Dear Icon8888, Agreed: Focus on earning growth KYY original formula Don't be distracted. But also need to look at Balance Sheet otherwise will end like JAKS and SENDAI.
Stock price always about earning and FCF. Not NTA or pile of cash that only director can enjoy. Unless they don't mind distribute it out as dividend then different story.
The key of stock like insas moving up...u need to ask what is the kicker or catalyst for insas....the answer already found & it is coming very soon loh....!!
Both SsLee and KCChong are intelligent seniors! But i guess, if you only look at one angle, you missout on what makes stocks go up! Anyway, in bursa, one must open the eyes to know why stocks move! Not continue to be hard headed and stick to unworkable formula! Just a friendly advise! Anyway, i really enjoy SsLee articles!
Although i agree, but do not completely totally on earnings loh...!! U new a package a combination to ensure the stock growth & appreciation is healthy mah...!
Stock price always about earning and FCF. Not NTA or pile of cash that only director can enjoy. Unless they don't mind distribute it out as dividend then different story.
Similar problem with TA. All these co. don't look after shareholders. They are miserable when it comes to paying div to shareholders. They perceive the co. belongs to their grandfathers and accumulate cash and the balance sheet looks great!. This puts off most investors. Incidentally, has the writer accumulated enough of Insas shares and hopes the man in the street will take the bait for him to exit.
Ask yourself loh...IF TA does not have this weaknesses or problem like u said, do u think TA will trade at such a huge discount leh ??
Ask yourself, what it takes for TA to correct the current weaknesses or problem mah ??...if u find soon...u already have identified the kicker or catalyst mah.....!
Similar problem with TA. All these co. don't look after shareholders. They are miserable when it comes to paying div to shareholders. They perceive the co. belongs to their grandfathers and accumulate cash and the balance sheet looks great!. This puts off most investors. Incidentally, has the writer accumulated enough of Insas shares and hopes the man in the street will take the bait for him to exit.
over the last 10 years, Insas only has traded above RM1 for only a few months in 2014 and a brief period in 2017,stock price has spoken loud & clear,it's a value trap neither a wise investment nor deep value investment,you won't get even half of its nta,market don't price it low for no reason. those empty handed better don't get burn by this value trap,those stuck in high price may have to consider sell when rebound hit resistance to cut & move on. how many stocks has gone up over five folds in bursamalaysia over the last ten years, why buy insas,in stock markets hold on with the right & must act fast to cut the wrong.
Dear all, Thank for sharing your view and even your experience that Insas is value trap as price never move anywhere and market don't price it low for no reason hence Mr. Market must always be right.
My question: Mr. Market what mental models or human behaviors at play in buying Inari at RM1.66 when you can use the same capital to buy 2.075 Insas share at 80 cents and hold indirectly 1.90 Inari share and all the cash and cash equivalent and all the other Insas business?
Everyone agreed on the value part and the trap part the question now is how to unlock the value? https://klse.i3investor.com/blogs/Sslee_blog/198128.jsp You can find some speculation answers on how the value of Insas could be unlocked from above blog. And as minority shareholder you can do a little bit of shareholder activism, ask questions and request your reasonable demand.
i dont know much about Insas investing philosophy...but i know the best time to sell is when maximum attention is given to this stock...this precious opportunity knocks once in a blue moon
Examples of value traps for investors who only use NTA as a single metric to buy a stock instead of understanding the business and its competitive advantage:
Company name share value / net worth 1. Parkson Holdings 279 million / 2,113 million 2. AsianPac holdings 140 million / 1,501 million 3. Protasco Bhd 136 million / 334 million 4. Talam Transform 172 million / 380 million 5. Nami holdings 462 million / 1,250 million 6. Sapura Energy 4,893 million / 13,865 million 7. Bumi Armada 1,352 million / 3,346 million 8. INSAS Bhd 551 million / 1,717 million
The first thing to notice is that a) I spent 5 minutes on the internet to find some very good deals. All seem very undervalued, by simple metrics. b) The second question you ask your self is all the NTA the same thing? Each business is subtly different, and its assets are classified differently (which surprisingly is valued by the company and friendly valuers, and audited robustly). IT is not an exact science, and judgement call needs to be made by the prospective investor on the INTRINSIC VALUE OF THE ASSET. c) In case of any incongruity of the intrinsic value, one must rely on cash flow generation and estimation in the years to come instead of relying merely on the accounting numbers of the "net assets", as evidenced from item 6 and item 7, where the value of the assets are valued at 13bilion and 3 billion, however they can't find anybody to buy their assets. If that is the case, what is the REAL INTRINSIC VALUE? d) For INSAS, if stated value if 551 million, and the gap is 1.7 billion, and this "temporary difference in INTRINSIC VALUE" has been going on for a very long time, one must make a good judgment call and understand the difference between a value trap and undervalued stock to see if the price will rise to meet the difference in the future. e) Only one true way has been shown to work: a company that uses the minimum amount of debt and produces a good amount of cash flow and earnings will have their share price guaranteed to increase. Not via stated value of the assets (versus real world demand for those assets). This way has been shown to work for a very long time, and why asianpac cannot be valued (in fact ALL property developers) at NTA alone.
Hope you learned something.
>>>>>
What is a Value Trap A value trap is a stock that appears to be cheap because the stock has been trading at low valuation metrics such as multiples of earnings, cash flow or book value for an extended time period. Such a stock attracts investors who are looking for a bargain because they seem inexpensive relative to historical valuation multiples of the stock or relative to the prevailing overall market multiple. The trap springs when investors buy into the company at low prices and the stock continues to languish or drop further.
BREAKING DOWN Value Trap Successful in prior years with rising profits and a healthy share price, a company can fall into a situation where it is unable to generate revenue and profit growth due to shifts in competitive dynamics, lack of new products or services, rising production and operating costs, or ineffective management. For the investor who is used to seeing a certain valuation of the stock, a seemingly "cheap" price becomes interesting. However, it becomes a value trap to the investor if no material improvements are made in the company's competitive stance, its ability to innovate, its ability to contain costs, and management by the executives.
As with any investment decision, thorough research and evaluation is recommended before investing in any company that appears cheap on the basis of conventional valuation metrics.
Dear Philip, Quote: b) The second question you ask your self is all the NTA the same thing? Each business is subtly different, and its assets are classified differently (which surprisingly is valued by the company and friendly valuers, and audited robustly). IT is not an exact science, and judgement call needs to be made by the prospective investor on the INTRINSIC VALUE OF THE ASSET, unquote.
All the NTA is different: agreed 1. Capex (PPE) on borrowing money that only increase the top line but bottom line lower than the cost of borrowing is a slow killer, like illicit drug give you the instant high but killing you slowly from the inside, 2. Real estate of properties/land that cannot generates income greater than its maintenance, staffs, utilities, quit rent and etc is a liability to company not asset.
So tell me in INSAS case how you value: https://klse.i3investor.com/servlets/staticfile/358668.jsp As at As at 31/03/2019 30/06/2018 RM Current assets Property development costs: 10,497,000 Inventories: 12,513,000 Trade receivables: 431,898,000 Amount due from associate companies: 94,468,000 Other receivables, deposits and prepayments: 63,688,000 Financial assets at amortised cost: 2,292,000 Financial assets at fair value through profit or loss: 245,640,000 Tax recoverable: 2,608,000 Deposits with licensed banks and financial institutions: 553,678,000 Cash and bank balances: 114,632,000 Total current assets 1,531,914,000 Note under trade receivable: http://www.bursamalaysia.com/market/listed-companies/company-announcements/6218041 As of 30th June 2019, ICL has outstanding loans portfolio of RM267.455 million which are fully collateralized and unsecured corporate loans RM30.162 million generating interest income to the Group. The interest rate charged by ICL is in accordance with the Moneylending Act, which is not more than 12% p.a.for secured loans and not more than 18% p.a.for unsecured loans
Non-current assets Property, plant and equipment: 157,249,000 Investment properties: 185,059,000 Financial assets at fair value through other comprehensive income: 22,159,000 Financial assets at amortised cost: 3,077,000 Jointly controlled entity: 22,000 Associate companies: 428,986,000 Intangible assets: 26,058,000 (broking and money lending license) Deferred tax assets 2,822,000 Total non-current assets: 825,432,000
The segment analysis on the Group’s results for the financial period ended 31th March 2019: 1. Financial services and credit & leasing: After-tax-profit RM 10,551,000 (After paying staffs salary , Overhead and BOD remuneration) 2. Investment holding and trading: After-tax-profit RM (4,567,000) 3. Technology and IT-related manufacturing, trading and services: After-tax-profit RM 54,027,000 4. Retail trading and car rental: After-tax-profit RM 2,224,000 5. Property investment and development: After-tax-profit RM 1,957,000 Total: After-tax-profit RM 64,192,000 out of this share of profits less losses of associate companies is RM 34,215,000 Cash flows from operating activities: Interest received RM 13,859,000 Cash flow from investing activities: Dividend received RM 35,056,000 Note: 1 sen dividend from Inari is about RM 6m to Insas cash inflow.
Am I right to say, I need to sell 2 Insas shares (2x 80 sen) to buy 1 Inari (RM 1.60). I just prefer to hold 2 insas share thus indirectly owned 1.8 Inari share, all the cash and cash equivalent and all the other Insas business rather than holding directly 1 Inari share?
So you make your own conclusion: Quote: e) Only one true way has been shown to work: a company that uses the minimum amount of debt and produces a good amount of cash flow and earnings will have their share price guaranteed to increase. Not via stated value of the assets (versus real world demand for those assets). This way has been shown to work for a very long time, unquote”
How I value INSAS? At 80 cents I am still not buying a single share of INSAS. Meaning I value INSAS far below your NTA of 1.7 billion.
Why? I can never fire current management 33% ownership who make stupid decisions after 1 good decision in inari to put money into sengenics, vigcash, hohup, omesti, dgsb, fintec etc ( things which not even sslee will buy).
I can never get a ever growing dividend from INSAS ( where is growing earnings and profits future coming from? After you kill golden goose inari from 40% to 20% to 0% transfer out cash into cash burning business line sengenics and vigcash and numoni and tribecar( JV with frauds to transfer money out from public to private hands), where will you get future revenue and earnings? No clarity on future earnings and profit meaning no future growth prospects.
At what stage will I buy INSAS?
1. After change of new management, trigger MIGO to show financial capability, then start selling non performing business units like melium, sengenics and numoni.
2. Use earnings and dividends to grow m&a business, revamp website and operational software, increase team to grow investing and IPO arm.
3. Stop investing in startups and instead target on taking over cash generating profitable business run by well run management seeking a good home for their business.
4. Reduce their revenues and profits from one off sources and increase revenues and earnings from consistent cash flow sources with a huge moat
Your way of thinking is still very immature. If it were that simple you can buy any of the above "undervalue" share and keep the billions of unrealised value.
The answer to that is the same reason why you would rather buy shares in ICAP fund than the ICAP business itself.
If you hold inari shares you get the dividends directly.
If you hold INSAS shares, you get the possibility of getting inari dividends, and no collective right.
If INSAS management decided to waste that money by giving it to a Mongolian company to start a vigsys business and burn/piss/waste all of the dividend money from inari, there is nothing you can do about it.
REMEMBER, YOU ARE A MINORITY SHAREHOLDER.
EVEN IF YOU DO NOT AFTER WITH THE BUSINESS DECISIONS OF INSAS MANAGEMENT, THERE IS ZERO CHANGES YOU CAN DO TO THEM.
THAT IS WHY INSAS IS VALUED AT 80 CENTS.
Not for whatever reasons you highlighted.
In same vein
If you were put money into ICAP, you would get zero returns, unless tan teng boo decided to do share buybacks or declare dividends.
Your logic is not flawed, but it is incomplete.
YOU REFUSE TO SEE THE FULL PICTURE, BUT ONLY WHAT YOU CHOOSE TO BELIEVE.
>>>>>>>
Am I right to say, I need to sell 2 Insas shares (2x 80 sen) to buy 1 Inari (RM 1.60). I just prefer to hold 2 insas share thus indirectly owned 1.8 Inari share, all the cash and cash equivalent and all the other Insas business rather than holding directly 1 Inari share?
Hahahaha deMusangking, the past is baggage and the future is burden. Recommend you to read: The Power of Now. Live in the present a spiritual journey to find their true and deepest self and reach the ultimate in personal growth and spirituality: the discovery of truth and light. https://www.amazon.com/Power-Now-Guide-Spiritual-Enlightenment/dp/1577314808
How much is your returns from this investment concept raider? Your are line a college teacher talking daily about efficient market theory and teaching graduate students.
But your real life results do not jive with your margin of safety concept.
Arguing for arguing sake. How much money did you make practising this concept in your stockpicking?
Did you buy more hengyuan at rm18, rm15,rm10,rm8 when your opinion of "margin of safety" of hengyuan at pe10, pe15 was rm35-rm50.
But right here i m not saying an outsider trying to unlock value on insas, but the insider owner trying to maximise value on insas and the consequence he indirectly unlocking value mah....!!
The key to this happen is the expiry of insas warrant in 20-2-2020 loh....!!
They is a high chance mkt will rerate too loh...!!
AS USUAL IF U WANT TO BUYOUT THE COMPANY, U WILL RATHER KEEP SHARE PRICE LOW MAH....THATS WHY THE MINORITY SHAREHOLDER FRUSTRATED LOH...!!
THUS INSAS INVESTOR JUST NEED TO BE PATIENT LOH...!!
KC COMMENT, Conclusions
Deep value investing is not easy. It requires patience, and a lot of patience. It is not for the faint hearted. Insas has been undervalued for a long time. A catalyst may be required to unlock the value. Fund managers and institutional investors will not be able to endure it as they will be long fired by their investors before value is unlocked due to their temporary under-performance. Most individual investors also have no stomach for it. They will be laughed at by others embarking in this strategy as it does look stupid at times. But if a stock is way undervalued, not only by 10%, 20%, or even 50%, but a much larger discount such as 72% as that of Insas, the probability of success is higher. Of course, nothing is certain in this world. But at least the chance of losing money is very slim as the extreme cheapness and quality assets would have taken care of this. Insas has also been providing satisfactory return over the years, and it is likely continue to do so even if the deep value is not unlocked.
Take care of the downside, let the upside takes care of itself.
What we are afraid of is if the value takes a long time to unlock, value may erode, such as in a business with persistence huge losses, burning cash in its operations, or management embarking on overvalued acquisitions, or squander away the cash it has, failed business ventures, or other shareholder value destroying activities. I my opinion, Insas does not belong to this category. Having different stocks with different return drivers in a diversified portfolio is also a smart strategy in investing.
I DON LIKE TO BOAST...THE LAST TIME I BRAG,REMEMBER YOUR RESPONSE VERY BAD LOH...!
I WILL RATHER FOCUS ON INSAS POTENTIAL LOH....!!
Posted by (S=QR) Philip > Jul 20, 2019 1:26 PM | Report Abuse
How much is your returns from this investment concept raider? Your are line a college teacher talking daily about efficient market theory and teaching graduate students.
But your real life results do not jive with your margin of safety concept.
Arguing for arguing sake. How much money did you make practising this concept in your stockpicking?
Did you buy more hengyuan at rm18, rm15,rm10,rm8 when your opinion of "margin of safety" of hengyuan at pe10, pe15 was rm35-rm50.
But right here i m not saying an outsider trying to unlock value on insas, but the insider owner trying to maximise value on insas and the consequence he indirectly unlocking value mah....!!
The key to this happen is the expiry of insas warrant in 20-2-2020 loh....!!
They is a high chance mkt will rerate too loh...!!
AS USUAL IF U WANT TO BUYOUT THE COMPANY, U WILL RATHER KEEP SHARE PRICE LOW MAH....THATS WHY THE MINORITY SHAREHOLDER FRUSTRATED LOH...!!
THUS INSAS INVESTOR JUST NEED TO BE PATIENT LOH...!!
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
Sslee
6,812 posts
Posted by Sslee > 2019-07-16 21:28 | Report Abuse
Dear Icon8888,
Agreed: Focus on earning growth
KYY original formula
Don't be distracted.
But also need to look at Balance Sheet otherwise will end like JAKS and SENDAI.
Thank you