Posted by kcchongnz > 2013-12-25 08:52 | Report Abuse

AMedia is a stock which is very dangerous for retail investors. It appears to have reasonably good earnings, and its PE ratio at 13.5 sen one year ago was a low single digit too. It even has good cash flows from operations. Its balance sheet is also nothing to fault about. But why is that Amedia required to exercise cash calls in right issues and private placements so often? A thorough screening through its financial statements show something is not right, a financial shenanigan?

http://www.intellecpoint.com/search?q=asia+media

AMedia’s share price has since fell from the adjusted price of 13.5 sen a year ago to 8 sen now, for a drop of 41%. It was even much higher than 13.5sen before that. There appeared to be a lot of share price manipulation, pumped and dumped, by insiders too. Plenty of blood is spilling everywhere for these two stocks.

KNM
Another of my “favourite” lemon which I was frequently asked is KNM. There are many loyalists for KNM, despite all the deceits, spinning from the major shareholder and management. I don’t know why but I guess it is hope again. KNM was the darling of the market. It had big plans; foraying and making its foot prints all over the world with big acquisitions. It reminds me of Enron. Each time I was asked about it, I gave bad comments.

KNM has been losing money almost every year in his operations. Cash ran out and many cash calls were made. Even when it said it made money I have doubt about it because it often did not reflect in its cash flows and balance sheet. Some may say. “don’t worry, it has a lot of assets”, but its assets are of very low quality; PPE of which not sure what is the realizable value, doubtful receivables and work in progress, inventories, goodwill and intangibles. Its debts and liabilities are huge. It may end up the only value KNM has is just an option value, minimum of zero and something questionable.

KNM’s share price dropped by just a couple of sen a year ago to 43.5 sen now. Actually it has nothing much to drop already. The blood has already spilled years ago. Yet many punters are still hoping that the insiders will fry the shares for them to make money. KNM’s share price did rise up to 60 sen middle of this year, but I am sure who are the people who made money, and who were the ones who lostt. A good place to read about the comedian story about KNM is as appended below:

http://whereiszemoola.blogspot.co.nz/search?q=knm

When people asked me if they should keep the stock, I like to cite this Sioux Indian proverb:

• When you realize that you are riding a dead horse, the best strategy is to dismount.

China Stationery Limited
CSL is a typical stock which punters should avoid. There are many more of these kind of companies in Bursa. Its annual report shows they are making tons of money with plenty of cash flows and cash in bank. And yet the major shareholders dumped the share, millions of them. Yes, he is very noble and wants to share and enrich the public with the huge earnings the company made and its cash in banks. So he offers the stock at 75 sen to the public when it has 19 sen earnings, and 70 sen cash per share. I fact now you can buy CSL at 19.5 sen. What a bargain of the century!

Guan Chong Berhad
Guan Chong Berhad is recommended by a famous investor a few months ago (I have great respect for this famous investor, I really do, but everybody can make mistakes). It appears to be making profit year in year out. However, few people looked a little deeper; why is it the total debts have been increasing at such a fast pace, and that there is hardly any cash flows from operation, not to mention about free cash flows. Something is definitely not right. Why can’t GCB show us the cash? Are they speculating (not hedging) on Coco future? Finally the straw broke the camel’s back. Its last quarterly financial results finally showed a loss of 12m. Not much but is it the end of the story? I doubt so. I think there are still a lot of skeletons behind the closet. Its share price dropped by 22% from RM1.80 to RM1.40 since then. Interesting stories to read at the same link below about GCB.

http://whereiszemoola.blogspot.co.nz/search?q=gcb

Yeah, it is good to practice value investing; buy companies at a good price using PE ratio, dividend yield. We must understand what this “E” means for that particular company, where did the company get the money from paying that good dividend.

To be continued

Posted by kcchongnz > 2013-12-25 08:54 | Report Abuse

Ivory Properties
Ivory property was also recommended by the same famous investor. Earnings appears to be good relative to price. However since listing, I see no money from its operations, but more and more debts. Financial report is doggy with one-time revenue as gain and cash flow from ordinary business. Recently it even announced taking over the Plaza Rakyat for redevelopment. Don’t know if it has the financial and technical capability to do so. Its share price has risen from 49 sen at the beginning of the year to 77 sen in May, but dropped back to 58 sen now. For sure there were people making money from the rise, but I think more people, especially retail investors losing money on the share price was on the downward side.

London Biscuits
A similar story is about London Biscuits. Made very good earnings also relative to its price. But the plot is the same; no cash flow, increasing debts, management manipulations of PPE etc as shown in the following article here:

http://klse.i3investor.com/blogs/kianweiaritcles/40683.jsp

Sometimes a company in a good and durable food business may not be a good investment.

Malaysian Pacific Corporation Berhad
MP Corp is another company which investors live with hope; hope that the management sells their land, which they valued the same high value as the neighboring one which was transacted, and distribute the cash to them. The company is doing nothing at the moment except paying for the costs of holding some land and an investment property estimate to worth a lot of money, if sold. I was told off that I was not in their league of making multi-baggers from the market as them and was asked to stick to my Dutch Lady and BAT (Actually I didn’t have any of these stocks) to earn the 10% return a year when the share price of MP Corp spiked to 54 sen . This was what I said:

• But remember, even though everyone is making money except you, it is ok.

MP Corp share price has since retreated by 30% to 38 sen now.


In actual fact,It is always not easy to predict if a company would do well in the future and that its share price would rise. It is much easy to see if a company is likely not to do well. So I like to remember what Charlie Munger says:

• “You don’t have to pee on an electric fence to learn not to do it.” - Charlie Munger


KC Chong on Christmas Day in Auckland 2013


Table 1: Return of some stocks in Bursa
No. Company Ref Price Price 24/12/13 Gain/loss
1 Pmetal 2.520 2.320 -7.9%
2 GCB 1.800 1.400 -22.2%
3 Ivory 0.550 0.580 5.5%
4 PW 0.720 0.880 22.2%
5 Rsawit 0.850 0.785 -7.6%
6 LonBisc 0.680 0.675 -0.7%
7 KNM 0.455 0.435 -4.4%
8 MPCorp 0.450 0.380 -15.6%
9 MKLand 0.330 0.360 9.1%
10 Careplus 0.315 0.310 -1.6%
11 CSL 0.750 0.195 -74.0%
12 AnComLB 0.185 0.185 0.0%
13 Smartag 0.180 0.100 -44.4%
14 Amedia 0.135 0.080 -40.7%
15 NovaMSC 0.065 0.065 0.0%
16 Hibiscus 1.900 1.840 -3.2%

xx Average xxxx xxxx -11.6%
xx FTSE Mid70 12294 14043 +14.2%

Posted by Ooi Teik Bee > 2013-12-25 08:59 | Report Abuse

Posted by Ooi Teik Bee > Dec 23, 2013 07:16 AM | Report Abuse X

Dear Fortunebull,
To be honest with you, I am a kiasu trader or investor. I dare not touch Hibiscus even though the technical chart is very good. The price had crossed > 2.14, which is a breakout chart now. Technically, I should buy base on the chart, but I dare not.
Best of luck to you.
Thank you.
Ans : Luckily, I am a kiasu trader or investor. I always avoid this type of stock.
Thank you.

Posted by faberlicious > 2013-12-25 09:10 | Report Abuse

kc,nice list of stocks. 2014 Stock Picks To Holland !

Posted by KCLoh > 2013-12-25 09:23 | Report Abuse

PMCorp also drop 40% from high! LOL

Posted by calvintaneng > 2013-12-25 09:45 | Report Abuse

I really enjoyed reading about these land mines by Kcchongnz. I am doing some "catch up" as I have been out of KLSE for 3 long years.

KCLoh,

Well, on 20th September 2013 I first promoted PM Corp when it was 15 Cents with net Cash of 18 Cents. I was told at AGM That there will be a Cash Payout. Price overshot on the upside to 37 cents. Since the unfortunate news of CFO Mr. Ho's resignation price has retraced to 21.5 cents - down 72% from the peak at 37 Cents. But price is still up 43% within 3 months.

I saw you in Weida Forum. 4 years ago in 1999 I bought Weida at 35 Cents. I also bought KFima at the same price of 35 Cents. Both Weida & Kfima were rejected by the "experts" of year 1999. I see that you are happily holding Weida at over RM1.70 currently.

After this bout of selling I think PM Corp still has a future.

The Most Important Is We Do Still Make Money In The Long Run. Anyway, I have learned a lot from Kcchongnz, OTB & also your postings.

Merry Christmas!

Posted by inwest88 > 2013-12-25 09:52 | Report Abuse

# kchongnz - Good morning ! What a well written piece of article. It's an eye opener especially for newbies who just jump in on hearing news (or rumors ?) about these companies. Sometimes even seasoned players also fall for it.

Wishing you a blessed and joyous Christmas and a grand New Year.

Posted by bsngpg > 2013-12-25 11:12 | Report Abuse

I have 2 lemons which are Notion and JTiasa which constitute 10% of my portfolio. Both suck.

“In investing, sometimes too much positive feelings can be detrimental to your outcome”: bsngpg is one of them.

Great Posting. Merry Christmas & Happy New Year to all.

Posted by ipomember > 2013-12-25 12:46 | Report Abuse

by far this is the best posting from kcchongnz as for me. Understand your risk before investing into a company is important and in fact, spotting a financial shenanigans can be easy or can be hard and it is a bless that there are bloggers who wrote on it and now it is highlighted by kc. In investing sometimes i might be confident and reading more can curb my overconfidence. In the above example, i learnt that aside from financial statement, the actions of director as well as the corporate exercise of a company is equally important to help us in identifying a bad investment? Like myself, i am always aware and sometimes afraid to buy into a cheap valuation company? We often see people recommend some stocks which are traded in low pe, huge discount to NTA , or high DY which seems attractive? However, before one decides to buy, its worth to ponder hard whether that particular stock is a value buy or a value trap? I always believe price is driven by market and i dont think market is stupid to let a so called "undervalue" stock to remain undervalue especially with the advance of technology we can easily used the search engine to filter out the stocks with our own criterias. With that in mind i am lucky to avoid those stocks mentioned above, however it is not adequate. I might still trap in AMEDIA(i assumed) in which i love a stocks with solid growth on its revenue and earning? If i know to analyse a company by looking on their past corporate actions, the cash call alone will at least make me aware and probably avoid into it? Director selling their stakes after the cash call is very fishy and i think i will definitely avoid the stock. In fact, i do not mean that whatever stock that is undervalue is not a good investment( altho i always think that good stock doesn't come cheap), but one has to understand the reason behind. Yes it is not easy and most of the time i cant tell why a stock remain undervalued. If anyone still remember, one or two years back most of the property companies is remain undervalued, but once the Iskandar project is getting the limelight from most of the research house, earning a few baggers is easy if you took profit middle of this year. How about this year? Previously, everyone knew that furniture stocks are undervalue, but why is it so after so many years? and now it is being re-rated by the market? For me understand the business is important and when the situation turns in favor of the company(i merely refer to those cyclical industry), its more likely a value buy than a value trap. I am glad that i able to pick up latitud tree and i admit that luck is involved. Lastly i would like to thanks Kcchongnz and wish everyone of you merry Xmas.

Posted by Ntpboon > 2013-12-25 12:48 | Report Abuse

新手如想在Bursa股海中生存，这是必读之佳作。
感谢kcchongnz 先生，又让我上了一课

Posted by KC Loh > 2013-12-25 13:33 | Report Abuse

wrong kcloh, calvintaneng LOL

try spotting the difference! :)

Posted by KC Loh > 2013-12-25 13:35 | Report Abuse

and 1999 was not four years ago. which age are you living in? :)

Posted by kcchongnz > 2013-12-26 07:56 | Report Abuse

Posted by bsngpg > Dec 25, 2013 11:12 AM | Report Abuse

I have 2 lemons which are Notion and JTiasa which constitute 10% of my portfolio. Both suck.

bsngpg, I don't think those two stocks are lemons. JTiasa has durable business in palm oil and timber. They will continue to make money and likely to give you the normal return of 10%-12% a year, even with your high purchase price, I believe.

The problem is this type of business, or rather commodity prices is cyclical. You happened to buy the stock right at the peak when palm oil price was reaching the peak, and at the same time, too positive feelings that prices will continue to rise. Hence you paid a high price.

That is why sometimes we value a stock, we have to think about cycles, and the swing of the pendulum. It is inevitable.

Part of Notion's business become obsolete. They will improve and keeps up to the new technology, i think. And they still have the good camera division which has been doing pretty well all the time. NASDAQ is picking up now, and may be Notion will follow suit.

Posted by calvintaneng > 2013-12-26 08:18 | Report Abuse

KC Loh,

I beg your pardon, it was year 2009. Anyway, I bought them cheap but sold way too early. For year 2014 I cannot find many cheap bargains. Have a nice day everybody.

Posted by KC Loh > 2013-12-26 08:34 | Report Abuse

No problem. I thought it was a typo too!No

Posted by tonylim > 2013-12-26 09:33 | Report Abuse

Calvin, I entered the market in 2009 during the exit of pak lah with abt half a million. It didnt talk long to double up. stock Selections based on bottom up approach with 5 counters are share warrants