@kcchongnz. A firm will borrow until its next borrowing (marginal borrowing) result in its increase in weighted average ROI = increase in weighted average cost of borrowings. In relatively simple terms, its last borrowing may be 5% per annum. BUT the overall (i.e. weighted average) cost of borrowings may increase from 1.8% to 1.9%. If it makes 2% on the new borrowings, its overall ROI may still increase. Therefore, the firm will continue borrowing until its overall increase in ROI = overall increase in borrowing costs. After this limit (or equilibrium to the economist) its ROI and therefore profit before tax will decrease. As it is, LonB's profit is still increasing. ROI more than a year ago is not relevant for medium term (not > 3 months) share trading. It is its recent profitability and its sustainability that is relevant. LonB has sustained its jump in profitability for two quarters. Therefore your scenario does not apply; unless its profit drops in the third quarter.
@kcchongnz. Besides, for capex, it's the ROI over it's life-span that counts, not the initial ROI when the investment is immature. Example: New plant and machinery for manufacturing. For OP, it is capex for new plantings.
Comment: LONBISC has broken out of its resistance level of RM0.84 to confirm a ‘Bullish Flag’ pattern, indicating a continuation of its prior uptrend. Indicators-wise, MACD has just staged a postive crossover over the Signal line. Buying volume was notably strong yesterday. Based on this bullish bias, we believe that follow through buying interest could rally the share price towards the ‘Flagpole’ measurement objective of RM1.03.
About the stock: Name : London Biscuit Berhad Bursa Code : LONBISC CAT Code : 7126 Key Support & Resistance level Resistance : RM0.93 (R1) RM1.00 (R2) RM1.04 (R3) Support : RM0.87 (S1) RM0.83 (S2) RM0.79 (S3) Outlook : Bullish
BUSINESS OVERVIEW Incorporated since 1981, LONBISC is primarily involved in manufacturing and marketing cakes and snack food. Its individually packed and ready to eat (RTD) products can be divided into 2 main categories namely corn-based snacks and cake products (e.g. Swiss Rolls, Pie Cakes and Layer Cakes). Some of LONBISC’s brands include Lonbisco, London, Kinos and Gega. BUSINESS SEGMENTS Manufacturing and Trading. This division is mainly involved in manufacturing and marketing of cakes and snack food. In FY13, this division contributed operating profit of RM20.9m or 97% of the Group’s operating profit. Others. This division is mainly involved in investment holding and letting of properties. In FY13, this division contributed operating profit of RM0.8m or 3% of the Group’s operating profit.
London Biscuits Bhd Last Price RM0.915 Kenanga Irresistible Bite! Trading Buy RM1.18 Consensus N.A. N.A. By Alan Lim Seong Chun, CFA / alan.lim@kenanga.com.my
it rises today... i think Q1 2014 report gonna be announced soon. and it's a good year, so that's y someone internal who know will buy a lot these few days~
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....
upsidedown119
4,326 posts
Posted by upsidedown119 > 2014-04-24 14:53 | Report Abuse
@kcchongnz. A firm will borrow until its next borrowing (marginal borrowing) result in its increase in weighted average ROI = increase in weighted average cost of borrowings. In relatively simple terms, its last borrowing may be 5% per annum. BUT the overall (i.e. weighted average) cost of borrowings may increase from 1.8% to 1.9%. If it makes 2% on the new borrowings, its overall ROI may still increase. Therefore, the firm will continue borrowing until its overall increase in ROI = overall increase in borrowing costs. After this limit (or equilibrium to the economist) its ROI and therefore profit before tax will decrease. As it is, LonB's profit is still increasing. ROI more than a year ago is not relevant for medium term (not > 3 months) share trading. It is its recent profitability and its sustainability that is relevant. LonB has sustained its jump in profitability for two quarters. Therefore your scenario does not apply; unless its profit drops in the third quarter.