns from the use of debt financing.

Posted by leno > 2014-06-09 12:29 | Report Abuse

u see leno keep collecting PKRCorp all the way from below RM 1.30 (when one fellow keep value PRKCorp below RM 1.00). Now RM 3.64 .. so wat ? We know Payout is RM 3.90 mar in 3 months times = 7.1% = 28 % p.a. Borrow margin 4% p.a. or 1% interest per 3 months. Meaning FREE MONEY lor. Borrow RM 1 million to buy PRKCorp and make RM 60 k within 3 months after pay interest mar. Easy moozy ... where got need to predict EPS growth ? Where got compare with FD. Wat inflation sheet u tok kok about ? Tis is called VALUE INVESTING LAR ... u still no belief hah ? KEKEKEKEKKEK .... KAKAKAKAKAKAK

Posted by cheongcy > 2014-06-09 12:33 | Report Abuse

Hi kcchongnz, I think your question very tricky to answer. Your question recall me a company, Megan Media. Assuming now is 2005 / 06, and we do not know or cannot predict what will happen to Megan in 2007. Wow, fantastic report, sales doubled up, EPS doubled up, but debt double up, PPE spending almost 45% of sales, and PE just damn low at 5 or 2 I couldn't remember.

So, shall we buy Megan? huge jump for EPS, huge Jump for Sales!! And even ROE maintained at double digit!!

Similar case to LonBisc, although low ROE, Sales growing tremendously, so does EPS. And it is selling at dirt cheap PE. Shall we buy? (I have to intention to say that Lonbisc is same as Megan, just an example here)

Posted by leno > 2014-06-09 12:39 |

Post removed.Why?

Posted by leno > 2014-06-09 12:51 | Report Abuse

Lonbisc - cash RM 25 m vs TL RM 306 m ... WoW ! Where got value investor wan to touch tis one ? where got safety of margin ? Where got value investor simply use NTA to share price to compare ? Onli Amateur will take NTA as intrinsic value lor. CASH is KING ! AUDITED CASH is KING KONG lor. Better go wallap PMCorp 22.5 sen mar ... like Leno the Most Panlai Investor hor ... KIKIKIKIKIKIK ...

Posted by cheongcy > 2014-06-09 12:59 | Report Abuse

Hi Leno, I started stock investment only 4 - 5yrs back and I do not have accounting background. It just so happened I came across Megan and study its report. Yes, now we knew what is happening to Magan next and can easily speak out :" I won't buy due to its high receivables.". As I mentioned, to get rid of our own bias, assuming now is 2005 / 06 and know nothing about what will happen next. The high receivables contained huge deposits or prepayment for PPE, taking that off from receivables, its receivable days was about 118 or 120 days where this may not a desirable figure, but possibly still acceptable. Also, Auditor for Megan was one of the Big Four.
Therefore, I believe any of the investor can easily fall into trap like Megan. They can always find explanation due to the fantastic on paper figures.

Anyway, Leno, if a company able to pay high dividend, but it its current ratio is below 1 and quick ratio is 0.46 something, will you buy?

Posted by calvintaneng > 2014-06-09 13:01 | Report Abuse

Cheongcy,

I bought Megan Media as a newbie back then at 78 cts. P/E 3, NTA over RM2.00 and pays a small dividend. They even announce venturing into blue ray disc production.

I met a Remisier and my Johor Friend whom I called "Sifu" later. Both The Remisier (MBA Holder) & Johor Sifu were Accountants. The Remisier Is For Megan Media While My Johor Sifu is against.

Remisier said Low P/E Plus High NTA. My Sifu Said "Profits" Were Under Receivables. To him as long as monies not in hand or in the Bank is "not real money"

At that time I was not sure so I monitored the screen diligently. One Day I say Directors Dumping in HUGE VOLUMES. Not knowing anything as yet I Sold Off All Megan Media at 76 Cts. To my surprise - after selling off at 76 cts the share price even rebounded to near 80 cts on closing.

I was puzzled but just watched. Few days later Directors completely Sold Out & parachuted. Not Long after Megan Media went Limit Down Twice To About 35 cts - about half its value.

At this juncture The Remisier has 2 customers - an elderly man and a young man. One elderly one decided to cut lost and sold all. The younger man went in to buy more Megan Media to average down. When market finally closed shop for Megan Media it was found that receivables were fake. And also the factory for blue ray disc is also non existence. The address given is also fake. If someone has just checked on it earlier many would have been warned.

That's why I always like to visit Factories/ assets to see if it's real.

Posted by stockoperator > 2014-06-09 13:08 | Report Abuse

My Dear Calvin, for example for Kluang, Sg Bagan and Kuchai, everybody also tempted But where can we go and verify all their lands and assets? I suspect they are Not plantable, if Not who does not want to replant with palm tree given that they are cash rich?? We cant say what is right or wrong as where is the facts right? You might know and ask around if my suspicions is correct since you are in Johor.

Posted by cheongcy > 2014-06-09 13:13 | Report Abuse

Hi Stockoperator, I have simply gone through Kluang, SgBagan, and Kuchai. All thses 3 companies are controlled by the same family if not mistaken. I believe these 3 companies do not really doing or focusing on plantation business, they are more on long term investment, either property, securities or anything else, no one know and too little info. But what I believe, most of their assets are hard cash or highly liquidable. Still the biggest doubt is, what kind of investment they actually involved in.

Posted by stockoperator > 2014-06-09 14:04 | Report Abuse

Thanks Cheong

Really?..then i am mistaken. The safest of all Net asset company ya? Will market give them Business Value + Cash + Investment Value?

Well, investment value is discounted Now.

Posted by speakup > 2014-06-09 14:12 | Report Abuse

sounds lke China listed firms in bursa :-)

Posted by sunztzhe > 2014-06-09 14:16 | Report Abuse

OK fraud accounting for dummies
- Tons of Cash at Bank but zero authentic proof
- Borrow money at high interest cost when got tons of money in FD earning low interest rate
- Fictitious invoices
- Fictitious claims
- Fictitious stocks
- Recycled inventories
- Inflated stock values
- Fictitious Receivables
- Receivables days increasing
- Fictitious payable
- Fictitious Expenses
- Fictitious short and long term investments
- Fictitious capital investment

What else have been missed out?? Any ideas?? This sitting down shaking legs can do lah. Why not?

Posted by stockraider > 2014-06-09 14:58 | Report Abuse

That's why market...always give a discount...on company where they are not comfortable with the owner corporate governance.
Example....FACB....the net cash is Rm 1.70....but share price Rm 1.39.
Also NTA Rm 2.40.......why so much discount ?

Value investor....have to decide....whether the huge margin of safety..is a worthwhile bets....taking into account the corporate governance loh......!!

Posted by speakup > 2014-06-09 14:59 | Report Abuse

bcoz FACB dont want to reward shareholders with big fat angpow.

Posted by speakup > 2014-06-09 15:00 | Report Abuse

FACB want to keep the money to save their KBUNAI investment!

Posted by stockraider > 2014-06-09 15:05 | Report Abuse

Market perceive....they will salvage kabunai....but is it official & real ?
Not sure mah.....!!

If it is real....market....is right to rate it a big discount loh...!!

If it is wrong....market...will rerate..Facb & trade it at higher price loh....!!

For value investor....they need to pick the right value stock....based on the interaction of markets dynamic loh....!!

Posted by sunztzhe > 2014-06-09 15:07 | Report Abuse

Stockraider,
I do not look at high NTA or Dividend payout. I look at Equity Capital vs Total debt first. Then go for increasing EPS growth, increasing ROCE growth where Earnings comes directly from BUSINESS Operations...

Posted by stockraider > 2014-06-09 15:10 | Report Abuse

This is growth investment mah....!!
Not wrong loh.....!!

For value investors....they are many more alternative approach mah...!

Posted by sunztzhe > 2014-06-09 15:19 | Report Abuse

Is not Growth in EPS, ROCE considered Value Investment? What drives up share price value is growth, Right?

Companies with high NTA, inconsistent EPS & ROCE growth or uncertain or negative growth, ably supported by poor/weak management, untrustworthy management, management with no idea how to create value, crooked management, lepak lepak management...what is the point of investing in these companies?

Posted by stockraider > 2014-06-09 15:27 | Report Abuse

Is not Growth in EPS, ROCE considered Value Investment? What drives up share price value is growth, Right?

Companies with high NTA, inconsistent EPS & ROCE growth or uncertain or negative growth, ably supported by poor/weak management, untrustworthy management, management with no idea how to create value, crooked management...what is the point of investing in these companies

STOCK IS ACTUALLY BOND LIKE LOH.....!!
THAT MEANS IF USA 30 YRS BOND....IS SAY 4% PA.....THAT MEANS ALL YOUR INVESTMENT IS BENCHMARK AGAINST THIS LOH.....!!

SO IF A STOCK IS TRADING AT ALL IN 10% YIELD MEANS....THERE IS A DISCOUNT....UNDERVALUE.....NEED FURTHER INVESTIGATION MAH....!!

SUPPOSE....THE STOCK...IS TRADING....AT RM 1.00 BUT THE BREAKOUT VALUE....IS RM 5.00....WE NEED TO TAKE A LOOK MAH. THATS HOW LENO FOUND PERAK CORP....!!

AGAIN...IF DIVIDEND YIELD 6 TO 8%PA ....AGAIN THERE IS A POTENTIAL UNDERVALUATION.....NEED TO TAKE A LOOK TOO.

ONE OF THE MOST POPULAR....STOCK SELECTION....IS GROWTH IN EARNINGS...AND WIDELY ACCEPTED BY FUND MANAGERS AND ANALYST....BUT BCOS IT IS POPULAR & WIDELY ACCEPTED....SOMETIME U TAKE A LOOK...IT IS USUALLY OVERVALUE...WHEN VERY POPULAR....LIKE PBANK, NESTLE ETC...!!

Posted by sunztzhe > 2014-06-09 15:30 | Report Abuse

High NTA with "Neither Dead nor Alive owners & company management"- AVOID
Reasonable or High NTA with "Pro-active owner and Company management"- BUY

Posted by sunztzhe > 2014-06-09 15:38 | Report Abuse

Fund Managers look for BIG CAPS but due to policy reasons do not look at Mid to Small caps. So there is opportunity at Mid to small caps stocks for retail investors but not necessarily big cap stocks unless the business structure changes like Tenaga for instance.

If you want to look for breakup value investing, you got to wait and hope. In that case better take pro-active steps to form alliances to take over company then break it up.

Go set up predator company and get investors to come in to join u to take over company and strip its assets!! Well I would commend you on your pro-active bias rather than wait , wait and hope .

Posted by leno > 2014-06-09 17:08 | Report Abuse

either u understand value investing in 5 min, and profit from it .. or u will never understand value investing forever. If u dun understand it, u will come out with all the nonsense must be patient lar, have to wait and hope lar, value trap lar, etc etc .... KAKAKAKAKAK.

Posted by sunztzhe > 2014-06-09 20:46 | Report Abuse

There is a big material difference between "Understanding Value Investing in 3 minutes" and "Trusting the Value" HAHAHAHA

Having Trusted the Value, the next question is "Does the controlling shareholder want to prosper himself/herself ONLY or prosper the minority shareholder too"

If controlling shareholder wants to prosper himself/herself ONLY, then how to make Profit after "understand value investing in 5 minutes and having trusted the Value?" HAHAHAHA

This is "Basic Value Investing lesson for Dummies". Don't worry its free of charge. HAHAHAHA

Posted by calvintaneng > 2014-06-09 21:07 | Report Abuse

Leno,

This is the sentiment expressed by Warren Buffet in his article on "Super Investors of Graham & Doddsville". Value Recognition is Instantaneous. A Value Investor will SEE IT IMMEDIATELY Whereas others might not even see it given a whole life time.

Now coming back to Perak Corp. I bought Perak Corp at 60 Cts. Those were misty years clouded with little visibility. I only saw vaguely the potential of Perak Corp's 1,000 acres land in Lumut.

Back then even my Friend Mr. Lee from Manjung, Sitiawan & his Stock Broker saw nothing of value in Perak Corp.

Now Management has proposed Perak Corp's privatization at RM3.90. At RM3.63 closing price today there is a 7.4% profit. Making money is really a no brainer indeed.

Now if only it is a 100% confirmation set in stone.

Over the years many of my shares were taken private but not all:

1) MTD offered to take MTD Infrar private at 79 cts. I already have MTD Infrar shares at 72 cts. So making 8.8% is so simple. MTD Infrar own the Kuantan - Gombak Toll Roll. All investors at OSK Johor protested against the low and unreasonable offer price. A Cash Cow taken away.

2) Southern Steel offered to take it private at RM2.10. Shareholders objected because they think price is too low. So Southern Steel privatization failed. When happen to share price then? It crashed to RM1.41 today.

Posted by sunztzhe > 2014-06-09 21:28 | Report Abuse

Value investing also mean Taking profit before it reaches its "ESTIMATED INTRINSIC VALUE" and investing into another Stock that offers relatively higher margin of safety.

The valuation of INTRINSIC VALUE is at best an ARTFUL ESTIMATE ONLY OF THE INTRINSIC VALUE.

Posted by sunztzhe > 2014-06-09 21:59 | Report Abuse

In estimating the Intrinsic Value, it is better to be more or less correct rather than 100% precisely wrong.

The conclusion from the above statement is that the determination of Intrinsic Value of a stock is just an Artful Estimate of the Intrinsic Value as there are several methodologies to determine intrinsic value with each methodology giving different values.

Besides developing competency in the artful estimate of the Intrinsic Value one must also develop high competency in EQ and diligently assess whether the controlling shareholders want to prosper himself/herself ONLY or also want to prosper the MINORITY Shareholders too.

So don't be too hasty in buying heavily or "SAPU" an intrinsically valued stock with high margin of safety without checking first about "the generosity and care of the controlling shareholders towards the Minority Shareholders."

This is second lesson in Value Investing for Dummies. HAHAHAHA

Posted by stockoperator > 2014-06-09 22:04 | Report Abuse

Young and Vibrant Suntzthe

Let me put it this way.

In your pursuit for Business value and earning growth with strong balance sheet, we Better have the following understandings as our prerequisite:

1)Do you have any in depth research in any sector in Bursa?
2)Any ideas of strength of weakness of the companies in that sectors?
3) Knowing any industrial report, trend, development in that sector?
4) Leaders and laggards in the Sectors? Why it is leader? So it is a Economic Moat?
5)Product Cycle or market cycle in that Sector?


When we have all these in our fingertips, then we can say we just come across a great company with great value in 5 minutes.

When we have all these in our mind, then we can understand all figures and ratio in the Balance Sheet, Profit and loss and Cash Flow statement instantly. They all click and piece together.

Then we can judge the Mispricing in the market immediately.

Posted by sunztzhe > 2014-06-09 22:13 | Report Abuse

Stockoperator,

I am merely quoting "understand value investing in 5 min" from Panlai investor lah as she really panlai to understand value investing in 5 mins lah. HAHAHAHA

Posted by stockoperator > 2014-06-09 22:20 | Report Abuse

My Dear Sunztzhe, Young and Vibrant:

I dont think Forumers here have any bad intention. It is just the way they present their views.

Look at Raider, i see that he is trying so hard in English to explain things to you mah! Pity him lah. He can misunderstand me sometimes But i understand his meaning. If he has bad intention, he wont bother you loh!