Posted by goreng_goreng > 2016-02-04 15:54 | Report Abuse

Ultra like and love for Kcchong:)

Posted by Icon8888 > 2016-02-04 16:09 | Report Abuse

First round Happy Chinese New Year to Sifu KC Chong !!! Lou Sang at Auckland China Town !!!

(Second round during CNY)

Posted by hissyu2 > 2016-02-04 18:18 | Report Abuse

Thanks sir for another piece of great work! happy Chinese New Year. :)

Posted by paperplane2016 > 2016-02-05 04:13 | Report Abuse

Gong hei fat chow, kc

Posted by speakup > 2016-02-05 09:24 | Report Abuse

GONG XI FA CAI everybody!

Posted by kcchongnz > 2016-02-05 10:26 | Report Abuse

Gong Xi Fa Cai to everyone here.

May your investment be safe and sound for this new year.

Posted by talkcockbotakchek888 > 2016-02-05 11:38 | Report Abuse

Is it a good business? Yes
Is it undervalued? Yes
Does it pay decent dividend? Yes

Is it a growth stock? This I have reservation coz earnings have been range-bound between RM25m-30m in the past 5 years. How so coz revenue have been growing from RM1.3b in 2010 to RM1.6b in 2014?? I think this is becoz this is an ultra competitive industry (IT products are getting increasingly commoditised) and they need to sacrifice margins to maintain market share. They need a different growth strategy other than just getting the distribution rights which will never be exclusive anyway.

Posted by jfanalytic > 2016-02-05 16:15 | Report Abuse

Dear sir, based on your analysis, it seems that the current price of ECS is undervalued. However, its ROE has been slowly decreasing over the years, from 20% to 13%. What is your view on this?

Thanks.

Posted by yongyou > 2016-02-05 16:26 | Report Abuse

Gong Xi Fat Cai Master KC

Posted by kcchongnz > 2016-02-05 16:55 | Report Abuse

Posted by jfanalytic > Feb 5, 2016 04:15 PM | Report Abuse

Dear sir, based on your analysis, it seems that the current price of ECS is undervalued. However, its ROE has been slowly decreasing over the years, from 20% to 13%. What is your view on this?


You got it right. ROE started at 20% 5 years ago. It has deteriorated to 13.1% for the last financial year.

One reason is the margin contraction which is normal in any business as competition creeps in. The second reason is its cash holding increases by three times more to RM124m compared to RM30m 5 years ago. This is in fact a good sign showing the cash generating of its business.

However, a 13.1% ROE is still a good number, higher than its cost of equity.

The more appropriate metric should be the return on invested capital, which is still above 20%. The trailing twelve month ROIC of 26% is getting closer to its historic high now.

Posted by jfanalytic > 2016-02-05 17:52 | Report Abuse

Dear sir, thank you for your explanation. Agreed that 13.1% ROE is considered a good value. Will keep this counter in check.

Posted by kcchongnz > 2016-02-05 17:53 | Report Abuse

Posted by talkcockbotakchek888 > Feb 5, 2016 11:38 AM | Report Abuse
Is it a good business? Yes
Is it undervalued? Yes
Does it pay decent dividend? Yes
Is it a growth stock? This I have reservation coz earnings have been range-bound between RM25m-30m in the past 5 years. How so coz revenue have been growing from RM1.3b in 2010 to RM1.6b in 2014?? I think this is becoz this is an ultra competitive industry (IT products are getting increasingly commoditised) and they need to sacrifice margins to maintain market share. They need a different growth strategy other than just getting the distribution rights which will never be exclusive anyway.


Growth is good. It is best if it comes free. But if I have to pay a lofty premium for it, I have second thought. One reason is this growth is an expectation in the future and it is not certain.

Imagine if a bank can give you a perpetual interest rate of say 20%, and no increase of this rate forever, meaning no growth, don't you still want to put your money there?

Posted by hissyu2 > 2016-02-05 22:27 | Report Abuse

Sir, this counter is 101% fulfilling magic formula criteria, isn't it?

Posted by kcchongnz > 2016-02-05 22:59 | Report Abuse

Posted by hissyu2 > Feb 5, 2016 10:27 PM | Report Abuse
Sir, this counter is 101% fulfilling magic formula criteria, isn't it?

Yes, KL. If the future resembles the past.

Posted by bracoli > 2016-02-06 14:46 | Report Abuse

those bought at 1.50 already earning lo.. this counter is resilient and taking care of down side.. yet it slowly climbs up!

Posted by globalvalueinvestor > 2016-02-09 11:04 | Report Abuse

but the profitable margin is consistently downtrend, that is the issue. Until the next time usd weak, only can consider.

Posted by kcchongnz > 2016-02-09 15:53 | Report Abuse

Posted by globalvalueinvestor > Feb 9, 2016 11:04 AM | Report Abuse
but the profitable margin is consistently downtrend, that is the issue. Until the next time usd weak, only can consider.

Margin is contracting, no doubt about it. However, the company sells more stuff. The lower margin is compensated by higher asset turnover to maintain a high return on equity.

Please read this:

http://klse.i3investor.com/blogs/kcchongnz/90970.jsp