Posted by kcchongnz > 2012-12-08 15:49 | Report Abuse

The most common method is to use PE ratio=P/E. with E known and a PE ratio similar to its historical ratio, or similar to other comparable companies doing the same business, and may be adjusted to risk, liquidity, growth etc, you should be able to come up with a P, the fair price of the share. You should be more familiar than me regarding its historical PE, of industrial PE. Are you testing me or what?
Personally I don't like PE ratio valuation that much. Why use PE of say 8? Why not 10, or even 15? For simple valuation, I like to use something related to ROE, return of equity. Why? Just like if I start a business and put in some capital, I want to know can I get say 10% per year considering the risk involved in this particular company. I usually use 10%, depending on the risk, roughly judged from its balance sheet, the kind of business, stability of income, its cash flows, etc. This is equivalent to 6% risk premium over a long-term MGS bond rate of 4%. 6% risk premium is an upper range of the historical risk premium of equity investment. Before the problem of the last three quarters, ROE of Mflour has been quite consistent at 15% for some years. So my valuation of Mflour would be 15%/10%*1.17=1.76, 1.17 being the last quarter equity attributed to common shareholders. I feel your estimate of 30 sen per share earnings is too high because that would jack up the ROE to 26% which it has never achieved that before, in fact had been far off. 15% ROE is reasonable and that will mean an earnings per share of 17 sen. (ROE=EPS/Equity, EPS=ROE*equity)
The other simplistic method I like is the Graham earnings valuation model of V=EPS*(8.5+2*g)*4.4/4, 8.5 is no-growth PE ratio, g=expected growth rate of 5%, 4 is the MGS rate. That would value Mflour to 0.17*(8.5+2*5%)*4.4/4=RM1.61 per share. These are simplistic methods of valuation which I think is quite useful. If I am interest in the share, I normally will further use discount cash flows methods. Hope I don't bore you.

Posted by KC Loh > 2012-12-08 16:11 | Report Abuse

nah, not boring at all. and no testing you! don't think further than that! I think a discourse like this is healthy, don't you think so?

i try think like businessman only. if business no good, why expand? consolidate business would be better bet! maybe the management know something i dunno! :)

30 sens per share earning is a target. no right or wrong if business expansion properly executed! currently it has reached as high as 25 sens before expansion! with an EPS growth of 21.64! after expansion, maybe not too far fetched. http://markets.ft.com/research/Markets/Tearsheets/Financials?s=MFLOUR:KLS

That would value Mflour to 0.17*(8.5+2*5%)*4.4/4=RM1.61 per share. (please tell me if i am reading your calculation wrongly), i state before:
Posted by KC Loh > Dec 6, 2012 05:54 PM | Report Abuse
If you want my valuation, i think it should be in the 1.6x range now! good opportunity to take advantage of Mr Market's manic! To me, looking at financial report alone is not enough.

that's FV to me, not intrinsic! :)

Posted by KC Loh > 2012-12-08 16:28 | Report Abuse

PE is a logical first step of calculation!

i like the word simplistic from you! me for the last few years utilize the word "realistic"! LOL

Posted by kcchongnz > 2012-12-08 16:56 | Report Abuse

For a company with debts, especially high debt, PE ratio may distort the picture to be too good. For example two companies, one with 100m equity and another equity 100m and debt of 100m. The no-debt company earns 10m and the debt ridden one 10.5m. After paying interest say 500,000, its net profit attributed to equity shareholders is also 10m. Are they exactly the same as an investment? Should there be traded at the same share price, or the same PE ratio? To me it is definitely not the same because the one with debt is more risky. What if profit drops below cost of borrowing? The one with debt would suffer much badly in his earnings and hence should be traded at a lower PE ratio.
hence in Mflour and other cases where debt is high, a better metric would be the ratio of enterprise value/Ebit.

Posted by KC Loh > 2012-12-08 17:14 | Report Abuse

correct about your last post! fully agree and fully endorsed! what i am trying to get at is, this MFlour valuation is healthy. With your no growth PE ratio, it still shows a positive margin! and with that I thank you! :)

you are still the Wharton principal in my book here in this forum! LOL

Posted by Hustle > 2012-12-08 23:53 | Report Abuse

Possibly flour is a control price item like sugar,even incoming material price increase,the retail price still have to be maintain.That's why,we will see decrease revenue for the company,when commodities price increase.Just logically assumption,possibly lots of investor will have that vibe too.

Posted by KC Loh > 2012-12-08 23:59 | Report Abuse

if indian grain comes in as expected, things may improve! nobody does a losing business!

but truth be told, the prolonged drought in USA is the main culprit! if things improve there, wheat and other grains price will go down. That will help the bottom line!

and yes, flour is staple diet! goes without saying! average 35kg per pax in Malaysia alone!:)

Posted by Hustle > 2012-12-09 00:17 | Report Abuse

Yup the major concern still in the west side,hope that Obama manage to cope the inflation.

Posted by pyramidpoh > 2012-12-09 08:21 | Report Abuse

shares go to bottom time to collect.Investors too much worry cannot make gain in the volatile market.

Posted by euscilyn > 2012-12-10 08:02 | Report Abuse

Usually, near end year all the market is dropping and uncertain election also one of the caused. Let's others blue chip stock also dropping. Beside the bushiness growing and company management, we should think of other issue as well don't jump to the conclusion. No rush money shall hold n see the market situation. I'm believe Mflour won't let you down just matter of time only.

Posted by yfchong > 2012-12-11 16:23 | Report Abuse

Now turning point begins.................

Posted by KC Loh > 2012-12-11 16:23 | Report Abuse

never discount window dressing only! but of course, i wish it rise too! hehe

Posted by liew kimguan > 2012-12-11 16:25 | Report Abuse

can start to accumulate some for Mflour?

Posted by yfchong > 2012-12-11 16:38 | Report Abuse

Are the T members jump in help to jump start the engine......................

Posted by Melvin G > 2012-12-11 17:16 | Report Abuse

higher! higher!

Posted by yfchong > 2012-12-11 17:25 | Report Abuse

The volume is insufficient to drive up the price, at least..........averaging half million units transaction.......... Then it will sail smoothly, else 2morrow highly potential wanting., just my limited edition of view..........

Posted by Melvin G > 2012-12-11 17:49 | Report Abuse

Hey buddy, never underestimate law of secret!

Posted by yfchong > 2012-12-12 09:28 | Report Abuse

Zzzzzzzzzzz............Zzzzzzzzzzzzz....... Need to wake up

Posted by playlj > 2012-12-13 19:13 | Report Abuse

exhausted !!!! need injet fuell laaaa

Posted by samcghee > 2012-12-14 08:51 | Report Abuse

It will drop down as this is not the time to go up! Timing is not so good. Wait it back to 1.22, then it is time to start to collect slowly.

Posted by Melvin G > 2012-12-14 11:36 | Report Abuse

The pink color in volume, what does that mean ?

Posted by pyramidpoh > 2012-12-14 12:45 | Report Abuse

pink color means outside dealt.

Posted by yfchong > 2012-12-14 14:34 | Report Abuse

If got special deal wat is the struck price good to share......

Posted by yfchong > 2012-12-14 20:04 | Report Abuse

Still thin volume............. Be patience.........ppb also wounded ..... Need to go checkup before joining the new year rally.........

Posted by pyramidpoh > 2012-12-17 08:55 | Report Abuse

Can consider for a long term investment?Is the stock stop bleeding already time tocollect????

Posted by minitrader > 2012-12-17 10:58 | Report Abuse

there's nothing interesting in the flour business. Govt-controlled item...so, it's difficult to make good profits unless govt approves on any price increase...

Posted by pyramidpoh > 2012-12-17 11:13 | Report Abuse

Now the company is controlled by Politically-linked businessman Tan Sri Syed Mokhtar Al-Bukhary.I think the price will be adjusted any time.

Posted by Matsaham Mashuk > 2012-12-17 11:17 | Report Abuse

Hmm..support at 1.22.still in downtrend mode.smile--)

Posted by Melvin G > 2012-12-19 15:52 | Report Abuse

http://www.intellecpoint.com/2012/12/the-curious-case-of-malayan-flour.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+blogspot%2FIFWDU+%28SERIOUS+investing%29

Posted by Melvin G > 2012-12-19 16:06 | Report Abuse

Hi KC feel free to check some opinion from Feli.

Posted by KC Loh > 2012-12-19 16:11 | Report Abuse

Melvin, whilst the article is good, what is not is that the author is still half-guessing in many instances!

he is talking about Malaysian market, whereas the management said before they are expanding to vietnam next year and Indonesia in 2014! Besides, they are also increasing capacity in Lumut and Pasir Gudang if not mistaken. Management indicates they are looking for a 15% IRR next year!

he is talking about competition from FFB, whilst scuttlebutts indicates FFB and MFlour managements are in good terms. This is because both of them dominates the flour refining business in Malaysia. Without MFlour, FFB also doesn't have the capacity to produce enough for.

politic vibes. FFB is not supplying to Gardenia, owned by Al-Bukhary! period. MFlour does, so they don't need to compete with each other! More so, FFB has gone downstream, so they will need their own supplies too. The only brilliant move is raising the chinese against Gardenia. Clever marketing as even my wife buys Massimo, whereas i still buy Gardenia wherever i can. Must support my shares mar! LOL

so, i am buying when the price is distorted by Mr Market. I am very sure, this counter will give me back a few million easily (estimated 80% returns before or by 2015)! oppsss better not say it in front of kids owning 2 Kfima lots only! LOL

Posted by KC Loh > 2012-12-19 16:15 | Report Abuse

noodle is staple diet in Vietnam with population of 87mn and Indonesia's diet is basically same like Malaysian, with a population of 242mn. Rice is seen to be no longer enough to sustain the Indonesian population, as observed correctly by the management of Mflour! :)

Posted by Ooi Teik Bee > 2012-12-19 16:19 | Report Abuse

Dear KC Loh and Melvin G,

M Flour belongs to Wood element related industry, will perform very well in "Water Snake" Year 2013.

Please be informed since KC cannot attend my talk.

Thank you.

Ooi

Posted by Ooi Teik Bee > 2012-12-19 16:22 | Report Abuse

Dear KC Loh,

Lumut is my home town, I knew the MD well. The company is doing well in Vietnam and Shanghai. I understand there is a factory in Shanghai because I meet him on the same flight to Shanghai.

Thank you.

Ooi

Posted by KC Loh > 2012-12-19 16:24 | Report Abuse

although i am not into fengshui, i think this is an opportunity miss to listen to Mr Ooi's talk! you never know if the chinese astrology could tell you something. I still recall my grandmother said to use the chinese lunar calendar as a basis of accuracy! til today, I still cannot figure it out how they can "predict" so many things accurately and many many generations ahead of time! Mind you, they can tell you when Hari Raya is, without even seeing the anak bulan! :)

And then there's Zhuge Liang, but let's leave that to another day when Ooi has done research on that! That one, i will surely attend, come rain or hailstones! LOL

Posted by KC Loh > 2012-12-19 16:29 | Report Abuse

Thanks for the info Ooi. i do feel bad cannot meet up with you today. We will do it next year, insya-Tuhan! Dinner on me, if you dont mind!

are you hock chew by any chance? :)

Posted by Ooi Teik Bee > 2012-12-19 16:34 | Report Abuse

Dear Loh,

I am a hokkien. My mum used to work for MD of M Flour as a chief cook 30 years back. The new MD is my family friend.

Thank you.

Ooi

Posted by Melvin G > 2012-12-19 16:35 | Report Abuse

Hi Mr Ooi,

Will be coming by Lrt to G tower.
Looking forward to see you.

Posted by liew kimguan > 2012-12-19 16:45 | Report Abuse

Dear Mr. Ooi, may i know Mflour is belonging to Gold or Wood element? since i heard some feng sui master said flour belong to gold element since their place of origin is come from western. again, western country consider gold element. thank you.

Posted by Ooi Teik Bee > 2012-12-19 16:47 |

Post removed.Why?

Posted by tonylim > 2012-12-19 17:13 | Report Abuse

Ooi, is Fabian Lim still with you

Posted by jumbo > 2012-12-23 00:16 | Report Abuse

Jumbo sit on Tonylim's face......rub rub...

Posted by yfchong > 2012-12-23 00:18 | Report Abuse

With the initial data fr www.agrimoney.com/ reports hope the flour milling would not be in cost challenge for 2013 FY. Still prefer to enter at a better price after window dressing season........Happy beginning for 2013.

Posted by KC Loh > 2012-12-23 00:25 | Report Abuse

http://www.reuters.com/article/2012/09/06/us-weather-elnino-cpc-idUSBRE8850PM20120906

Posted by jumbo > 2012-12-23 00:34 | Report Abuse

Jumbo ...like KC...king digi...Dave slayer.....scomi practitioner......>>>>Singh will be back.

Posted by jumbo > 2012-12-23 00:35 | Report Abuse

Jumbo use Singh's arrow >>>>>>>> on KClow

Posted by KC Loh > 2012-12-23 00:45 | Report Abuse

Kiddies league! Hahaha still wants to play with bow and arrows! No wonder scared or samdogass!

Come out chicken Dave! I don't talk to your figment of imagination, mumbo & jumbo. Hahahahaha

Posted by jumbo > 2012-12-23 00:47 | Report Abuse

Jumbo defends with shield )))))))))))))
Didn't feel KClow attack....Samdogass has smelliest ass.....Jumbo sit on Samdogass....Rub rub for luck

Posted by jumbo > 2012-12-23 00:50 | Report Abuse

Jumbo tells KClow, 3 days of Darkness coming.....Mayan didn't happen, this may....

KClow hides underbed again?

Posted by KC Loh > 2012-12-23 00:50 | Report Abuse

<yawn>, no time for imaginary kiddies! Will leave that to samdogass!