Posted by Flintstones > 2017-12-31 09:26 | Report Abuse

This is a good piece of fundamental value analysis article right here. So much better than some other self proclaimed sifu who keeps on chirping the same fundamental value thing while what being written is nothing more than the historical prices of his previous picks.

Posted by Flintstones > 2017-12-31 09:26 | Report Abuse

Look forward to more of your future articles. Thumbs up!

Posted by kser > 2017-12-31 10:29 | Report Abuse

nice article, tqvm chiobu. very detailed.

Posted by Fabien Extraordinaire > 2017-12-31 10:53 | Report Abuse

Liquidity crunch was the main reason in the last financial crisis that made some banks go bust or almost bust.

With Basel III kicking in, more emphasis is placed on liquidity (refer Liquidity Coverage Ratio or LCR) and capital buffer for the banks to withstand during crisis times.

These days, central banks no longer look at the Bank's Loan to Deposit Ratio, it is the LCR.

Posted by kimao123 > 2017-12-31 11:05 | Report Abuse

Cold eye definitely buy below myr1.00 .. not a loss for him at current price..

Posted by thec16 > 2017-12-31 11:21 | Report Abuse

thanks. learn something new today

Posted by Fabien Extraordinaire > 2017-12-31 11:32 | Report Abuse

as regulatory requires the banks to set aside additional capital requirements, the bank's ROE suffers as a consequence. though ROE is still the key metric to look at in assessing the bank's performances including the credit rating agency, return on risk weighted assets is the more accurate assessment.

valuation wise, the implied P/BV would seems higher in view of declining ROE...hence the investment community may revisit the assumptions in valuing the banks, the average P/BV of 1.2 which many used as the rule of thumb to value the acquisition of a financial institution may no longer valid

Posted by Flintstones > 2017-12-31 11:57 | Report Abuse

Btw Jon, how do we apply the rule of thumb on other banks with different leverage ratio? Using maybank as an example, I couldnt get the valuation that you got from the spreadsheet. Would you mind showing the maths behind the calculation?

Posted by TheContrarian > 2017-12-31 12:11 | Report Abuse

Affin most undervalued?

Posted by joetay > 2017-12-31 15:21 | Report Abuse

@thecontrarian,

i think msbs most undervalued, followed by affin.

looking to see if i might want to grab affin at 2.

Posted by zoozooka > 2017-12-31 15:45 | Report Abuse

Good quality article. Ty

Posted by cheoky > 2017-12-31 15:48 | Report Abuse

Salute your sharing. Gave me new perspective. You are good. Btw, for bank, bnm compulsory bank to provide 1.5% impairment to their loan right? Ok not assets , loan only. So mbsb once become bank need to comply such. So more impairment moving forward?

Posted by Choon Soo Tan > 2017-12-31 16:30 | Report Abuse

Thumbs up

Posted by Unlevered > 2017-12-31 16:32 | Report Abuse

very good article!! btw drop in value to bankruptcy for BANK A,B,C should be 9%, 20% and 1 % respectively. Can Jon kindly elaborate the math underlying the thumb rule valuation? Please write more such articles in the future :D, thanks!

Posted by Jon Choivo > 2017-12-31 17:49 | Report Abuse

Refer to the formulas in the spreadsheet. The rule of thumb, does take leverage into account. But it does not take bankruptcy risk into account.

I'm guessing you're referring to KCCHONGNZ. I definitely learned a lot from him. I actually finished all his blog post. He's a great writer and has very very varied experience and knowledge of the markets. Even OTB said that his returns was rubbish until he started to learn from KCCHONGNZ.

If i were him, i would not be talking about my current picks either, especially since his subscribers are paying him money for that. It would be unfair to the people that pay him for him to share his picks here.

"Flintstones Btw Jon, how do we apply the rule of thumb on other banks with different leverage ratio? Using maybank as an example, I couldnt get the valuation that you got from the spreadsheet. Would you mind showing the maths behind the calculation?
31/12/2017 11:57"




One of the most undervalued. There is another company, that is the best and most undervalued. I kept it out of the spreadsheet.

Affin is at a 40% discount to fv using my formula now.

"TheContrarian Affin most undervalued?
31/12/2017 12:11"




You comments on the basel 3 requirements as well LCR do hold merit. However, this is only a rough guide. I'm not a bank expert. For me, when it comes to investing, i follow this saying.

"You don't need to know the weight of a woman to know if she's fat, or the age of a man to know if he's old"

As long as its within the margin of safety, i'm fairly good with it.

On liquidity. Liquidity crunches are common and a way of life for banks. The real life equivalent would be "Tripping".

In life, when you are walking or running, you will trip over something. Sometimes you will fall, sometimes, you will be able to catch yourself. Its almost never a big deal.

Tripping becomes a problem when you're running top speed on uneven ground, while carrying 100 plates stacked to the sky. An small bump, or in this case liquidity crunch, and you will be properly fucked.

Pre-crisis. The banks using synthetic CDO's (Which in itself were leveraged) were theoretically leveraged in same cases more than 100 times. And these so called liquid instruments, were build upon very illiquid assets. This means the instruments themselves were not truly liquid to begin with.

It would be a little bit premature to say that the main reason for the crisis is due to liquidity crunch. |

Its like saying, the only reason he died was because he tripped. If you tripped while walking, no biggie. If you died, when your tripped while walking on a tightrope 500 meters in the sky. Maybe the main reason you died was because you were walking on a tightrope 500 meters in the sky in the first place.

"Fabien Extraordinaire Liquidity crunch was the main reason in the last financial crisis that made some banks go bust or almost bust.
31/12/2017 11:32"




Good catch! Updated. Thanks!

"Unlevered very good article!! btw drop in value to bankruptcy for BANK A,B,C should be 9%, 20% and 1 % respectively. Can Jon kindly elaborate the math underlying the thumb rule valuation? Please write more such articles in the future :D, thanks!
31/12/2017 16:32"

Posted by valuelurker > 2017-12-31 18:28 | Report Abuse

No, and I'll give you a hint, its got to do with your 'rule of thumb' and the assumptions youre making

Posted by stockraider > 2017-12-31 18:54 | Report Abuse

Good work Jon chivo, but add one point....the roe on bank is another assessment for value

Posted by Unlevered > 2017-12-31 19:25 | Report Abuse

"One of the most undervalued. There is another company, that is the best and most undervalued. I kept it out of the spreadsheet. "

rce?haha just guessing

Posted by Jon Choivo > 2017-12-31 22:49 | Report Abuse

What do you mean?

valuelurker No, and I'll give you a hint, its got to do with your 'rule of thumb' and the assumptions youre making
31/12/2017 18:28

Posted by limml > 2018-01-01 10:05 | Report Abuse

On undervaluation of a certain bank, maybe you should find out how many of your family members, friends and associates park their money, especially the portion meant for retirement, with the bank as FD. If you find that most of them, especially if you yourself don't park the money with the bank, then you may have got the answer why the market gives it low valuation.

Posted by Icon8888 > 2018-01-01 10:21 | Report Abuse

well done Jon Choivo. I enjoy reading your articles, meticulous and quantitative. Keep up the good work bro.

And I welcome your comments on my articles, good or bad, no problem

Posted by Jon Choivo > 2018-01-01 15:52 | Report Abuse

Definitely, that's one way to get real down to earth information. That's why my position is very small. =)

limml On undervaluation of a certain bank, maybe you should find out how many of your family members, friends and associates park their money, especially the portion meant for retirement, with the bank as FD. If you find that most of them, especially if you yourself don't park the money with the bank, then you may have got the answer why the market gives it low valuation.
01/01/2018 10:05

Posted by 10bagger10 > 2018-01-02 12:38 | Report Abuse

choivo sifu, prlexus any opinion?

Posted by Jon Choivo > 2018-01-02 15:24 | Report Abuse

I am out.

Why? In essence, not a fan of the industry (cost based, increase in earnings due to higher efficiency tend to go to customers via discounts instead of to the company).

I held it as i thought the ROIC is pretty good and i like the gigantic cash balance, however, i think but the problem is that this wonderful cash balance will all be going into their expansion into the fabric mill, which while good for the company, is much better for the customers and not so good for the investors.

Whatever cost savings from the mill, will need to be given to customers in order to undercut magni etc. Its a race to the bottom.

I have better/cheaper opportunities available. I have originally wanted to sell my PRlexus at 1.2 for this similarly undervalued opportunity, except its in a far better industry.

But my ego got in the way, i wanted this to be a gain as i was sure of my research, which included all of the above.

PRLEXUS is my biggest loss in 2017.

Moving forward, i will not be buying any stocks from cost based industries with high capex, unless it is a net net (ie choobee, which i bought at 1.75 and sold at 1.9 and 2.1).

10bagger10 choivo sifu, prlexus any opinion?
02/01/2018 12:38

Posted by james86 > 2018-01-03 14:01 | Report Abuse

mbsb already 1.17, overvalued?

Posted by Jon Choivo > 2018-01-03 16:51 | Report Abuse

By my metric yes.

Does not mean it cannot go higher though. Feel free to buy it if you feel there is someone, moving forward, who will be willing to pay more.

james86 mbsb already 1.17, overvalued?
03/01/2018 14:01

Posted by Orange88 > 2018-01-05 01:28 | Report Abuse

Boys and girls listen

Did the author, in May 2017 also said that Hengyuan is was overvalued at RM 5 saying buying Hengyuan is even more risky that Bitcoin...

Posted by Orange88 > 2018-01-05 01:32 | Report Abuse

j

Posted by Orange88 > 2018-01-05 01:33 | Report Abuse

Jon Choivo Capital is pessimistic of MBSB. The same person who caught Sapura Kencana Crest and sold off Hengyuan at RM 6. Run away from this guy like the plague.....

Posted by james86 > 2018-01-05 11:54 | Report Abuse

mbsb can go higher to 3.2 since 2013

Posted by latlut > 2018-01-05 12:36 | Report Abuse

u have to consider the potential after getting the Islamic banking license mah.

Posted by Jon Choivo > 2018-01-06 00:44 | Report Abuse

Do quote what you said of me from my old post, i've never deleted anything from my history.

Orange88 Boys and girls listen

Did the author, in May 2017 also said that Hengyuan is was overvalued at RM 5 saying buying Hengyuan is even more risky that Bitcoin...



Historical price is not indicative of intrinsic value, see Sapura Kencana, it sed to be worth RM4, then RM2, now RM0.8

james86 mbsb can go higher to 3.2 since 2013
05/01/2018 11:54



Just because get license does not mean your profit go up immediately, remember what i said about banks finding it hard to increase profit a lot due to difficulty in obtaining deposits and managing cash flow.

Also, almost every bank have that license, and even better BIMB got the word "Islam" in their name. Why not that then?

latlut u have to consider the potential after getting the Islamic banking license mah.
05/01/2018 12:36

Posted by Invest_168 > 2018-01-07 00:53 | Report Abuse

"why Coldeye is wrong on MBSB"???? With recent surge of MBSB share price, then we know investment is an ART. You no need to know too deep in those banking theory behind.

Posted by godhand > 2018-01-07 01:14 | Report Abuse

if i may correct u. the whole bursa is bullish.

Posted by Jon Choivo > 2018-01-08 21:54 | Report Abuse

Definitely, looking at EKOVEST with sadness. Really wanted to buy at 90, but bolui. Than at thursday, wanted to buy the warrants at 585, but i am the conservative type one, hate paying more. Now. Haih

godhand if i may correct u. the whole bursa is bullish.
07/01/2018 01:14


It definitely is. Its not so precise that its like physics, nor is it so abstract, that its like a painting.

But the movement in price does not mean that i am wrong. Enron and Valeant reach incredibly high prices as well.

If i'm wrong, it must come from either something i overlooked or miscalculated fundamentally.

My figures on the impairment is definitely not precise and may even be wrong =) And MBSB may very well be worth RM1.35 or whatever the bulls want to put on it.

Invest_168 "why Coldeye is wrong on MBSB"???? With recent surge of MBSB share price, then we know investment is an ART. You no need to know too deep in those banking theory behind.
07/01/2018 00:53

Posted by Maxireturn > 2018-01-30 00:10 | Report Abuse

Investment is abt future, not merely based on current data. U will nvr make big analyzing available data or figures. That’s the diff btw super investor guru and normal investor.

Posted by Outliar > 2018-01-30 19:05 | Report Abuse

http://www.theedgemarkets.com/article/mbsb-net-profit-nearly-triples-kitchen-sinking-ends

Posted by Ng Shu Tsung > 2018-08-04 21:32 | Report Abuse

Malaysiakini on 1st August 2018, Wednesday
(co-authored by Peh Beng Kheng Foundation)
https://www.malaysiakini.com/letters/436883

Some tips on how to manage GLCs

Posted by bluebiznet > 2018-08-05 00:15 | Report Abuse

Maxireturn: exactly. Lol

Posted by bluebiznet > 2018-08-05 00:19 | Report Abuse

Coldeye 13.8 millions? Not 33.8millions? Aiyoh, i always say 33.8 millions to people oh.. Haha i should get this right before i comment mah. If such simple figure i also wrong, how i convince people oh... Let alone article.. Haha LOL

Posted by hollandking > 2018-08-05 00:22 | Report Abuse

bursa bullish?????? U sure or not

Posted by Jon Choivo > 2018-08-05 03:09 | Report Abuse

Guys, this post is damn old.

The essence is still there. Butt the data is likely to be outdated.

Mbsb I still think it is not that cheap, but it's definitely more interesting since Dec 2017.

I am looking at it, but I'm somewhat unconvinced. The license is not the gamechanger, but another thing, which I am not sure yet.

Posted by Icon8888 > 2019-12-23 08:25 | Report Abuse

Excellent article

Posted by ahbah > 2019-12-23 08:55 | Report Abuse

Financial institutions ... overweight

Posted by ahbah > 2019-12-23 08:57 | Report Abuse

Bursa ... now already in super bull mode !

Masuk !