Posted by R40s > 2016-06-27 23:21 | Report Abuse

Kwang2209, rightly said, instead of looking to next 1 to 2 qtrs, we should look at next 1 to 2 yrs, in order to see how they perform after completing their Stage-1 & 2 expansions.

Posted by R40s > 2016-06-28 00:29 | Report Abuse

iloveshare88, I fully understand ur concerns on the EPS dilution by the new shares, besides the new total shares at 165M, I also would like to discuss on the following points u raised :

1. We normally compare Q-o-Q because seasonality often influence the business performance, Prolexus' Q3 is in Feb-Apr period, Feb is the shortest month in a year and furthermore CNY usually falls on Feb, this normally cause the production and sales figures to reduce in this month.

2. By looking at past 3 yrs, 2013~15, we can see consistently that Q2 and Q4 profits are highest at roughly rm7M, and Q3 profits are lowest. The Company forecast in their report that the current year's prospects should remain stable, so give or take 1M just in case of surprises such as forex loss in Q4, we may assume Q4 profits at rm6M. So EPS'16 = (18.2+6)/165 = about 14.6sen. At current price of rm1.41, the PER'16 should be ~9.65, this is quite attractive because Prolexus is a growth stock currently in expansion mode.

3. For the warrants, it's free for RI subscribers, but it's not really free, WA holders must pay rm1.20 to convert to new shares, if all WA is converted (this won't happen soon unless it's in-the-money), then there will be rm68M cash hordes in the account, or about 30.5sen/share of CASH, So the NTA should increase by ~30sen which should also increase the value of the shares. Even if the Company simply put this cash for FD, it could earn about rm3.1M interests, or 3.1/(165+56.8) = another +1.4sen EPS. Assuming PER = 10, the share price should be worth +14sen higher.

4. Share investment is about the future prospects of the Company, not so much about the history. Your reference to 2012 Q4 profits has missed the fact that in 2012, the USD/RM exch. rates was about 3.0~3.2, compared to 2016 rate at about 3.9~4.2, this makes a very big difference to their bottom line.

Posted by R40s > 2016-06-28 00:34 | Report Abuse

iloveshare88, I fully understand ur concerns on the EPS dilution by the new shares, besides the new total shares at 165M, I also would like to discuss on the following points u raised :

1. We normally compare Q-o-Q because seasonality often influence the business performance, Prolexus' Q3 is in Feb-Apr period, Feb is the shortest month in a year and furthermore CNY usually falls on Feb, this normally cause the production and sales figures to reduce in this month.

2. By looking at past 3 yrs, 2013~15, we can see consistently that Q2 and Q4 profits are highest at roughly rm7M, and Q3 profits are lowest. The Company forecast in their report that the current year's prospects should remain stable, so give or take 1M just in case of surprises such as forex loss in Q4, we may assume Q4 profits at rm6M. So EPS'16 = (18.2+6)/165 = about 14.6sen. At current price of rm1.41, the PER'16 should be ~9.65, this is quite attractive because Prolexus is a growth stock currently in expansion mode.

3. For the warrants, it's free for RI subscribers, but it's not really free, WA holders must pay rm1.20 to convert to new shares, if all WA is converted (this won't happen soon unless it's in-the-money), then there will be rm68M cash hordes in the account, or about 30.5sen/share of CASH, So the NTA should increase by ~30sen which should also increase the value of the shares. Even if the Company simply put this cash for FD, it could earn about rm3.1M interests, or 3.1/(165+56.8) = another +1.4sen EPS. Assuming PER = 10, the share price should be worth +14sen higher.

4. Share investment is about the future prospects of the Company, not so much about the history. Your reference to 2012 Q4 profits has missed the fact that in 2012, the USD/RM exch. rates was about 3.0~3.2, compared to 2016 rate at about 3.9~4.2, this makes a very big difference to their bottom line.

Posted by iloveshare128 > 2016-06-28 09:55 | Report Abuse

Hi R40s, thanks for your feedback. I agree to some extent of your comments. I do know that there is a conversion/exercise price of RM1.20 for the "free warrant"... what I wanted to say is the effect of dilution of warrants (once exercised) will be greater than the effect of getting the additional cash from the conversion charges. It is not anti-dilutive as compared to other warrant situation (when the exercise price is higher than the current share price). I do agree than it is likely Q4 will be better than Q3 (if you read my comment clearly) that I expect them to improve the net profit to be RM4.5million... and my calculation has included the assumption of "better Q4"... my question is, what "if" Q4 turns out to be worse.. we should only weigh on the potential risk... and I know you may say this is short term...ok, let me rephrase, with more competition in garment business, especially in China and Vietnam, what are the strengths of PRLEXUS that can guarantee they will outperform in future. Garments are not rocket science and can be easily manufactured by anyone...

Posted by iloveshare128 > 2016-06-28 09:56 | Report Abuse

Hi R40s, thanks for your feedback. I agree to some extent of your comments. I do know that there is a conversion/exercise price of RM1.20 for the "free warrant"... what I wanted to say is the effect of dilution of warrants (once exercised) will be greater than the effect of getting the additional cash from the conversion charges. It is not anti-dilutive as compared to other warrant situation (when the exercise price is higher than the current share price). I do agree than it is likely Q4 will be better than Q3 (if you read my comment clearly) that I expect them to improve the net profit to be RM4.5million... and my calculation has included the assumption of "better Q4"... my question is, what "if" Q4 turns out to be worse.. we should only weigh on the potential risk... and I know you may say this is short term...ok, let me rephrase, with more competition in garment business, especially in China and Vietnam, what are the strengths of PRLEXUS that can guarantee they will outperform in future. Garments are not rocket science and can be easily manufactured by anyone...

Posted by iloveshare128 > 2016-06-28 09:57 | Report Abuse

R40s, perhaps you can share more on their expansion plan (in more detail) and we can further discuss if their expansion plan has any bright prospect... thanks...

Posted by iloveshare128 > 2016-06-28 09:59 | Report Abuse

typo: we should "also" weigh on the potential risk

Posted by iloveshare128 > 2016-06-28 10:32 | Report Abuse

another remark of mine is on the "intrinsic value" of this share after the right issue..
current Net asset is RM1.19/share. after right issue, it will be RM1.19x108.35/165.15=RM0.78.
Price/Net asset = RM1.40/RM0.78=1.79 (>1.5 ratio)... which means we are using extra money to buy lower value shares... (if you follow "value investing" method)...

Posted by iloveshare128 > 2016-06-28 10:33 | Report Abuse

another remark of mine is on the "intrinsic value" of this share after the right issue..
current Net asset is RM1.19/share. after right issue, it will be RM1.19x108.35/165.15=RM0.78.
Price/Net asset = RM1.40/RM0.78=1.79 (>1.5 ratio)... which means we are using extra money to buy lower value shares... (if you follow "value investing" method)...

Posted by R40s > 2016-06-28 16:41 | Report Abuse

iloveshare88, good that you raised these points for discussion, first let's talk about their "intrinsic value", which I think you missed out a very important value in your estimate above:

1. The RI at Rm1.00/share has raised Rm56.8M funds (net = 56.8-1.6 = Rm55.2M after Rm1.6M RI expenses), it was not accounted in Q3, and that the "Weighted average number of ordinary shares in issue" in Q3 actually has increased from 108.35M to 113.88M shares (mainly from ESOS), and the total NA for Q3 = Rm135.95M, so the new NA/share = (135.95+55.2)/(113.88+56.8) = Rm1.12, very little drop from pre-RI at Rm1.19.

2. The funds raised will be sit idling, it is immediately channel into the construction of Vietnam factory and Johor factory, expected to start now (Vietnam) and September (Johor). Bear in mind that the money is invested for business expansions, not to pay debts or put in FD, when the factories are ready next year, their values should increase further because the money would produce more profits from higher production of apparels (Vietnam) and more value-added products (Johor).

We should be optimistic about their business expansion and their prospects instead of being sceptical about it, and to be patient to reap more profits from this as shareholders who are participating in this exercise.

Posted by R40s > 2016-06-28 16:48 | Report Abuse

So the "Intrinsic value" should actually increased to above Rm1.19/share @ Q3, because of the "Power of Money" when they are put to good use to work hard to make even more money for us, so to speak.

Posted by R40s > 2016-06-28 22:29 | Report Abuse

Sorry, #2. above should be "The funds raised will NOT sit idling, ..... "

Posted by R40s > 2016-06-28 23:19 | Report Abuse

On the dilution by Warrants, in fact this was adjusted in the Ex-RI price, because at Rm1.20 conversion price, the WA was in-the-money unlike those warrants with conversion price higher than share ex-price (eg., Tomypak's case, Conversion at Rm2.29 vs share ex-price at Rm1.99):

Prolexus ex-price = (price-before-ex Rm2.04 x 2 + RI price Rm1 + WA Conversion price Rm1.20)/4 = Rm1.57. Their ex-price accounted for potential dilutions of warrants when converted to shares.

Tomypak ex-price = (price before ex Rm2.49 x 2 + RI price Rm1)/3 = Rm1.99. Their ex-price did not account for potential dilutions of warrants when converted to shares.

So Prolexus' ex-RI price have already been pre-adjusted down by making a very conservative assumption that all WA get converted, even though in reality, many warrants in BURSA ended up unconverted when they hit maturity.

Prolexus RI with warrants at such low strike price, it's actually beneficial, especially for a growing and expanding company, the WA should become more valuable later.

Posted by R40s > 2016-06-28 23:32 | Report Abuse

For a company with matured business and stagnated with little room for growth, then any increase in new shares would surely cause EPS dilution. But for a company expanding due to growing business, the new funds received are invested for Productive purposes that generate more profits, then the risks of EPS should be lower, unless unforeseen circumstances happened. However, that's part and parcel of stock investments, no risks no gains, if investors cannot or not willing to take such risks, then better avoid stocks and put money into FD.

Posted by R40s > 2016-06-29 00:14 | Report Abuse

iloveshare128, regarding concerns on competitions in Garment industry, it's not new, in fact it's a perennial issue. Many years ago there were already many nay-sayers who said that Malaysian Garment Industry was riding into sunset, because of competition from new emerging countries with lower costs. But decades later, look at these companies, they are still thriving and growing.

This is because instead of competing on cheap garments selling in places like pasar malam, Malaysian producers have successfully transformed and moved upmarket with higher quality and more customized products, eg., Prolexus produce apparels for premier brands like Nike, Asics, Under-Armour, etc. The reason Prolexus business is growing is because US economy is picking up steam and Consumer Spendings are increasing, thus forcing them (and others too) to expand their factories and/or build new factories to cater for their customers' increase in demands.

Another reason they still thrive is because, as the old-saying "If you can't beat them, join them", since Malaysian companies can't beat the lower costs of countries like China and Vietnam, so they move some of the productions to these countries, in the case of Prolexus, they already have a factory in China and currently undergo expansions, and now they are building a new factory in Vietnam, due to Vietnam's TPPA status and a big pool of cheap labour that will help reduce their costs further. Their China factory will eventually produce 50% of the group's total productions, whereas their new Vietnam factory will initially add 4.5M apparels/year to current production level of 14M/year, with potentials to expand and increase later in future when required.

Posted by iloveshare128 > 2016-06-29 12:56 | Report Abuse

Hi R40s, appreciate your detailed explanation. Most of them sounds logical to me. There are still 2 items that are haunting me and stop me from buying the shares:
1) I agree that the ex-share price has taken into the account of all warrant conversion. But my concern is: the EPS dilution is still a concern as more shares will be converted from warrant. The current estimate of full year 13-14sen EPS has not included the possibility of any warrant conversion. if all warrants are converted in future, the EPS will be heavily diluted.

2) On expansion, yes, all investors like the companies to expand... however, please do not forget if you are spending RM56.8million to expand but you only expect to gain additional a few million of net profit (or less), that kind of investment is not worth. Magni, on the contracy, uses much lower capital expenditure to grow their business and earning. Can you forecast how much additional earning will PRLEXUS gain after the vietnam and China expansion? We need to know how many years will be required to breakeven on the capital invested to see if that is a good investment.

Posted by value88 > 2016-06-29 13:41 | Report Abuse

My opinions are as follows :
- Prolexus' earning will grow upon the completion of Vietnam plant and Johor plant next year.
- The warrant is likely to be converted into mother shares since it is already in-the-money. It's expiry date is in 2021, it is still 5 more years, normally, people do not convert the warrant too early, thus the warrant dilution effect will not be significant in next one to three/four years.

- What we can't be certain is how much the earning will grow when the two new factories are in full operating mode, if at that time, the company can achieve higher EPS after taking into account the dilution effect from RI as well as warrant conversion, it's stock price should follow. Otherwise, the expansion will not benefit the company. I suppose the management must have thought they can achieve higher EPS upon expansion, otherwise, no reason for them to do so.

- In short, Prolexus is a growing company and worth to invest in it's future. However, the earning will be diluted by the RI in several Qs to come until the new factories can start to contribute to top & bottom lines. This means it's stock price may be stagnant from now till the new earnings kick-in. For me, I may want to wait till early next year to invest into this stock to avoid my money sitting idle there.

Posted by weng > 2016-06-29 22:06 | Report Abuse

Dear R40s,
May I know where do you get the information below?
"Their China factory will eventually produce 50% of the group's total productions, whereas their new Vietnam factory will initially add 4.5M apparels/year to current production level of 14M/year, with potentials to expand and increase later in future when required."

Posted by iloveshare128 > 2016-06-30 09:55 | Report Abuse

value88, you have got a good point there.. it is better to monitor for the next few quarterly results before we decide if this is a good investment.. after all, at current PE ratio (compared to Magni which is an even bigger player with higher earning yield), it is not cheap.. by looking at its P/BV, it is close to 2x (much higher than the 1.5x ratio)... so I think it is a bit overpriced... just my 2 cents.

Posted by iloveshare128 > 2016-06-30 09:56 | Report Abuse

Hi R40s, yes, I am also as curious as weng... where did you get that % info from?

Posted by R40s > 2016-06-30 11:17 | Report Abuse

Hi Weng n iloveshare128, see TheStar news below on Prolexus' expansions into China market:

http://www.thestar.com.my/business/business-news/2010/12/27/garment-maker-prolexus-counts-on-china-plant/

It started with only 200 workers about 5 years ago, Prolexus would gradually increase the workforce at its China factory to 1,000 workers.

See the Kwongwah Daily's news (sorry, in Chinese) about their expansion plan early last year:

http://finance.sina.com/bg/economy/kwongwah/20150215/04441211868.html

This was also reported by TheEdge Weekly, see this news quoted by Bull&Bear Research:

http://bullandbearresearch.blogspot.my/2015/02/update-prolexus-bhd-ramping-up.html

Actually I misinterpreted a bit on the news, it should be : China's plant to double the operation capacity by end of 2015 with a capex planned at RM8mil last year. Their China's operation is expected to contribute over 50% of group sales in 5 years time, in anticipation of China's potentially huge domestic market.

Posted by R40s > 2016-06-30 11:24 | Report Abuse

Last year before Prolexus planned their Stage-1 expansions, their total production capacity was only about 10M apparels/year, but in Q3-2016, this has increased to 14M/year, this goes to show that their Stage-1 expansion plan has completed successfully.

Posted by R40s > 2016-06-30 11:30 | Report Abuse

The current capacity of 14M/year and the new Vietnam factory's initial capacity at 4.5M/year or +32% higher, is stated in their "Abridged Prospectus dated 20.5.2016, page#18-19.

Posted by R40s > 2016-06-30 11:39 | Report Abuse

With their capacity increased by 40% now and another 45% from earlier 10M/year, total 85% increased, and based on Prolexus' objective to grow at average 10%/pa, the total capacity should cater for their growth in the next 5 years.

Their Vietnam factory going on stream by Q3 next year is a very timely move, because TPPA will kickoff in 2018.

China has not yet become a TPPA Signatory nation, so their China factory is expected to mainly cater for China market.

Posted by R40s > 2016-07-02 01:05 | Report Abuse

Dear iloveshare128,

you have said above "by looking at its P/BV, it is close to 2x (much higher than the 1.5x ratio)... so I think it is a bit overpriced... just my 2 cents.".

I wish to know how did you get the P/BV ~ 2x for Prolexus? Did you use post-RI's NA/share of 78sen you calculated earlier? So you use 146/78 = 1.87 or nearly 2x to say that it's overpriced?

But what if it's post-RI NA/share is Rm1.12, as I clarified, after adding the funds raised by the RI? Then the latest P/BV = 146/112 = 1.30, it's below 1.5x and it's not overpriced? Do you agree?

Since you compare it to Magni-Tech earlier and feel Magni is a better buy, but Magni's NA is Rm1.98 and it was trading at Rm4.12 two days ago, so it's P/BV = 4.12/1.98 = 2.08, this is more than 2x, can you elaborate?

Posted by iamsoonoob > 2016-07-02 02:13 | Report Abuse

so the bottom line is right issue is a bad thing as most ppl does not like this right issue thing?since asking money from us shareholders means the company does not have enough cash reserve for capex or investment?and also indicate the company is in trouble?just need advice from the fellow shareholders abt this thought of mine.

Posted by rayloo > 2016-07-02 09:30 | Report Abuse

Worth to share that both potential of US new president object TPPA, highly to be off during their presidency.

Posted by iloveshare128 > 2016-07-04 09:17 | Report Abuse

Hi R40s, I have actually explained it above.. i copy and paste here again:
another remark of mine is on the "intrinsic value" of this share after the right issue..
current Net asset is RM1.19/share. after right issue, it will be RM1.19x108.35/165.15=RM0.78.
Price/Net asset = RM1.40/RM0.78=1.79 (>1.5 ratio)... which means we are using extra money to buy lower value shares... (if you follow "value investing" method)...

Posted by iloveshare128 > 2016-07-04 09:19 | Report Abuse

Hi R40s, I have actually explained it above.. i copy and paste here again:
another remark of mine is on the "intrinsic value" of this share after the right issue..
current Net asset is RM1.19/share. after right issue, it will be RM1.19x108.35/165.15=RM0.78.
Price/Net asset = RM1.40/RM0.78=1.79 (>1.5 ratio)... which means we are using extra money to buy lower value shares... (if you follow "value investing" method)...

Posted by iloveshare128 > 2016-07-04 09:21 | Report Abuse

R40s, it is your assumption that the funds raised from RI will be included in the balance sheet as net asset... i normally do not like assumptions... haha... so I would still be conservative to think that the NTA is around 78sen... we should see how much of value is added to the balance sheet in next quarterly result... for Magni, what I meant is their profit growth and the dividend yield.. much better, and their ROE also better.. and they require less capex to earn more money.. just my 2 cents

Posted by R40s > 2016-07-04 12:54 | Report Abuse

Hi iloveshare128, I'm not an accountant, so maybe you know better than me, but I wish you can explain the following doubts to your replies above:

1. Your NA/share calculation was using NA at Q3 period closed @ 30.4.16, but then you use the enlarged share base after 20.6.16, by assuming the Rm55.2M Net Cash proceeds from RI has become ZERO, no effects on the NA, is this the correct accounting practice?

2. The Rm55.2M will be gradually drawn down to finance the constructions of the 2 new factories, over a period of about 18 months (assuming no delays), as the constructions progress till full completion. Does that mean the investment of this Rm55.2M becomes ZERO? Or will it go into the account statement as "Property, Plant & Equipment"?

3. The Rm55.2M still in cash form now, does it qualify as "Current Asset"? When the factories are ready and become operational next year, will it become "Non-Current Asset" in next year account?

4. Can the Company's Prospectus state clearly that the Rm55.2M proceeds will be used for building the 2 new factories, but later end up diverted for other purposes, and then lost all the money, and the Company can get away with it?

5. For fair argument sake, the new factories will be depreciated over a period of time to become ZERO or left with some Salvage Values, can it considered that the Rm55.2M end up as NOTHING?

6. If in future these fixed assets actually appreciated as is usually the case actually, especially the land prices usually escalate with time as the developments of that location matures. Will the accounts be adjusted to reflect this? Or if it becomes ZERO from Day-1 in your assumption, then how to make this fair price adjustment?

Thanks in advance for enlightening laymen like us with your clarifications.

Posted by iloveshare128 > 2016-07-04 16:23 | Report Abuse

hi R40s, I am also not an accountant.. I did "not" use the NA at q3 period close.. see my reply clearly above.. i used the estimated q4 NA of RM0.78. WHat I wanted to highlight is, the current share price is already reflective of the RI and warrant, but the NA is yet to show that in Q3... so I said Price/Net asset = RM1.40/RM0.78=1.79 (>1.5 ratio)

Posted by iloveshare128 > 2016-07-04 16:24 | Report Abuse

hi R40s, I am also not an accountant.. I did "not" use the NA at q3 period close.. see my reply clearly above.. i used the estimated q4 NA of RM0.78. WHat I wanted to highlight is, the current share price is already reflective of the RI and warrant, but the NA is yet to show that in Q3... so I said Price/Net asset = RM1.40/RM0.78=1.79 (>1.5 ratio)

Posted by iloveshare128 > 2016-07-04 16:25 | Report Abuse

and for the 55.2 proceeds, normally it won't be translated 100% into the balance sheet as net asset, like you mentioned... and i think you are right about the depreciation and the risk of them not using the proceeds properly...

Posted by R40s > 2016-07-04 18:49 | Report Abuse

iloveshare128,
But you mentioned "current Net asset is RM1.19/share. after right issue, it will be RM1.19x108.35/165.15=RM0.78", please take note that the Rm1.19/share is actually NA at Q3 closed date, and then you prorated it with 108.35/165.15M shares to get your estimated Q4's NA/share, which is (share base @Q3)/(share base after RI @20.June.2016), isn't that as what I queried in #1 above?

Posted by R40s > 2016-07-04 19:08 | Report Abuse

I agreed that the Rm55.2M won't be 100% translated into NA, but it's definitely not going to be ZERO (0%) right? Do you agree on this point?

Please also take note that when the accounts show "Depreciation of plant & equipment", it's to Company's benefits, as they can get deducted from taxable income, so they may be depreciated to Zero over 10 years to get back the tax money, just like if you own a company, you would buy a Company Car to get tax deductions from depreciation. After 10 years fully depreciated in terms of accounting, the plant & machineries will still be running happily to churn out products at full capacity if it's well maintained.

Posted by R40s > 2016-07-04 20:02 | Report Abuse

On the Rm55.2M investment not 100% become NA, in fact, if you have followed the Company's news on their expansion plan, you would know following important facts:-

1. The 40-yrs Leasehold land of about 15-acres in Vietnam was acquired with Rm10.9M, with Company's internal funds (from their cash hoards, nothing to do with this RI proceeds),

http://www.bursamalaysia.com/market/listed-companies/company-announcements/5081997

2. The Freehold land of about 28-acres in Johor was acquired with Rm9.9M, with Company's internal funds and/or bank loans (from their cash hoards, nothing to do with this RI proceeds),

http://www.bursamalaysia.com/market/listed-companies/company-announcements/4766893

3. The Company's major shareholders have actually increased their shareholdings via Open-market purchase and ESOS Subscriptions, so that they could subscribe for more RI shares. They made the commitments to take up the RI via their underwriters,

http://www.bursamalaysia.com/market/listed-companies/company-announcements/5086269

So with Rm55.2M, Company actually have already paid for the land costs, the RI will be purely for construction of the new factories only, as detailed in their RI prospectus. So what's your take?

To say that there is risks of the Company abusing the RI proceeds, is whether you pick the right company and their management team, this company exists for several decades, and it's well managed with a good track records, having very healthy cash flows and balances. Don't forget item#3 above which shows that they themselves have major stakes in this, and should be more keen than us to see through the successful completion of the new factories.

Posted by iloveshare128 > 2016-07-05 14:08 | Report Abuse

R40s, I think you still didn't get me right... what I mentioned is: in Q3 report, NA is 1.19... but the share price has been "adjusted" due to RI and Warrant... so, to match the price and NA, we should use the same period, which is after RI and warrant... after RI and warrant, the NA is supposed to be 78sen.. the share price of RM1.46 is after RI and warrant so it matches with the 78sen NA... you get what I mean?

Posted by iloveshare128 > 2016-07-05 14:19 | Report Abuse

On the other hand, I am a bit paranoid and skeptical about the ability of PRlexus to utilize the equity to generate more EPS... please see what Warren Buffet said:

Warren Buffett’s investing principles focus on return of equity, ROE. This is his thought.

“Customarily, most investors measure annual company performance by looking at earnings per share (EPS). Did they increase over last year? Are they high enough to brag about? For his part, Buffett considers EPS a smokescreen. Most companies retain a portion of their previous year's earnings as a way of increasing their equity base, so he sees no reason to get excited about record EPS. There is nothing spectacular about a company that increases EPS by 10%, if at the same time, it is growing its equity base by 10%. That's no different, he explains, from putting money in a savings account and letting the interest accumulate and compound. Worse still, there are many companies borrow huge amount of money to improve EPS, but the marginal return is way below its borrowing costs.

The test of economic performance, he believes, is whether a company achieves a high earnings rate on equity capital ("without undue leverage, accounting gimmickry, etc."), not whether it has consistent gains in EPS. To measure a company's annual performance, Buffett prefers return on equity or ROE. -- The ratio of operating earnings to shareholders' equity.”

I don;t own any Magni share as well, but to me, Magni has a much better ROE and this means they need less equity to earn more money....

Posted by iloveshare128 > 2016-07-05 14:20 | Report Abuse

so if i have to choose either Magni or Prlexus, I would opt for the former

Posted by rayloo > 2016-07-05 18:17 | Report Abuse

I guess investment is not a math question like 17+12=29, or base on scientific logic to make decision. It is however largely base on confidence or emotion. If investors are confident in a company then they may be willing to pay high like PE30 to buy. Else even PE5 with ROE >20 also no one dares to take, this is especially significant in bear market.

Otherwise, top successful investors will be mathematician.

Even I am the smartest and the only 1 in the world is right about a company, and 99.9% people is wrong in the same company. There will not matter, because the stock price is decided by the 99.9% people which is wrong.

So, my opinion is to know what majority is heading to, then try to head the other way. Everyone has his own intrinsic value in any company, but it does not mean a sure win situation. It only serves as a guideline to risk management.

Posted by R40s > 2016-07-05 22:34 | Report Abuse

Hi rayloo, very well said, I couldn't agreed more on what you say above...

I'm very sure that Warren Buffet isn't among the 99.9% of the herd, WB is in the 0.1% who read a lot and analyse a lot, and make very detailed and accurate studies before he make his investment decisions on the companies he targeted. But I think we need to point out the errors posted here, because some readers may base on the wrong info posted here and get wrong impressions or make decisions base on such wrong info.

I don't try to advocate anyone's buy or sell decisions, iloveshare128 wants to buy Magnitech, it's purely his personal decision, and I don't deny it's also a good company to invest in.

Posted by R40s > 2016-07-05 23:07 | Report Abuse

iloveshare128, I don't know why you still insist your 0.78sen NA is correct, and you didn't really answer my questions. Can you please read this abridge prospectus before you make conclusions:

http://disclosure.bursamalaysia.com/FileAccess/apbursaweb/download?id=175568&name=EA_DS_ATTACHMENTS

Just read from page 38-41, there are Company's calculations of NA/share from Q4-2015 to after RI and after full WA Conversions. See the page-39, "Minimum Scenario (for 56.56M RI)" which is the case now because the RI issued is 56.8M. See Column-II, the NA after RI is estimated at Rm1.01, and it has taken into account of the RI's proceeds less Rm1.6M expenses (see page 41, Note-2). The Rm55.2M net proceeds will appear as increase in the "Share Capital" and "Share Premium", exactly at the amount, no more no less, please check it yourself.

The NA at Q3-2016 was estimated at Rm1.03 based on adjustments from Q4-2015 audited results, with Q3-2016 Equity for Company Owners at only Rm116.9M (actually it's Rm131.52M and NA is Rm1.19), if adjusted based on latest Q3 results, and enlarged shares after RI at 170M shares, NA/share = (131.52+55.2)/170 = Rm1.10, approximately, just as I mentioned before.

Posted by R40s > 2016-07-06 00:03 | Report Abuse

It would be most ideal if a company can give consistently high ROE without increase in equity base, but in reality can this actually happen to a small cap company? Look at current blue-chip companies with huge share capitals, how did they grow? Without increase in share base and/or equity base?

Prolexus started as a tiny Second Board company with only about 40M shares just a few years ago, can it grow without enlarged share cap and equity base and without borrowings? Having said that, don't forget Prolexus was actually financially sound with NET CASH position, until they invested on rapid expansion plans lately.

http://klse.i3investor.com/blogs/kenangaresearch/80382.jsp

Posted by rayloo > 2016-07-06 14:49 | Report Abuse

Btw, well analysis sharing. R40s.

Posted by R40s > 2016-07-07 20:22 | Report Abuse

Hi rayloo, about the concern of US exit from TPP after either Hilary or Trump become the next US president, it's not impossible, but I think it's a very remote chance to happen.

Posted by R40s > 2016-07-07 21:39 | Report Abuse

Here is my analysis of TPP's outcome base on 4 possible scenarios:

Scenario*1 -- Obama was endorsed by the Senate House to expedite on the TPP just 2 weeks ago (see news link below), so most likely he will succeed to get TPP legislated before his term ends by end of this year. The Republican-majority Senate House has approved it by 60-38 votes, shows that Obama's TPP efforts is strongly supported by both parties, so he should be able to get the Congress to pass it too. Once legislated, TPP can't be simply be nullified by his successor.

https://www.theguardian.com/us-news/2015/jun/24/barack-obama-fast-track-trade-deal-tpp-senate

Scenario*2 -- Hilary will most likely get elected as next US President, she is still leading Trump by over 6% in the latest poll (see link below). She supported Obama's TPP in principle when she was his Secretary-of state, but now she backed off from TPP because of workers unions demand, after seeing Trump's rejection of TPP get the unions' supports. But after election and if Hilary win, her rationality would choose to abide her party's endorsement on the TPP (see news below), which she played a part too under Obama's administration. At most she would just fine-tune the TPP instead of rejecting it, by adding some sweeteners for the unions.

http://elections.huffingtonpost.com/pollster/2016-general-election-trump-vs-clinton

http://www.dw.com/en/democrats-to-endorse-trans-pacific-partnership-agreement/a-19356105

Scenario*3 -- Trump may win the election, though not very likely, but after election he may make a U-turn on the TPP. Most Republican reps and leaders are pro-business, because they normally enjoy a lot of sponsorships and donations from US Corporations, even Trump himself is a property tycoon who enjoyed the GOP's pro-business policies. So most probably instead of "Tear off the TPP" as he promise now, he would just revise the TPP to give some candies to the unions.

Scenario*4 -- Trump win the election, he may try to nullify the TPP, but he won't be able to get pass the Senate and Congress, because not only the Democrats, even his own Republican reps would not allow it. So far, as you can see that Trump is a maverick in his own party, most of the GOP's leaders don't like him at all, because of his grossly populist approach and shooting his mouth off like a loose cannon, only the lower working class people love him, but not the present crop of reps and leaders in both camps.

So, TPP should become reality, and Obama would be remembered for his efforts to make TPP happened, a historic pact that will be effected in the US-led 12 nations that controls 40% of the world's economy.

Posted by R40s > 2016-07-07 22:52 | Report Abuse

Economics aside, if we look from geopolitical aspect, it's all the more reasons for US leaders to support the TPPA. This is because after the 2008 Subprime-Crisis, US was too busy to rescue their nearly bankrupt financials, bailout corporations, revive their stalled economy with QE after QE, disengage their military operations in Iraq and Afghanistan, etc, etc. After all that were done, Obama shifted his attention to the Pacific Rim, where China is making big strides in this region, and threatens US dominance here, so besides making military pacts with countries around China, for economics, TPPA is formulated to counter China's 'One Belt, One Road' Economic Belt.

US consider China as the No.1 biggest threat to US supremacy in both military and economy. If US make an exit from TPP pact which is motivated by themselves, it would bring themselves shame and loss of respects by the other nations, not to mention they may indirectly push these nations towards China's welcoming arms.

Furthermore, China's RMB is now accepted as 1 of the 5 reserve currencies, if US play a US-exit from TPP to become isolated, then the US Dollar may lose it's dominance as world currency, probably to get substituted by RMB, that's the last thing US leaders would tolerate.

So in conclusions, US will not exit from TPP, unless they let the irrationals rule over the rationals.

Posted by joni > 2016-07-15 16:37 | Report Abuse

bought some in case i missed the chance!

Posted by Kklow77 > 2016-07-26 09:29 | Report Abuse

Me 2... Pr raise fund for expansion due to demand increases n competition... Not for pay debt or operating cost...