Posted by speakup > 2016-01-19 17:56 | Report Abuse

many malaysian companies have deffered making IT purchases due to the weak RM vs strong US$. This will negatively affect ECS revenue in the near term.

Posted by talkcockbotakchek888 > 2016-01-19 21:25 | Report Abuse

Agreed with speakup: weak domestic demand which reflected in their 3Q15 results.

"Attractive business model with some moat". Given that the margins have decreased from 2% to 1% over the years, what are the moats of this attractive business model?

That said, I would say this is a relatively safe company with good management. I'm just concerned with the deteriorating industry fundamentals and the throat-cutting competition.

Posted by talkcockbotakchek888 > 2016-01-19 22:00 | Report Abuse

Btw the 5% yield includes a special dividend declared for their 30th anniversary. Excluding that, normalised yield should be around 3-4%.

Posted by shinado > 2016-01-19 22:55 | Report Abuse

KC, I have this stock in my watchlist. Apart from the lower ROAE and FCF vs Revenue, this company tick most of the boxes in my selection criteria. Especially for the high ROIC & CROIC of above 20%.

But I think the weak ringgit will continue to squeeze gross and net profit margins out of this business. Of course we do not know when Ringgit will recover, but right now the outlook remains unfavourable.

As a precaution, I am sitting on the sidelines until the situation looks better.

Posted by paperplane2016 > 2016-01-19 23:53 | Report Abuse

Their biz model is to get sole rights to sell the brand name. It migth work or might not.

Posted by globalvalueinvestor > 2016-01-20 02:18 | Report Abuse

I will wait for the worst of this company happen, as the real discipline value investor as said, FEAR WHEN OTHER GREEDY, GREEDY WHEN OTHER FEAR. I see PAT latest quarter reduce about 35%, this didnt alight with the revenue grow. I will HOLD.

Posted by citychew_1886 > 2016-01-20 07:31 | Report Abuse

This is what i get from the 2014 annual report
Currency risk sensitivity analysis
A 10% (2013: 10%) strengthening of Ringgit Malaysia (“RM”) against the following currency at the end
of the reporting period would have increased (decreased) post-tax profit or loss by the amounts shown below. This analysis is based on foreign currency exchange rate variances that the Group considered to be reasonably possible at the end of the reporting period. The analysis assumes that all other variables, in particular interest rates, remained constant and ignores any impact of forecasted sales and
purchases.
Group
Profit or loss Profit or loss
2014 2013
RM’000 RM’000
USD 2,493 3,230
A 10% (2013: 10%) weakening of Ringgit Malaysia (“RM”) against the above currency at the end of the reporting period would have had equal but opposite effect on the above currency to the amount shown above, on the basis that all other variables remained constant.

Posted by citychew_1886 > 2016-01-20 07:34 | Report Abuse

and i am not so clear about this , can someone tell me this will make ECS earn more or the opposite ?thanks .
(The Group is exposed to foreign currency risk on purchases that are denominated in a currency other than the respective functional currencies of Group entities. Approximately 33.8% (2013: 36.5%) of the Group’s purchases are priced in US Dollar (“USD”). The Group hedges a portion of these exposures by purchasing forward currency contracts. Most of the forward exchange contracts have maturities of less
than one year after the end of the reporting period. Where necessary, the forward exchange contracts are rolled over at maturity).

Posted by speakup > 2016-01-20 09:52 | Report Abuse

ECS imports goods quoted in US$, which is opposite of "export" theme which is pushing up shares like Latitude, Poh Huat, Evergreen, VS, ....

Posted by speakup > 2016-01-20 09:54 | Report Abuse

Due to the weak ringgit and strong US$, plus the deteriorating malaysian business sentiment, I will rate ECS a Sell.

Posted by JT Yeo > 2016-01-20 10:40 | Report Abuse

"I am sitting on the sidelines until the situation looks better" - if you didn't see it coming, how are you going to know when it is over?

Posted by kl foong > 2016-01-20 10:41 | Report Abuse

Fully agree with speakup.

Posted by zzas > 2016-01-20 10:48 | Report Abuse

if u think ECS will be rm1.00 in 2 years time, pls sell but if u think it will be rm2.00, can buy lor..

Posted by shinado > 2016-01-20 11:09 | Report Abuse

JT Yeo I am no Oracle and certainly do not have a crystal ball to look into the future.

When I mentioned 'situation is better', I mean when economy outlook is much better than it is now.

I have still much to learn and do not consider myself as a very experienced investor yet. Therefore, there is nothing wrong when I try to limit as many downside to my investments as possible.

I know I will miss a few trains (opportunities) but I know I can always board the next one that suits me.

Just my 2 cents. Cheers.

Posted by NOBY > 2016-01-20 11:31 | Report Abuse

Yes. We know that USD strengthening will impact ECS bottom line/revenue. Question is if its already priced in.

Posted by kcchongnz > 2016-01-20 18:08 | Report Abuse

"First-level thinking says, ‘I think the company’s earnings will fall; sell.’ Second-level thinking says, ‘I think the company’s earnings will fall less than people expect, and the pleasant surprise will lift the stock; buy.’"
Howard Marks

This is a second level thinking:

Posted by NOBY > Jan 20, 2016 11:31 AM | Report Abuse
Yes. We know that USD strengthening will impact ECS bottom line/revenue. Question is if its already priced in.

Posted by GODinvest > 2016-01-20 18:26 | Report Abuse

ecs 已经换成每天对冲

Posted by speakup > 2016-01-21 11:34 | Report Abuse

got third level thinking?

Posted by vinext > 2016-01-21 11:36 | Report Abuse

it's a biz without moat but the moat is now the value of the network/ mktg channels and its ability to squeeze price, mkt leader

Posted by Henry Tan > 2016-04-03 23:24 | Report Abuse

Can I understand why the profit margin is <2%? Should investor worried about it?

Posted by kcchongnz > 2016-04-03 23:51 | Report Abuse

osted by Henry Tan > Apr 3, 2016 11:24 PM | Report Abuse

Can I understand why the profit margin is <2%? Should investor worried about it?


Trading business is generally come with low margin. As long as the margin is still positive, then the more important thing to look at is return on capital, or rather ROE. High ROE above its cost of equity is a good business. High ROE can also be achieved with volume of sales wrt it assets, or asset turnover.

And that is what ECS is able to do, so far so good.

Everyone talks about the most is if the business is a good business, and buy only if it is good. But few talk about if the price is right.

Even a so so business is a good investment if the price is cheap.

Posted by paperplane2016 > 2016-04-03 23:58 | Report Abuse

Low margin biz, i dont like. What make them so special.

Posted by moneySIFU > 2016-04-04 00:00 | Report Abuse

Plane, How about Airasia & Bornoil?