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Choivo Capital

Author: Choivo Capital   |   Latest post: Sun, 3 Mar 2019, 12:08 AM

 

(CHOIVO CAPITAL) The Art of Trading (DAYANG) Profitably Around Mr Koon Yew Yin and Mr Ooi Teik Bee.

Author: Choivo Capital   |  Publish date: Sun, 10 Mar 2019, 4:30 AM


For a copy with better formatting, go here, its alot easier on the eyes.

 

The Art of Trading DAYANG Profitably Around Mr Koon Yew Yin and Mr Ooi Teik Bee.

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Well, here we go again.

First there was the boom and bust of export stocks. Though to be fair, its not that bad of a bust as the earnings were resilient, due to Malaysia having a decent cost based globally for those items as well as large supply of rubber trees.

Then there was the steel boom and bust. 

After that was the construction boom and bust.

And in tandem, the semiconductor and testers boom and bust.

And finally there is the Petroleum Refinery boom and bust. This one was pretty interesting.

And now with the bear market behind us, dead cat bounce or not, we’ll soon find out. We find ourselves welcoming back Mr Koon Yew Yin and Mr Ooi Teik Bee to I3.

 

Introduction

Well, neither of them need any introductions. When it comes to KLSE small caps, there is no larger market force than these two individuals, and their followers.

Forget EPF, Tabung Haji etc, they are small fry when it comes to these two gods of the small to mid-cap stocks.

For Mr Koon, after his RM64 million loss and the sale of his prized lands in Ipoh (from what I heard), he is back with a vengeance and making full use of the special characteristics of the KLSE markets.

The unique characteristics of the Malaysian Equities Market

Understanding Koon Yew Yin, The real enigma.

As for Mr Ooi who only posted a small loss last year, with the jump in small caps, the animal spirits are back in the KLSE retailers, and the pain of 2018 long forgotten.

With technical breaking SMA20 or 69 or 100 (I honestly have no idea), the recommendations to private followers are back in earnest.

A Conversation With Mr Ooi Teik Bee

When it comes to trading profitably around these two market forces, its important to identify the phases of the, well, frying.

I wish i could think of a better and more polite word, but, if it looks like a duck, swims like a duck, and quacks like a duck, then it probably is a duck.

They all have different characteristics, and the shifts are gradual, like the boiling of water, and a “Grand Ah-Whoom!” moment at the end. I’ll explain that phrase later.

You will not see KLSE raising up a sign when things shift into different phase, but i hope this article will you help you identify roughly the phase you’re at.

Depending on which phase you are at, the things you need to do, to notice, and the risk involved is very different.

For the sake of simplicity, we will split them into 3.

“The Beginning” , “The Middle” and “The End”.

 

 

The Beginning

They usually start the same way. A company has about 2 good quarters. The company was in the doldrums before this and at a cyclical low, or somewhere near that price.

Coupled with the 2 good quarters, is a story that explains this increase in profit in a believable manner. In this case, its that PETRONAS having higher capital expenditures, which should and did increase maintenance works.

For the case of DAYANG, its also coupled by a very nice, detailed and long report from RHB on the industry, which helped to provide the background for the story presented to the public.

With this story in mind, they extrapolate the now to the future, and thus infer that results will be far better in the future, and therefore an increase in valuation is in order.

Mr Ooi, only announces it to his private subscribers.

However, Mr Koon Yew Yin will announce publicly he is buying as his goal is to help you make money and teach you investing. Obviously! No reason to doubt that.

Now, this is the point where you need to jump in fast, especially if he says Mr Ooi is recommending it as well. Check the forum comments, if Mr Ooi recommended it, you should notice an uptake in the number of comments as well as the level of enthusiasm.

If you’re lucky, it may be sometime before the quarterly results, in which case, you have a nice long wave to ride before the quarter.

Before the quarter hits, you will need to do your own expected value calculation. What kind of profit the market is pricing in?

Better than last year?

Better than the previous quarter as well?

What are the probabilities and outcome for each scenario?

And do your expected value calculation from there. So for example:

  1. 20% Chance of Bad Result: Down 20%
  2. 50% Chance of Better Than Last Year Result: Up 10%
  3. 30% Chance Very Good Result: Up 20%

Expected Value: (0.20*-0.2)+(0.50*0.1)+(0.30*0.2)=7%

This means that all outcomes considered, this has a positive expected value of 7%, in which case you should hold.

If the quarter was bad, there is a good chance that the story ends here. In which case, sell and wait for the next one.

 

 

The Middle

If the quarter is good, you can now enter the middle phase.

The thing you need to know here is this, Mr Koon and Mr Ooi, along with all their immediate followers will now proceed to sailang. However, they or their members will be a little hesitant unless the price were to start going up significantly.

There is no need to fear much here, because Mr Koon usually buys in an extremely aggressive manner which will instantly push up the price.

At this moment, you need to be very decisive and whack all your cash in along with a significant portion of your margin, before the greed infects everyone else and they start to buy as well

You will have until next quarter to ride the wave, assuming nothing unexpected happens.

As Mr Koon and Mr Ooi buy very aggressively, along with their direct followers which are often quite rich as well, you should see an strong inflation in price.

It is around this time, that the average market participant should start to get itchy and join as well.

And as the price rise further, the more conservative ones will not be able to tahan, and join as well.

At the same time, some fund management money will also start flowing in as its a big catalyst event. They too intend to ride the wave and make some money from the more foolish retailers.

They key thing you need to track here is,

"How much money does Mr Koon have left?"

This is the amount that he can use to further push or support the price. This amount is also a decent proxy for how much money Mr Ooi, his followers as well as Mr Koon’s rich friends have left.

Most of the time, you need to do it by feel. However, the rule of thumb is,

“The more articles he writes, the larger the amount of money he has in there.”

When he says he has a lot of shares and don’t need your support, its more than 50%. Every subsequent time he releases an article, add 5%.

Occasionally, he may even tell you the actual figure, by being a 5% member.

However, after his loss of RM64mil, and assuming a margin limit drop of at least RM64mil as well, I don’t think he may appear again unless the company has market capitalization of well below RM1 billion.

 

 

The Final Stage

This stage is where both people as well as their direct followers are all pretty much all in. Or at a point, where they just can’t stomach putting more.

I will describe it using two perspectives, “Diversity of Participants” and “Valuation”, as they are quite key to understanding how all the stages tie up, and also conveniently describes how the final stage ends.

Its also here, that i will show you how lohsoh i can be. Hahaha

 

“Diversity of Participants”

Every market or individual stock is a complex system that is typically filled with a diverse group of participants who are irrational in one way or another.

They consist of people having different ideas and different views of things. Long term, short term etc etc, and all these individuals are a little or very irrational towards one end or the other.

For example,

The long-term investor may decide not to trade even though it may make sense for this quarter, allowing the trader to trade and make that profit.

The trader’s inability to sit still and hold, allows the long-term investor to buy it from them and hold it, making the money from the long-term growth of the company. Etc etc.

Despite the irrationality of their participants, their diversity ensures that they are all irrational in different directions, giving a net effect of zero, allowing the wisdom of crowds to prevail over the long term.

This ensures that the market is efficient and accurate most of the time. This means that over the long term, movements in share prices are usually in line with movement in earnings.

However, this diversity can often undergo phase transition, and thus result in boom or bust in the short term. What is a phase transition? This is where small incremental changes in causes lead to large-scale effects, or the “Grand Ah-Whoom!” moment.

What is this Grand Ah-Whoom! moment?

Imagine this. Put a tray of water into your freezer and the temperature drops to the threshold of freezing. The water remains a liquid until—ah-whoom—it suddenly turns into ice. Just a small incremental change in temperature leads to a change from liquid to solid.

The Grand Ah-Whoom! moment, occurs in many complex systems where collective behavior emerges from the interaction of its constituent parts. And this includes the behavior of the stock market.

In complex systems with human beings like the stock market, diversity is the most likely condition to fail first.

As you slowly remove diversity, nothing happens initially. Additional reductions may also have no effect. But at a certain critical point, a small incremental reduction causes the system to change qualitatively.

Taking DAYANG for example,

At the beginning before the boom, their active (KLSE have a lot of frozen shares where nothing is done) participants consist of mainly,

  1. Cyclical Value Investors (say 20%)
  2. People who were trapped (say 80%)

This results in the shares being quite undervalued, as the people who were trapped don’t want to top up and the cyclical value investors, are there by virtue of their cheapness.

As the boom starts, the market participants become increasingly diverse as new participants buy the share from the current participants, and the price slowly approaches fair value, the participants now consist of say (figures are just for illustration, they are likely to be different),

  1. Cyclical Value Investors (15%)
  2. People who were trapped (65%)
  3. Koon Yew Yin & Ooi Teik Bee (5%)
  4. Koon Yew Yin’s & Ooi Teik Bee’s immediate followers (15%)

As the boom rushes along, the “Cyclical Value Investors” and “People who become trapped” becomes increasingly smaller portions of the pie, especially as the retailers (foolish and shrewd) and fund money looking to ride the wave come in.

  1. Cyclical Value Investors (10%)
  2. People who were trapped (35%)
  3. Koon Yew Yin & Ooi Teik Bee (7%)
  4. Koon Yew Yin’s & Ooi Teik Bee’s immediate followers (15%)
  5. Growth Investors (8%)
  6. Shrewd Retailers (Usually Momentum Traders) (5%)
  7. Foolish Retailers (10%)
  8. Fund Money (10%)

Soon the price shoots past fair value at which point, it looks more like this,

  1. Cyclical Value Investors (5%)
  2. People who were trapped (20%)
  3. Koon Yew Yin & Ooi Teik Bee (8%)
  4. Koon Yew Yin’s & Ooi Teik Bee’s immediate followers (19%)
  5. Shrewd Retailers (Usually Momentum Traders) (8%)
  6. Foolish Retailers (20%)
  7. Fund Money (20%
  8. Growth Investors (8%)

It is around this point, as the price climbs higher and higher into bubble territory, that the fund managers and shrewd retailers start selling. Growth investors may start selling as well.

Population diversity falls, invisible vulnerabilities and risk start to build despite the price constantly marching upwards.

This is the point at which you should be selling, assuming your are a KOONBEE Trader,  never chase the last dollar.

Soon, participants consist mainly of,

  1. Koon Yew Yin & Ooi Teik Bee,
  2. Koon Yew Yin’s & Ooi Teik Bee’s immediate followers
  3. Growth investors
  4. Foolish retailers.
  5. Foolish Fund Money

Except, every single one of these participants use extremely similar trading strategies, and as they keep buying, their common good performance is reinforced.

This makes the population very brittle, and a small reduction in the demand for Dayang shares could have a strong destabilizing impact on their prices. It is at this point that risk is at absolute highest.

Why?

As most of the market participants have the same strategy, in the event the thesis, or in this case, the results are not as strong as they expected, or worse, a loss.

Its not just some of the market participants who want to sell, but, ALL OF THEM. And as prospective buyers are likely to be market participants with similar trading or investment strategies, demand dries up instantly as well.

How do you know you're at this stage,

"When everyone in the stock cannot think of even one bad thing that will happen, or about the company, and the comments all sound the same."

In the meantime, if the result was good, it will not increase by much as everyone who wants to buy the stock already has it, and has exhausted their cash and credit lines, unless it’s a very fantastic result like HengYuan.

In this case the expected value calculation is highly negative, it probably looks something like this.

  1. 20% Chance of a loss: Down 60%
  2. 50% Chance of not as good as expected result: Down 20%
  3. 20% Chance of good enough result: Up 5% up.
  4. 5% Chance of better than expected result: Up 10%
  5. 5% Chance of very good result: Up 20%

Expected Value: (0.20*-0.6)+(0.50*-0.2)+(0.20*0.05)+(0.05*0.1)+(0.05*0.20)=-19.5%

This means all outcomes considered, this has a negative expected value of 19.5% in the first day. Its likely to fall further as people sell.

Often as Mr Ooi is quite shrewd, he would have sold a large portion of his position as prices go up and inform his followers.

This is where you may see some “consolidation” in terms of chart movements, which is where Mr Ooi, Mr Ooi's direct followers, shrewd traders and fund managers are transferring their shares to the foolish retailers.

Mr Koon on the other hand, often considers himself an investor, and thus will hold on longer, or wait for margin calls to force him to sell.

Having said that, given that he was burnt properly 2018, he is likely to listen and do exactly as Mr Ooi tells him to, at least until his profits make him feel like he is smarter than Mr Ooi again.

Just kidding.

While the foolish retail participant who is in reality, a trader, but foolishly considers himself an investor, makes the fatal mistake of averaging down, often on margin.

Turning a bad trade, into a mediocre and at times fatal investment.

Soon, diversity returns, and the foolish retailer, turns into people who are trapped. And as prices fall further,  with the cyclical value investors return.

 

“Valuation”

So how did the shrewd investors, fund managers and to an extent Mr Ooi or Mr Koon know when to sell?

It’s simple, the valuation.

In the case of Mr Ooi and Mr Koon, its also because they are the first movers and catalyst.

The intrinsic value of an investment is simply all future cashflows discounted back to present value.

However, when a “Target Price” is set in these scenarios, Mr Koon for example, just takes the forward earnings, which is often at an all time cyclical high, and multiplies it by  10, for a TP of RM2.24 or something.

This does not consider the resilience of the earnings, or the capital structure of the company.

In this case, The Enterprise Value (Market Capitalization + Debt – Cash) of DAYANG is roughly RM2.4 billion.

Even when the current all time high earnings (which includes a ton of write backs of impairments/allowances as well as forex gains) is used, roughly 14 years is needed to see a return on investment, or roughly 7.14% yield.

Do you honestly think that, only a mere 2.49% premium from the risk-free rate of 4.65%, is needed for these kind of highly cyclical business, on the high end of the cycle and with write-back boosted earnings?

Have you ever wondered, why Mr Koon when presenting his track record at investment forums, only shows the first half of the chart?

Hint, the share does not stay at that price, a sea of fools paid for it. For those people, it would have been better if the price had not risen at all.

Reading the comments here, people here like to quote the RHB report verbatim, stating that PETRONAS will have higher capital expenditure, and therefore have a greater need for an MCM provider, which DAYANG can provide.

Well, do note that  back when oil prices was USD100 or so per barrel in 2014, when Petronas pays for MCM, their goal is to produce as much as possible. MCM companies could basically quote any price they want, especially if they were good.

So what if it cost PETRONAS an extra USD2- USD3 per barrel? They were making at least USD40 per barrel. Forget about it, let you make a bit lah!

However, today the situation is vastly different, oil prices are about half at USD50-USD60 and highly volatile, with future outputs from US shale constantly increasing.

PETRONAS will fight with you like dogs over the price. From talking to my friends in PETRONAS and petroleum consultants, if you can even get a 10% net margin, you’d be breaking out the champagne.

In addition, do note current revenues and “earnings” are higher (or close to) than 2014 and 2015, when PETRONAS had their highest capex ever, and paid golden mountain prices for good MCM works.

A few slightly more, i hesitate to use to the word “insightful”, people, may then point towards the RM3 billion order book and say earnings for future years is guaranteed.

May I also point out that just before they started losing money in 2017, the order book was also around RM3 billion? And that the order book was around that figure every quarter they made a loss?

Which also goes for the tenders and their quantum.

I doubt Mr Koon or Mr Ooi genuinely thinks its worth RM2.24 per share. That if they actually had the money, they would privatize it at that price.

And neither would the shrewd traders, or any investment manager in a fund worth half their salt.

The foolish retailer on the other hand, really do think identifying the intrinsic value of a company, is as simple as taking the forward/ current earnings, which is currently at an all time  high, and multiplying it by 10.

 

Conclusion

So, the million-dollar question. Talk so much, got buy anot?

Not a single cent! Hahaha! 

The only one where, i might have considered an error on my part was CARIMIN, and to an extent NAIM. I saw it at RM0.2X and RM0.4x or so. And as they had a pretty good balance sheet and pretty damn cheap, I figured it would be worth a cyclical/net asset play and was thinking of a 2-3% position.

Do note that for companies not in my circle of competence, or have close to no moat, which include MCM’s, my investment checklist, consist solely of,

  1. Is the management decent?
  2. Does the balance sheet have low leverage?
  3. Is it cheap enough?
  4. Is the downturn cyclical or permanent?

However, I decided against it in the end, as they were better opportunities then that were within my circle of competence. Still wish i bought like 1- 2% at least though!.

To be fair, I did not even really read the prospective statements as I wasn’t that keen on it. If i had, i may have made that 1-2% buy.

And this was despite having friends in Petroleum Divisions of Consulting Firms, as well as PETRONAS, who told me capex works are picking up in 2018. Oh well.

What about my 500% trader friend? For more info on this fellow, read below.

Conversation with a top tier trader, and lessons learnt.

He bought and made a ton of money. Hahaha.

If it was another value investor who was friends with him, the fellow may have lost alot of money, being tempted into doing things he has no skill nor business doing.

I must admit, from my previous observations of the same scenarios, and as i looked at the meteoric rise of DAYANG, as an un-involved third party. I was quite tempted.

However, I don’t think this is my money to earn.

So, which phase are we in?

Well, my 500% trader friend, who trades like a young George Soros, has sold off most of his position.

Do what you may.

走好,不送.

 

PS: By the way, in the event Mr Koon and Mr Ooi reads this and decide to change the way the do their trading, what you need to do is likely to change somewhat.

 

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Facebook: Choivo Capital
Website: www.choivocapital.com
Email: choivocapital@gmail.com

 
Labels: DAYANG
  14 people like this.
 
Heavenly PUNTER Still no end, what is going to happen today?
13/03/2019 7:39 AM
Heavenly PUNTER Someone going to jail or not ah? Walao don't leh, later no more article to read. Two greatest writer on i3 masuk lokap, wa pigi holand oh
13/03/2019 8:42 AM
Sslee Dear all,
Thank god and I am glad that the war of word is over and peace and reasoning prevail. No one going to jail and I am looking forward to read Philip, Jon , Icon8888, Kcchong and many other Sifu’s articles and comments in I3.
The one deserve to be in jail is quack quack quack the “Batu Api”

I had to salute Mr. Koon’s magnanimous in only blaming himself and no other for his losses in JAKS. Everyone should know that it was quack quack quack misleading Koon astray and even “Batu Api” to the extent that at one time Mr. Koon is not in talking term with Mr. Ooi. I am very happy and glad to see Mr. Koon and Mr. Ooi like abang-adik during the Investment blogger day. Let bygone be bygone and seize today opportunity to make your intelligent and informed investment.

Thank you.
P/S: Nowadays we type faster that what our brain can think properly hence we tend to be rude, arrogant, provocative and sarcastic when making comment. Thus I would like to make a personal sincere apology to Mr. Philip for my many sarcastic and rude comments on you. Let’s befriend each other.
Similarly Mr. Koon like to write provocatively but in life he is a very gentle gentlemen when talking in person. I miss the good old day when he use to send me many interest article from Babamail but I ask him politely to exclude me from his mail list because I do not want to be group with quack quack quak. My profound apology too to Mr. Koon for writing an article in i3 blog that hurt him so much.
13/03/2019 9:00 AM
Choivo Capital Yes i am aware of this method. Its an investment partnership type co. The same used by Li Lu, Buffet in his early days, as well as Mohnish Pabrai.

I was thinking of this type of structure, 3-5 years from now if my track record is set, as the requirements to do fund management activity in malaysia is very stringent, and with high barriers of entry.

It would be a quite of a compounding and performance miracle for me to turn the few hundred k i have now into 5 mil required by SC, in 3 years.

Nice to know we are not going to be cellmates.

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(S = Qr) Philip FYI this only works if I don't have to take money from the public, the investors/partners are clearly stated, percentages fixed. We are all partners in the company, wth me as technical manager.
13/03/2019 06:11
13/03/2019 9:26 AM
qqq3 i3lurker > Mar 13, 2019 06:20 AM | Report Abuse

In the whole world the concept of remisier only happens in Malaysia
=========

there are separate licences for remisiers, for IB analysts and for handling discretionary funds.......

all in the SIA........
13/03/2019 9:49 AM
qqq3 and as for this sslee, I think he need a psychiatrist.
13/03/2019 9:50 AM
i3Value Choivo, you are stubborn like cow and immature. Moral of story is dont do what you not qualified to do. Are you qualified? No. You got license? No. You go work on your license and then you do this business. Not work around the legal system now.

You put the problem as RM5m capital. That is wrong thinking. If you have qualification and license, plenty people will invest in this type business. The reason the capital requirement high is to protect investors so that the company is not fly by night company.

Why you cannot get license now? Because you dont have practical experience. Read books is not experience. Know theory is different from real world. But you think you smarter than everyone else so you should be different.

Close your business now. If you really want to do this business, read the requirements again. And work towards meeting all of them. Right now you are an illegal operator. Nothing more than that.

Continue this business now and if you get into problem, nobody will pity you. You know very well you are trying cheat the system and law.
13/03/2019 10:11 AM
Icon8888 just say "thanks" will do

he is sharing info with you

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Posted by Choivo Capital > Mar 13, 2019 09:26 AM | Report Abuse

Yes i am aware of this method. Its an investment partnership type co. The same used by Li Lu, Buffet in his early days, as well as Mohnish Pabrai.

I was thinking of this type of structure, 3-5 years from now if my track record is set, as the requirements to do fund management activity in malaysia is very stringent, and with high barriers of entry.

It would be a quite of a compounding and performance miracle for me to turn the few hundred k i have now into 5 mil required by SC, in 3 years.
13/03/2019 10:14 AM
Icon8888 stupid boy
13/03/2019 10:16 AM
stockraider Chivo

No point being a fund manager or getting license damn waste of time with so much restriction loh...!!

U R better off doing like Philip do, borrow from family members and close friends and relatives and use bank margin and do the investment all by yourself loh....!!

And Start buying into Sapnrg cheap b4 too late, it is one of the way increasing ur networth exponentially and steadily & safely...trust me...this is a very good investment for upcoming young industrious cikku like U mah.....!!
Please check it out and don miss this golden opportunity loh....!!

If u can grow ur networth to say Rm 50 million....perhaps u can set up a stock raiding co....and get it listed in the leap mkt 1st....raider promise to put some monies in your listed vehicle loh...!!

At this point u can be the managing director of stock raiding co loh..!!

Posted by i3Value > Mar 13, 2019 10:11 AM | Report Abuse

Choivo, you are stubborn like cow and immature. Moral of story is dont do what you not qualified to do. Are you qualified? No. You got license? No. You go work on your license and then you do this business. Not work around the legal system now.

You put the problem as RM5m capital. That is wrong thinking. If you have qualification and license, plenty people will invest in this type business. The reason the capital requirement high is to protect investors so that the company is not fly by night company.

Why you cannot get license now? Because you dont have practical experience. Read books is not experience. Know theory is different from real world. But you think you smarter than everyone else so you should be different.

Close your business now. If you really want to do this business, read the requirements again. And work towards meeting all of them. Right now you are an illegal operator. Nothing more than that.

Continue this business now and if you get into problem, nobody will pity you. You know very well you are trying cheat the system and law.
13/03/2019 10:24 AM
iamnew GO READ about the license from the SC handbook and the law.

Its not Grey just not enforce, just like IB, Corporate Advisory License and Research analyst license is not the same. The exam modules are different. AS well as the scope.

No one will go to jail fortunately for all this drama

http://www.sidc.com.my/programmes-services/sc-licensing-examinations/module-combination-for-regulated-activities.aspx


Posted by i3lurker > Mar 13, 2019 06:20 AM | Report Abuse
In the whole world the concept of remisier only happens in Malaysia. No other country has it. Its an old license. Powers of remisier was very broad previously. Remisiers could obviously give advice to clients and also prospective clients (this is important and has strong legal implications). Paying a Remisier for advice is obviously not illegal per se.

SC hands are tied coz obviously its black and white ok in the old days. Its a grey area nowadays. Authorities believe that if it is a Grey Area, they will give you the benefit of the doubt.

As such SC will not take any action against any Remisier for a) advice to clients and prospective clients and b) getting paid for advice.

ONLY manipulative actions are prosecutable.
13/03/2019 10:28 AM
Icon8888 I am actually quite upset that sakura is moving so fast

I am hoping to buy more after taking profit in certain stocks

: (
13/03/2019 10:30 AM
stockraider Trading Stocks - Sapura Energy (5218)
Author: AmInvest | Publish date: Wed, 13 Mar 2019, 10:27 AM

Sapura Energy was testing the RM0.33 level in its latest session. With a healthy RSI level, a bullish bias may be present above this mark with a target price of RM0.365, followed by RM0.38. Meanwhile, it may continue moving sideways if it fails to cross the RM0.33 mark in the near term. In this case, the immediate support is anticipated at RM0.305, whereby traders may exit on a breach to avoid the risk of a further correction.

Trading Call: Buy on further rebound above RM0.33

Target: RM0.365, RM0.38 (time frame: 3-6 weeks)

Exit: RM0.305

Source: AmInvest Research - 13 Mar 2019

RAIDER VERY SPECIAL VALUABLE ADVICE, THE BEST MONIES ARE MADE BY JUST SITTING, THUS JUMP IN SAPNRG WHEN IT START MOVING, AND SIT ON IT FOR 3 YRS AND 3 MTHS AND THE CHANCES OF U GETTING RM 3.00 ON SAPNRG IS HIGHLY LIKELY LOH........!!

DO NOT SETTLE FOR TINY SMALL TRADING PROFIT AND THINK BIG AND BE SMART AND BIG MONIES START FLOWING IN MAH.
13/03/2019 10:59 AM
stockraider DO NOT DESPAIR IF SAPNRG JUST SHOOT UP LOH...!!

REMEMBER THIS LOH...!!

"No problem loh....out of 100 people only 1 person really make monies on sapnrg mah.....!!

Sapnrg long way to go ....the coming turnaround will be very strong loh...!!"

LOOKING AT THE ABOVE FACT ARE U NOT CONVINCE AND CONFIDENT TO JUMP IN WITHOUT HESITATION LEH ??
13/03/2019 11:14 AM
qqq3 http://www.sidc.com.my/programmes-services/sc-licensing-examinations/module-combination-for-regulated-activities.aspx


all there
13/03/2019 11:24 AM
qqq3 Icon8888 > Mar 13, 2019 10:30 AM | Report Abuse

I am actually quite upset that sakura is moving so fast

==========


trading buy....but not like raider says X 10 in 3 years.....
13/03/2019 11:26 AM
qqq3 and as for trading buy, Perdana, son of Dayang is faster running horse.
13/03/2019 11:27 AM
(70B-SAPNRG-3Yrs) Philip Times 10 in 3 years hahahaha the next Amazon!

Laugh die me.
13/03/2019 11:29 AM
qqq3 I very fair one... I got Sapura but also disagree with raider posting sapura X 10 in 3 years............



I also got Perdana.....all cigar butters.
13/03/2019 11:36 AM
(70B-SAPNRG-3Yrs) Philip Sapura got possibility to make money I'm sure, but if you buy it expecting it to go to X10, I think better go tanning rambutans
13/03/2019 11:38 AM
qqq3 people playing shares.

now playing OG especially those with OSV....

after the MCM ( maintenance, construction and modifactions) results were out, it became obvious those with boats ( like Dayang ) have better margins than those without own boats ( like Carimin).
13/03/2019 11:41 AM
Choivo Capital Raider,

I'm a pure bottom up guy, i don't take into account industry average p/e or sentiment etc.

For Sapura to make sense for me, i need to see it being able to make 1.3-1.7 billion a year in profit after tax (or preferably owners earnings) reliably by the next year, and grow moving forward.

I don't think that is probable.

If you do, please illustrate and teach.

The price however, will go wherever it wants to.
13/03/2019 12:02 PM
Icon8888 Why does a company with RM7.8 bil market cap needs RM1.7 bil profit before it is a buy ?

Sorry not only my England bad, my Maths also bad
13/03/2019 12:08 PM
Choivo Capital I dont just look at Market Cap.

I also look at debt.

When you are in a highly cyclical industry and you have a lot of debt. Things can get very interesting.

Masteel, Annjoo etc

I won't accept 10% earning yield (earning over PE). I need at least 17-20%. Because the next 10 years is so cloudy.

However, people do tend to think fair value is roughly 10 times PE regardless of capital structure. So if you are aware of this, there is some intelligent speculative money to be made.
13/03/2019 12:12 PM
Choivo Capital If it earns at least around 10% of enterprise value, ill take a look.
13/03/2019 12:14 PM
Icon8888 Oh ya those enterprise value thingy ... got it ... finance professor Favourite ....
13/03/2019 12:14 PM
stockraider THE ROUTE TO TIBET....COMES WITH U MAKING THE 1ST STEP LOH...!!

REMEMBER THIS LOH...!!

"No problem loh....out of 100 people only 1 person really make monies on sapnrg mah.....!!

Sapnrg long way to go ....the coming turnaround will be very strong loh...!!"

LOOKING AT THE ABOVE FACT ARE U NOT CONVINCE AND CONFIDENT TO JUMP IN WITHOUT HESITATION LEH ??

Posted by Choivo Capital > Mar 13, 2019 12:02 PM | Report Abuse

Raider,

I'm a pure bottom up guy, i don't take into account industry average p/e or sentiment etc.

For Sapura to make sense for me, i need to see it being able to make 1.3-1.7 billion a year in profit after tax (or preferably owners earnings) reliably by the next year, and grow moving forward.

I don't think that is probable.

If you do, please illustrate and teach.

The price however, will go wherever it wants to.
13/03/2019 12:16 PM
Choivo Capital Haha icon,

I go at it with a very owner perspective, as if i actually have the money to privatize it.

Now they are exceptions. If the debt is non-recourse debt, ie ring fenced to certain assets. Then its a different story.

In this case, the risk is all passed to the bank, and i get the free money, as long as i meet certain financial ratios as per the loan agreement.
13/03/2019 12:18 PM
Choivo Capital Raider, i doubt the turnaround will be strong enough for me to justify paying that for the company.

However, there is a good chance it will be enough for many and push the price up.

I dont invest based on what i think other people will think its worth. I'm stupid like that.
13/03/2019 12:20 PM
stockraider DON LISTEN TO THE RUBBISH PHILIP COMMENT ON HIS HIGH DEBT YINSON ON RING FENCE HIGH DEBT RUBBISH MAH....!!

NOTHING CAN SHIELD U FROM HIGH DEBTS, UNTIL AND UNLESS U EMBARKED MASSIVE MONEY MAKING BUSINESS PROFIT AND CASHFLOW EXPANSION LIKE WHAT SAPNRG DID LOH.......!!

Posted by Choivo Capital > Mar 13, 2019 12:18 PM | Report Abuse

Haha icon,

I go at it with a very owner perspective, as if i actually have the money to privatize it.

Now they are exceptions. If the debt is non-recourse debt, ie ring fenced to certain assets. Then its a different story.

In this case, the risk is all passed to the bank, and i get the free money, as long as i meet certain financial ratios as per the loan agreement.
13/03/2019 12:24 PM
Choivo Capital Raider,

Non-recourse or ring fenced debt means.

It is tied to the asset. If i cannot pay, you just take the asset. You wont chase after me.

If its recourse. If my asset not worth enough after auction, you can still chase me!

Either way, if you screw up to the extend that they need to take the asset, you are probably not doing well.

But imagine if HYFLUX got a ring fenced debt agreement for their TUAS water plant. In that case, bank bankrupt, not them.
13/03/2019 12:28 PM
stockraider Once u have non recourse funding, it will mean higher interest rate or u may even end up not getting enough & type funding u want loh...!!

Why the bank think that way ??

1. Very obvious mah...the bank is not expert in your business...if u want non recourse lending....the bank will ask u to provide more skin in the game, like u putting up 50% to 70% of equity and the bank will fund the rest loh...!!

2. As for interest rate, it will be higher bcos this will mean higher risk mah....! Nothing is free...if u want the bank to take more risk u pay loh.....!!

Posted by Choivo Capital > Mar 13, 2019 12:28 PM | Report Abuse

Raider,

Non-recourse or ring fenced debt means.

It is tied to the asset. If i cannot pay, you just take the asset. You wont chase after me.

If its recourse. If my asset not worth enough after auction, you can still chase me!

Either way, if you screw up to the extend that they need to take the asset, you are probably not doing well.

But imagine if HYFLUX got a ring fenced debt agreement for their TUAS water plant. In that case, bank bankrupt, not them.
13/03/2019 12:49 PM
Choivo Capital Raider,

Yes, however if sapura had ringfenced funding, by now share price still RM3-4.

I don't know, up to you.

I just cannot buy, you however can. I hope you make money, ill just study/buy opensys more.
13/03/2019 1:00 PM
3iii Don't worry about missing the Next New Thing. Avoiding mistakes and danger zones is more important for long term investment performance.
13/03/2019 1:02 PM
stockraider The company with ring fence funding is armada...just look at armada state....they are in deep trouble, even with the ring fence loh...!!

Thats why when Philip says yinson ring fence....raider see craps loh...!!

Posted by Choivo Capital > Mar 13, 2019 01:00 PM | Report Abuse

Raider,

Yes, however if sapura had ringfenced funding, by now share price still RM3-4.

I don't know, up to you.

I just cannot buy, you however can. I hope you make money, ill just study/buy opensys more.
13/03/2019 1:03 PM
Choivo Capital Yeap,

Difference between sapura and armada is this.

Sapura question is, whether i want to go bankrupt.

Armada is, whether i want to lose my ships are stupid prices due to bad contracts. (not with the banks, with customers)
13/03/2019 1:05 PM
Choivo Capital Of course, sapura got saved by PNB so, theres that.
13/03/2019 1:06 PM
qqq3 I will leave choi boy to do his investing, but please do better than RCE, Timecom and Insas.............



in the mean time, people are making money in OG stocks, today, those OG shares with OSV even better....those with IPP also doing well.
13/03/2019 3:47 PM
qqq3 forum is forum....but no OG shares can go to sleep .

After Dayang, its now Naim ( Tun Daim ) and Perdana ( Mentri)
13/03/2019 5:39 PM
stockraider Raider has been talking about explosive bulls coming loh...!!

Please don get distracted on the trivial issue below like;

Posted by Yu_and_Mee > Mar 13, 2019 10:05 PM | Report Abuse

someone need to distribute their shares or need help to push the share up because of high liquidity shares?

Yu_and_Mee
999 posts
Posted by Yu_and_Mee > Mar 13, 2019 10:06 PM | Report Abuse

tomorrow may be the same pattern, if up in the morning, sure sell off will happen. Don't be trapped!!!!!

Depeche
1929 posts
Posted by Depeche > Mar 13, 2019 10:13 PM | Report Abuse

IDSS volume was very heavy..be prepared for a slow ride up.

RAIDER COMMENT;

U SEE LAH....WHEN U R INVESTING RM 0.34 AND EXPECTING TP RM 3.00 WITHIN 3 YRS, WHY DO U BOTHER WITH THE TRIVIAL ISSUE ABOVE LEH ??
U R NOT GOING TO SETTLE FOR TINY TRADING PROFIT MAH....!!

U JUST BUY & HOLD AND WIN VERY VERY BIG OVER 3 YRS MAH....!!

BE ON GUARD ON THIS TRIVIAL AND UNPRODUCTIVE ISSUE THAT WILL DISTRACT U FROM MAKING A MAJOR KILLING IN INVESTMENT, THAT U HAVE NEVER DREAM OR IMAGINE B4 MAH.....!!

JUST REMEMBER THERE ARE STILL HUGE PROFIT MAKING OPPORTUNITY COMING YOUR WAY MAH......!!
13/03/2019 10:42 PM
stockraider U need to stick to champion mkt leader stock in the O&G industry to ensure longterm sustainability loh...!!

What are the champion mkt leader stock in the Oil & Gas Industry leh ??

There are 2 chun chun abang adik stock loh ??

1 It is Velesto with TP Rm 2.00 over 3 yrs 3 mths now only 30.5 sen.

2. Sapnrg with Tp Rm 3.00 over 3 yrs 3 mths now only rm 3.00 mah...!!

Both of these leaders are owned by PNB and had undergone massive restructuring to strengthen its financial & viability loh...!!

Yes u can jump to other oil & gas stock....but most have gone up alot ,furthermore their sprint up are short term and not sustainable loh...!!

Just stick to quality and undervalue the twin very important point for strong sustain gain loh.....!!
13/03/2019 10:46 PM
stockraider THE BEST INVESTMENT STRATEGY IS THAT U BET WITH LOW RISK AND WITH VERY HIGH POTENTIAL RETURN LOH.....!!

SAPNRG IS THE BEST PICK BCOS IT MAKE ITS OWN FUTURE MAH....!!

WHY LEH ??

1. SAPNRG HAS OIL EQUIPMENT N MACHINE WHICH CAN DO VERY COMPLICATED JOBS, IT IS THIS REASONS IT HAS RM 19 BILLION CONTRACT IN HAND TODATE AND THIS IS BASING ON ONLY 50% OF ITS CAPACITY UTILIZATION LOH...!!
SAPNRG STILL HAS BALANCE CAPACITY TO TAKE UP ANOTHER RM 20 BILLION MORE JOBS LOH.......!!

2. UNLIKE OTHER OIL & GAS COMPANY SAPNRG IS ACTUALLY A MINI PETRONAS...BESIDE IT CAN DO SERVICES AND CONTRACT, IT HAS ITS OWN MANY OIL FIELDS THAT IS VERY RICH IN DEPOSITS AND CAN CONTRIBUTE STRAIGHT TO SAPNRG BOTTOM LINE AND GROWTH VERY QUICKLY....THRU ANYTIME INCREASING ITS OIL EXTRACTION... VERY QUICKLY IS NOT A PROBLEM

3. IT IS EXPECTED SAPNRG OWN INTERNAL OIL FIELD WORKS CAN CONTRIBUTE AT LEAST RM 4 BILLION OF CONTRACTS TO SAPNRG PA....THATS THE REASONS WHY RAIDER SAYS SAPNRG...ORDER BOOKS IS INCREASING AND GROWING EVERYDAY AND MINUTES, BCOS OF THIS OWN INTERNAL WORKS THAT CAN FLOW IN ANYTIME LOH....!!

THE BOOMING OIL CONDITIONS WILL KICK START SAPNRG RECOVERY FROM BEING A PENNY STOCKS OF RM 0.34 TO ITS RIGHTFUL ORIGINAL POSITION OF A PRECIOUS BLUECHIPS AT RM 3.00 GIVING IT MKT CAP OF RM 70 BILLION LOH...!!

SAPNRG HAVE THE FOLLOWING MOST IMPORTANT ALLIES LOH...!!

1. PETRONAS ...THEY HAS AWARDED THE MOST CONTRACT TO SAPNRG COMPARE TO ANY OTHER OIL & GAS LISTED CO IN MSIA.

2. OMV ITS REPUTABLE JOINT VENTURE PARTNER..THAT INVOLVE WITH HUGE OIL EXTRACTION AND OILFIELD RESERVES ENHANCEMENT ASSETS...THAT WILL INCREASE ITS REVENUE AND REDUCE THE COST OF PER BARREL OF OIL LOH...!!

3.PNB WHICH PROVIDE CORPORATE ADVISORY, FUNDING REQUIREMENT AND GOOD CORPORATE GOVERNANCE, THUS SAFEGUARDING THE MINORITY SHAREHOLDERS.

WITH THIS IN PLACE WE ARE PRETTY SURE & SAFE THAT SAPNRG WILL GROW EXPONENTIALLY AND SUSTAINABLY...THATS WHY RAIDER SAYS ALL OUT SAILANG ON SAPNRG, WHEN IT IS VERY CHEAP MAH....!!
13/03/2019 10:52 PM
stockraider WHICH ONE U PREFER IN YOUR QUEST FOR SUCCESSFUL INVESTMENT WEALTH BUILDING ???

BUY NOW THE SHARE TODAY AND LIMIT UP TOMORROW COMPARE TO BUY THE SHARE TODAY AND UP O.5 SEN TO 2 SEN UP EVERYDAY FOR THE NEXT 200 DAYS LEH ??

RAIDER WOULD CHOSE THE LATTER ?? WHY LEH ??

A} IF U BUY TODAY UP TOMORROW ....YES U MAKE FAST MONIES....BUT CAN U BUILD WEALTH....NOT REALLY LOH...!!
1. IT UP SO FAST DO U HAVE TIME TO BUILD BIG POSITION LEH ?
2. DO U DARE DARE TO BUY BIG BIG...FAST FAST.. WITHOUT INSIDER INFO LEH ?? USUALLY NO NO LOH.....!!
3. THUS LIMIT UP IS ONLY FOR SOONG SOONG PLAY...NOT REALLY SERIOUS MANY MAKING WEALTH BUILDING LOH....!!

B} ON THE OTHER HAND....U SELECTED A GOOD STOCK SLOWLY ACCUMULATE BIG POSITION OVER 3 TO 4 MTHS....U WILL MAKE VERY VERY BIG RETURN LOH...!!

SAPNRG IS THAT KIND OF STOCK THAT WILL MAKE U VERY RICH AS IT GIVE TIME FOR U TO ACCUMULATE LOH....!!

Posted by stockraider > Mar 14, 2019 09:16 PM | Report Abuse X

SAPNRG IS CREEPING UP O.5 TO 2.0 SEN ALMOST EVERYDAY, NOW IT IS UP TO RM 0.35 MAH.....!!

SO HOW LONG MUST U WAIT OR HOW LONG MUST U HOLD THIS VERY UNDERVALUE SAPNRG STOCK LEH ??

TO ANSWER TO THIS QUESTION PLEASE LISTEN TO JON CHIVO LEARNED ADVICE HERE MAH......!!

"Despite the irrationality of their participants, their diversity ensures that they are all irrational in different directions, giving a net effect of zero, allowing the wisdom of crowds to prevail over the long term.
This ensures that the market is efficient and accurate most of the time. This means that over the long term, movements in share prices are usually in line with movement in earnings.

However, this diversity can often undergo phase transition, and thus result in boom or bust in the short term. What is a phase transition? This is where small incremental changes in causes lead to large-scale effects, or the “Grand Ah-Whoom!” moment.

What is this Grand Ah-Whoom! moment?
Imagine this. Put a tray of water into your freezer and the temperature drops to the threshold of freezing. The water remains a liquid until—ah-whoom—it suddenly turns into ice. Just a small incremental change in temperature leads to a change from liquid to solid.

The Grand Ah-Whoom! moment, occurs in many complex systems where collective behavior emerges from the interaction of its constituent parts. And this includes the behavior of the stock market.
In complex systems with human beings like the stock market, diversity is the most likely condition to fail first.


TAKE NOTE OF THIS POINT

As you slowly remove diversity, nothing happens initially. Additional reductions may also have no effect. But at a certain critical point, a small incremental reduction causes the system to change qualitatively."

THIS MEANS U NEED TO HOLD UNTIL INFLEXION POINT WHERE THE VERY UNDERVALUE SAPNRG SHARE WILL BREAKOUT AND EXPLODE LIKE ATOMIC BOOM UPWARDS LOH.....!!

RAIDER SEE THIS NUCLEAR BOOM WILL LIKELY TO EXPLODE SHARPLY UPWARDS SOMEWHERE RM 0.80 AND WITHIN A VERY SHORT PERIOD....WILL TAKE THE SHARE PRICE THRU THE ROOF OF RM 1.00, RM 2.00 AND RM 3.00 LOH....!!

THIS WILL BE DRIVEN BY EARNINGS OF RM 3.0 TO RM 5.0 BILLION PA LOH....!!
15/03/2019 12:52 AM
stockraider Overwhelming demand for KYY comment on dayang and carimin loh...!!

All sold out....!!

Investment Talk by Koon Yew Yin & Ooi Teik Bee
Author: Koon Yew Yin | Publish date: Fri, 15 Mar 2019, 09:50 PM

Venue: Hee Lai Ton Restaurant. 274, Jalan Sultan Iskandar, 30,000, Ipoh.

Talk on: 17 March Sunday at 11 am-1 pm

Lunch: 1-2 pm.

Cost per person: RM 30


You can contact the following:

Daniel Lee RHB Investment Bank Ipoh, Tel 012-5230121

Ng Eng Hock HLIB Ipoh Tel 019-5573786

Allan Yeoh Kenenga Ipoh Tel 012-5018990

Soo Weng Hoe MB Investment Bank Ipoh, Tel 016-4424683

Ricky Kon TA Securities Ipoh Tel 012-5222844

Koon’s assistant James Ong Tel 012-5091997


Koon will explain his well proven golden rule for share selection. Based on his golden rule, he recently discovered Carimin and Dayang, each of which has gone up a few 100% within 2-3 months.

Ooi Teik Bee will explain his method of using technical and financial analysis to buy and sell stocks.


Note: no more vacant seats available
15/03/2019 10:07 PM
Heavenly PUNTER really or not stockraider, it's pattern like this that will end up costing all the youngster all their hard earned money lah. I would rather pay RM1,000 attend talk by Philip anyday anytime!
15/03/2019 10:12 PM
stockraider DO U REMEMBER A VERY OLD SAYING THAT FORTUNE FOLLOW THE BRAVE ??

AFTER RAIDER FEED U WITH ALL NAPSHOT INFO ON SAPNRG....U NEED TO BE BRAVE AND SUMMON YOUR COURAGE, TO TAKE STEPS TO BUY SAPNRG KAW KAW B4 TOO LATE..DON FORGET THEY WILL BE MANY MANY THOUSAND OF PEOPLE SLOWLY SUMMONING THEIR OWN COURAGE TO POUNCE ON SAPNRG LOH...!!

JUST REMEMBER...U R VERY LUCKY...TO HAVE RAIDER IN I3 TO ADVICE U AND SHARE THE JOY OF SAPNRG AND ITS FUNDAMENTAL...VERY FAR AHEAD OF THOSE THOUSANDS OF LONELY PEOPLE..TRYING TO SUMMON COURAGE TO INVEST IN SAPNRG LOH....!!

RAIDER CAN ONLY ADVICE U ON THE GOOD THINGS ON SAPNRG....BUT ON COURAGE U NEED TO DEPEND ON YOURSELF...BCOS RAIDER IS NO EXPERT TO HELP U ON COURAGE MAH......!!

REMEMBER TO GO TO ROME...U NEED TO MAKE THE 1ST STEP LOH...!!
16/03/2019 2:24 PM
probability if you watch carefully a herd of horses suddenly turn almost simultaneously to another greener grass direction...

you will realize it was actually a ''single horse that made this move first''...instinctively....

this horse is non other than raider
16/03/2019 2:39 PM
(70B-SAPNRG-3Yrs) Philip I think it may be easier to teach stockraider how to think in lateral terms. If Stockraider is so adept at buying and selling stocks in the short term, I give him a chance to compare the results of his yearly investment against KLCI benchmark.

This is the year on year performance ( share price turn) of the 30 biggest companies in bursa Malaysia, indexed.

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
45.2 19.3 0.8 10.3 10.5 -5.7 -3.9 -3.0 9.4 -5.9

The local passive investing, if you will.

In 2017, choivo did 12.2%, but in 2018 he had a total turnaround with -17.95% returns. Of course, if you do benchmarking, the average retirees who put money into the index made money in 2017 and lost money in 2018, so you can say the Jon choivo active management is underperforming retiree passive management.

I wonder what is stoneraider year on year performance like, for him to be so confident and say sapura will be a 70 billion dollar company in 3 years 3 months.

Or does he not keep track of his own investing performance, but same like Calvin tan just spout out whatever stocks he likes, but did not act on anything material?

I believe 2019 will be a good year, but will you outperform the benchmark index?
16/03/2019 5:16 PM
stockraider Philip,

u understand what is long term investment or not ??

It is buying sapnrg at rm 0.30 & sitting & holding sapnrg longterm at least 3 yrs with long term tp of rm 3.00 mah...!!

Posted by (70B-SAPNRG-3Yrs) Philip > Mar 16, 2019 05:16 PM | Report Abuse

I think it may be easier to teach stockraider how to think in lateral terms. If Stockraider is so adept at buying and selling stocks in the short term, I give him a chance to compare the results of his yearly investment against KLCI benchmark.

This is the year on year performance ( share price turn) of the 30 biggest companies in bursa Malaysia, indexed.

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
45.2 19.3 0.8 10.3 10.5 -5.7 -3.9 -3.0 9.4 -5.9

The local passive investing, if you will.

In 2017, choivo did 12.2%, but in 2018 he had a total turnaround with -17.95% returns. Of course, if you do benchmarking, the average retirees who put money into the index made money in 2017 and lost money in 2018, so you can say the Jon choivo active management is underperforming retiree passive management.

I wonder what is stoneraider year on year performance like, for him to be so confident and say sapura will be a 70 billion dollar company in 3 years 3 months.

Or does he not keep track of his own investing performance, but same like Calvin tan just spout out whatever stocks he likes, but did not act on anything material?

I believe 2019 will be a good year, but will you outperform the benchmark index?
16/03/2019 5:22 PM
VenFx Why need argue ?
Cant play 2 pattern in 1 same counter meh ?

No conflict d.
赚钱于无型 不好吗?
16/03/2019 5:47 PM

(CHOIVO CAPITAL) My Speech on 2 March 2019: My experience and Identifying a wonderful company.

Author: Choivo Capital   |  Publish date: Sun, 3 Mar 2019, 12:08 AM


For a copy with better formatting, go here, its alot easier on the eyes,espeacially since im very lohsoh!

My Speech on 2 March 2019: My experience and Identifying a wonderful company.

 

Today, i delivered a speech at the I3 Investment Blogger Forum.

Due to time constraints, i was not able to deliver the full version.

I even opened the wrong slides which did not contain my contact information!

After the event, i had a few request to post up the speech and slides in full. Well, i was planning to do it to begin with. Warning, its very lohsoh!

===================================================================

Introduction
 
Good afternoon,
 
By way of introduction, my name is Jonathan Choi. Some of the more active members of the I3 forums here may know me as Choivo Capital or Jon Choivo, also known as that arrogant sounding young fella who is not adventurous at all.
 
When I first got the invite to speak at this forum, I instantly thought, “Wah, must be really cannot find anyone, until me also want”. In addition, I was also given 45 minutes, the longest time slot. They must really know I very lohsoh.
 
I wasn’t sure if I should accept the invite, considering how many people I may have inadvertently offended online, but I decided to do it for the reference experience.
 
It was then that I realized that I didn’t really know what to say or present, to our typical I3 Investor audience. As many of them are likely to be older than me, further up in their careers or as I notice in this room, retirees and are thus likely to have life experience that is far more comprehensive than mine.
 
There is a Chinese saying I really like, “I’ve eaten more salt than you have eaten rice”, among the Chinese community, this is a saying often used by the elders against the younger member who are no big no small. I’ve gotten it a few times, and definitely deserved it most of the time.
 
And I think there is a lot of truth in that saying, even if the elder person is sometimes wrong. As whatever he is wrong about, it is based off a lot more real-life experience than what the younger member may be right about, his viewpoint is therefore much more nuanced, even if it’s erroneous. At times his wrong, may even be righter that your rightness.
 
Therefore, I did not think it would be right for me, to arrogantly think I am worthy of standing up here and spend 45 minutes lecturing my betters. I have therefore decided to spend this time sharing my experience in investing thus far and what I have learnt from it. I hope you find some value out of it.
 
 
 
My Experience
I was very lucky to have been exposed to Warren Buffet, Charlie Munger and Benjamin Graham as a child. My father had a copy of “The Intelligent Investor” lying around, and I think I was around 9 or 10 years old when I picked it up and read it. Parts of it didn’t make sense to me then, I was 10 years old, but the concepts of value investing stuck in my young mind very clearly. Especially those about Mr Market and Margin of Safety.
 
Shortly after, I found out about Warren Buffet, who had an incredible ability to explain value investing in a manner a 10-year-old can understand. I went on to read his biography and a few books on him. It was around then that I could start talking about investments with my parents and give minor input on their portfolios. Do note, I was 10 years old, so most of the time, it was just my parents being patient and encouraging with me.
 
Now you would think, with this kind of investment education background, I must have saved all that stock market tuition money that most people pay and went straight to buying wonderful companies at fair prices and making a lot of money. Well that wasn’t the case, as you will shortly see, one way or another, I still found a way to be stupid and foolish.
 
It wasn’t until more than 15 years later, in the later half 2016, having worked for around 2 years, that I took out my savings of around RM50k (my salary and some small business and trading I used to do) and started investing it. Despite having an education in investing that many would envy, I was still incredibly foolish and made mistakes the likes of which I still couldn’t believe.
 
One of the first stocks I remember buying was GAMUDA-WE. I bought my first batch at RM1.35 and averaged down at RM1.30. The main reason I choose this back then was because it was recommended by a very famous trader in I3 and looking at his results for the past 5 years, I got greedy. Do note I’m not a subscriber, so my experience is likely to be very different than if I was.
 
During the entire period I owned it, despite studying it for a long time, I just couldn’t see why GAMUDA should be worth the RM5 or, so it was selling then, however, as that famous trader had it, and had such a wonderful track record, I thought it must be good.
 
I kept thinking, I must be stupid, his track record is so amazing. If this genius looking fellow buys it, and I can’t see why its worth it, I must be wrong. Better buy first and just keep studying.
 
As I was stupid and did not know how to size my investments, that tuition lesson, which is to do your own research from the bottom up and to only do what makes sense to yourself, cost me around RM3,000. As it turns out, me and the famous trader are fundamentally extremely different in terms of our philosophy when it comes to the stock market. What works for him will not work for me.
 
And back then I was an incredibly frugal person, who will think very long and hard if I should pay RM1 for an egg when ordering rice. But despite that, I could somehow spend the RM8 plus the stamp duties etc to buy and sell a stock a few times in a day, a fundamentally stupid thing to do.
 
In just a few months, I managed to rack up transaction cost of roughly RM3,500 on a cash only account portfolio of a mere RM50,000 and falling. And only had an additional pointless losses of RM4,000 to show.
 
One of my most vivid memory of the time back then was, when I told a very close friend and a current investor in my fund that, “If only I had a margin account and a higher trading limit, I would be able to average down and make money”. I sounded like a pure-bred delusional gambling addict, just unbelievably stupid.
 
Thankfully, despite all that, the initial teachings of Warren Buffet and Benjamin Graham still lingered on my mind and managed to convince me otherwise and limited my future losses.
 
I can’t help but shiver thinking of the many other new market participants like me, who unlike me , were not lucky enough to have had a decent education on investing by Warren Buffet etc at a young age. I remember a colleague of mine, who borrowed RM100k from his parents, his father is a broker by the way, to trade in the market. He lost almost 80% of it.
 
Charlie Munger is right, in this modern world, where people are trying to get you trade actively in the stock market, actions like that is the equivalent trying to induce a bunch of young people and retirees to start off on heroin. To be fair, brokerages etc need these kind of people, they also need to eat, but i feel there is a better way of making money.
 
And if someone becomes rich doing stock trading, do you think they will feel a need to write a book, go around to these talks to encourage you get rich by trading? They say things like I have a trading or investment system to teach you how to make 300 percent a year and all you must do is sign up for a 3-hour course that cost RM8,000 and I will teach you. Its very easy to make money in the market.
 
How likely is it a person who suddenly found a way to make 300 percent a year will be trying to sell books or teaching you how to do the same for just RM8,000? It doesn’t make sense.
 
In addition, in the KLSE we also have a bunch of very confident people writing articles on I3 telling you to buy this or that stock as if they they’ve got an endless supply of wonderful opportunities. These people are the equivalent of those tow truck drivers who wait for people who get into accidents by trying to extort them into using an expensive workshop.
 
Investing is a game of reading a lot, constantly learning and sitting there all the time and recognizing the rare opportunity when it comes and recognizing that a normal human life does not have very many. And when they do come, you need to back up the truck into it.
 
Anyway, back to topic, it was around that moment, which is six months in and RM10,000 or so worth of tuition fees paid, that I thought something is completely wrong.
 
Do I even know what I’m doing?
 
Do I even understand what I’m buying and how it compares to the rest of the companies in the KLSE?
 
I said I was a value investor, but I sure don’t feel, act or think like one.
 
Do I even understand value investing?
 
And I was lucky, some people were unfortunate enough to pay millions in tuition fees.
 
I decided there and then I was going to study properly. The first question I had was, investing is all about putting money in the best opportunity, but how do you know which is the best opportunity in the market?
 
Well, I asked that question to Warren Buffet. Or at least in a proxy manner, where an interviewer asked him that same question. He told him to read the annual reports of every single public listed company in the exchange. The interviewer said, there are more than 15,000! Warren replied, Start from A.
 
And so, I did that, and as the KLSE was a much smaller market than the American one, there was only 950-960 or so companies. It took me around 3 months or so to finish it. Do note I was not married and single, I had a lot of time.
 
The next question I asked was do you even know what value investing really is? Why are some value investors so different from another? Some diversify a lot, some concentrate very highly, and yet both had great points
 
I decided then to read everything about value investing. One of my favorites were from Warren Buffet and Charlie Munger. the complete annual letters of Berkshire Hathaway, his old partnership letters, transcripts for the Annual General Meetings, every single speech he ever made etc. Compared to the previous question, this took a longer time to answer, just the few items above were around 10,000 – 11,000 pages.
 
I just want to make clear here, that I’m not saying this to sound impressive or that it is an impressive achievement. If they were difficult and boring to read, like the IFRS Accounting standards book, it would be. But these books were very easy to consume.
 
Why? When someone who is very wise and smart, takes the time to answer every single one of your questions of a topic you are very interested in, in a patient, detailed, comprehensive, humorous (they are quite funny at times) and most importantly, honestly and sincerely, that feeling is incomparable at times.
 
I’m confident that if you had a copy as well, you wouldn’t be able to put it down. It was after I had built my base of knowledge from the greats, that I could now build on it and solidify my investment philosophy.
 
One of the most important and insightful things I’ve learnt during from reading those tens of thousands of pages and would like to share with you is this.
 
 
 
Identifying a Wonderful Company
This also happens to be title of my presentation. I also feel this is one of the hardest thing to find and understand.
 
Now do note I mean WONDERFUL business, not “Normal”, “Good”, or “Great” business, but a capital W, “WONDERFUL” business.
 
In order to know what an all CAPS “WONDERFUL” business is, we need to know what is a “Bad”, “Normal”, “Good”, “Great” and “Wonderful” business.
A “Bad” business, well, we all know what they look like. They are usually in overly competitive cost based commodity industries, in a bad position with higher than average cost than the competitor, may also include incompetent and malicious owners or management, coupled with horrible capital structures.
 
These companies are also often cheap, and for good reason. Buy a bad business for a cheap price, and another 5 quarters of losses will turn that into an expensive price.
 
Unless they have hidden assets that are extremely valuable and selling at minimum a 65-90% discount to Revalued Net Asset Value, and even then you should only put a small amount like 1-3% in it and diversify unless you know a catalyst event is coming. These are your Talamt, Facbind, MUI, BJCORP etc
 
How do you know it’s a bad business? The litmus test is this, “The company is worth more dead than alive”.
 
It should be noted that they are plenty of bad businesses that “appear” to be worth more alive than dead, but this is mostly illusory. From my study of the KLSE, they consist of about 25% of the KLSE.
 
 
How about a “Normal” business. Well, in all sense of the word, they are well, “Normal”.
 
They are usually in a cost-based industry that is not stupidly competitive, management is “OK” to “Good” and somewhat shareholder-centric.
 
The earnings often need to plowed back to the company to maintain its competitiveness and current earnings via Property, Plant and Equipment purchases.
 
These companies often say they are buying new machinery to be more efficient, save cost and thus make more money and increase market share. Except they are selling a commodity and have no pricing power.
 
All their competitors also buy the same machine, everyone cut cost and everyone cut price, and in the end all that extra profit pass on to the customers. But not buying is also not a solution.
 
There is a saying,  “Even if you have not bought the new machinery, you are already paying for it”
 
Low returns on equity and incremental capital, at best 1-4% above risk-free rate. Revenue and earnings likely to grow below country GDP.
 
Only worth buying is they become very cheap at the bottom of the cycle, all industries got boom and bust. You better make sure its not a permanent downturn though.
 
This consist of about 70% of the KLSE market. These are your HEVEA, LATITUD etc.
 
What about a “Good Business” then? These businesses are usually not in a cost centric (or at least more quality or brand centric) business, and thus have some leeway is charging higher prices.
 
Management is Ok to Good, these companies often have good return on equity and incremental capital.
 
They can also be in a cost based business, where due to various reasons, they have the cost base advantage, a little pricing power and/or is part of a fast growing industry. A rising tide lift all boats after all.
 
The problem with good businesses, is that they are unable to scale up, and reinvest the earnings at a high rate of return. However, if they have “Ok” to “Good” management, that do not have empire building tendencies, (If they do, you have companies like Berjaya Corporation) they will pay them out as dividends.
 
Having to find new ways to invest the dividends is a problem I’m sure most investors would be happy to have. This consist of about 3% of the KLSE market.
 
In our last two descriptions of “Normal” and “Good” businesses, you may have noticed that in both scenarios, i said that management is “Ok” to “Good”. Why do I say this? This is because whether a manager is “Ok” or “Good” in the eyes of the public, depends on the industry they are in. If you get into a horrible industry, not even the best management can save you.
 
For example, Tan Sri Willian Cheng is a good, hardworking and conscientious businessman, however, the industries he is in, have both had their economics destroyed in the last few years, and its almost impossible to make money. Just because PARKSON make money in the early 2000’s and to an extend 2010-2012, does that mean he was a genius then and bad business man now? I don’t think so.
 
Does this mean that Tan Sri Leong Hoy Kum of Mahsing or Tan Sri Jeffrey Cheah of Sunway is better than him? I don’t think so, they just happened to get into the right industry.
 
Is Tan Sri Ananda Krishnan and Tan Sri The Hong Piow being better than the previous 2? Or if Mark Zuckerberg, Jeff Bezos Bill Gates is better than Tan Sri Teh Hong Piow etc?
 
I don’t think so, it is the industry that is key, some industries are so good, that if you’re hardworking and a little smart, and get a dominant position in it and be a tycoon. That’s assuming you can find one.
 
There are some industries where its almost impossible to make money, if i had Tan Sri Teh Hong Piow to start a textile company in Malaysia tomorrow, the company will open on Day 1 and go bankrupt on Day 2.
 
So, what is a “Great” business then? It is a good business, but with a good to great management that can scale up!
 
These companies can make high returns on equity and incremental capital, churn out a lot of cash, and take this money to make more at higher returns.
 
They vary in greatness, some can be a few billion in size, others hundreds of billion in size. In Malaysia, they consist of companies like Public Bank, Hong Leong Bank etc,  overseas they are companies like Intel, Facebook, Google, Alibaba etc.
 
Now, you may think, those businesses are that you consider to be just “Great” seem incredible to me already.
 
Waseh, you telling me you so picky until even Google is not considered “Great” in your book ah? What is the difference between “Great” and “Wonderful” then?
 
 
The difference is this. A wonderful company is good for humanity.
 
For every single dollar extra, this business, it provides at minimum an extra dollar worth of benefit to humanity and society. This kind of company, both the Public and the Government want them to make more money. If they made 1 billion today, and with the same business model made 10 billion tomorrow, the world would be better off.
 
Now you may think, “Make money is make money”, why is the second important, is this some kind of odd modern millennial thinking etc? Not really.
 
Let me give you some examples of “Great” but not “Wonderful” businesses, and why this “Wonderful/Good for Humanity” factor was important. We will start off with a foreign company first, and then we will move on to local examples.
 
Mainly because the foreign one is one where they were making a lot of money, and if they made more money, humanity will be even more miserable.

 

 

The Rise and Fall of Valeant Pharmaceuticals.

The name of the company is formerly called “Valeant Pharmaceuticals International Inc”. After its downfall, the company changed its name to “Bausch Health Companies Inc”.
 
 
This was a pharmaceutical company listed on the Toronto Exchange. In 2008, when its then new CEO Micheal Pearson, an ex McKinsey Director with deep pharmaceutical experience, took charge. The market capitalization was less than USD2billion in 2008.
 
With mergers and acquisitions and soaring stock prices, it rose to a high of USD90 billion, before falling back down to a low of USD2.9 billion in 2017. A 96.7% drop from peak to trough. Its currently at USD8.2 billion.
 
They are a few things to note, when Micheal Pearson was hired, his was incentivized as if he joined a private equity firm. He was required personally to buy USD3 million worth of stock (he bought USD5 million).
 
And his compensation mainly consists of a form of restricted equity that would pay him USD4 for every USD100 in value created (measured via stock price increase), with a hurdle rate of 15%. In addition, if he hit 30%, his rewards will be doubled, and if he hit 45%, it would be tripled.
 
For example: Lets say Valeant was at USD2bil market capitalization, they bought another company with USD2 bil market capitalization. Total is USD4 billion capitalization. No compensation on this.
 
Lets say the price of the stock then went up to USD8 billion in a year. That is a 200% increase, above the 45% hurdle rate.  His restricted equity at USD4 per USD100 value is now tripled to USD12. So, the difference of USD4 billion, he gets USD480 million salary that year.
 
Why is it important to know this, because incentives are the iron law of nature, at the end of the day you get what you incentivize for. If you put out honey, you get ants. If you put out salt, what eats salt ah? No idea.
 
This example also illustrates why incentivizing a CEO on share price increases is usually a stupid idea in the long term. An increase in share price does not mean the company is improving. Its better to do it via incentives on Return on Incremental Capital/ Retained Earnings not paid out.
 
Micheal Pearson being an ex-Mckinsey Director who had deep experience in the pharmaceutical industry, did things differently from most Pharmaceutical Companies.
 
 
For most pharmaceutical companies, they way they do business, is by using the profitability of the current biopharmaceutical portfolio, to do doing research and development for new drugs.
 
Typically, most pharmaceutical companies spend 20% of their annual on R&D. Valeant spends 6-2% or 3 to 10 times less.
 
And it makes sense, according to a McKinsey Report, the return on investment in a typical biopharmaceutical portfolio often fails to cover its cost of capital, and so naturally the logical thing to do is to do less research on new drugs.
 
Someone once asked the CEO Michael Pearson what he thought of cancer research. He famously replied, “I think it’s a losing proposition. I don’t know any pharmaceutical company who has generated positive returns on it.”
 
Basically, screw cancer research, i want my money.
 
So how do they increase their revenue and profitability if they don’t have new drugs from research? It’s simple.
 
They bought over companies with drugs that have no easy replacements nor have generics sold in the United States. Cut their R&D cost by 80% or so, and then massively increase the prices of these drugs.
 
The logic is simple, like it or not, no matter the price I charge, you or the insurance company must pay for these drugs. This is one of the reasons why insurance cost in the US is one of the highest in the world.
 
In 2015, they raised the prices of all their brand name drugs by 65%, 5 times more than their peers. The prices of two key heart medications “Nitropress” and “Isuprel” had prices raised by 212% and 525% upon the acquisition of the right to sell these drugs.
 
The cost of “Flucytosine” by Valeant was 10,000% higher in the United States than in Europe, and those sold in Europe was simply not allowed to be sold in US. And here is the funniest thing, the drug was not even developed by them. It was developed in 1957, considered an essential medicine by World Health Organization’s List of Essential Medicines (therefore considered key in an effective healthcare system), and was no longer patented. However, as they were the only FDA certified generic producer, they could essentially price it as if they held the patent for it
 
The price of “Syprine” a key drug for Wilson’s disease, which can result in, among other things, fatal liver failure and which can be bought for USD 1 per pill in some countries, cost around USD300,000 for a year supply.
 
For “Syprine”,  Valeant bought a pharmaceutical company called, Aton who owned the rights to sell that drug for $318 million. Despite the tiny patient base for Syprine, Valeant raised the price so strongly that they made back 2.5 times its cost in less than two years.
 
When Valeant acquired Salix Pharmaceuticals, the price of the diabetic drug, “Glumetza” increased by about 800%.
 
When asked to justify these price increases, the CEO replied, “All I care about is our shareholders. Our duty is to our shareholders and to maximize value, cash returns and be accountable for that.”
 
What a wonderful CEO and management.
 
A captive market, highly inelastic demands. Essentially, your money or your life.
 
What a great business.
 
 
In addition, he also took advantage of lower tax rates abroad, by making tax “inversion” purchases of foreign companies.
 
In 2010, Valeant purchased Biovail, a Canadian Pharmaceutical company at a 15% premium. However, post-acquisition, the shareholders of Valeant held only 49.5% of the combined entity. Why?
 
Well, the operating subsidiary of Biovail is based in the Barbados, and to preserve its low tax rate, Biovail needed to be the company doing the acquiring.
 
Why was this particularly important? With the lower tax rates, Valeant could offer better prices as an acquirer.
 
A pharmaceutical company could be they purchased, could have a tax rate of say 38.9% (the US combined corporate tax rate) will now have a tax rate of 25%. Top that off with a couple hundred million in savings by firing your scientist and cutting your R&D budget. That’s a lot of money.
 
 
Indirectly owning a specialty pharmacy called Philidor (they created an option to buy the company that had a price of USD100million and strike price of USD0, enabling them to treat the company as if it was a third party, when the reality was anything but if) whose main business was dispensing Valeant’s drugs to consumers and getting insurers to pay for them.
 
Well, what happened then? Couple great business economics with a highly motivated and intelligent CEO with a lack of morality, and you get share prices rising from USD8.55 to a peak of USD257.53, or 3000% gain.
 
At one point, Valeant even exceeded the market capitalization of the Royal Bank of Scotland to be the company with the highest market capitalization on the Toronto Stock Exchange.
 
 
It was around the peak years of 2013, that it started becoming the darling of hedge funds and investment managers around the world. Even famous value investors like Bill Ackman (whom if you’ve read the Berkshire AGM Transcripts, you would have noticed him asking questions every other year) were investors, along with Sequoia Capital, Paulson & Co (famous for shorting mortgage bonds during the 2008 Crisis and made USD15billion in 2007, on capital of USD12.5 billion) and ValueAct whose president, Mason Morfit was quoted saying “Micheal Pearson is the best CEO I’ve ever worked with”.
 
Even companies with friendly links to Warren Buffet such as Ruane, Cunniff & Goldfarb and personal friends and business partners such as Jorge Paolo Lemann of 3G Capital were investors.
 
One could scarcely find a fund manager who disagreed with Valeant or thought they were a bad investment. Except for short sellers, Warren Buffet and especially Charlie Munger who said that “Sewer is too light a word for Valeant” and that the company was deeply immoral.
 
We will now see how a great business, falls due to immorality. It started slowly.
 
 
First, their public failure in acquiring Allergan, which raised the Company’s Public profile, in addition to an insider trading lawsuit, as Bill Ackman of Pershing Square bought options on the shares of Allegan to help fund the acquisition and intimidate the company into selling. The fund made a profit of USD2 billion despite the failed acquisition.
 
During the fight, Valeant was compared very publicly to TYCO, a huge conglomerate company with a similar business model that imploded in a wave of accounting scandals in the early 2000’s. This failed acquisition was particularly painful for Valeant as their acquisition and business model required them to issue their shares, like TYCO. And with that public comparison, no board of directors will dare to sign. They will technically go to jail if found guilty.
 
In addition, the former of CEO of Biovail Eugene Melnyk, filed a filed a whistle-blower complaint with U.S. regulatory agencies over Valeant’s tax structure.
 
 
But things really took pace on 20th September 2015, when “The New York Times” wrote an article about a Martin Shkreli, a pharmaceutical CEO who hiked the price of a life saving drug by 5000% overnight.
 
The article mentioned Valeant, and its hiking of Nitropress and Isuprel by 525 percent and 212 percent, the day they acquired the right to sell.
 
The then democratic presidential candidate Hillary Clinton tweeted, “Price gouging like this in the specialty drug market is outrageous.”.
 
In short order, Valeant admitted that it was being investigated by both the House and the Senate, and had received subpoenas from the U.S. Attorney’s Offices, in the Southern District of New York and Boston, over its pricing of drugs and its programs to assist patients.
 
Its amazing how fast politicians can work, when their interest are exactly aligned with the public.
 
It was also around this time, that Charlie Munger made his comments on the company and research reports from various investment banks and short selling houses appeared, stating that any revenue growth was due to price increases.
 
The share price have now fallen to USD90 from USD257.53, in 2-3 months.
 
It was currently, that the final blow came, newspaper had found out about the specialty pharmacy company Philidor, and they published pieces quoting former Philidor employees who said they were told to do things such as change codes on doctors’ prescriptions to Valeant’s brand, even when much cheaper generics were available, and re-submit rejected claims by using another pharmacy’s identification number.
 
In addition, due to the auditors now finding out about Philidor, Valeant was not unable to file previous year’s financial report and disclosed that the S.E.C. was investigating it. In addition, the company missed its projection on a key metric by a wide margin.
 
On April 27 2016, Bill Ackman (Fund Manager), the CEO and CFO were forced to appear before the United States Senate Special Committee on Ageing to answer to concerns about the repercussions for patients and the health care system faced with Valeant’s business model.
 
After the meeting, the Senate Special Committee ordered the firing of the CEO.
 
It was around this time that sales started to drop as even doctors started to boycott their products whenever possible.
 
The share price is now USD33.36. It fell down to a low of USD8.51 on April 21 2017, amid doubts that the company will be able to service its loans. It had USD1 billion in cash and USD30 billion in loans.
 
 
 
Now that we’ve seen a great but not wonderful company with a lack of morality, lets look at a wonderful company.
 
 
 
The Wonderful Company called Costco
 
 
Costco Wholesale Corporation (COST) is wholesaler for grocery goods, where anyone can go and buy their groceries or household items, in bulk. The only requirement is that you need a membership card, which cost USD60 or USD120.
 
Here is their Revenue, Profit Before Tax, Membership Fees and Number of Members from 2014 to 2018.
 
Now, some of you may have noticed that unlike retail, grocery stores were not as effect by the rise of e-commerce. This is due to their margins being a lot thinner to begin with and thus more efficient and harder to run. Despite that, we still see falling sales in companies like Whole Foods etc.
 
Despite this, Costco have still managed to grow sales at CAGR of 5.86% and PAT at 11.16%.
How did it do this? If you look closer, you would notice that the profit after tax of the company consist almost wholly of membership fees. They literally make around or less than zero from customers.
 
Here is what COSTCO are telling their customers. Every year, we will only make USD60-USD120 dollars in profit from you, regardless of how much you buy. You own a restaurant and spend USD20k a month? We earned USD60 from you this year. You are a big business and spent USD10 million with us? We only make a profit of USD60.
 
And this company by being absolutely obsessed with cutting cost, has the lowest cost base in the industry. They don’t even have name tags for the employees. They just pass you a sticker with your name, and have you wear a black shirt, pants and shoes. Buy your own.
 
In 2009, Coca-cola tried to increase the selling price by 3 cents per bottle, they completely refuse to stock coca cola, telling their customers,
 
“Costco is committed to carrying name brand merchandise at the best possible prices. At this time, Coca-Cola has not provided Costco with competitive pricing so that we may pass along the value our members deserve.”
 
Coca cola buckled and didn’t increase the price.
 
Unlike Valeant, if Costco maintained their business model and profits next year doubled from USD3.1bil to USD6.2bil. America would be rejoicing, as that would mean 51.6 million more people get to buy their daily goods and groceries for far cheaper prices.
 
This definitely be value accretive for the American people. The same cannot be said for Valeant.
 
 
 
Other Examples
This “Good for humanity” factor which results in both the Public and Government cheering for increased profits for you, is especially key.
 
Almost every great company that have fallen since the start of time has been due to it not being “Good for humanity”. “Good for Humanity” is as good as a moat you are ever going to get. Others fall due to fundamental technological disruption.
 
 
Why is PARKSON and SEARS etc, formerly amazingly profitable retail companies either on the verge of bankruptcy, or loss making with no end in sight?
 
Its simple. Back in the day PARKSON and SEARS sold household and clothing items with an extremely fat net profit margin of 20-30%, and gross margins of 50-70%
 
Would humanity be better of from them doubling their profits? Would humanity be better from paying double to triple for household items when it can be had for around half or a third of the price? I doubt it.
 
Extremely fat profit margins of great companies are opportunities for wonderful companies who kill the margins and make it up with volume, increasing the value, productivity and efficiency per dollar and per head of society.
 
Wonderful companies are essentially companies that increase the value of each ringgit exponentially other companies include,
 
Interactive Brokers – The cheapest international stock broker in the world, you can trade across most major stock markets in the world, with fees of 0.5 cents per share or a minimum of 1 dollar and a maximum of 1% of trade value. Volume discount available. For the record, this is in most cases far cheaper than what Malaysian brokers charge for buying Malaysian Stock. There is a reason why this company is not allowed to operate in KLSE.
 
Berkshire Energy – Unlike other energy companies with high dividend payout ratios, Warren Buffet does not require a dividend if money can be reinvested at a good rate of return. And since in America’s utility industry, the government basically guarantee you an IRR of 8-10% (most who go bankrupt here do so because they took up debt to pay dividends), the company can basically pour all their money into building the best utility plants and pipelines with no debt.
 
Whenever Berkshire Energy takes over another energy company or goes into a new area, energy prices drop by around 15%.
 
TTI – This is a global electronics parts distribution company. This is an enormously complex business where you need to manage inventories with millions of types of parts, and you make a profit of less than one tenth of a cent per part. An unbelievably hard business system to set up with close to a thousand suppliers, and the millions of data sheets for parts. Just a wonderful business.
 
There are some companies that appear great now, whose business is currently deteriorating due to it not being a wonderful business.
 
Coca Cola/Pepsi/F&N  In the last 3 years, sales volumes of soft drinks have been falling. Why is this the case? Studies have shown that sugar is almost as addictive as heroin, and it is a very refreshing drink.
 
Well, its not healthy and therefore not good for humanity. Would humanity be better off if they sold 2x more next year? I don’t think so.
 
And with the current drive to be healthier, the soft drink market is really suffering. I personally don’t really know anyone around my age group who still drinks soft drinks.
 
Even for our local champion F&N, sales of soft drinks have been falling, except for those of 100 PLUS, which for some reason, Malaysians think drinking 100PLUS is good for health.
 
I personally remember my doctor recommending me to drink it when I was younger when I had fever or stomach-ache.
 
Other companies such as General Mills, Kelloggs, Kraft Heinz etc is also facing falling sales.
 
So how many of these wonderful companies are there in KLSE. Maybe 2 or 3. There is a good chance it’s because I’m not smart enough to identify more. But it appears in line considering the size of our markets.
 
 
 
 
TIMECOM
Having gone through all the annual report of companies listed Malaysia, I managed to identify only 2 wonderful companies.
 
One of them had a real moat, the other appears to have a decent one. The first is around fair value or a little above fair value, the other is cheap-ish maybe.
 
I’m not a fan of sharing my best ideas to strangers, however, as I’ve already built up my position for the first one, and they are better opportunities in the market, and will therefore be unlikely to top up soon, I don’t particularly mind sharing this, as it will not affect myself and my fund investors much.
 
The main reason i gave it out back then, was because the valuation i paid was quite expensive at 25 times earnings, and as i wasn’t sure, i wanted a second opinion and for people to criticize it in order for me to find out the strength of my research.
 
Currently the earnings have almost doubled, without a change in the price. Personally, i’m quite happy to be paying the same price for a much improved company!
 
The name of the company is TIMECOM. I wrote a post on it in my website back in 2017,
 
 
However, allow me to give you just a brief overview.
 
The thing about wonderful companies is that when the insight comes, they are often already expensive and TIMECOM was about 10-15% above my fair value when I bought it.
 
I first found and understood it around April 2017, and being so excited, after thinking very deeply for 3 weeks, I sold half my portfolio and put it into TIMECOM, a little foolish.
 
But to be fair, I was younger, and everything else was a lot more expensive. I’ve only topped up once since then, and as my portfolio is a lot bigger now, despite not selling a share, it has fallen to around 15% of portfolio.
 
 
TIMECOM is the only full fibre internet provider in Malaysia and is vertically integrated with their own data centre business and shares of international underwater fibre optic cables.
 
Pre-2008, TIMECOM was a mediocre telecommunications company. Late 2008, they hired their new CEO Afzal. His turnaround plan was to turn TIME into a telecommunications company that connected Malaysia internally and externally with a pure fibre optic network.
 
They first started laying down the main backbone of the fibre network from Thailand/Penang to Johor/ Singapore in 2010, and since then, mainly provided their network services to enterprises and business such as Astro which require very high speeds and bandwidths. And in 2016, the network was finally dense enough to launch to the Retail market.
 
Now, why does having a full fibre network matter? Its simple, copper is inherently slower, and its signals degrade over long distances, this is not the case for fibre optic cables, as long as there is a single stretch of copper in your network line, it won’t be as fast.
 
And TM, has a Fibre /Copper Hybrid network, which is also why they have so many Streamyx users, who are on copper lines. This is also why TM turned extremely quiet on their TURBO plan which came out 3 days after elections. If they could sell 10x speed, they would, but they can’t, which is why 100MB is their fastest plan now.
 
And as we can see from the table above, they are way ahead. And if you go to my article, which was written in 2017, the gap is value is far bigger. While TM and AXIATA etc struggle with the Gorbind Singh’s pledge of double the speed at half the price, with impairments coming left right centre.
 
What about TIMECOM? Profits hits an all-time high, this is what you call a moat!
 
Now you might ask, why don’t TM or Maxis etc just build a pure fibre optic line and compete? Well, time and money. I said money second but let’s talk about that first.
TM has net borrowings of about RM15 billion, and they have a legacy copper fibre network which spans hundreds of thousands of kilometres long of km long and built over decades, replacing that is going to be expensive, especially since they still have hundreds of thousands of Streamyx users to upgrade.
 
It’s going to be very difficult, and TIME is net cash, and growing 18% per annum while TM sorts that out.
 
As for our mobile telco’s. They could, but their stocks are all very overvalued with support of a 90-100% dividend payout policy. If they drop the payout, the share price will drop like a stone, I don’t think EPF etc would find that acceptable.
 
In addition, they still need to buy spectrums, and build new towers, especially with 5G coming up, which already take up most of their borrowing capacity.
 
And to top it off, you need time. Starting in 2010, it took them 3-4 years to connect Penang to Singapore and offer to commercial users. And another 2 more years before they could start with retail customers, imagine a blood vessel, its kind of like that.
 
Network effects just take time, even if you have a lot of money to pour into it, it’s a little like having children, you cannot have a baby in one month by getting 9 women pregnant.
 
 
And as we can see from this table here, which strips out any one-off income, that is the effect of their moat.
 
When I first bought it in 2017, I expected the retail business to grow at 70-100% per annum, which translates to 15-18% growth per annum. The income and revenue did not grow at that speed in 2017, when one off depreciations, forex losses hitting the books, as well as lower IRU sales. But I could see very clearly that the recurring revenue and earnings was increasing at the pace I thought it would.
 
The growth and demand for their service was obvious especially if you went to their Facebook page, where people ask two questions.
 
1) Why your installer not yet arrive!
2) When you want to connect to my area
 
What wonderful complains to have!
 
It started showing the increased in earnings later mid to late 2018. The focus of the company now is in connecting condominiums. Why? Connect to one condo, you will instantly steal 200 customers from TM or Maxis.
 
I expanded on a few things a lot more in my article, but due to time constraints, I better skip it and go straight to the most important part risk and valuation. Feel free to read the article enclosed.
 
The biggest risk to this company is 5G.
 
Let me just give a brief layman introduction on what it is. It is the 5th generation wireless connection that runs on low frequencies and high frequency bands and is expected to be up to 100 times faster than current 4G speeds.
 
Now, despite how loudly people talk about the wonders of 5G, we need to note this.
 
4G is not even properly implemented worldwide, not in even in the US or Malaysia. Do you see the LTE sign on your phone, that stands for “Long Term Evolution”, or basically as how BN ministers use to say ”Akan cuba lah”. LTE is what you put when its not yet full 4G. You notice how they even say “Long Term”, this means few years also can mah!
 
Now let’s say they roll out 5G, the thing you need to know is this, it will take a long time for nationwide rollout. Because the key weakness of 5G, is that if you want to get those extremely high speeds, you need MIMO devices every 50-100m, or basically everywhere.
 
Those articles you read about where 5G had speed of 10-30GB per second, it’s the 5G device directly facing the MIMO device 50 meters away on the highest frequency bands. If someone walk in between, putus straight!
 
If they want better range, they need to use the low to mid frequency bands. SPRINT, a US company is aiming to release 5G in parts of the nation, the minimum speed they are aiming for is 2-4mb, even our “akan cuba” 4G is faster.
 
Now, even if they do take off in a big way, TIMECOM stands to benefit in a big way. These MIMO devices need to be connected by a fibre optic backbone, and TIMECOM is well positioned for it. And if people start using 5G for their connections, it would save TIMECOM cost when it comes to connecting to suburban areas.
 
When it comes to suburban areas, the reason TIMECOM does not connect to them is firstly cost, its just more profitable to connect to condo’s and secondly, because they can’t.
 
TM previously did not allow the use of their poles, and government does not allow above air fibre optic cables as they look ugly. And so, if TIME wanted to connect, they need to dig new tunnels to all the houses.
 
But if 5G took off, they can very easily just install a few MIMO devices, connected to their fibre network, near suburban areas and use the mid-spectrum bands to offer high internet speeds to homeowners.
 
Valuation wise, its currently 16 times earnings. A company growing earnings and revenue at 16-18% and selling at that price, translates to about 11%-12% yield. FD’s currently yield 4.6%. And to top it off, this company can really scale up with the profits they earn at good rates of return. ROE is 11%.
 
Up to you. Make up your own mind.
 
 
 
 
Choivo Capital
 
 
From the speech thus far, some of you may have correctly deduced that I intend to enter fund management. However, I consider it immoral for someone to manage another’s money for a fee, unless you have a high confidence level backed by a decently long track record, of your ability to obtain higher than average results.
 
And like a fibre optic cable network, this takes time. And so, until I get a good 5-year track record (and if I do get it), i do not do any fund management in an official capacity.
 
Having said that, I consider the mere act of investing to be a zero value add activity to society. A life spent getting rich by getting increasingly shrewd at buying and selling pieces of paper is a life wasted.
 
My main goal now therefore, is to create my own course online on investing. I intend for it to cover everything you need to know on investing and the mental models, and I also intend for it to be free.
 
Currently, I’ve not yet started on it, but if you go to my site and the page, I’ve listed down the list of books I believe will teach you far better than I can, and you will find my articles there, which may be interesting and of use.
 
At the end of the day, investing is the last real liberal art. Its about understanding human beings, business, psychology, maths, physics, economics, biology and life itself. The older you are, the more you know about life and the better you are likely to be. I’m certain that if the people in this room were as lucky as me, in being given such a good investment education, you guys are likely to be way better.
 
If I could help young people like me, and retirees or people advanced in their careers, understand money and investing properly, and save their tuition money, which can often exceed hundreds of thousands to millions, I think I would have lived a decent life.
 
 

=====================================================================

Facebook: Choivo Capital
Website: www.choivocapital.com
Email: choivocapital@gmail.com

 

  12 people like this.
 
calvintaneng THUMBS UP TO JON CHOIVO

GREAT WRITE UP & PRESENTATION

THIS ONE GOOD

Costco Wholesale Corporation (COST) is wholesaler for grocery goods, where anyone can go and buy their groceries or household items, in bulk. The only requirement is that you need a membership card, which cost USD60 or USD120.

Costco is the share to buy!!

Costco will cause Kraft & all other consumer goods stocks to stagnate
It will save lots of money for the average consumer
03/03/2019 12:43 AM
apolloang datuk calvin your MAA kaya liao,why butaland still sleeping? now buy which counter?
03/03/2019 12:47 AM
calvintaneng Posted by apolloang > Mar 3, 2019 12:47 AM | Report Abuse

datuk calvin your MAA kaya liao,why butaland still sleeping? now buy which counter?


GO BUY PENERGY AS IT WILL CROSS RM1.00 SOON

Why?

2 Strong Reasons

1) Fundamental & Prospect better than Dayang or Carimin

2) Uncle Koon pumping Dayang to Rm1.50 will lift up Penergy to next target price of Rm1.35 (give a 10% discount from Dayang Rm1.50)
03/03/2019 12:57 AM
apolloang fri wanna buy at 77cts back no buy,mon likely will drop cos oil price down more than 2%
03/03/2019 1:01 AM
calvintaneng Oil already rebounded lah
See https://www.cmegroup.com/trading/energy/crude-oil/brent-crude-oil.html

No more 77 sen as Dayang already crossed Rm1.15

Dayang & Penergy were twin sisters long ago in Petra family of stocks

So penergy will follow where dayang goes

And that is only up trend for 2019
03/03/2019 1:08 AM
apolloang https://www.bloomberg.com/energy
fri oil price down 2%
03/03/2019 1:11 AM
kcchongnz Great if more youngsters, and even retirees can spend time and effort learning the right path of investing, the fundamentals of investing, or at least as the basics before plunging into other disciplines.

This ensures building of long-term wealth, steadily, rather than most likely, 99% of the time, getting killed by the sharks trying getting rich quick.
03/03/2019 6:24 AM
(70B-SAPNRG-3Yrs) Philip And I thought I was long winded...
03/03/2019 6:27 AM
kcchongnz The propagation to the public about getting rich quick, without spending much or any effort but by just following tips and rumours, is so pervasive, even in a blog like i3investor. Most of all know the end results. They had happened before, again and again.

Hence it is good to have some refreshing ideas such as that of Choivo capital here, and some others, including also S=QR of Philip.
03/03/2019 6:49 AM
3iii Nothing to add to this wonderful discourse on Warren Buffett style of investing by Choivo. Thanks for sharing your hard work.

Allow me to add two comments:

1. Every investor should define the long term end-point of his/her investing objective, should have a sound philosophy and strategy, and should stay focus on achieving this over the long term.

2. I enjoyed the way you classifies "bad, normal, good, great and wonderful companies". I think Buffett's grouping of his stocks into gruesome, good and great companies is easier to understand and implement.


I have to add another name to this list of investors I have to follow in i3.

KC
Philip
Choivo
Icon (provisional)
03/03/2019 7:59 AM
Heavenly PUNTER Good Good, love your work choivoboy, I will read it everyday, to absorb your knowledge, wakakaka
03/03/2019 8:18 AM
3iii Investor's Checklist: Telecom Sector


The telecommunication sector is filled with the kinds of companies we love to hate:
They earn mediocre (and declining) returns on capital,
economic moats are nonexistent or deteriorating,
their future depends on the whims of regulators, and
they constantly spend boatloads of money just to stay in place.

Even companies that once boasted wide moats, such as those that control the local phone network, face increasing competition from newer players, such as cable and wireless networks. Because telecom is fraught with risk, we typically look for a large margin of safety before considering any telecom stock.

Telecom Economics

Building and maintaining a telecom network, whether fixed line or wireless, is an extremely expensive endeavor that requires truckloads of upfront capital. This requirement provides a substantial barrier to entry and usually protects the established players. To raise capital, a new entrant must have a great story to tell investors. The emergence of the Internet, the opening of local networks to competition, and rapid wireless growth during the 1990s gave numerous new players the yarns they needed, which is why the usual barrier provided by huge capital requirements came crumbling down as investors lined up to grab a piece of the action.

While the effects of this massive infusion of capital are still being felt in the industry, ongoing capital needs have sunk many new entrants. Even a mature telecom firm will need to invest significant capital to maintain its network, meet changing customer demands, and respond to competitive pressures.

Because of the enormous cost to build a network, carriers typically have very low ratios of sales to assets (asset turnover ratios). Even a mature carrier typically generates only around $1 per year in sales for each $1 of assets invested. But building a business of ample size to support interest payments and ongoing capital needs is very important. Because fixed costs are so high, it's imperative for carriers to have enough customers over which to spread the costs.

Squeezing as much profit from the sale as possible is also crucial. While size again plays a role here, a telecom company must be able to send bills, provide customer service, maintain the network, and market services efficiently. A mature company, either fixed line or wireless, should expect to earn operating margins between 20 percent and 30 percent. Short of this level, it is extremely difficult to earn an attractive return on invested capital, given the slow pace at which assets turn over.

With so many companies raising money and building networks in the late 1990s, the volume of business needed to support all these huge investments never materialised.

Conclusion:

The telecom sector of tomorrow will look nothing like the sector of the past. Competition is far greater throughout the industry and economic moats exceedingly difficult to come by. The future of the industry will be shaped by regulatory and technological changes, which means that financial strength and flexibility are likely to be what separate successful firms from unsuccessful ones over the next few years.


Investor's Checklist: Telecom

Shifting regulations and new technologies have made the telecom industry far more competitive. Though some areas are more stable than others, look for a wide margin of safety to any estimate of value before investing.
Telecom is a capital-intensive business. Having the resources to maintain and improve the network is critical to success.
Telecom is high fixed-cost business. Keeping an eye on margins is very important.
Watching debt is also important. Firms can easily overextend themselves as they build networks.
The price of wireless airtime is plummeting. Carriers continue to compete primarily on price.


The Five Rules for Successful Stock Investing
by Pat Dorsey

https://myinvestingnotes.blogspot.com/2010/05/investors-checklist-telecom.html?m=1
03/03/2019 8:20 AM
soojinhou Thumbs up even you are a dick to everyone you don't agree with.
03/03/2019 8:24 AM
Choivo Capital Haha lol!
03/03/2019 9:11 AM
Sslee Dear all,
This is how you feel working in a wonderful company.
I am glad I growth up to become an engineer and now working for PT Musim Mas, a fully integrated palm oil corporation that subscribed fully to the principles of RSPO and committed to the production and use of sustainable palm oil for People, Planet and Prosperity. We are in an industry that brings benefit and prosperity to all stakeholders.

Our plantation division planted million and millions of palm tress in a responsible and sustainable way so that our mother Earth can breathe a little bit easy. ((Note: Tree/plant through a process called photosynthesis utilizes the energy of sunlight and capture CO2 from the atmosphere and H2O from the ground water and convert it into Hydrocarbon building block (Basic HC building block that started and sustain all living creature on this World and releasing O2 back to the atmosphere.)). Our conservation and rehabilitation program on HCV areas will allow thousands if not millions of our next generation children to enjoy the beauty of flora and fauna at its pristine natural environment. Our social responsible program of building kindergarten, school and giving bursary to students will help thousands and thousands of local communities children to build a better tomorrow for themselves and their family through better education. Our small holder program of given financial assistance and managing small holder plantation for them had enable thousands of previously landless farmers to own land and uplift their living standard.

Our mid stream operation produce an affordable healthy cooking oil and specialty fat so that millions of peoples do not need to go hungry tonight and many more millions of overfed peoples can still remained healthy.(Note: If not for palm oil, many food items will be un-affordable to millions of peoples)

Our downstream Oleo Chemical operation produce renewable, biodegradable and edible environment friendly natural chemical at competitive pricing so that our customers can turn it into an affordable hygienic, cosmetic, health and consumable product that enable millions of peoples to look good, smell good and feel good.

We believe we are “Enriching others at the same time enriching ourselves” a Must Do Principle. It is this believes that drive us to do more, to do our best, to be the best and passionate about our work. Together we do make a different to this world. That a life worth living for.

Thank you
03/03/2019 11:18 AM
RainT Zzzzzz
03/03/2019 11:44 AM
qqq3 by kcchongnz > Mar 3, 2019 06:24 AM | Report Abuse

Great if more youngsters, and even retirees can spend time and effort learning the right path of investing, the fundamentals of investing, or at least as the basics before plunging into other disciplines.

This ensures building of long-term wealth, steadily, rather than most likely, 99% of the time, getting killed by the sharks trying getting rich quick.
=================

S=Q r...............Its Q or don't Q?


Its business sense too...........
03/03/2019 12:22 PM
qqq3 whoever wrote this is Q....His name is Q

https://klse.i3investor.com/blogs/koonyewyinblog/196112.jsp
03/03/2019 12:24 PM
newbie4444 3iii so Timecom a sell?

Posted by 3iii > Mar 3, 2019 08:20 AM | Report Abuse
Investor's Checklist: Telecom Sector

The telecommunication sector is filled with the kinds of companies we love to hate:
They earn mediocre (and declining) returns on capital,
economic moats are nonexistent or deteriorating,
their future depends on the whims of regulators, and
they constantly spend boatloads of money just to stay in place.

Even companies that once boasted wide moats, such as those that control the local phone network, face increasing competition from newer players, such as cable and wireless networks. Because telecom is fraught with risk, we typically look for a large margin of safety before considering any telecom stock.
03/03/2019 1:20 PM
Goh Kim Hock nice one bro Jon. Give you a like.
03/03/2019 1:30 PM
qqq3 2018 very bad year for small caps..last 2 months small caps doing well.
03/03/2019 1:39 PM
Icon8888 so longwinded ... I need to keep slapping myself to stay awake

ok lah give you a like also
03/03/2019 1:51 PM
abang_misai Cantek comment. Couldn’t agree more.

Posted by Icon8888 > Mar 3, 2019 01:51 PM | Report Abuse

so longwinded ... I need to keep slapping myself to stay awake

ok lah give you a like also
03/03/2019 2:01 PM
qqq3 share market is about Q, not about writing England.
03/03/2019 2:06 PM
Choivo Capital Haha i find that my articles are much better when i present them live.

I have to admit, written out, its honestly hard to finish (unless you're an avid read), since i like to elaborate on my points.

====
Icon8888 so longwinded ... I need to keep slapping myself to stay awake

ok lah give you a like also
03/03/2019 13:51
03/03/2019 2:10 PM
Choivo Capital Haha cute!

I dont know why i look odd in pictures. Must be gain weight d.

or just face problem! Hahaha

Hope it brings you luck!
03/03/2019 2:14 PM
Icon8888 you looked ok lah

cough cough
03/03/2019 2:25 PM
Heavenly PUNTER hahahahah what is going on here
03/03/2019 5:01 PM
3iii This is yet another reason to stay with great companies.



There is no price low enough to make a poor quality company a good investment.



If you're in doubt about the quality of a company as an investment, abandon the study and look for another candidate.

When in doubt, throw it out.

Abandon your study and go on to another. There is no price low enough to make a poor quality company a good investment.


The worse a company performs, the better value its stock will appear to be.

Because declining fundamentals will prompt a company's shareholders to sell, the price will decline. This will cause all the value indicators to show that the price has become a bargain. It's not!

When the stock is selling at a price below that for which it has customarily sold, you will want to check to see why - what current investors know that you don't.



http://myinvestingnotes.blogspot.com/2012/06/there-is-no-price-low-enough-to-make.html?m=1
03/03/2019 5:07 PM
probability if Jon has a long beard on his chin...no one will doubt him as the ''úlama saham" of i3...

bersyukur sangatlah i3..he he
03/03/2019 6:40 PM
lizi i think i am slow reader, started in the morning, stuck at Valeant Pharma currently.....
03/03/2019 8:19 PM
Choivo Capital Haha I'm quite thankful that anyone is even reading this 8,800 word monster. There are so many words, that out of the 51 articles I've written on this site, only 2 of them have more views than the number of words on this article.
03/03/2019 8:37 PM
adrianjessy A Wonderful writeups that stroke the conscience of Topups'.
03/03/2019 8:51 PM
feimah Good sharing..
03/03/2019 10:30 PM
Sslee Dear all,
Repost from dayang forum
I am glad that the whole attention of Investment bloggers days is focus on the oldest speaker Koon and not so young Jonlohsoh. One is market mover and the other is “books with two legs and two hands sticking out (putting in at least 10 lb to his weigh lately)” but able to fully understand what he read and articulate his thoughts into a very well structure and refreshing presentation. Well done

This leaves me not so old man look like (NATO) no action talk only. Thus I need to emphasis my talk on FA least everyone forget about it.
Fundamental analysts study anything that can affect the stock's value, including macroeconomic factors (e.g. economy and industry conditions) and microeconomic factors (e.g. financial conditions and company management). The end goal of fundamental analysis is to produce a quantitative value (Intrinsic Value) that an investor can compare with a stock's current market price, thus indicating whether the stock is undervalued or overvalued.

Read the annual report thoroughly: P/L statement, Balance sheet and Cash flow. When you fully understand all the three then from Balance sheet derived the holy grail of investment the “Intrinsic Value”
So ask what is the intrinsic value for long term investment but target price (TP) for trading purpose but remember to lari kuat kuat when thing turn south.

Thank you.
03/03/2019 11:31 PM
PureBULL . dear Choivo Capital,

U r quoting Warren B's wonderful words all the time.

There is only 1 Warren B. in the entire world thus far.
Be like him as follows:-


https://purebull-bursatrader.blogspot.com/
04/03/2019 12:05 AM
kalteh Want to say I really enjoyed your talk. It was interesting and fun. Thanks a lot for sharing.
04/03/2019 8:54 AM
GreenTrade Good event :)
04/03/2019 9:56 AM
Trader Hub I think yours is perhaps the most well-explained and well-illustrated presentation on general stock investment mindset, though a bit long winded ;)

But i have to say i thoroughly enjoyed it. Like!
04/03/2019 10:37 AM
Aseng choivo,

uncle want to teach you a new Chinese saying today

other than " I eat more than you eat rice "

interested to learn ?

ask you will get it .

( may be a bit late to response to your request because I go gai-gai with my wife now )
04/03/2019 10:40 AM
3iii Top Gainers
Stock Last Change
TIMECOM 8.570 +0.370
AEONCR 17.020 +0.320
PENERGY 1.100 +0.195
DAYANG 1.360 +0.180


The top 4 gainers today @ 4.30 pm.

3 of these stocks are actively promoted in i3.

Timecom was highlighted by Choivo on Saturday's symposium.

Conclusion: i3 is a powerful forum in Bursa.
04/03/2019 4:23 PM
Heavenly PUNTER the blogger day very effective
04/03/2019 4:24 PM
Choivo Capital https://klse.i3investor.com/blogs/PilosopoCapital/172101.jsp

Wrote something on it a few months back.

====
3iii Top Gainers
Stock Last Change
TIMECOM 8.570 +0.370
AEONCR 17.020 +0.320
PENERGY 1.100 +0.195
DAYANG 1.360 +0.180


The top 4 gainers today @ 4.30 pm.

3 of these stocks are actively promoted in i3.

Timecom was highlighted by Choivo on Saturday's symposium.

Conclusion: i3 is a powerful forum in Bursa.
04/03/2019 16:23

Heavenly PUNTER the blogger day very effective
04/03/2019 16:24
04/03/2019 5:26 PM
dompeilee Only invested since 2016 & already asking for fees? Wow! You have a long way to go!!!
04/03/2019 8:20 PM
Heavenly PUNTER dompeilee, one thing to note in Bursa is that, experience is not = skills. You can have some 60 years old uncle, punting / "investing" in Bursa for the past 40 years yet making losses consistently. I think investing is one of the only aspect of life where experience does not amount to much if you don't learn from it.
04/03/2019 8:23 PM
Choivo Capital Dompeilee,

Read again the structure.

On me charging for my time, when it comes to going through ones portfolio etc. Well my time is not free.

And I'm quite sure of providing more than adequate value. People are free to ask for their money back, if they find it not worth the money, no questions asked.
04/03/2019 11:35 PM
stockraider Choivo,

Don waste time...managing other people funds...put ur effort accumulating ur wealth on your own, i think in short run this is more efficient mah....!!

Managing other people funds there are too much constraints and conditions place by authority, if u want to do it legally loh....!!
05/03/2019 8:18 AM

(CHOIVO CAPITAL) A Conversation With I3's Most Famous Quarter Prediction Article Writer

Author: Choivo Capital   |  Publish date: Sun, 13 Jan 2019, 2:51 AM


For a copy with better formatting, go here.

A Conversation With I3's Most Famous Quarter Prediction Article Writer

 

 

 

Overview

2 weeks ago, while meeting with an investor of mine, I had the opportunity to meet one of the most (if not the most) famous quarter prediction article writer in I3. We spent roughly 1-2 hours discussing as a group. We touched on a few topics, but I don’t think they are worth talking about.

For this article, I will focus on the parts of our conversation relating to his article writing, the Malaysian markets, as the discussion was from a group, I will be paraphrasing our conversation very heavily.

However, I believe the essence to be accurate. However, the flow of the edited conversation will be quite awkward, as we did not spend time talking from front to back, unlike my discussions with Calvin, OTB, KC or 500% Trader.

I will not be identifying the person in this case, as I don’t think what I write will be flattering. I’m a firm believer in the “Praise by name, criticize by category maxim”

Having said this, this famous quarter predictor writer, wrote articles on various companies, however, his most famous is his Hengyuan and Masteel articles.

To be short, my articles

The art of being a quarter predictor

The unique characteristics of the malaysian equities market

Were unfortunately relatively accurate.

The conversation is not as combative as it would sound below, as we are relatively good at being polite and frank to each other, but when edited to the essence, it will seem so.

 

 

The Conversation

Choivo Capital: Hello, it’s nice to finally meet you. You seem to a little silent these days, I rarely see any post from you in 2018. Why is this?

 

Famous Quarter Prediction Article Writer (“FQPAW”): Well in bear markets, nobody will have the mood to buy. Even if you have good news, the price of the stock barely moves and may even drop. I’ve written quite a few articles, but I didn’t post them for this reason.

 

Choivo Capital: Ok that makes sense. I have to say, whenever I read your articles, it always felt a little like a pump and dump article. Albeit one done up to a very high standard. They are usually very detailed, with the facts, figures and assumptions.

However, they always seemed to be very biased and unbalanced. I won’t say it’s a bonescythe article, that one is a pure pump and dump article with little actual facts.

But yours seem to be cherry picking of the facts to suit the narrative you want to drive, which is essentially, “Earning go up over short term, this is the TP, go buy”

 

FQPAW: Well. First of all the facts and assumptions stated in my article are either public knowledge, and back by news articles or the annual report, or the various commodity trackers etc. This is where I am different from bonesycthe.

 

Choivo Capital: True, however, you must admit they are very biased. Like for example in your Heng Yuan articles, the way you write about the crack spread is as if, this incredible thickness will stay forever. You seem to ignore natural feed backs, ie: When cracks spread is fat, supply will go up via maintenance delay driving it down. Vice Versa.

You made a TP of RM14.3 and above based one off extraordinary events, as if this will continue forever.

Yes, your data is based on available figures or articles. But this is the internet, for every position you take, you can find another article out there arguing for and against. They were articles on “Seeking Alpha” on analysing American refiners, that this will not last forever.

 

FQPAW: To say it is biased is not that accurate. Because I do add in a few lines describing the risks etc.

The reason why it’s not balanced, is because if you were to write a balanced one, that considers all the perspective, you will just confuse people. They won’t know what to do.

I want people to know very clearly what they need to do, which is to buy and push up the price.

 

Choivo Capital: Makes sense. So, my guess is that the few lines give an appearance of balance, but by making it short and not quantifying or emphasizing the impact, it almost disappears in the article, especially since the Target Price etc is in bold at the bottom.

 

FQPAW: Correct. To be honest, most people probably don’t even read the analysis. They just go down straight to the bottom for the TP.

 

Choivo Capital: Well, if im honest, neither do I. I usually speed read it, because they almost always have zero bearing on the real economic power of the business.

And even if it’s the short term results you’re predicting, even a relatively simple business, like refineries have so many moving parts and hidden complexity, that your analysis ends up precisely wrong. I prefer being roughly correct.

Did you think RM14.3 or whatever to be the fair value of the company, do you think it reflects the real economic power of the business?

 

FQPAW: Well, yeah, it’s hard to get the figures right, you just know roughly. I thought RM14.3 was the fair value at that point in time. There has since be changes in the crack spread, and therefore the fair value now is much lower. It’s a cyclical business after all.

 

Choivo Capital: I mean the real economic power of the business. The earnings of each business can be split into two components. The first is the real economic power of the business. This encompasses, the quality of the management, the actual economics of the business, the moats it has etc.

The second, is one off temporary changes in the various external factors, which if normalized over the long term, should be close to zero.

For you to say that the fair value of Heng Yuan is RM14.3 when crack spread is thin, but much lower when crack spread is thin.

Its like a father saying calling his son a genius when he gets 100 marks in the exam because he saw the friends answer, but when he fails the exam because he had a fever at the time, the father then calls him a failure in life and wishes he had never been born.

No one or any father will do this unless they’re crazy or have mental illness. You will know the kind of person your son really is and what he's really capable off, regardless of short term results.

What do you think is the real economic power of the business? How much do you think the real economic power is worth?

 

FQPAW: Well, most businesses in Malaysia is cyclical. You need to buy at bottom of the cycle and sell at the top to make money.

 

Choivo Capital: I digress. Almost all business is cyclical. Even nestle sales drop in recession. They’re economic power just happen to be very strong.

For cyclical business, you just need to buy it when its selling far below its real economic power, ie when its cold and dead, and sell it when its selling for far above its real economic power. Ie when everyone wants it.

*We then went on to talk about cyclical business that are cold and dead now, but I don’t think there is any interesting insight there*

How was Heng Yuan for you, how much did you sell it at. Can you tell me what is your returns this year?

Can you tell me your modus operandi? When you write these articles, who do you intend to attract?

 

FQPAW: Well, I sold all the way down from the top. The last batch was sold at RM9.9. In 2017, I made a lot of money from Heng Yuan. In 2018, I’m down 8%, I was actually gaining this year, but I got burned by Masteel etc.

To be honest, it’s not so much the average retailers I’m trying to attract. Those people are too small. I’m looking to get the big fish interested. Like Koon Yew Yin, Ooi Teik Bee, Icon8888 and the other big buyers in the market. KLSE market is very thin after all.

And then you want the retailers who chase high as these big fish buy, and the fund managers who want to ride this wave and make money from the retailers and if possible the big fish as well.

If Ooi Teik Bee recommends it to his followers, and people like Koon Yew Yin etc buy, you really hit the jackpot. Everyone will follow.

 

Choivo Capital: You’re not wrong on that observation, I wrote a little on it in an article.

For most pump and dumpers, which you are, just a very sophisticated one, they will always come a time, when their word and articles mean nothing. Because the fact they are trying to make money from the readers in a somewhat dishonest manner becomes too widely known.

When do you think this will happen to you?

And what do you think of your picks which have fallen by 70-80% from peak to trough?

 

FQPAW: Well, I don’t know. I think my articles have enough facts in them, that they are not false. It’s up to you to buy or sell, I’m not responsible for you. You get to keep your profit, so you should keep your loss.

It’s not just my picks that have fallen, but most of the market. At least 300 companies is down 50% or around there.

 

Choivo Capital: Correct. But most of them have little retail participation. Tasek fell from RM12.2 to RM4, but no one is really making noise, because the retail investor is not there.

Yours happen to be the ones with the highest volume and retail participants.

 

FQPAW: Well, as you are aware, the KLSE market is very immature and unsophisticated. Especially when compared to Hong Kong, US etc.

For us traders, and those who do what we do, we need the constant flow of new water fish that comes in every time we are in a bull market.

All of us here was at one point a water fish, who got chopped properly by the sharks by not selling in time etc.

We just learned from it, and now become the sharks and make that money from the new people. It is a zero sum game after all. To make money, you need to take it from someone else.

 

Choivo Capital: Well I digress, stock valuations and dividends should grow in tandem with the economy, which is how most investors make money. But I don’t want to talk about this. You are more than aware of my views.

 

We went on further here on other things like the audit perspective when it comes to the figures in the financial statements, if the financial statements can be trusted. The difference between the accounting representation of the figures versus the economic reality  But i dont think i'll be writing them here

 

 

Conclusion

The one thing I want to stress at the end of this article, is that I don’t consider myself more moral than him.

At the end of the day, it all boils down to incentives. Fuck up your incentives, and you can get good people to do despicable things.

In the US, directors used to give themselves ESOS like crazy without expensing them in the profit or loss. Therefore essentially robbing the shareholders blind in broad daylight, and trying to hide it. And these directors, if not for this, would be considered models of society. They donate to charity and you would want your children to marry them.

If I ever wrote a goreng article at the start of my investing career.

If I had not known Warren Buffet, Charlie Munger, Peter Lynch, Seth Klarman, Howard Marks etc so deeply.

I can see myself being one of the best quarter predicting article writers (ie pump and dumpers) in i3. And probably quite a bit richer.

However, for all our actions, we always pay one way or another. You get cynical of the markets, thinking it’s only the dishonest and manipulative people who make money, and you miss out on the wonderful companies available for sale.

And most of all, if you spend this much amount of time thinking of how to manipulate people, I’m not sure what kind of life you will end up with.

Having said that, I’m also long term greedy. I have never heard of a pump and dumper, who ended his life a USD billionaire. And if they were, they usually ended up in jail at some point. Hahaha

There is no such thing as people sharing for your learning. Or to share the profit with you. Track the incentives! If you are not paying for it, you’re the product!

Having said that, as I’m an investor, it’s my preference that other people do not invest and instead participate in those games. Feel free to get on that merry go round and have fun! Leave the rest to me.

=====================================================================

Facebook: Choivo Capital
Website: www.choivocapital.com
Email: choivocapital@gmail.com

  calvintaneng likes this.
 
Flintstones Hahahaha
13/01/2019 5:02 PM
Ricky Yeo there's no feeling to jaga since you haven't said anything substantial
13/01/2019 5:09 PM
Connie555 dont know why, whenever u say smtg my brain will immediately process the message as it came out from the mouth of jon.

you 2 belong to the same hood, bunch of theories but non of it is helping ppl to make money...

may i knw what is ur job? i can intro both of u to the best local u as their finance professor seriously.

as i knw even part time lecturer could make as high as RM300 per hour
13/01/2019 6:12 PM
Ricky Yeo dont know why, whenever you say something, everything gets filter out because none is substantial
13/01/2019 6:19 PM
Connie555 i have a better job for baby jon, have u heard of anakku? call them, bcz i knw that they invest heavily in their R&D trying to come out with the BEST pacifier in the town, so maybe Jon can be their lab mouse. Whenever Jon stop crying, that means they found their formula for the BEST pacifier in the town.
13/01/2019 6:21 PM
soojinhou Haha connie555 love your sarcasm.
13/01/2019 6:57 PM
qqq3 there are just big hitters and small hitters.

big hitters have almost unshakable beliefs

small hitters value here value there

worry here worry there.
13/01/2019 7:37 PM
Flintstones Jesus guys. I mean Jon Choivo and Ricky is daft with their academic theory. But no need to insult them lah. Argue facts with facts. Thats the gentlemanly way. Dont scare away the young boys. They are contributing useful knowledge. Instead, we should get rid of CP Teh which contributes zero to the community.
13/01/2019 8:23 PM
qqq3 Big hitters keep thing simple, some times too simple

King of small hitters is calvin...5% invested in stock market spread over 30 counters ( at one time 150 counters). Market up or down no effect on them.
13/01/2019 8:31 PM
paperplane Show so!w result to see! Don't always talk cock
13/01/2019 10:39 PM
i3Value Connie555 on a roll
13/01/2019 10:48 PM
calvintaneng Hahaha'

So many are really dumb!

Given bro Jon Choivo age he has a brilliant mind

THE book says, "Better is a young and wise child than an old king who will no longer be admonished"

I think Jon will survive and prosper for the next 50 years. Don't be surprised he will excel cold eye or Dr Neoh Soon Kean one day

Better wake up!!!
13/01/2019 11:00 PM
i3lurker Strongman giving wrong teachings.

The words arrogance, arrogant, proud, and haughty are mentioned over 200 times in the NIV Bible. And in practically every occurrence, it is a behavior or attitude detested by God. The Bible tells us those who are arrogant and have a haughty heart are an abomination to Him: “Everyone who is arrogant in heart is an abomination to the Lord; be assured, he will not go unpunished” (Proverbs 16:5). Of the seven things the Bible tells us that God hates, “haughty eyes” [“a proud look,” NKJV] is the first one listed (Proverbs 6:16-19). Jesus Himself said, “What comes out of a person is what defiles him,” and then goes on to list the thirteen characteristics of those who are outside of God’s favor, with arrogance being considered alongside sexual immorality and murder (Mark 7:20-23).

There are two Greek forms of the word arrogance used in the New Testament, essentially meaning the same. Huperogkos means “swelling” or “extravagant” as used in “arrogant words” (2 Peter 2:18; Jude 1:16). The other is phusiosis, meaning a “puffing up of the soul” or “loftiness, pride” (2 Corinthians 12:20). It is incumbent upon believers to recognize that being arrogant or having a pompous attitude is antithetical to godliness (2 Peter 1:5-7). Arrogance is nothing more than an overt display of one’s sense of self-importance (2 Timothy 3:2). It is akin to that “it’s all about me” mindset that says, “The world revolves around me” (Proverbs 21:24).
13/01/2019 11:06 PM
calvintaneng This i3lurker sound so pious like the pharisee

Jesus warned in Matthew 23:2 and 3

All that the pharisee tell you to do... That do. But do not what the pharisees do. For they say and do not

So this i3lurker the son of lucifer can speak so righteously but actually selling dog meat displaying cow head

All better be careful
13/01/2019 11:36 PM
calvintaneng Pharisee teach good doctrines you can follow and do. Because they sat in Moses seat

Problem with them hypocrites is they say the truth but practice evil.

So this dam able i3lurker quote scripture no use if your heart not right with God
13/01/2019 11:41 PM
klee Calvin you talk so much for what?When is your bjcorp going to turn into berkshire hathaway of malaysia?Hahaha dumb ass.
14/01/2019 12:12 AM
Icon8888 Calvin must be a person with good heart and integrity, because he always talks about religion
14/01/2019 12:16 AM
Icon8888 Somebody who opens mouth close mouth talk about religion, he must be a very good person
14/01/2019 12:17 AM
Icon8888 Hmmm must be ....
14/01/2019 12:17 AM
calvintaneng Posted by Icon8888 > Jan 14, 2019 12:16 AM | Report Abuse

Calvin must be a person with good heart and integrity, because he always talks about religion

No. You are wrong

Calvin is only a sinner saved by the Blood of Jesus.
14/01/2019 12:18 AM
Icon8888 Ya , Calvin talks about the teaching of his religion, he must be a very good person

Hmmm must be ...
14/01/2019 12:20 AM
i3lurker true colors of Strongman showing!
100% hatred Zero % LOVE
14/01/2019 12:21 AM
calvintaneng Are You Washed in the Blood?

Have you been to Jesus for the cleansing power?
Are you washed in the blood of the lamb?
Are you fully trusting in His grace this hour?
Are you washed in the blood of the lamb?

Are you washed in the blood
In the soul-cleansing blood of the lamb?
Are your garments spotless? Are they white as snow?
Are you washed in the blood of the lamb?


Lay aside the garments that are stained with sin
And be washed in the blood of the lamb
There's a…

https://www.youtube.com/watch?v=wQyA2rAWTNM
14/01/2019 12:21 AM
Icon8888 Even though he is a sinner, because he opens mouth close mouth talk religion, next time when he leaves this world he is guaranteed a place in heaven
14/01/2019 12:22 AM
Ricky Kiat very Agree......:)
14/01/2019 12:23 AM
calvintaneng Posted by Icon8888 > Jan 14, 2019 12:22 AM | Report Abuse

Even though he is a sinner, because he opens mouth close mouth talk religion, next time when he leaves this world he is guaranteed a place in heaven

No.

Talk religion. Doing charity or even good works won't bring a person to heaven

It is by grace through faith

see this carefully www.chick.com
14/01/2019 12:24 AM
klee Yaya,just like one Hadi guaranteed to go to heaven.
14/01/2019 12:24 AM
Icon8888 Oh ok... Calvin has faith so he is a good person and he goes heaven

I see...
14/01/2019 12:31 AM
Icon8888 I must also start talking more about religion , because that will make me a better person

Hmmm....
14/01/2019 12:45 AM
calvintaneng Listen to this

https://www.youtube.com/watch?v=9wkJffomYeE
14/01/2019 12:52 AM
Ricky Yeo When someone refer something as 'academic theory', it is often because they don't have a clue what is being said. But of course, it is embarrassing to admit that. So just categories it as 'academic' to make it sound irrelevant to real life investing. It is easy to talk about the person's character than what is being said i.e theory, because as point out, he doesn't know what the theory is about! You can't expect a person who doesn't have a clue about a theory i.e probability, economic profit, return on capital to argue about those theories or concept. So the best route is argue about the person's character. It is an irony when a theory is called 'academic' not because it is irrelevant in real life (it is backed by empirical evidence and peer-reviewed articles), but because someone don't understand it. What is even more irony is calling someone daft about academic theory when he doesn't want to discuss his own pseudotheory i.e "A no growth company becomes a value trap"

Oh well, when an ignorant choose a closed-attitude and refuse to learn, everything is an academic.
14/01/2019 7:22 AM
Connie555 Ricky, wanna become lecturer just say it out loud, nobody gonna laugh at you, dont worry. Here take this, please contact her for job application. Aunty put money into your pocket, pls appreciate it.

Dr. Izlin Binti Ismail
Department Of Finance And Banking
Faculty Of Business And Accountancy
izlin@um.edu.myDr. Izlin Binti Ismail
Department Of Finance And Banking
Faculty Of Business And Accountancy
izlin@um.edu.my

Aunty old liao, can't theory with u too much...you wanna win i let u win, aunty came here just to make money not to boast around how strong your knowledge about theory...so now u win liao do u feel happy? happiness cant guarantee u a meal, so go and apply, remember put a remark there say connie aunty intro one, that will guarantee u extra meal allowance.

p/s: Aunty is fellow member of CFA, but aunty dont boast around, oi i got cfa what i say is right!!!! make money or not dont care!!!!!!! (that is my son (johhny choivo) and his partner in crime's attitude)

养不教,父之过

so i think he behave like this is not my fault, its his father fault.
14/01/2019 10:11 AM
14/01/2019 10:24 AM
Ricky Yeo How ironic this came from the ignorant - 养不教,父之过. Charlatan.

Don't misunderstand aunty, I come here to make money too. But if you don't understand what I am saying, keep quiet please? If you have nothing better to say beside someone's character, then silence is really gold. Besides, haven't seen anything of value coming out from your mouth thus far.
14/01/2019 10:29 AM
qqq3 christians should go elsewhere to preach.
14/01/2019 10:30 AM
qqq3 there are muslims and Buddhist brothers here too.
14/01/2019 10:31 AM
qqq3 are all singaporeans like u, calvin?
14/01/2019 10:32 AM
Ricky Yeo Out of all diversion tactics, I must say academic professor is a pretty useful one. Red herring fallacy. But it is getting boring peddling that for far too long now. Started throwing chinese proverb pula.
14/01/2019 10:51 AM
Jester What an interesting comment from the community. Haha. The comment section is more interesting than the blog post itself. Nice.
14/01/2019 2:54 PM
Icon8888 Aunty Connie scold son
14/01/2019 2:57 PM
qqq3 Singaporeans , a bit disappointing....I thought Singaporeans smart....My daughter say the team from Singapore U was last in the Regional inter varsity competition .....reality different from expectations....even Thailand and Vietnam and Indonesia beats them.
14/01/2019 3:06 PM
calvintaneng Sporeans per capita income is 6x more than Malaysia. How come not smart
14/01/2019 4:12 PM
qqq3 calvin...u tell me..u so smart.
14/01/2019 4:13 PM
joetay2 in that case, i rather be neighbors with satan than with pastor calvin.

i dont want to be driven stupid by pastor calvin in eternity.

lol............

Posted by Icon8888 > Jan 14, 2019 12:22 AM | Report Abuse

Even though he is a sinner, because he opens mouth close mouth talk religion, next time when he leaves this world he is guaranteed a place in heaven
14/01/2019 7:08 PM
joetay2 at least choivo dont talk nonsense like calvin.

thats why u dont see so many negative comments on him.

u shld learn from choivo, pastor calvin.

lol..........

Posted by qqq3 > Jan 14, 2019 04:13 PM | Report Abuse

calvin...u tell me..u so smart.
14/01/2019 7:09 PM
3iii >>>>
(CHOIVO CAPITAL) A Conversation With I3's Most Famous Quarter Prediction Article Writer
>>>>>


Quarter Prediction Article Writer

Short term predictions practitioner makes astronomers reputable.
14/01/2019 7:09 PM
stockraider I think the competition is about islamic history loh...!!

Posted by qqq3 > Jan 14, 2019 03:06 PM | Report Abuse

Singaporeans , a bit disappointing....I thought Singaporeans smart....My daughter say the team from Singapore U was last in the Regional inter varsity competition .....reality different from expectations....even Thailand and Vietnam and Indonesia beats them.
14/01/2019 7:35 PM
qqq3 no...it is ICEAW competition......Chartered Accountants....
14/01/2019 8:27 PM
qqq3 won by the team from Vietnam, Malaysia second, Singapore last.
14/01/2019 8:30 PM
stockraider How can msia can lose to vietnam in ICAEW competition ??

Your daughter msian team must be very chehkai loh...!!

Posted by qqq3 > Jan 14, 2019 08:30 PM | Report Abuse

won by the team from Vietnam, Malaysia second, Singapore last.
14/01/2019 10:48 PM

(CHOIVO CAPITAL) 2018 Year End Update and Memo to Investors

Author: Choivo Capital   |  Publish date: Sun, 30 Dec 2018, 12:55 AM


For a copy with better formatting, go here.


2018 Year End Update and Memo to Investors

 

 

Dear Fund Unit Investors/IOU Holders
 

Our performance

As a fund manager of a long only, bottoms up, value oriented fund, it is my expectation and hope (it's always hard to tell which is which) that we will do relatively well compared to the general market in down or static markets, but that we may not look so good in advancing markets. In strongly advancing markets I expect to have real difficulty keeping up with the general market.

 

However, thus far, this does not appear to be the case for the fund, at least on a surface level, as we will see below.

 

As most of us are probably aware (considering the sheer amount of panic and talk about a recession these days, it would be hard not to), equity markets around the world have been falling very strongly this year, with many being officially characterised as a bear market (down more than 20% from peak)

 

For example, the Chinese stock market (Shenzen and Shanghai) has fallen more than 30% from peak, along with the US markets (Nasdaq and S&P500) also having fallen by more than 20% from peak.

 

For the period under review, 3 January 2018 to 28 December 2018, the benchmark used by the fund, the “FBMEMAS Index” which represents 98% of the market capitalisation of all listed companies in Malaysia, have fallen from 12,930 to 11,537 or 10.77%.

 

In addition, the Bursa Malaysia MidS Cap Index, which consist of companies listed in the BURSA with Market Capitalisation of RM200m to RM2bil and is roughly 70% of our portfolio (and thus a more accurate representation), have fallen from 17,338.5 to 11,709.7 or 32.46% .

 

This year, the net asset value (NAV) for each fund unit have fallen from RM1.13 to RM0.9272, a fall of RM0.2028 or 17.95%.

 

This represents an underperformance of 7.18% against the FBMEMAS Index and an overperformance of 14.51% against the Bursa Malaysia MidS Cap Index on our part.

 

There is a saying by Goethe I particularly like, “When ideas fail, words come in very handy”.

 

At the end of the day, negative returns are negative returns. Using the Japanese stock market for the last 40 years as reference, one can outperform the market every single year and still lose money

 

As investors, we expect not just outperformance, but a positive return on our capital over the long term. And as your fund manager and largest unsecured investor in the fund, I intend to provide it.

 

My continual objective in managing this fund is to achieve not just a long term performance record superior to that of the FBMEMAS Index, but also a positive one. And unless we do achieve this, there is no reason for the existence of this fund.

 

For our IOU holders, regardless of performance, at minimum, the protection of your capital and interest of 4.5% (0.2-0.3% higher than the highest FD rate in Malaysia) is guaranteed.

 

 

 

A Word About Yardsticks.

As the fund manager, one of the most important matter in relation to my relationship with you, the investor or IOU holder, is to ensure that we both use the same yardstick.

 

Based on that yardstick, if my performance is poor, I expect partners to withdraw upon the end of the contract period, and indeed, I should look for a new source of investment for my own funds.

 

If performance is good, I am assured of doing splendidly, a state of affairs to which I am sure I can adjust.

 

The rub, then, is in being sure that we all have the same ideas of what is good and what is poor. I believe in establishing yardsticks prior to the act; retrospectively, almost anything can be made to look good in relation to something or other.

 

Since the start of the year, I have used the FBMEMAS Index as our measure of par. It is my feeling that 1 year 8 months is a very minimal test of performance, and the best test consists of a period where the terminal level of the FBMEMAS Index is reasonably close to the initial level, over a length of 5 years or more.

 

While the FBMEMAS Index is not perfect (nor is anything else) as a measure of performance, it has the advantage of being widely known and used (Pheim Unit Trust uses a benchmark of 60% FBMEMAS Index and 40% Maybank 1 year average FD Rate), has a long period of continuity, and reflects with reasonable accuracy the experience of investors generally with the market.

 

I have no objection to any other method of measurement of general market performance being used, such as other stock market averages, leading diversified mutual stock funds, bank common trust funds, etc, however, accurate data for these is significantly harder to obtain, with high survivorship bias due to underperforming funds being shuttered.

 

It is quite common for a bank to launch 30 new unit trust, and only keep the top 3-5 funds with decent track record, while shuttering the rest. Allowing them to report significantly higher performance when the reality cannot be further than that.

 

Despite our underperformance to the FBMEMAS Index, I do not consider the FBMEMAS Index to be a strong competitor over the long term, as the KLSE is historically known as a “Stock pickers market”, due to higher than usual amounts of mediocre companies, as well as extremely overvalued GLC’s which pulls down prospective growth of the index, thus giving higher probabilities of success to those who are shrewd in their selection of equities.

 

The above dose of philosophy is being dispensed since I have never properly elaborated on the benchmarks used and why they were chosen, and thus i wanted to take this opportunity to make sure everyone understands my objectives, my measure of attainment of these objectives, and some of my known limitations.

 

 

 

 

Observations and predictions about the economy.

Regular readers of my letters and articles from the website (I may be flattering myself) will feel I have left the tracks when I start talking about predictions, especially since our investment philosophy consist of analysing from the bottom up (company level) instead of top-down (economic picture and trends).

 

This is one thing from which I have always shied away and I still do in the normal sense.

 

However, like any human being, I can discuss our view of the economy and the market. Fortunately for you, i don’t tend to operate based on those view, and at best, only lean on them slightly.

 

I am certainly not going to predict what general business or the stock market are going to do in the next year or two since I don't have the faintest idea.

 

However, as my previous two letters this year have touched upon the specifics of some of our current investments, with there being little change in the subsequent months, I think it would be of greater use if I were to try and make some sense over what has been happening over the last few months.

 

As someone on an investing forum I frequent have said, for most market participants, this year is likely to be and “Annus Horribilis” which is latin, for a horrible year. And they were a few reasons for this.

 

 

  1. 2017 was truly a fantastic year.

    As many of you have noticed. Although the performance of stock market is usually tied to the performance in the economy over the long term. Over the short term, this is usually not the case.


    In 2017, the Dow Jones Index Average (“DJIA”) rose 25.8% despite the US economy only growing 3.5% or so.  Its was spectacular for market participants. We had returns with no volatility, and every single correlation worked.


    In 2018, despite the American economy growing at a record pace of 4% or so, with the strongest jobs gains for a long time, the DJIA has fallen by 6.4% and this drop appears unlikely to abate too soon.


    At the end of the day, the markets grow in tandem with the economy, any growth far in excess of the growth in the economy/earnings is likely to result in a correction somewhere down the line, unless sudden and extreme productivity gains are obtained.



     
  2. Foreign fund outflow in emerging markets due to rise in US interest rates.

    In 2008, interest rates in the US were lowered to around 0.25% to stimulate the economy. And it had stayed there till 2016, when it was gradually hiked to the current 2.5% today.


    This interest rate hike, have resulted in foreign funds in emerging countries around the world, flowing back to the US to be invested in “risk free” instruments such as US Treasuries.


    Since January, foreign fund outflow from the KLSE alone amounted to RM9.8billion. Another RM3.7 billion, and we would break the record foreign fund outflow for KLSE set in 2009.


    Due to prolonged close to zero interest rates along with the USD being the reserve currency of the world, much of the debt worldwide is denominated in USD.


    With higher interest rates, along with the appreciation of the USD relative to other currencies due to the increased demand for USD (due to the higher interest rates), this will have resulted in much higher borrowing cost for many companies.


    Therefore, foreign companies with USD denominated debt will now be a lot more motivated about paying back the debt or speeding up the repayment schedule. And this creates even more demand for the USD and results in the currency rising which the further increase the debt, and thus further motivate repayment and repeats ad nauseum.


    To understand this a little better, you can read this.



    Demystifying the under-performance of the KLSE versus other markets (NASDAQ, S&P, SGX, NIKKEI etc)



This strong selling have resulted in equity valuations in emerging markets such as ours falling to unduly low levels. 


Ironically, it is this incredible cheapness now, that gives me the increased expectations for favourable returns in the years moving forward.




 

  1. The ongoing trade war between China and the US

 

One of the reason for the current market volatility and uncertainty is due to the ongoing trade war between China and the US.


Since 9 December 2018, the trade war has been put on pause for 90 days while negotiations continue, with the new deadline being 9 March 2019.
 

Being a small country wedged between two much larger powers, their actions towards each other will naturally influence us. However, to be honest, whether two elephants make love or war, the grass (Malaysia) is still going to be affected.


And personally, I don’t view this trade war as having particularly adverse effects, for Malaysia, and may even be beneficial to some extent, with production being moved out of China to markets such as Vietnam and Malaysia.


You can read some of my thoughts here.


Trade Wars, Bear Markets and Getting Trapped.

 

My thinking now is largely similar with my thinking then, when the article was written.

 

At the end of the day, this is a money problem. It is not an emotional, religious or race problem. Unlike the other types of problems which have no solutions, as no one can compromise without going to hell. Money problems have historically been solved relatively quickly.

 

 

 

  1. The victory of Pakatan Harapan in GE 14.

 

With the victory in GE 14 by Pakatan Harapan. Most of what is rotten in the Malaysian economy have been brought to light, and the smell from these festering wounds now reach the high heavens.

 

Given the amount of coverage given by the news towards these matters, I do think it is necessary to elaborate.

 

In the short term, markets are governed more by people’s perception of the economy instead of its actual health. And the public airing of these dirty laundry have certainly done no favours for the market in the short term.

 

Over the long term, however, I believe the Malaysian economy’s prospect have never been better. Now that these festering wounds, have been reopened, with painful but effective medication applied, the healing and subsequent vigour of the economy can now begin.

 

You can read about my in-depth thoughts on this matter here.


PH Win, I Called It!! Whats next?


The Malay Tsunami and the effects of elections on the economy (and by extensions, the market)

 


 

  1. Recession

One of the most common talk we see these days on financial news, is how a recession is imminent, and would likely occur in the next year or sooner.

 

The first question is then, as per the theory of reflexivity, the conditions of the market changes according the actions of the market participants.

 

If everyone is fearful, well in advance of any major and sudden changes in the economy, and thus become much more prudent in their actions, wouldn’t this reduce the probability of a recession happening?

 

The second question is this, if an economic crisis were to occur. Would holding cash be the correct move? What if the recession is inflationary and not deflationary? And thus, severely destroys the value of cash?

 

They are two kinds of recession (I’m generalizing heavily), the first being inflationary and the second deflationary.

 

Recessions often occur when the productivity per dollar borrowed is no longer higher than the principal and interest cost. This gives rise to a liquidity and equity crunch, when the profit from each dollar borrowed is not enough to cover the principal, or worse even the interest cost.

 

Since 1930, most recessions (other than those in Zimbabwe, Venezuela) etc have been deflationary. We are currently at a point where, there isn’t a single generation that does have lived through a depression or inflationary recession.

 

Thus far, most recessions since 1930 have been deflationary.


In this scenario, the country holds debt primarily denominated in their currency. In an economic downturn, when the country or companies are unable to pay back this debt, the central bank can just print money to purchase these debts. While the printing of money is inherently inflationary, it is counteracted by the forgiveness of debt and purchase of these debt by the central bank, which is deflationary.

 

The pain is therefore absorbed by the central bank to be spread out over a longer period.

 

An inflationary recession on the other hand, is when a country holds a lot of foreign debt, and in an economic downturn, they become unable to pay back these debts.

 

As the debt is in a foreign currency, they cannot print currency to buy over these debts or forgive it.

 

However, as the alternative of an instant and complete breakdown of the financial system is far worse, Central Banks will typically decide to print these currencies and try to purchase foreign currencies with it.

 

The incredible boost in supply, coupled with a low demand, due to the outflow of currency from its own citizens and foreign investors, as there is no longer any faith in the ability of the government to pay back its debts and back its currency, results in not just inflation, but hyperinflation.

 

Only those holding commodities or foreign currencies have good outcomes in times of hyperinflation. Equity holders do not do as well, but far better than cash holders.

 

Why all this talk about hyperinflation? Isn’t the US the largest economy in the world?

 

Well, in 2008, during the recession, what happened was relatively straight forward, the amount of money borrowed (with extremely lax standards) and invested into housing, gave returns far below the amount needed to cover even the interest cost, and thus resulted in a crash.

 

It also did not help that corporate debt and leverage were close to all time high. The US government had no choice but to make guarantees for money market funds, purchase toxic assets, and inject equity and liquidity via money printing by the Federal Reserve. The European Central Bank soon followed.

 

And china, the only country then with significant savings then, ploughed that money into supporting the economy. Even China is currently in debt.

 

What happened was debt that was in private hands, were passed into public hands globally, none more than what happened in 2008. And regardless of who is holding it, all debt must be paid.

 

These days, according to data by Bank for International Settlements, debt is losing its ability to stimulate growth. In 2017, one dollar of non-financial debt generated only 40 cents of GDP in the US and even less elsewhere. This is down from more than four dollars of growth for each dollar of debt 50 years ago.

 

This has significantly worsened over the last decade. China’s debt productivity dropped 42.9% between 2007 and 2017. That was the worst among major economies, but others lost ground, too. All the developed world is pushing on the same string and hoping for results like we saw 40–50 years ago.

 

 

 

The US Government is currently USD24.5 trillion in debt (both federal and state debt, not including off balance sheet items, unfunded pensions and social security which can easily add on another USD30-200 trillion, depending on who you ask ).

 

Refer to here.

 

17 Nobel Laurates on USD200 Trillion Deficit

 

The yearly US government deficit for 2018 is currently USD1.3 trillion (including off balance sheet items) and projected to rise USD1.5 trillion by 2028 by the Congressional Budget Office.

 

This projection appears to be highly optimistic as it assumes zero recession, and deficit projections by most people for 2019 appears to be USD1.5 trillion.

 

Interest expense on all these debt is currently $263 billion, or 1.4% of GDP. The Congressional Budget Office expects it will rise to $915 billion by 2028, or 3.1% of GDP.

 

From what we can see, the US will need to keep borrowing vast sums of money from the rest of the world via treasury bond sales to keep the government running.

 

And for the last few decades, given the US’s exorbitant privilege as the reserve currency in the world, they never had a problem when it comes to borrowing money.

 

Except, demand for increasingly large Treasury auctions have seem slowing demand. With both China and Japan not participating in the last auction.

 

In addition, due to the low interest rates of the last decade, as well as higher hedging cost, European, Chinese and Japanese investors can no longer buy US Treasury debt at a positive rate of return, unless they want to take currency risk, which most do not. This is a new development.

 

To borrow to more, the US government will likely need to offer increasingly higher interest rates. And as all the debt held by the US government is in USD with interest rates linked into US Federal Fund rates. Interest cost for the government will likely skyrocket, and thus require even more borrowing at higher interest cost, fuelling a vicious cycle.

 

In addition, as most of the debt held by corporate America have risen to USD 9.2 trillion in 2018, compared to USD 4.9 trillion in 2007 pre-crisis, due to the low interest rates. Things will likely turn out to be very interesting as all the interest cost of all these floating rate debt increase.

 

Who will save the US if the US can no longer save itself by selling debt at extremely cheap rates?

 

What would happen if countries and people stop believing in the US’s ability to pay back its debt and back its currency?

 

I’m leaning towards an inflationary kind of recession/depression, and in times like those, I would rather be holding equities than cash.

 

Conclusion

There is a saying by Warren Buffet I particularly enjoy,

 

“Forecasts may tell you a great deal about the forecaster; they tell you nothing about the future.”

 

My treatise on the economy above may at times border on the ramblings of an overactive and overanalytical mind.

 

After all, if you have an economist on your payroll, you probably have one staff to many.

 

Fortunately, as your fund manager, I do not invest based on my macroeconomic understanding and forecast, at best, I lean on it slightly.

 

If anything, the bearish market of 2018, and hopefully 2019 and 2020 are very good things for those such as us, who are likely to be long term buyer of stocks. It’s very simple, lower prices allow you to buy more stock.

 

Emotions, however, too often complicate the matter: Most people, including those who will be long term net buyers in the future, take comfort in seeing stock prices advance.

 

These people resemble a car driver who rejoices after the price of petrol increases, simply because his tank contains a week's supply.

 

Fear is the foe of the faddist, but the friend of the fundamentalist.

 

Given the long-term nature of the fund, our low leverage policy, our discipline in only investing in companies that meet our increasingly strict criteria’s, and ensuring that our investments are generally good to great businesses with good capital structure that won’t go bust in the trough and bounce back fantastically when things turn around. It makes me optimistic for the years and years ahead.

 

Overall, as your fund manager, I remain grateful for your support, and will continue working hard to continue to merit your confidence.

 

The current shareholding of the fund is as follows.

Name

Percentage

XX

30.50%

XX

19.81%

XX

17.34%

XX

8.20%

XX

3.69%

XX

3.32%

XX

2.48%

XX

2.38%

XX

2.20%

XX

1.90%

XX

1.90%

XX

1.89%

XX

1.78%

XX

1.49%

XX

1.34%

XX

1.33%

XX

1.29%

XX

1.11%

XX

1.10%

XX

1.08%

XX

1.06%

XX

1.02%

XX

0.85%

XX

0.79%

XX

0.64%

XX

0.56%

XX

0.39%

XX

0.39%

CASH

0.79%

MARGIN LOAN

-12.60%

TOTAL

100.00%

 

Fund Performance To Date

 

Period

 

Fund Returns

 

FBMEMAS Index

Over/(Under) Performance

21/3/2017-3/1/2018

12.22%

4.22%

8%

3/1/2018-30/12/2018

(17.95%)

(10.77%)

(7.18%)


=====================================================================

Facebook: Choivo Capital
Website: www.choivocapital.com
Email: choivocapital@gmail.com

 

  2 people like this.
 
CharlesT 2019 will be better i believe...if u cant do well in 2019 then yr 3 years result will be worse than fd n yr piggy banks will pecah
30/12/2018 8:32 AM
CharlesT Just wonder u hv how many years of experience in stock mkt prior to this so called fund managements in 2017....how was yr track record then until u built yr confidence to establish yr funds in 2017?
30/12/2018 8:35 AM
CharlesT Using a simple calculation yr return todate is -5.73...basing on fd rate of 4% per year (4%×3 years= 12%) u hv to score 17% return in 2019 to be on par to it....

Even so then whats the purpose? Better put yr money into fd n get a full time job...yr return will be much better
30/12/2018 8:41 AM
tm9999 Bwtter put fd...no need keep worry.
30/12/2018 9:16 AM
Choivo Capital Haha Charles,

Tks for your concern. I work full time.

My record before 2017 was pretty ok, but it was only for a year and i didnt track it.

FD just does not make sense to me tbh. Hold PetronM or hold FD. Its pretty clear to me.

If it wants to go down another 18% in 2019, so be it. I know what im buying, ill just buy more on the way down.

I told myself ill be putting my money to work for at least 5 years. If i cant get good returns in 5 years (Beat index as well as positive), I'll just throw it all into china index and forget about it.
30/12/2018 9:39 AM
tm9999 Hi Choivo, with new petrol price mechanism starting 2019, how do u see effect to petron, hy and petdag?
30/12/2018 9:48 AM
CharlesT My friend who is a public mutual agent showed their 5 years or 10 years return chart (vs epf div) i also dare not buy
30/12/2018 9:48 AM
CharlesT Meaning to say u only hv 1 year experience (with yr claimed good return) in 2016 prior to yr fund management service in 2017

Yr friends/ investors r very brave loh
30/12/2018 9:52 AM
CharlesT U lagi brave loh
30/12/2018 9:52 AM
CharlesT So now hv to break piggy banks loh
30/12/2018 9:53 AM
CharlesT What gives yr the confidence that u can hv a fund management, after 1 year record n experience in bursa?
30/12/2018 10:01 AM
Choivo Capital Charles,

I have made it clear many times, that this is a test run. If i was running a proper fund, the size of outsiders compared to my equity in fund would be many times larger.

This fund is for me to establish a verifiable track record with third parties. Which is why guarantee portion is only 40% of my own equity. Or about 30% or less of the whole fund.

I can settle it now if need be.

They are not so much brave. But they believe in my ability to pay back their capital with interest if things don't work out. I have relatively strong earning power after all. The total fund owed to them, is about 6-7 month salary, and my monthly savings easily exceed 80%.

Also, they do understand the philosophy. Whenever someone is worried. I just provide the list of stocks held, and let them decide themselves if i'm stupid or market is just being foolish.

I have always made it clear to them, if they do not understand my philosophy or believe in my ability, feel free to sell back their units to me at the end of maturity date.

Its not confidence that drives to me open this fund. But curiosity. I have a good feeling about my ability, but i can't know until 5-10 years have passed and my track record shown.
30/12/2018 10:11 AM
Choivo Capital Its not a concern.


====
Posted by tm9999 > Dec 30, 2018 09:48 AM | Report Abuse

Hi Choivo, with new petrol price mechanism starting 2019, how do u see effect to petron, hy and petdag?
30/12/2018 10:12 AM
Heavenly PUNTER hahah waddup idiot !
30/12/2018 10:12 AM
CharlesT So yr investors believes more on yr ability to pay them yr guaranteed returns n capital than yr investment skills?
30/12/2018 10:16 AM
CharlesT They know yr parrents got big house in bukit jelutong...cannot run away...
30/12/2018 10:17 AM
BumbleBee Keep up the good work
I enjoy reading your escapades
Good luck
Uncle BB
30/12/2018 10:19 AM
Choivo Capital To even invest with me, you need to first believe in my ability to pay back. If you don't believe this but still invest, then you must be really really brave.

In some cases, We have known each other for decades. We know where each other live haha.

For them, it's simple. Put in fd or invest with me and get guaranteed higher than fd rate, plus whatever else depending on my ability.
30/12/2018 10:22 AM
CharlesT Why i in mkt for so many years with track records also so coward leh
30/12/2018 10:27 AM
Haw Liao in life, only guarantee is life and death...

other than that, no guarantee...including your investments
30/12/2018 10:40 AM
zhangliang Wah Choivo boy, out to con people again? . U chg name, used to Jon Choivo who called the lousy Prolexus, ask ppl to buy RM1.40... What happen? I think Prolexus is 50+ sens. U still holding? Talk lots of nonsense to bluff people

apa mau lagi? follow ur lame unit trust that is down 17% this year? con people to buy ur unit trust scheme like money game?
30/12/2018 10:58 AM
zhangliang I remember Choivo con guru attack Tradeview bro call QL at RM3.5. U insult Tradeview all the time like stalker! I think u shud insult more than every time u insult Tradeview stock fly! hahahaha. I learn from Tradeview bro for 2+ yrs, I enter QL RM3.5 sold RM7 in 1 year. Pls dont be a faker ok? bad karma, later ur unit trust all lose money.

https://klse.i3investor.com/blogs/tradeview/143376.jsp
30/12/2018 11:00 AM
Flintstones Haha charles! One needle saw blood!
30/12/2018 11:20 AM
Flintstones Charles is the best member i3 can have. Very outspoken, honest and straight to the point. No politically correct or diplomatic statements. Sometimes, i3 members are living in their own bubble. eg. CP Teh. We are here to poke the bubble and knock some sense into their head
30/12/2018 11:21 AM
Apabagus I am a practical man.This choivo kid writes an article every other day.Any one seen him give a good stock call before?Hey kid,there is a saying..."you are only as good as your last call".And you did not even make a single call.Everyday blah blah blah.....fighting a war on paper....come back here in 5 yrs lah.
30/12/2018 12:30 PM
Apabagus Many big timers have already close shop after these 3 months.But this choivo is still blahing away.Either you are super good,better than OTB or your position is so small that even klci drop to 800 you will still be ok.I believe the latter scenario.
30/12/2018 12:34 PM
Apabagus In other words,you choivo is just a peanut.That speaks volume of your ability in stock picking.
30/12/2018 12:36 PM
Choivo Capital Thanks for the reminder, its important to rub our own mistakes in our noses often, to reduce them in the future.

But i don't think you have the kind of mind needed to criticize me properly. Allow me to help you.

https://choivocapital.com/2018/11/28/much-ado-about-warrants/
https://choivocapital.com/2018/12/04/an-analysis-into-my-2018-stock-pick-results/
https://choivocapital.com/2018/11/28/an-analysis-into-my-2017-stock-pick-competion-results/

I go into my many mistakes here. Study them and maybe you will be able to criticize me better.

I wish you the best. The better you are at criticizing me, the lower my probability of making mistakes

======
zhangliang Wah Choivo boy, out to con people again? . U chg name, used to Jon Choivo who called the lousy Prolexus, ask ppl to buy RM1.40... What happen? I think Prolexus is 50+ sens. U still holding? Talk lots of nonsense to bluff people

apa mau lagi? follow ur lame unit trust that is down 17% this year? con people to buy ur unit trust scheme like money game?
30/12/2018 10:58

zhangliang I remember Choivo con guru attack Tradeview bro call QL at RM3.5. U insult Tradeview all the time like stalker! I think u shud insult more than every time u insult Tradeview stock fly! hahahaha. I learn from Tradeview bro for 2+ yrs, I enter QL RM3.5 sold RM7 in 1 year. Pls dont be a faker ok? bad karma, later ur unit trust all lose money.

https://klse.i3investor.com/blogs/tradeview/143376.jsp
30/12/2018 11:00
30/12/2018 1:18 PM
Choivo Capital On QL, people said the same about MYEG.

So many people felt so brilliant for so long, until May this year.

You bought a 30PE stock that went up to 60PE.

Every fool has his day.
30/12/2018 1:22 PM
Choivo Capital Judging by how your talk. My portfolio size is probably larger than yours.

I write about companies and you can see how they turn out.

I don't write about my favorites, unless i absolutely have to, or where it will not hurt me in terms of higher purchase cost, because good ideas are rare.

This kind of thinking however, is not shared in this forum which consist mainly of pump and dump-ers.

====
Apabagus I am a practical man.This choivo kid writes an article every other day.Any one seen him give a good stock call before?Hey kid,there is a saying..."you are only as good as your last call".And you did not even make a single call.Everyday blah blah blah.....fighting a war on paper....come back here in 5 yrs lah.
30/12/2018 12:30

Apabagus Many big timers have already close shop after these 3 months.But this choivo is still blahing away.Either you are super good,better than OTB or your position is so small that even klci drop to 800 you will still be ok.I believe the latter scenario.
30/12/2018 12:34
30/12/2018 1:24 PM
qqq3 y Choivo Capital > Dec 30, 2018 01:24 PM | Report Abuse

Judging by how your talk. My portfolio size is probably larger than yours.
=================
choivo...your portfolio size so what?

Tabung Haji has great portfolio size....lose more only.....
30/12/2018 1:29 PM
Choivo Capital Aih, that was rude, shouldn't have said that.

Thankfully, not yet new year, so technically didn't break my resolution.
30/12/2018 1:47 PM
qqq3 my opinion...choivo...u no better, no worse than any educated person first come to stock market......armed with a few soft cover investment books one can get from any book store.....


but that long number guy....I like him, I really do....he knows his stuff.


https://klse.i3investor.com/blogs/qqq3/188009.jsp
30/12/2018 1:52 PM
Choivo Capital Cool.

I don't think of you.
30/12/2018 1:52 PM
Flintstones Jon Choivo, you are still young. This is the time when you should focus on your career instead of the stock market. 40-50+ years old uncle like us punting in the market is ok lah. But you have a bright future, dont waste it gambling on stocks. I have seen many young people in their 20s making only rm3-4k monthly salary and lose focus in their full time job because of stock gambling. The real successful young people I have seen are fully focused on their full time job earning 5 or 6 figures per month.
30/12/2018 1:58 PM
Haw Liao anyways sifus and sages...

dedicate this song to u...

https://www.youtube.com/watch?v=Cd9rQ5pu3m8
30/12/2018 3:19 PM
RainT @CHOIVO

Your fund is holding 28 companies ?

is that too many? Can share what is the top 5 companies ? hehe
30/12/2018 8:45 PM
RainT if you are smart enough

you can excel both in share investment and career as well

plan your time , invest in good, strong , you understand biz for long term and work smart for your career
30/12/2018 9:02 PM
TabulaRasa May I say something, I think Jon is a very good writer and a clear thinker. He regurgitates Buffet a bit too much but it's normal in the journey to becoming an expert fund manager. You start by imitating the best, then slowly you learn from experience and you apply your own independent thoughts shaped by the realities of investing in Malaysia.

Anyway, good luck to everyone for 2019!
31/12/2018 12:26 AM
Icon8888 Damn bloody long article. Talk mountain talk sea. At the end don't know what is the actionable item
31/12/2018 4:35 PM
Apabagus Talk cock only lah.

Icon8888 > Dec 31, 2018 04:35 PM | Report Abuse

Damn bloody long article. Talk mountain talk sea. At the end don't know what is the actionable item
31/12/2018 5:13 PM
Apabagus Paralysed when challenged to give only one call.
31/12/2018 5:14 PM
qqq3 icon....visit QL forum.....

long number guy very very good....puts young man in his place.
31/12/2018 5:15 PM
Choivo Capital Apabagus,

RM5k, and i'll give you a call.

RM10k, ill give you a deal, and tell you 3.

With full research. That does not consist of copy and past from ar and quarterly.
31/12/2018 5:17 PM
qqq3 icon....visit QL forum.....

long number guy very very good....puts young man in his place.

first time I have seen some one in i3.....what I was writing about for 3 years.....and put in a few pages...and actually practises it....

I am a trader...I can only write, I cannot practise.
31/12/2018 5:18 PM
Choivo Capital Icon,

Its a letter to my investors.

Not to goreng stock. Very different.
31/12/2018 5:18 PM
Apabagus young turk trying to gain attention of big fish like kyy,kesian you lil kampung boy,u dunno how huge the ocean is...hahahahaha
31/12/2018 5:22 PM
(70B-SAPNRG-3Yrs) Philip Looking at the comments here, I realize that I have been too harsh on this choivo, being quite upset with his holier and smarter than thou attitude for someone who seemed to so knowledgeable but only started learning about investing recently.

I apologize sincerely and will stop bringing you down in front of your future clients.

I hope you do well in 2019 as I know it is difficult to keep your hopes up and your chin straight when the chips are down and everyone is crying for your blood and making fun of your investing skills.

But if you will hear out an old man, my advice will be to you:
1) listen and read more than you speak, as others might have opinions and ideas of worth, but useless to you if you do not take it in, analyze it and understand it.
2) try to trim your fund down to manageable levels, as you can never keep track and understand each stock deeply enough. I think you probably cant remember who the ceo's of each company are and what their philosophy or characters are like without referring to google.

and if you think if details like this is unimportant, let me ask you this:

if you could only buy 1 stock for 10 years, and you had to top up every quarter for that 10 years, what extra edge in information do you need to keep up an open mind to continue investing through rain and shine? Is reading financial reports, quarterly reports, stock price movement enough? Is going to i3 forum for bias confirmation enough? Because that is what everyone else is doing. Do you see them doing well? Minimal effort gets you minimal results.

zhangliang doubled his money in 1 years, and yet he sold. where does he get his conviction to buy and sell?

I bought QL in 2009, topped up every quarter, and never sold even until today. Where did I get my conviction to buy and not sell even until today?

That comes from reading every possible detail from every possible source, visiting sites, going to agms, talking to competitors, talking to suppliers, reading market journals, reading orderbooks, reading third party ctos reports,talking to bank managers, reading on capital allocation reports, loan interest rates, reading fund manager analysis, reading reading reading. All over a 9 year period.

I have a feeling that I spend more time trying to understand 1 stock than you do trying to understand 28 stocks in your portfolio. I hope you get what I mean after all this rambling, without the pretty pictures.

Again,

I hope for you the best for 2019, and good luck!
03/01/2019 2:58 PM

(CHOIVO CAPITAL) Why properties are typically mediocre investments

Author: Choivo Capital   |  Publish date: Thu, 27 Dec 2018, 5:30 PM


For a copy with better formatting, go here.

Why properties are typically mediocre investments

 

One of the things I’ve noticed in Malaysia and many other Asian Countries, is the idea that “Investing in property will make you rich” is so prevalent among the community, particularly the Chinese.

And the success stories are so numerous. Li Ka Shing, one of the many Chinese who made it in Hong Kong, Wang Jian Lin and the countless others who made it big in China (Shanghai and Shenzen), Tan Sri Liew Kee Sin, Tan Sri Leong Hoy Kum, Tan Sri Jeffrey Cheah, along with Tan Sri Lee Shin Cheng and the many other property development tycoons.

And this does not include the hundreds of thousands of Chinese in Malaysia who made it via investment in property. It’s not uncommon us Chinese who were born in the city areas to have parents who have made it to the middle or upper class via the purchase of a house back in the day.

 

 

Why was this the case?

Even if you were to take the best piece of land in the world. Over the last 500 years, it would have returned less than 1% per annum, compounding, lagging far behind equities etc.

Most of the gains in real estate came in the las few decades. This is due to populations growing exponentially in city areas in the last few decades.

And when it comes to Asian countries, the gains were much more extreme due to

 

  1. Third world to first world jumps in 30-40 years

    It’s in Asia, due to the extremely fast paced development, (a combination of FDI and extremely hard working people). It was not uncommon for countries to go from backwater swamp to metropolis in 30-40 years. Just look at Singapore and Hong Kong etc.

    This coupled with an explosive growth in population in city areas. Created an extremely strong demand for real estate in the cities.

    I do not see how Subang, Sunway or KL etc can double the populations now. Just being in KL makes me want to vomit blood. Malaysia have a lot of land. If prices get to high or population too dense, people will start moving, therefore lowering the future growth.

    And with remote working becoming increasingly popular, I really don’t see how cities can maintain high population growth rates moving forward.



     
  2. Extremely low deposits.

    Prior to 2003, purchase of houses in the US required deposits of 30% or so. It was around 2004 and 2005, that this was loosened to 10%, then no deposit, then NINA loans (no income, no asset loans). I don’t need to elaborate on the effects of this in 2008.


    In Asian Countries, we have started with 10% deposits to begin with, due to government initiatives to encourage home ownership. And these low deposits have also therefore encouraged an appreciation in real estate price.

    Historically, people have required higher returns in exchange for the higher level of risk assumed, or lower liquidity.

    For example,

     

Fixed Deposit/Money Market: 3.5%

5 year Treasury: 4%

10 Year Treasury 4.5%

AAA Bonds: 5%

SP500 stocks: 10%

Low grade bonds: 11%

Penny Stocks: 13%

Real Estate: 15%

Venture Capital: 25%

However, in Asian Countries, this was subverted in a major way. Due to low deposits and accommodating banks, the investment philosophy is now “Make Enough in Rental to (Mostly)Cover Deposit). Which translates to roughly 5% or less returns unlevered.
 

 

  1. Natural Feedbacks and the Asian Propensity for property.

Given the large increases in value. It naturally attracts more investment (which is immensely stupid really), and what the wise man does at the beginning, the fool does at the end.

We get people pushing up property prices to untenable areas. And often this craze even flows to the non-city areas, where they do not have the benefit of exponential growth in population. Making what is a mostly speculative investment, PURE speculation.

One does not need to look much further for that than Ireland.

Even in Hong Kong, the building sold by Li Ka Shing to a private investor was so expensive, the rent increase so insane, that even “Goldman Sachs’ a tenant in the building decided to move out. If even Goldman can’t afford your rent, who can?

And anyone who remembers the 1990’s of japan, would remember prices in Tokyo being so high, that rental yield was below 1%. To date, the Japanese property market have not recovered.

 

 

Why do people buy property?

They are many reasons why people invest in property, however i consider most of them to kind of foolish. Reasons include, 

 

  1. Got something real to hold

If you buy OSK shares, you can go and touch the OSK building if you want. Behind every share is a business, just keep that in mind.

 

  1. You own control.

Unless you’re a genius property manager, I don’t see why you’d want control. Especially when the alternatives are so much cheaper, have better management, and give way better returns. Dividends from property development companies are about 6-7% at current prices.

And these companies are not even paying out all the earnings. They sell for 6 times earnings or less and are often also valued at less than 30% of RNAV.

Having control also means you need to manage the property and collect rent. If your tenant is a gangster, refuse to move and threaten your family if you report police, what you want to do?

If he say he got cancer, no work , no family etc, you want to kick him out yourself?

I’d rather wait for dividend to go into account like clockwork.
 

 

  1. It’s safer than stocks.

    No, it isn’t. It just so happens that there isn’t a flashing screen telling you the change in prices every second, causing you to panic buy or sell. 

    The prices fall just as much in a crisis. It’s just that most have no choice but to hold, thus saving themselves from their own stupidity.

    Being a highly leveraged investment, its actually far more dangerous as an investment. However, due to people paying more care into their decision making when buying a house compared to a stock, better decisions were usually made.

    Having said that, try asking someone who bought property in 2014 and 2015, how their investment is turning out. I bet more than 60% are underwater and cannot cut loss.



     
  2. Forced Savings and Forced Holding

    Some people view the purchase of property as a kind of forced savings, which one will at the same time be forced to hold for a long time, therefore essentially, "forcing" one to not make stupid financial decisions.

    Well, do note you can very well do the same for equities.

    But if your self control and discipline towards your personal finance is so weak, that you require a gigantic amount of debt on your back, that is tied to an at best mediocre investment, in order for you to save any significant amount of money and put it to investments.

    You deserve the lower returns. Go buy a house.

 

 

Investing in Property

There is only one good reason to invest in property. Only one. (the second reason only applies if you’re bumiputra)

It is the only asset where the bank will allow you to leverage 10 times. Therefore, even a small gain of 5%, could result in a 50% gain in net worth. Do note it cuts both ways.

One of the things i’ve be spending a long time trying to find out, was how invest in property intelligently by talking to people who actually made buckets in real estate with mostly skill, not luck

When I was in Johor, I grilled Calvin Tan for many many hours on this.

And the essence boils down to this.

“Buy at 10 times rental, sell at 20 to 25 times rental. If you can't find at 10 times rental, don't buy.”

And the ability to buy at 10 times rental, only happen during recession at the auction houses. When literally no one show up to the auctions but you.

There is a cynical saying in real estate markets, characteristically said during tougher times, when optimistic generalisations can no longer be summoned forth.

"Only the third owner makes money"

Not the homeowner who first bought the house during a boom cycle. (First owner)

Nor the bank who repossessed the home and auctioned it off at less than the loan and bankrupted the first owner. (Second owner)

But the investor who bought the property from the bank amid distressed conditions and then rode the up cycle. (Third owner)

Ie, bought at 10 times rental, sold at 20 to 25 times rental.

 

 

Buying Property as a Bumiputra 

Now if you’re Bumiputra, you should probably focus on property. Due to the bumi discount for property, I think most bumiputra’s have very little good reasons to be poor.

Bumi lots (Property) on auction go for easily 11-15% cheaper. At times maybe even 18%.

Non bumiputra cannot buy these units. You can easily buy prime locations with 6-8% yield, more than enough to comfortably cover instalment, while charging the lowest rental in the area. This Bumi discount also often disappears in a bull market when sentiment is all time high.

And these days, Bumiputera’s can even push for the Bumi discount from developers when buying non-bumi lots

That is just easy money.

Do whatever you can to get the first RM25,000 to Rm35,000. And plot it down to buy a property yielding 6-8%. Just keep doing that till your 3rd or 4th property, when the deposit gets too big.
Done.

 

 

Other Salient Points

Most of the time, property is an inherently speculative investment, due to the loose financing standards in Asia for property.

Fundamentals are also extremely hard to value, as you need to analyse an area and its potential.

They are a few common denominators however.

 

  1. Buy where there is a lot of Chinese or fair skinned Asians (unless you’re in India)

In Malaysia, property investment that have historically worked out is in areas with high Chinese populations.

There is something about us Chinese that is very Kiasu, and like to make money. And when people you have a group of people who like to make money and thus very industrious in this respect lumped together. You get very good natural feedbacks.

As incomes of that area rise, the people there are willing to spend more money, which results in businesses opening in the area. As those business do well and expand, it brings in even more people.

Higher income individuals are willing to splurge on school, hospitals etc. Bringing the best schools and hospitals to the area. And when the best schools is in that area, even more families want to move to that area, increasing prices.

This works just as well in Indonesia, Philippines, Vietnam, Cambodia etc.

Penang, Selangor, Kuala Lumpur, Johor. Got Chinese , high property prices.

Kedah, Kelantan Pahang etc.. Holland.

 

  1. Population and Economic Flows

The fundamental analysis in property usually consist of making an intelligent guess on the economic and population growth rates in certain areas. Thus making it by and large a speculative venture.

Beyond, “Go where the Chinese are” they are very little hard and fast rules for it. A lot of it needs to come from experience and gut instinct.

However, one thing for certain is, it is a very scenario, when a government can actually dictate and drive where the economy or population will go to, to any significant degree, once a central economic hub is established.

A decade or so ago, the Malaysian Government tried to make Putrajaya the next capital of Malaysia, by moving all company functions there. But by and large, Putrajaya is a failure in that respect.

If you bought property there then, you would likely consider property a very stupid investment.

 

  1. AirBNB is not the answer

One of the things being down now, is to use AirBNB to boost returns and enable on to cover the instalment.

Some areas like Regalia Suites in KL, is particularly popular because its one of the places where there is an infinity pool facing the KLCC, making it very Instagrammable for travellers.

However, if you paid a price where by it would only work or cover your instalment if you did AirBNB, you’ve fucked up. In a crisis, travel is going to drop like a rock. If you practice that “Die in MASSIVE debts” philosophy when it comes to property investment, by holding 5-6 with compression loans, you are likely to die after being a bankrupt via jumping off the infinity pool.

Your margin of safety is to buy at so good a price, that you can offer the lowest rental in the area and still cover instalment. That way, even in a crisis, your tenant wont move.

Hard to find? Yes, it should be. Cannot find? Don’t buy.

 

  1. Consider the rubbish

One thing you should consider, is buying properties that look like rubbish in good areas. Often the problem is cheaper than the discount given during auctions. Especially if you have a good workman on hand.

 

 

Conclusions

Honestly, I didn’t really feel like sharing this article as I don’t think it’s that good.

I started writing this down by compiling some of the notes I got from talking to people, and currrently, I feel very little confidence in investing in property and in identifying economic and population trends for specific area.

But the best way to get the correct answer on the internet, is to give the wrong answer.

Considering the amount of retired chinese on this forum, who are likely to have made their money in property from back in the day. Can probably learn a thing or two from the critiques on my stupidity.

I doubt i'll be able to buy property unless its so cheap, that even a blind man can see, but due to fear, people refuse to buy.

Considering I need to borrow 10X to buy one, it’s probably for the better that I wait till then.

I am building my "property deposit in crisis" fund, but it’s not a top priority to be honest.

Having said that, Johor looks like a fantastic place for property now. A lot of Chinese in and around the place. And you can get KL rent at half the price. It’s not that hard to find one yielding 5-6% (KL or Subang is like 2.5-3% now). Just read calvin’s posts.

Unfortunately, I’m no longer in Johor and am in no mood to manage a property 350km away. Might be time for me to start a business there just so I have a reason to stay in JB.

====================================================================

Facebook: Choivo Capital
Website: www.choivocapital.com
Email: choivocapital@gmail.com

  TanTeeHean likes this.
 
Icon8888 Too long !!!! Make it shorter lah

(I have yet to read)
27/12/2018 5:44 PM
abang_misai He copies SSlee's style of writing.
27/12/2018 5:47 PM
teareader818 Quite enjoyed reading, had a laugh here and there. Ya you can write.
27/12/2018 6:10 PM
calvintaneng Good.

Actually the secrets are these:

1. Market timing.
There is a book burst cycle
Johoreans properties crashed for 12 years from 1997 to 2009 before rebounding.
12 years of downturn will be compensated by 12 years of upturn

Johoreans property only took off in year 2010
So the boom will last till year 2022....4 more years of upside for landed houses only (not highrise condo)

2. Neighbouring factor
The Sing Dollar is now 1 to rm3.05

And one third of Johoreans work in Spore. So the purchasing and rental power is strong

3. Pricing
Johoreans house price is one ten of Spore. One third of Kl or Penang.
So if you work in All Banks, Ikea, McDonald, KFC, Tnb, TM, for the same uniform wages your standard of living is comfortable due to lower house prices. And Jb got little toll booths on it's highways except for Plus

4. FDI
AT RM353 Billions the Jobs creation in Jb is dynamic. Vs, Skpres, Hershey, Rapid and Microsoft are here
Highest FDi beats Selangor, Penang or Sarawak hands down easily

5. Tourism
Johoreans will be the Orlando of Asia with Legoland. Desaru ocean Park. Hello Kitty sanrio. Jpo. Sunway Pendas 2 theme parks and many others

So many others

The boom is here

See www.johorinvestment.com
27/12/2018 6:30 PM
Jonathan Keung Bangsar a double storey house cost only 30,000 ( in the mid 70's ). SS 2 a single storey cost less than 20,000. 40 years down the road. Bangsar hpouse is price above 1 Million plus. SS 2 single storey price above 600-700K.

Shares not everyone can hold for 30 -40 years. People tend to take profit on their shares { every now and then } Just my personal and alternate view on the above topic
27/12/2018 6:33 PM
Flintstones Jon Choivo, how are we going to trust your analysis when you are still staying under your parents roof
27/12/2018 6:33 PM
calvintaneng Yes my neighbour bought a house in lot maarof bangsar year 1970 for only rm20k

Today 2 storey house price there is rm1.8 millions
27/12/2018 6:35 PM
Choivo Capital Yeah, makes sense to me. Only thing im not in johor, and stocks so cheap ahahah.
27/12/2018 6:38 PM
Choivo Capital I renting outside. You might mean, "When you don't own property".

How am i suppose to trust you analysis on DKSH, when you dont run a FMCG business.

How am i suppose to trust your ability to pick good durian when you don't own durian farm.

Need me say more ah.

We are given the ability to observe for a reason.

Honestly, i dont consider you as one of the foolish ones in I3, but your logic and thinking sometimes really nothing to say.

====
Posted by Flintstones > Dec 27, 2018 06:33 PM | Report Abuse

Jon Choivo, how are we going to trust your analysis when you are still staying under your parents roof
27/12/2018 6:43 PM
lizi inflation..
27/12/2018 6:59 PM
calvintaneng Lizi is correct.

Inflation

Last time roti canai is 10 sen
Nasi lemak 10 sen
Tau sar pay 10 sen
Coffee with milk also 10 sen

Now from rm1.00 to Rm10(if drink Starbuck coffee)
27/12/2018 7:06 PM
calvintaneng Lizi is correct.

Inflation

Last time roti canai is 10 sen
Nasi lemak 10 sen
Tau sar pay 10 sen
Coffee with milk also 10 sen

Now from rm1.00 to Rm10(if drink Starbuck coffee)
27/12/2018 7:06 PM
Alex™ Good ah
27/12/2018 7:08 PM
Alex™ So can hoot property now?
27/12/2018 7:08 PM
calvintaneng No Alex
Now don't do anything just sit still and watch
27/12/2018 7:13 PM
Alex™ Ok Calvin bro... I listen to u hehe....
27/12/2018 7:14 PM
okdoke Calvin, Why did you say " now don't. do anything just sit still and watch". Kindly elaborate. Knowledge + action = result. If no action, no result.
27/12/2018 10:25 PM
moneykjtwin he is a fraud!!!! dun listen to him
27/12/2018 10:30 PM
calvintaneng Posted by okdoke > Dec 27, 2018 10:25 PM | Report Abuse

Calvin, Why did you say " now don't. do anything just sit still and watch". Kindly elaborate. Knowledge + action = result. If no action, no result.

There is a time for everything under the sun.

These are the reasons why we should not do anything now:

But let me qualify the statement. Unless you are buying for your own use as a necessity or if you can get one at 20% discount from Johor High Court or some distressed sale from owners.

Or else there is nothing cheap on offer now. In JB High Court there are syndicates who won't let you buy cheap as they have cornered all cheap auction properties now.

You might get one with 10% discount if you are lucky. Even so you might not get a Bank loan (some who bid successfully from auction later got their 10% deposit forfeited due to Banks rejecting their loan application

So wait first since market is tough. See OTB also didn't want to play in bear market.

For those who bought early and bought cheap there is the support of good rental yield of 10% to 15% easily. For those who buy now at current prices the rental yield is only 3% to 4% for landed houses

For all high end condos now too risky to buy
27/12/2018 10:56 PM
Alex™ now hard to meet ends meet lol...playing poker anyone? haha
27/12/2018 10:58 PM
Haw Liao just marry a rich girl...solve all your worldly problems
28/12/2018 8:07 AM
Haw Liao but u must be good looking...lah
28/12/2018 8:08 AM
Alex™ Rich girl duwan me oh... How?
29/12/2018 9:24 AM
stockraider Very unintelligent comment on real property investment by the author loh...!!

Property is one of the very best investment vehicle for ordinary folks it can protect against inflation, it is a force savings and most important it is a wealth creation assets for the long run loh...!!

Generally People should think of at least getting his 1st property, then only think of equity investment loh...!!

In property people is willing to hold 10, 20, 30, 50 years disciplinary whereas in share some people hold 1 yr also cannot tahan loh...!
Why like that leh ?? Bcos sharemarket create bad influence due to its activities mah....!!
29/12/2018 12:54 PM
qqq3 properties offers 10 times gearing effect.......that is where most of the profits come from........
29/12/2018 1:00 PM
stockraider THAT IS TRUE LOH....BUT BANSK ARE WILLING TO LEND AND HISTORICALLY THESE BANKS MAKE GOOD SAFE MONEY TOO LOH...!!

FOR YEARS YEARS & CENTURIES BANKSS ARE LENDING TO REAL ESTATE, THAT SPOKE HIGHLY OF PROPERTY INVESTMENT VIABILITY IN THE LONG RUN MAH...!!

BANKERS ARE SMART & CONSERVATIVE AND NOT STUPID LOH.... TO BELIEVE IN REAL PROPERTIES INVESTMENT FOR THE LONG RUN MAH...!!

IF BANKS BELIEVE IN THE VIABILITY, THE LAY PROPERTY BUYERS SHOULD BELIEVE IN ITS VIABILITY IN THE LONG TERM TOO LOH...!!

Posted by qqq3 > Dec 29, 2018 01:00 PM | Report Abuse

properties offers 10 times gearing effect.......that is where most of the profits come from........
29/12/2018 1:09 PM
Choivo Capital Protect against inflation? Stocks can do better.

Hold for 10,20,30,40,50 years? You should do that for equities as well.

Cant do it for equities? Well, that person deserve the lower returns due to their bad discipline, and should go buy a house.



===
stockraider Very unintelligent comment on real property investment by the author loh...!!

Property is one of the very best investment vehicle for ordinary folks it can protect against inflation, it is a force savings and most important it is a wealth creation assets for the long run loh...!!

Generally People should think of at least getting his 1st property, then only think of equity investment loh...!!

In property people is willing to hold 10, 20, 30, 50 years disciplinary whereas in share some people hold 1 yr also cannot tahan loh...!
Why like that leh ?? Bcos sharemarket create bad influence due to its activities mah....!!
29/12/2018 12:54
30/12/2018 12:56 AM
enigmatic Very unpopular opinion in Malaysia. But I like it.

Property investment takes up a huge chunk of capital from an individual,for a long period with little certainty that a future buyer will buy it from you when there are other similar units available.

Money is stagnant in one place and not liquid. The hassle of obtaining a property and disposing it is tedious and time-consuming.

Especially now, one cannot simply flip properties as there is new tax on property.

But of course, if one doesn't buy a property despite capable of owning one, he/she will be subjected to endless queries from family&friends.
07/01/2019 2:04 AM
stockraider I think not that true loh....!!
Most people make monies from property mah...!!
This property is your longrun trusted friends mah...!!
Thus buy your 1st property then only look into investment in stockmah....!!

Posted by enigmatic > Jan 7, 2019 02:04 AM | Report Abuse

Very unpopular opinion in Malaysia. But I like it.

Property investment takes up a huge chunk of capital from an individual,for a long period with little certainty that a future buyer will buy it from you when there are other similar units available.

Money is stagnant in one place and not liquid. The hassle of obtaining a property and disposing it is tedious and time-consuming.

Especially now, one cannot simply flip properties as there is new tax on property.

But of course, if one doesn't buy a property despite capable of owning one, he/she will be subjected to endless queries from family&friends.
07/01/2019 12:22 PM

(CHOIVO CAPITAL) A Conversation With Mr Ooi Teik Bee

Author: Choivo Capital   |  Publish date: Mon, 24 Dec 2018, 5:13 PM


For a copy with better formatting, go here.

A Conversation With Mr Ooi Teik Bee

 

Overview 

This Saturday, after several false starts (once, I had a car accident on the way to meeting him, resulting in me cancelling it), I finally had the chance to meet Mr Ooi Teik Bee for a meal, in KLCC, which he very kindly treated me.

Well, who is Ooi Teik Bee? Well, he is the person with the highest ever publicly tracked record on I3, via the yearly stock competition.

Assuming someone started with RM 100,000.00.

2013 Competition - 104% ROI - The total value is now RM 204,000.00.

2014 Competition - 61% ROI - The total value is now RM 328,440.00.

2015 Competition - 129% ROI - The total value is now RM 752,128.00.

2016 Competition - 22% ROI - The total value is now RM 917,596.00.

2017 (Self claimed)- 87% ROI - The total value is now RM 1,715,905.00.

Needless to say, this kind of track record even if it’s for 4-5 years (publicly tracked portion), we can probably count with our hands, the number of people in Malaysia who can beat/or have beaten this track record.

He was also someone I was very eager to meet, because of how different our thinking when it comes to investment is. And considering his track record, chances are, there is more skill than luck involved.

We spoke for about 3 plus hours, and we tended to jump from topic to topic, and on many occasion, come back to a previously spoken about topic.

Therefore, for this article, I will be paraphrasing our conversation very heavily by topic. The chronology of our conversation will be very different, but I believe the essence to be accurate.

We also spoke on my favourite picks, and what I consider to be great companies at good prices in Malaysia and why, as well as his portfolio size, net worth etc. I will not be giving specifics on this as they are understandably private and confidential.

So let’s begin.

 

 

The Conversation

Jon: Mr Ooi, thank you for being willing to spend some time with me to talk in general. Let me begin by saying that, when it comes to talking about the market, investment, trading or speculating in general. I’m going to come across a little abrasive at times and will be asking questions that breaches propriety.

Because the goal for me is to find out the truth and learn as much as possible, and for this conversation to be as useful for you as it will be for me. I’ll do my best to be polite and respectful, but only to the extent of it not affecting what I really mean.

Can you give me a background of your life and career so far?

 

Mr Ooi: Yeah, sure. I was born in Perak and have stayed in Kuala Lumpur for the last 30 years. I was born into a very poor family. I remember helping my mother sell kuih every day due to make some extra income.

During my schooling years, I was considered to be quite smart and hardworking. For the most part, in terms of academics, I was either the top of my class or near the top. However, when it came to university, despite my good results, I was not able to further my education as my parents were too poor to pay the fees. And so I had to start working.

For the first 18 years, I worked the electronics industry. And around 1990 or so, I left the industry to become a remisier. And I’ve been a remisier for the last 30 plus years.

 

Jon: Haha talk about great timing. You managed to become a remisier just before the go-go years. How was the experience for you, during the boom, up until the 1998 asian crisis, and post crisis?

 

Mr Ooi: Pre-crisis, during the boom from 1993 up until 1997, i did extremely well. The remisier business was booming, and working in the industry, I was 100% in the market, and held some margin loans. At my peak then, I was worth a few million. It’s a fortune now, and doubly so then.

 

Jon: What happened during the crisis for you? Did you manage to get out before hand?

 

Mr Ooi: Unfortunately, no, and as my entire net worth back then was in the market. As the market dropped from 1200 to 270 in 1998-1999. I lost every sen of my fortune, and then had to vomit out even more to cover my margin losses.

Things were extremely bad for me back then. I was extremely close to bankruptcy. I started working 3 jobs for several years and managed to dig myself out. It was really difficult.

 

Jon: When did things turned around for you?

 

Mr Ooi: Well it started around 2006. I started my subscription service then, which back then, was a free newsletter for my clients in the remisier business. I also started to learn TA just before then. Around 2009, I had climbed out and had enough to live.

It was around 2009, when things started to really turn around for me, as you can see from my track record. I'm more comfortable today.

 

Jon: What changed for you? How did you get such fantastic results?

 

Mr Ooi: Well, it was around 2009 that I used my current investment formula. My stock selection criteria, “UBS GM".

Technical Analysis comes first

U - Uptrending stock
B - Breakout chart
S - Sector to focus (cross 200 days SMA)

Fundamental Analysis comes second

G - Growth > 10% per year
M - Margin of safety > 30%

Cut loss when it breaks SMA200.

 

Jon: Well Mr Ooi, you read and commented on some of my articles so you probably have a rough idea on my perspective.

So, I’m not going to elaborate too much. However, you are aware of the “Theory of Reflexivity” as propounded by George Soros. Where he states, the landscape of the market (and therefore what works) is affected by the activity of the participants.

Your investment philosophy, is essentially one of that for a momentum investor. And now in the bursa, almost everyone is a momentum investor.

As you may have noticed, due to the unique characteristics of the bursa market as well as its thin liquidity, it’s not uncommon for people to post articles about an explosion in earnings and fry the price of the stock up beforehand. And when the results come out, even if it’s a good one, it will drop. And if it’s even slightly below expectations, it will drop, or even limit down.

The sheer amount of money flowing into that must have affected you somewhat, how do you deal with it.

 

Mr Ooi: Well, you are not wrong, now in the Bursa, there is too much money following me. And it’s starting to be difficult for me and my followers to sell or buy at good prices, because we tend to be holding a lot.

I started some different strategies for entry points, such as SMA20 cross SMA70 (I have no idea if he really said that as i’m ignorant of most Technical Analysis methods, and happily so). However, this did not work so much for me, and has in fact caused me losses. If I follow my original trading strategy only, I would have lost a lot less this year.

 

Jon: Well, you know my thinking. For me, liquidity is dynamic.

If you want to buy when the market is selling, and to be selling when the market is buying. You will rarely find liquidity a problem.

Since you feel there is too much money following you, and thus affecting you and your clients returns, what do you plan to do?

 

Mr Ooi:  Well, one of the things I’m considering is closing my subscription service. For the most part, I do not post my picks on i3, because I do not need more people knowing it. However, plenty of people steal my research and post it online, or forward it to their friends.

And that is even worse than me putting my research online publicly, because these people only post half the research, ie the buy call for the trade. They don’t post the sell call. And so the people who buy when I and my followers buy, and don’t sell when we sell, are not going to have good out comes and will be very unhappy, tarnishing my reputation.

One thing I’m considering is for me to close down the subscription services. But there is so many people following it and relying on me, that I just cannot in good conscience do so.

 

Jon: From what I heard, you have 2,000 or more followers. Given your RM1,000 subscription fee, that should be at least RM2 million a year. Isn’t that highly profitable and thus also a reason why you would not want to close it down?

 

Mr Ooi: Hahahaha, no I don’t have anywhere near that number of followers. Most of the people who see my research see it for free, due to people stealing it and posting it online or forwarding it to their friends.

In addition, I also hired 2 people to help me with my research, and I pay them good salaries of RM6K or so each. That is also only their net salary. As they know my picks first, its not uncommon for them to make more than their yearly salary on the side.

The profit net of my cost, is very small. And any profit, I’ve donated it to charity. I earn more as a remisier and from my trading/investing.

 

Jon: Alright, I’ll take your word for it. In that case, why not just open your own fund, and run it for people? 

 

Mr Ooi: Honestly, I really don’t need the money. My lifestyle from when I only had enough to eat, to what i have now, did not change much. The only difference is that now, I’ve been buying up some property for my two children, and for the rental to cover my living expenses. My monthly living expenses now is very similar to when i was only had enough to eat in 2009. I really don’t need the money or the stress.

Right now, the goal for me, is to never suffer what I did in 1998 again. This fortune I am never losing it again.

 

Jon: May I know why did you buy property? Malaysian property prices, like most Asian countries, is historically extremely high. This is due to down payments here being 10% or less. In the US and other western countries, pre-2003, down payments were 30% of the property. When they lowered it to 10% or more, we all know what happened in 2008, the housing crisis that almost brought down the global economy.

Since 1700, property globally have only appreciated by 0.7% per annum. With most of the gains coming from the last few decades.

And in those decades, human population in certain areas (particularly cities) have multiplied many times, which lead to the burst in property values. I don’t think this will be the case going forward, even now, the jam in KL is making me want to vomit blood. People will open offices or move away from KL etc, slowing the growth, if any.

Given the above, I consider property to be a foolish investment most of the time. Even if the price was right, the only reason to buy is because it’s the only asset class where the banks allow you to leverage 10X.

If you wanted property, you can buy so many fantastic property counters, many of them selling at 30% of RNAV or less. With PE of 2-6 times.

If you do not want stock, you just get FD. Even FD will give you better yield. I doubt your property is yielding even 2.5%

 

Mr Ooi: Correct. However, I bought it for a few reasons. Firstly, I already have FD, I don’t need more.

Secondly, I want something that can give me enough rent to cover my living expenses. In addition, I want that possibility of price appreciation. Even if its small.

And most of all, I want something I can touch. I do not want what happened in 1998 to happen to me again.

In terms of investing/trading, I really learnt it the hard and painful way. Only the last 9-10 years allow me to catch up and succeed financially.

 

Jon: Fair enough. Everyone have certain quirks that lowers returns. Warren Buffet's is that he refuses to sell any of his businesses at any price, and will only close them down if they are expected to make unending losses.

Mine is to look at my companies as Sdn Bhd, and never sell unless there is a change in fundamentals or its now too expensive. In addition, I also refuse to sell even if better opportunities happen  (may change my mind), and I’ve probably lost out on some gains. Having said that, I probably forgot about some of the potential losses if I did shift out. So, we’ll see.

I have to ask; have you ever front run your own followers? The temptation must be incredible. Knowing that the moment you post your research, the price will shoot up at least 10% or so.

How much of your fantastic results do you think is due to your followers pushing prices up, and how much is it due to your skill?

 

Mr Ooi: Before posting a buy all, in terms of position, I will buy 1% of portfolio or so, to test the market. By testing, I mean to test if my TA is correct. Only if I feel the TA is OK, I will announce to my followers via my weekly update.

It is only then that I buy the rest of my position, the same time as my followers.

Honestly, I have no idea how much of my returns is due to my followers. But I have to admit, when Mr Koon follows my buys, such as the export stocks in 2015, Gamuda WE etc. It really did push up my returns.

 

Jon: Fair enough. How do you think this strategy works in bear? I remember reading that you lost a significant amount of money this year. Do you still hold anything?

 

Mr Ooi: This year, I lost some money. It meant something to me. But personally, for me, I am fine with it. Because no strategy works forever, we have to look as a whole. And considering how much money I made from 2009 to 2018, the amount of money I lost, is not significant.

My strategy, which is basically momentum investing, does not work in bear market at all.

Having said that, I feel very bad for my subscribers who lost money in 2018, especially if they signed up this year. Money is not easy to earn, and I hate it when my subscribers lose money. Since 2009 I have not lost money other than this year. I hope that we can make money for the next few years so my subscribers can cover.

My portfolio is currently 90% in cash. The remaining 10% is in Hibiscus. I only hold this counter.

 

Jon: Yeah Hibiscus. I remember getting a whatsapp message from you out of the blue, asking about my opinion the fundamentals on Hibiscus. I studied it abit and decided that even if they can only make 5 dollar per barrel on their 2P reserves (Which translates to oil prices less than USD 25 per barrel). The value of the company undiscounted is worth RM1.9bil or so.

As oil price will not be below USD50-USD60 per barrel, in my opinion, for any significant amount of period, due to the cost of extraction of shale in the US being like USD40-USD50 per barrel, it represents a pretty good buy investment wise

From my understanding your cost is RM1 or so. Now that it’s at RM0.8. It has broken your cut loss of below SMA200, why have you not sold it yet?

 

Mr Ooi: Well, I informed my followers its below SMA200. But I have not sold, because it think it is too cheap. As it is my only holding, I decided to hold on.

 

Jon: If it went to let’s say RM0.4. Would you buy more or cut loss?

 

Mr Ooi: I don’t think I will cut loss, but I will not be buying more.

 

Jon: When would you buy? Following your rule, when it breaks out above SMA 200? So, you would buy at say RM1, but not at RM0.4?

 

Mr Ooi: Yes.

 

Jon: Well, it’s clear we have extremely different philosophies. You know my style. For me, if it’s cheap, I buy more.

For me, risk is permanent loss of capital via the purchase of overpriced securities. I’m guessing in your case, volatility is risk?

 

Mr Ooi: Yes, for me volatility is risk.

 

Jon: Ok. I remember we spoke about a few stocks that you think are cheap, such as VS etc. However, you said you would not buy it now. But will wait for trend to turn, even if it’s more expensive.

I noticed that based on your style, you will buy an up trending stock, almost regardless of Fundamentals. And when down trending, you would sell, almost regardless of Fundamentals.

Would it be accurate to say that fundamentals concern you very little, and you focus mainly on technical and if it’s up trending or down trending?

 

Mr Ooi: Yes.

 

Jon: One of the things I’ve noticed about top traders. Is that they are usually very clear about the fact they are trading/speculating. Unlike the mediocre traders, they cut loss as per their rule. And do not allow a bad trade turn into an even worse investment.

Bad traders on the other hand, confuse if they are trading or investing. And continue averaging down a bad trade. Turning a bad trade into a worse investment and thus being “stuck”.

One friend of mine, used to say, to make and keep the easy money in bull market, he needs to be able to refuse to make the big money in bear.

Does this apply to you?

 

Mr Ooi:  Yeah that is accurate. Although as we can see from my record, the easy money is not necessarily small.

 

Jon: Hahahaha, Touche! I have to admit, for much of 2017, this was the question on my mind, I was wondering if I should follow your method, even though it often made very little sense for me. In the end, I chose to only make money through methods that make sense to me. Some money, just not for me to make.

Having said that, speaking to many traders, even the best ones, they often break the rules, and it is during these moments that they make a lot or lose a lot.

Whether it is a good decision or a bad one seems almost wholly dependent on the outcome. Which does not make sense, for good decisions can result in bad outcomes. Vice versa. However, over the long term or over a large sample size, an improvement in decision making should result in good outcomes.

For example, you said that if you had followed your method only, you would not have lost the amount you lost this year. And yet here you are holding on to hibiscus despite it having broken your rule.

Although, to be honest, I think it’s a good decision to hold. How do you reconcile this decision making in your head?

 

Mr Ooi: Well, for me, I held it because it is as you said, it’s really cheap. And in every respect, it follows my rule, except for below SMA200 cut loss. As it is only a 10% small position, I’m willing to hold. I won’t lose it all, and any losses won’t be significant to me.

 

Jon: Haha Mr Ooi, that does not really answer the question. Though to be honest, every single trader/non-investor can’t really reconcile and give a comprehensive answer. Which makes me think that in trading, traders have a certain set of rules, but 20% (unscientific) of it comes down to gut instinct.

This makes it really hard for you to know if you’re lucky or skilful. Or if you’re both, what’s the split. 80% Skill 20% Luck etc or?

How do you know that your method really works, not due to luck or underlying economic market?

How do you find the confidence to not panic when everything seems to be going on badly, and you have contradicting thesis in your head?

 

Mr Ooi: Well, for me, it was because I have this track record behind me. I made money in 2015 when it was a bear market. And in the competition, I was number 1 and far far ahead of the number 2.

I think for me, its because it has worked so well for so long. And given the time period, it appears to be good enough.

 

Jon: Alright. Fair enough. Many people here like to quote Deng XiaoPeng. "It doesn't matter if a cat is black or white; as long as it catches mice, it's a good cat."

In that case, how do you avoid the turkey before Christmas error?

A turkey is fed by the farmer every morning for 1,000 days. Eventually the turkey comes to expect that every visit from the farmer means more good food. After all, that’s all that has ever happened so the turkey figures that’s all that can and will ever happen.

But then Day 1,001 arrives. It’s two days before Thanksgiving and when the farmer shows up, he is not bearing food, but an ax. The turkey learns very quickly that its expectations were catastrophically off the mark. And now Mr. Turkey is dinner.

How do you avoid this from happening to you? You clearly avoided major losses this bear year, what is it about your process that saved you?

 

Mr Ooi: Well, these days im generally quite conservative. One of the things I do, is to not put all my money in the market. I have FD, I have property, and I don’t borrow much when investing.

In addition, I have my cut loss rule, which I follow relatively strictly, although it is getting hard to dispose at a good price when so many follow me and know my rule. So I have to find a new rule to adapt.

I do not really chase high when valuations is too expensive. I sold Gkent at RM2.4, and watched it go up to RM3.4 pre-elections.

Also in terms of sizing, no stock can be more than 20%. With most of the big ones being 10%. This one I follow very strictly.

I also do not trade or invest in a company when they have high debts.

 

Jon: Fair point. Do you have any plans to turn to investing in bear markets? Seems like abit of a waste to not buy when so many things are so cheap.

 

Mr Ooi: Nope, I will only buy when I think market is no longer bear. This method have worked for me for a long time and it’s still working. I will follow my method.

 

Jon: Fair enough. Mr Ooi, you probably said this publicly before, but did you have anything to do with Mr Koon’s buying of Jaks, Sendai and other companies?

 

Mr Ooi: No. Since day 1, I have always advised Mr Koon against buying those companies. And sometimes we even start arguing and don’t talk for a while because of this. But right now, everything is ok again. Mr Koon and I still text often now about what to buy, and my ideas.

Mr Koon has been very good to me and I owe him a lot. He recommended a lot of clients to me and these clients are not small. If I think differently from Mr Koon, I will tell it to Mr Koon privately.

Jaks was recommended by QQQ3/Stockmanmy only.

I have always tried to advise Mr Koon that the management is being ungentlemanly by doing private issue cheaply and selling it them to him at a higher price.

 

Jon:  What is your opinion on QQQ3/Stockmanmy? For me, I think it’s quite disgusting how he front run Mr Koon with max margin. That is really the bulk if not all his profits.

 

Mr Ooi: He is very ungentlemanly, to recommended stock to Mr Koon, and trade against him. Buying cheap to sell to Mr Koon at a high prices, when you know he is buying and collecting.

I asked Mr Koon recently what he thought of QQQ3/Stockmanmy recently. He said he is not even worth my little finger.

 

Jon: Alright. Ok, this will seem a little disrespectful, but I want to ask you on your process for a specific counter to see thing turned out. Lets talk about MASTEEL.

 

Mr Ooi: Well for MASTEEL, when we started buying, we bought very cheap, at around 0.4 pre split in 2016. Overall, we sold at 0.9 when it broke the SMA200. We rebuy in at 0.52 or so before the second bounce, before I made a second sell call at 0.5.

My followers who follow me strictly and diversify would not have lost much or even make profit. But if you don’t subscribe but rely on people to forward you my research, or you read rumor’s online on i3, you will probably only see the “Buy” call and not the “Sell” call, which will lose you a lot of money.

 

Jon: Fair enough. One of the things I remembered about MASTEEL was you complaining how the PE is so low even though the results was good. For me it was obvious, the capital structure is not good with high debts.

They are many companies with high debts and therefore despite appearing to have good prospects, don’t sell for much. Such as Softbank in Japan that sells for 7-8PE.

At the end of the day, investment is to look at all the future cashflows of the company and discount it to present value. If you cannot see with strong confidence the earnings of the company 10 years from now, and buy at a significantly cheaper price, you are not investing.

All these PE, EV/EBIT, ROE etc is just a short cut, which if you don’t look at it as such, will likely result in very bad outcomes at some point.

 

Mr Ooi: Well for FA, I have a list of things I look at, and it’s in my research reports. My range of target price is based off that. My focus is on TA.

But having said that, if the debt is too high, I also won’t touch.

 

Jon: Fair enough. Alright Mr Ooi, before we end things I would like to ask of some advice.

Being someone who has lived and experience life far more than me. As well has having been in the market for 30 years.

There is a Chinese saying, “The old man have eaten more salt, than the young man have eaten rice”. And I think this is particularly obvious in this scenario.

What would be your advice to me?

 

Mr Ooi: Well, one of the things that have really helped me and I think is absolutely key. Is to be truthful and sincere. To be gentlemanly when dealing with others. Never lie. Never take advantage of your clients.

It is wrong, and in bear markets, when everyone is criticising you or calling you name online, you will at least have a clear conscience, knowing that you did not do anything wrong on purpose.

You will still feel bad and want to work harder to make back the money for clients. But this one is quite a natural feeling, if you’re a good person.

 

Jon: Thank you, I’ll take that to heart.

 

Conclusion.

During the conversation, we also spoke a lot about my own picks, my thinking of investments, which are the good/great companies in bursa at good prices. Whether market will crash, a little more on Mr Koon. On the development of economies, property market, energy in general, China etc

But some of this I think we both want to keep private, or would take too long to write out, and others, his subscribers can ask him themselves.

Overall, I learnt a lot from Mr Ooi. It was an interesting conversation. I hope this is as useful as it was to me when I spoke to him.

====================================================================

Facebook: Choivo Capital
Website: www.choivocapital.com
Email: choivocapital@gmail.com

 
  20 people like this.
 
FamousAmos TanEnd with so many holang calls now talk integrity! How funny is that! Christians are hypocrites !
28/12/2018 10:41 PM
Up_down When your boss knows you are ‘free’, she may add more portfolio through promoting you. Promoting your subordinate/junior may not be suitable unless she is really outstanding and able to make a difference of the department....Sometimes, your boss also consider whether your junior character suitable to work with her or not..
28/12/2018 10:42 PM
calvintaneng 3iii

No use for investlah or i3 people

We talk about year 2013 when I posted on Pm Corp

Your history is of no value in the present time context

To really show your skill your must pick a winner today that is practical to follow now!

Not what you picked 20 years ago.

I have picked these 3 great defensive stocks

1. Ta Enterprise
2. Eksons
3. Dutaland

See if you can find 3 stocks that will beat these 3 for next year?

Now don't run and hide like a tortoise again!
28/12/2018 10:45 PM
probability wow..you really know the management thinking well!

my junior has very good interpersonal skills..so she stand a good chance and she is ambitious

actually i stand a risk of losing my job..as mine is high salary and i can see they are already training some young engineers to come to my level...with probably half the salary..

corporate culture can be cruel..

lets see what happens...whatever happens i am prepared for it

i am working in overseas where the culture is quite different


Posted by Up_down > Dec 28, 2018 10:42 PM | Report Abuse

When your boss knows you are ‘free’, she may add more portfolio through promoting you. Promoting your subordinate/junior may not be suitable unless she is really outstanding and able to make a difference of the department....Sometimes, your boss also consider whether your junior character suitable to work with her or not..
28/12/2018 10:50 PM
calvintaneng Probability

I think you must hope for the best. But you are wise to prepare for the worst

I know of one Johoreans guy who worked for S$15k to S$20k in Singapore during good times (that's Rm45k to Rm60k)

One day he was replaced by cheaper worker as business turned bad.
28/12/2018 10:58 PM
Up_down China economy seems slowing down aggressively triggered by trade war recently ie property crash, P2P lending burst, job cutting, sharing economy popped....so much bad news. US companies won’t be immuned from the impact from China. DJ companies are facing challenging QR in next 6 months. @@
28/12/2018 10:58 PM
stockraider Raider see dishonesty in 3iii loh....!!

Dutch lady is Rm 62.62 but u get rm 2.00 dividend ...so u get less than 3% pa yield....thats why raider says 3iii is dishonest & manipulative loh...!!

Posted by 3iii > Dec 28, 2018 10:17 PM | Report Abuse

Simply put:

Historical cost for DLady RM 1.60 per share.

Present dividends > RM 2.00 per share.

The return yearly is at least 100% per year.

An amzing stock indeed.
28/12/2018 10:59 PM
probability yes calvin, overseas...one day they will just ask you to handover the laptop and leave the same day...reasons given simply being challenging business environment
28/12/2018 11:00 PM
calvintaneng Probability

That is why in youth go oversea and earn maximum. Work for money first. Then let money work for you

There are some examples

1.Peter HO worked in Christmas Island in the 70s. Invested in landed houses in Penang around Rm100k plus. Today worth millions

2. The Johor guy who worked in Singapore also bought houses in Johor

3. I know of 2 guys who worked in Japan.
He worked for a scrap car exporting reconditioned cars to Malaysia.
With capital he started his own import car business in Batu Pahat later. But one foolish one wasted his money by splurging on expensive new cars and others on returning. He wasted his capital
28/12/2018 11:20 PM
probability yes Calvin, exactly....thats my objective...i had bought some plantation lands...but unfortunately that is also not doing well presently for reasons known...but in future it should be up...and give some peace of mind..
28/12/2018 11:24 PM
Up_down Probability. Expart life won’t last for long unless you are a key person holding with critical technical competency or excellent in management skills. Normally, they have a time schedule for succession or replacement of expart. Now, you are seen ready to venture a new life in stock market. Normally, we have to get ourselves fully involved in order to trigger a major breakthrough. Small matter to you.
28/12/2018 11:24 PM
Choivo Capital Haha my portfolio not so big until can swing one year salary.

But definitely, i think one of the reason i study so much on investing, is because i very lazy when it comes to doing low value add work, like presentation and reports, which is most of the corporate life tbh.

I was very ambitious last time, now, not so much. Because i know investing will get me where i need to be.

No mood for office politics also. Let they all go fight, i just focus on saving 80% of my salary and investing.

With luck, by 33 and hopefully before 35, can stop working for money anymore. Just sit home all day read annual reports and books.

======
Posted by probability > Dec 28, 2018 07:12 PM | Report Abuse

yesterday i realized something....while at office....observed all my colleagues who seems to be very professional and extremely hardworking...

just for a small monthly income...

i feel i can never work like them till retiring....

the daily/weekly fluctuation on my stock investment value ...is almost the same as the whole savings we make in a year...

look at the amount of time and effort people place to earn? they spend their whole life learning new things everyday...send hundreds of mail...presentation and reports..drive to work..send kids to school etc..

...................

we investors are completely different than these people...

i think most of us have some kind of inherent defects these people dont have (some kind of laziness or gambling attitude)...this defects are the one that pushes us to make money from the market...

its like a blessing in disguise..

perhaps this answers why we have so many abnormal people in i3...
28/12/2018 11:29 PM
calvintaneng Probabilty

Good for longer term

My Friend Mr Chia the lorry dealer from Jalan Kapar, Kelang, heard in the late 70s and early 80s that Airport will be built in Sepang

So he bought 5 acres of freehold lands near Sepang

30 years later Mr Chia visited me in Spore.

I asked him about those lands and how much they are worth today.

He said he has no idea as he has no intention of selling it yet. He said it must be worth a lot today.

He told me to buy lands in Johor rather than houses in early days. I think he is correct. I missed the opportunity. But it's ok. At least I bought houses when cheap
28/12/2018 11:35 PM
korek2 probability,

You're right. Everyone can be replaced in the work force easily, I tendered my resignation after taking too much of unnecessary shits from my ex-boss. That's my first job and I've worked for 2 years. I told myself that every job has its own difficulties and do not give up easily, always find ways to solve the problem. That's what keeps me there for 2 years.

During the 2 years, I tried to learn as much as possible from my boss, from my work, and used the spare time to read articles in i3investor, and started trading and investing. My bank a/c has only 4 figures during that time. I still remember, I looked at the menu at cafe, I was still thinking whether to add ayam into my nasi lemak, by considering the price. I'm from a humble family.

Thanks to many bloggers in i3investor especially Icon8888, it really speeds up my process to learn about the real investment and ways to analyse companies. With luck, the bull mkt in 2016 & 2017, I've made 6 figures. N with that, I don't tolerate with the shits I shouldn't be dealing with and tendered my resignation.
28/12/2018 11:36 PM
probability yes Jon, ...its those work where you cannot see the benefit immediately which really makes one demotivated.....

in another 5 years...i dont know how Bursa market will work....may be should really focus on China stocks...
28/12/2018 11:40 PM
korek2 Thanks to Up_down, probability and Icon8888. Learnt a lot from your sharing & comments - those couldn't b learnt in the textbooks.
28/12/2018 11:42 PM
Up_down Korek2. Congrats. You have earned so much and yet manage to escape from big bear in past 2 years. No problem to you in the next bull run.
28/12/2018 11:53 PM
zhen wei & JP Many have gone through the corporate world and translate their capabilities into the market. The up and downs which most of us gone through has lead us into better placement.

China one of the toughest market to invest in. You may turn millionaire overnight.

A night stories - demotivating workplace & truth cruel of corporate.
29/12/2018 12:07 AM
paperplane Raider bro, wish u happy new year first!
29/12/2018 12:30 AM
3iii >>> Posted by Choivo Capital > Dec 28, 2018 11:29 PM | Report Abuse

Haha my portfolio not so big until can swing one year salary.

But definitely, i think one of the reason i study so much on investing, is because i very lazy when it comes to doing low value add work, like presentation and reports, which is most of the corporate life tbh.

I was very ambitious last time, now, not so much. Because i know investing will get me where i need to be.

No mood for office politics also. Let they all go fight, i just focus on saving 80% of my salary and investing.

With luck, by 33 and hopefully before 35, can stop working for money anymore. Just sit home all day read annual reports and books. <<<



I have spoken to many people, of various ages and backgrounds, on stock investing.

Essentially, you are either bitten by the investing bug or you are not.

Among those involved in investing in stocks, few have safe strategies or give me the impression they know what they are doing. This means investing for them is going to be risky.

Jon Choivo, on the other hand, is bitten badly by the investing bug. Given he is also knowledgeable in his investing, his investing should be fun and rewarding.

His confidence in attaining great wealth through only investing is something I feel those with the right philosophy and knowledge can achieve. In fact, the successful investor will find little motivation to earn a salary as this will be small compared to what he can get through his investing.
29/12/2018 7:05 AM
Alex™ I3 bro, what's ur take on the bogle's folly?
29/12/2018 9:24 AM
stockraider CORRECTLOH....SIFU CALVIN ISSUE CHALLENGE TO 3iii MAH, AS USUAL THIS DISHONEST 3iii NO BALLS TO RESPONSE & ACCEPT LOH...!!

SIFU CALVIN PICK A TRUE BRED OF BEN GRAHAM STOCK PICK BASED ON THE MARGIN OF SAFETY PRINCIPLE LOH...!!


Posted by calvintaneng > Dec 28, 2018 10:45 PM | Report Abuse

3iii

No use for investlah or i3 people

We talk about year 2013 when I posted on Pm Corp

Your history is of no value in the present time context

To really show your skill your must pick a winner today that is practical to follow now!

Not what you picked 20 years ago.

I have picked these 3 great defensive stocks

1. Ta Enterprise
2. Eksons
3. Dutaland

See if you can find 3 stocks that will beat these 3 for next year?

Now don't run and hide like a tortoise again!
29/12/2018 1:02 PM
qqq3 young people should go and work....unless you really cannot tolerate your work.
29/12/2018 1:08 PM
qqq3 stockraider...forget your ridiculous competition....share market is about challenging one self...not challenging some one else.....
29/12/2018 1:10 PM
stockraider THESE 3iii IS TOO ARROGANT NOT TO BE CHALLENGE LOH...!!
BUT TOO BAD HE HAS A REAL CHICKEN HEART TO STAND UP LOH...!!

Posted by qqq3 > Dec 29, 2018 01:10 PM | Report Abuse

stockraider...forget your ridiculous competition....share market is about challenging one self...not challenging some one else.....
29/12/2018 1:12 PM
stockraider CORRECTLOH....CHIVO SHOULD PUT EFFORT IN HIS WORK TOO LOH....AND GAIN PROMOTION IN HIS CAREER ADVANCEMENT LOH....!!

UNLESS U ARE A FUND MANAGER OR ANALYST U NO NEED SPEND FULLTIME IN INVESTMENT LOH....!!

USUALLY FULL TIME IN INVESTMENT IS A WASTE OF TIME MAH...!!

Posted by qqq3 > Dec 29, 2018 01:08 PM | Report Abuse

young people should go and work....unless you really cannot tolerate your work.
29/12/2018 1:15 PM
qqq3 young people should go and work....unless you really cannot tolerate your work.

a lot of working people make a lot of money from stock market by investing not by trading.....

for some one like me, no longer working, full time in stock market, I can make money trading.....but not everyone can do that......
29/12/2018 1:30 PM
stockraider yes fulltime investment is different from full time trading loh...!!
For good traders taking fulltime career maybe ok but not for full time investor loh....!!

The way chivo talk he is bias to towards investment & not trading mah....!!

If that is true it is not productive loh...!!

Posted by qqq3 > Dec 29, 2018 01:30 PM | Report Abuse

young people should go and work....unless you really cannot tolerate your work.

a lot of working people make a lot of money from stock market by investing not by trading.....

for some one like me, no longer working, full time in stock market, I can make money trading.....but not everyone can do that......

Posted by stockraider > Dec 29, 2018 01:15 PM | Report Abuse X

CORRECTLOH....CHIVO SHOULD PUT EFFORT IN HIS WORK TOO LOH....AND GAIN PROMOTION IN HIS CAREER ADVANCEMENT LOH....!!

UNLESS U ARE A FUND MANAGER OR ANALYST U NO NEED SPEND FULLTIME IN INVESTMENT LOH....!!

USUALLY FULL TIME IN INVESTMENT IS A WASTE OF TIME MAH...!!
29/12/2018 1:44 PM
3iii >>>Posted by calvintaneng > Dec 28, 2018 10:45 PM | Report Abuse

3iii

No use for investlah or i3 people

We talk about year 2013 when I posted on Pm Corp

Your history is of no value in the present time context

To really show your skill your must pick a winner today that is practical to follow now!

Not what you picked 20 years ago.

I have picked these 3 great defensive stocks

1. Ta Enterprise
2. Eksons
3. Dutaland

See if you can find 3 stocks that will beat these 3 for next year?

Now don't run and hide like a tortoise again!<<<



Calvin

You keep throwing up so many stock names; one fine moment you mentioned how well one has performed.

Look back over the months, how many stocks you have embraced.

Do you agree you were not entirely honest in the way you promoted or calculated the returns of PMCorp.?
29/12/2018 2:27 PM
stockraider AIYAH READ PROPERLY LAH...!!

CALVIN TAN IS CHALLENGING U WITH 3 STOCK SELECTION MAH...!!

TA
EKSONS
DUTALAND

DISHONEST 3iii GIVING STUPID EXCUSE TO DIVERT CALVIN CHALLENGE BCOS NO BALLS TO TAKE UP LOH....!!

IF U DARE NAME YOUR STOCK LIKE SIFU CALVIN LOH...!!

Posted by 3iii > Dec 29, 2018 02:27 PM | Report Abuse

>>>Posted by calvintaneng > Dec 28, 2018 10:45 PM | Report Abuse

3iii

No use for investlah or i3 people

We talk about year 2013 when I posted on Pm Corp

Your history is of no value in the present time context

To really show your skill your must pick a winner today that is practical to follow now!

Not what you picked 20 years ago.

I have picked these 3 great defensive stocks

1. Ta Enterprise
2. Eksons
3. Dutaland

See if you can find 3 stocks that will beat these 3 for next year?

Now don't run and hide like a tortoise again!<<<



Calvin

You keep throwing up so many stock names; one fine moment you mentioned how well one has performed.

Look back over the months, how many stocks you have embraced.

Do you agree you were not entirely honest in the way you promoted or calculated the returns of PMCorp.?
29/12/2018 2:32 PM
probability wei..all you please participate on 2019 stock pick...

i3 is running out of sifus/investors...

all become talk cock kaki judis...kiki
29/12/2018 2:34 PM
qqq3 probability > Dec 29, 2018 02:34 PM | Report Abuse

wei..all you please participate on 2019 stock pick...
=============

its a firm NO for me.
29/12/2018 2:37 PM
probability qqq3 is kakijudi...so excused...but whoever claim they are 'investors' (not sure the real meaning of this)...are expected to participate...
29/12/2018 2:39 PM
qqq3 probability....what is not gambling?


life is gambling...even the sperm is gambling...
29/12/2018 3:32 PM
probability quantum physics is based on probability...there are no hidden variables.

even Einstein hated the idea that God wants to play dice to decide his decisions in life...
29/12/2018 3:41 PM
qqq3 1 year money?

I got only two ideas Jaks 90%, Sendai 10%......


I look and look and look , I see Jaks and Sendai as the best buys for 1 year money.....
29/12/2018 3:43 PM
probability what we want is a calculated gamble..having higher odds....the same way Genting makes money
29/12/2018 3:43 PM
qqq3 u think 1 year money got higher odds of success than short term money?

well.....for 2018, all buy and hold all die ...I still alive and still healthy......
29/12/2018 3:47 PM
probability http://www.murderousmaths.co.uk/books/roulette/wheel%200.jpg

when you place an extra hole '0' in the roulette on top of the 36 holes in your favor...the others being neutral implications

time will ensure you get the 1 out of 37 customers who visits your casino...

the more the time the more the customers..

all depends on your edge & the system you use
29/12/2018 3:52 PM
qqq3 roulette is maths.....stock market is more than maths......stock market is about human beings.......
29/12/2018 3:54 PM
probability gut feelings is also maths too...just a more advanced maths that are ineffable...

just like our subconscious mind
29/12/2018 3:56 PM
Icon8888 Gut feeling in psychological term is called heuristic
29/12/2018 4:02 PM
qqq3 roulette is truly random...stock market is not truly random.....so any comparison misses the point.
29/12/2018 4:02 PM
qqq3 the best performance is by those who can make the correct calls all in or all out a few times a years at major turning points......


I could not do that with 100% accuracy in 2018, but gotten above average score on that...the objective is to that do with even greater conviction.....I experienced leakages due to too frequent buying back.....
29/12/2018 4:13 PM
qqq3 jumping from stock A to stock B is not a good solution.......only solution is all in or all out at the correct times......
29/12/2018 4:14 PM
probability aiyo..of course we need a mechanism of predictability to get what we want la...

these mechanism can be seen by the extra hole the casino organizers place on roulette...capitalizing randomness of outcome and the available outcomes itself

for stock market...some learns..figure out these potential outcomes with various settings..from trial n error like Icon said...from experience..from gut feelings...

this you know if you have gained the edge....if you had been surviving the market and making money...but its of no use to others...
29/12/2018 4:17 PM
qqq3 jumping from stock A to stock B is not a good solution.......only solution is all in or all out at the correct times......


do that correctly two or three times a year can do marvel for the portfolio........
29/12/2018 4:18 PM
moneypedia in bearishness the best solution maybe no solution kikiki
29/12/2018 9:03 PM
apolloang at nite moneykjtwin went to chow kit again to sell his butt , sell until r butt hole sore also cannot recoup his losses in bursa.....hahaha
30/12/2018 3:37 PM
3iii An hour invested on strategy could save you years.
01/01/2019 8:05 AM

(CHOIVO CAPITAL) What if you got a 50% discount? (JAKS)

Author: Choivo Capital   |  Publish date: Thu, 6 Dec 2018, 2:08 PM


For a copy with better formatting, go here.

 

What if you got a 50% discount (JAKS)




On 21’st August 2018, I wrote an article on JAKS to try and better understand it.

Why Business Sense is not enough (JAKS)

The company was selling at RM0.97 then and have since fallen to RM0.5 or so.

Do note this does not mean I am correct. Price movements mean but little in the short term. Whether or not I am right, depends on whether my thesis then was right. Which will take another 2 years at least.

In the meantime, I’ve spent some time to better understand JAKS, the international and Malaysian IPP markets better, along with firming up my understanding of the contracts involved.

Now, let’s see if JAKS is a good investment at 50% discount.

 

Overview

Many here are likely to be familiar with this company, as well as a story, but to just refresh, I’ll just pull extracts from KYY’s blog posts.

“JAKS Resources Bhd was awarded the contract to construct two units of 600 megawatts (MW) coal-fired power plant to sell electricity to the Vietnamese Government for a 25-year period in August 2011.

Since the total cost of US$1.87 bil (RM7.76 bil) (based on US$1=RM4.15) is so huge that JAKS could not find any bank to finance the project, the construction of the power plant was postponed several times until JAKS found China Power Engineering Consulting Group Co Ltd (CPECC) to be its joint venture partner in March 2016.

The construction is scheduled to complete in 2020. CPECC is very experienced in conducting survey and designing of power generation and transmission plants. Moreover, CPECC has been playing a leading role in China’s power survey and design industry with about 90% of such work in the country undertaken and completed by the group.

After careful study of the viability of the concession, a consortium of three banks, namely Industrial and Commercial Bank of China, China Construction Bank Corporation and Export-Import Bank of China have expressed preparedness to finance US$1.4 bil (RM5.81 bil) for the entire scheme.

Assurance of project completion

The three Chinese banks accepted the power purchase agreement (PPA) duly signed by the Vietnamese Government as collateral to finance the project. The banks will provide 75% of the funding for the project cost totaling of RM7.76 bil with the balance (25%) to be borne by JAKS and CPECC.

To protect the banks’ interest, the financiers must make sure that the PPA is water-tight and that JAKS and its JV partner must be able to complete the project on time. Both JAKS and CPECC must also be financially sound, otherwise they will not be capable of paying up the remaining 25% of the project cost of RM7.76 bil which amounts to RM1.94 bil.

To ensure that the whole project can be completed satisfactorily, the Chinese JV partner undertakes the full responsibility to complete the construction and operate the power plant for 25 years. JAKS will receive US454.5 mil (RM1.89 bil) during the construction period and 30% share of the independent power producer (IPP) business. The profit of about RM400 mil for JAKS will flow back into the JV company to fund JAKS’ equity portion. In other words, JAKS only needs to fork out RM203mil to own a 30% stake in the power plant. JAKS is also given an option to buy up another 10% of the JV company.

In essence, JAKS is sure to make RM400 mil during the construction period. Upon completion of the power plant project, both JAKS and its partner will enjoy profit every year for 25 years from the sale of electricity to the Vietnamese government.”

 

 

Overview of the contract.

Exchange Rate: USD:RM is 1:4.17

Investment in Power Plant: USD 1.87bil (USD:RM is 1:4.17) RM7.8bil

Debt: USD1.4bil (75% of USD 1.87bil) RM5.83bil

Interest Rate: Fixed 6% (Standard Rate given by China and Chinese Banks, except its usually floating)

Concession Period: 25 years

Tax: Zero.

 

Do note, this is likely to be very rough, as i have close to zero data on the PPA beyond the above.

So, what is the estimated operating earnings of the power plant before tax and Interest expense?

For the sake of simplicity, we're just going to use the EBIT (Earnings before interest and tax) 

EVN (Vietnam Electricity) is the largest power producer in Vietnam. They have 25,884MW installed capacity. It’s a mix of difference sources, but coal is the largest.

Its not as precise as one would like, but you do not need to know the weight of a woman to know if she's fat. Its accurate enough to determine if its a good investment. If anyone here can get me the EBIT of a Coal Fired plant, that would be great. Because its not like Power Utilities Companies provide segmental information by power generation type. 

EVN, have EBIT of VND27,524,822,000,000. That is RM4.9bil.

Prorated over 25,884MW, and extrapolated to the 1,200MW plant being built by JAKS, we end up with operating profit, before tax and interest expense of RM227mil.

This information is taken from their 2016 financial statements, as the 2017 one is not out yet for some reason.

Now this is just an estimate, what does management say? They never gave any figures or details, but indirectly, from KYY’s blog post we find this.

"It is only good in securing the 1,200 MW coal fired power plant in Vietnam with a very good power purchase agreement (PPA). It will have very good profit every year for 25 years. I understand in the first few years, its annual profit will be Rm 200 to 300 million before interest charges, depreciation etc. Moreover, I understand all the profit from the sale of electricity is tax free."  

KYY was once a 30% shareholder of JAKS and I’m going to assume he has at least spoke with management before making that statement.

These estimates are actually lower than my own estimate, which considers depreciation expense.

 

My Estimate

EBIT: RM227mil

Interest Expense: RM350mil (RM5.83bil X 6%)

Net loss: RM123mil per annum initially

 

Management/KYY Estimate

EBITDA: RM200mil to Rm300mil

Interest Expense: RM350mil (RM5.83bil X 6%)

Depreciation: RM312mil (RM7.8bil divided over 25 year concession)

Net Loss: RM472mil to RM372mil per annum initially

 

Now do note this does not take into accounts certain things such as,

  • Potential additional capex from transmission lines.
  • Potential escalating power rates, which should be higher or equal than the escalating maintenance cost.
  • Jaks power plant is as efficient as the average EVN plant from the get go.
  • This is a BOT (Build Operate Transfer). How much of the debt can they transfer to the government? 

 

The reality.

Koon Yew Yin made this statement in one of his blog posts

“In my 60 years’ experience in the construction contracting industry, I have never seen such a juicy contract as Jaks’ power plant contract. As an independent power producer selling electricity to the Vietnamese Government at a profitable rate for 25 years.”

I think the reality of the situation is likely to be a little different. Chinese companies are never known for giving the other party a good deal, unless forced to.

My current line of thinking is, JAKS won a PPA contract that they cannot build or finance. Therefore, they sold it to a CPECC for a 30% stake. Which they had to pay RM203mil in cash for, with the balance of RM400m to be covered by the expected construction paper profit.

The banks are willing to loan the money, because in their view, they should be able to get interest serviced for 20 years at minimum. I have no idea how the loan is going to be repaid, given the estimates above, but I’m guessing it can be rolled forward for a long time, or in perpetuity.

It’s a Chinese bank after all, and being essentially part of the Chinese government, profit is not really the number one motive. The real goal is one belt one road, and projects to take up the overcapacity of state owned companies in China.

CPECC is willing to do it (other than because it’s essentially part of the Chinese government), is because of the banks funding and taking most of the risk.

They get to build that project, and have their staff run the plant for 25 years. Putting some of that overcapacity to work.

Despite the expected losses, they may be allowed to still pay dividends. Over 25 years, they may potentially recoup their equity stake and more.

As this a BOT, if they can transfer the debt. We can forget about the debt, compound the interest and just throw it to the Vietnamese government to figure out at the end of the 25 years. But i doubt they will allow this.

But if the interest needs to be paid yearly, I would have no idea how the company will be able to pay dividends.

Now, on that line of thinking, it sounds like the kind of contract a China company would give you. It’s a very very hard line.

Except.... If one were to use my estimates and not KYY's.

 

Best Case Scenario

Now, lets play with the mathematics for this. Using the best case scenario, which is my estimate, which is roughly RM350mil higher than management's or KYY's. We get this.

EBIT: RM227mil
Depreciation: RM312mil

Therefore,
EBITDA: RM539mil
Interest Expense: RM350mil (initial figure, reducing balance)

Capture

A minimum of RM457,503,094.46 needs to be paid every year for 25 years in order for the debt to be repaid.

This gives about RM82,846,817 worth of dividends payable each year to the shareholders. Discounted at 5%.

The entire thing is worth RM1.2bil. With Jaks portion of 30% being worth RM360mil.

Far below the RM603mil (cash plus paper construction profit). But RM157m higher than cash paid.

IRR on the cash paid of RM203mil is about 11.42%.

Do note this is the absolute best case. Its RM312m in cash higher each year than the figure given by KYY. 

 

Conclusion

At the current price of RM0.5 per share, the market capitalization of JAKS is RM278m.

The company has equity of about RM843m.  Removing out the investment in JV, the property and construction division has equity of about RM652m

As it does not have any significant hidden assets such as large pieces of land held at extremely old valuations. We can take this as the RNAV.

The prop dev and construction company are selling for 42% of RNAV. And in exchange for paying this price for a prop dev and construction company that has

  • A mediocre track record
  • Bad capital structure, high debts with current liability exceeding current assets.
  • Outstanding legal issues along with looming LAD charges
  • Potential cash calls and right issues.

And most importantly, your opportunity cost, considering the sheer amount of opportunities available in KLSE now, whether in property development, trading, export etc etc

You will be getting a flyer on a stake of a power plant in Vietnam that will in our best case scenario, using earning estimates RM350m higher than management, that is worth RM360mil if discounted at 5%.

Is it worth it?

Well, if management made a mistake, and they meant the figures shown above. Then its a yes. 

But i dont think so. No idea, unless they give verbal confirmation or we see a copy of the PPA.

As always if you feel I made an error, or have a very different perspective, Let me know.
 


 

Disclaimers: Refer here.
 

====================================================================

Facebook: Choivo Capital
Website: www.choivocapital.com
Email: choivocapital@gmail.com

 

 

Labels: JAKS
  2 people like this.
 
CharlesT So Ah Jon's revised calculations: Neither a juicy deal nor a Holland deal?

"In my 60 years’ experience in the construction contracting industry, I have never seen such a juicy contract as Jaks’ power plant contract. As an independent power producer selling electricity to the Vietnamese Government at a profitable rate for 25 years.”


Just a better deal than FD??

"You will be getting a flyer on a stake of a power plant in Vietnam that will in our best case scenario, using earning estimates RM350m higher than management, that is worth RM360mil if discounted at 5%."
07/12/2018 8:58 AM
SarifahSelinder Oh ya Sarifah kan ada Sslee d shareholder activist sbg teman in tis Andy

As we talk Sslee is crunching d figures always cari bukti

Keep it up Sslee
07/12/2018 9:10 AM
godhand the way u written how they handle debt is purely assumption.
07/12/2018 9:13 AM
qqq3 to the psycho sslee

you lost money on Jaks, none of my business
Go and jump if u want.
07/12/2018 9:25 AM
Choivo Capital sslee,

I am just basing off my own guess.

Or KYY figure.

Which if you want, try and twist it into postive (zero debt plus say 5%% irr).

The amount of rake hikes needed is intersting.
07/12/2018 9:43 AM
Choivo Capital Yes, i dont have the PPA.

So i have to make my best estimate.
===
godhand the way u written how they handle debt is purely assumption.
07/12/2018 09:13
07/12/2018 9:43 AM
qqq3 choi....projecting IPP profits....

http://aglblog.com.au/wp-content/uploads/2013/09/No.38-Normal-Profit.pdf

I don't even understand it nor have any intention....
07/12/2018 10:28 AM
qqq3 lurker

now it is 50 sen
everybody very smart in writing eulogy

to me....those didn't sell above 70, too late to sell
those bot recently,, look to sell around 70.

others may want to keep and fight....well, its a huge IPP, 30% of 1.2 GW is a big deal for tiny little Jaks. Market cap $ 400M......It offers huge gearing effect for shareholders of Jaks. Its a US$ 2 billion project. If it works out, rewards are tremendous.

yes, immediate horizon, there will be cashflow problems for Jaks but gearing of .25X is manageable, back to the drawing board for them.......u weight that against potential reward from balance of EPCC profits about $ 250 million, ....with NTA $ 1.50 and .25 X gearing, eulogy is too early.

at 50 sen...eulogy ? what is the point?

buying the warrants at 25 sen? don't be silly when u can buy the shares at 50 sen......
07/12/2018 10:42 AM
cend0l Rubbish article. trying to manipulate market sentiment. borderline criminal.
07/12/2018 11:07 AM
qqq3 lurk

if Jaks cannot solve its cash flow problems it may have to give up some or all of this Vietnam plant to the Chinese...the minimum price would be its cost....and still the NTA is $ 1.50......

management will need to work hard...
07/12/2018 12:38 PM
qqq3 there are ways to solve cash flow problems....1. clearly there will be people who are willing to buy some or all of its stakes in the Vietnam plant....Koreans, Japanese and Europeans are still bidding for Vietnam plants.....
07/12/2018 12:41 PM
qqq3 by i3lurker > Dec 7, 2018 11:13 AM | Report Abuse

qqq3,

for traders and gamblers it would be worth a punt soon enough. Coming very soon.
=========

no way la....

to me....there is little risk at 50 sen....its not like market just beginning to fall....

and yes.....recency bias......if one can fight recency bias, one already is an above average trader......
07/12/2018 12:44 PM
qqq3 no rights issue....I guarantee u....

They will have to dispose assets...including some or all of its stake Vietnam plant if terms are acceptable...actually, not bad one.....if they can arrange a sale but keep the EPCC profits which have been agreed upon...about $ 250 million remains....This share can still fly if they strike the right deal.
07/12/2018 12:51 PM
qqq3 i3lurker > Dec 7, 2018 01:02 PM | Report Abuse

my personal opinion is that the Directors will prefer to destroy Jaks rather than sell off the Vietnam IPP.
=========

crazy talk.
07/12/2018 1:08 PM
qqq3 Posted by i3lurker > Dec 7, 2018 01:21 PM | Report Abuse

PN17 coming if no action taken, Chinese like this very much.
========

crazy talk....with so much assets,, where got PN 17....?

huge positive current ratio, huge assets....where got PN17?....what concerns Jaks is not creditors/ bankers liabilities....but its own commitment for Vietnam venture.

Material Commitment
Save as disclosed below, there are no material commitments incurred or known to be
incurred by the Group that has not been provided for, which upon becoming
enforceable, may have a material impact on the financial results/position of the
Group:-
There is capital contribution contracted but not provided for in respect of shares
subscription in the joint venture, JAKS Pacific Power Limited, amounting to
approximately USD110.14 million or * RM456 million, using exchange rate of
USD1 : RM4.1405 as at 28 September 2018.

* about 30% is cash commitment, rest being EPCC profits
07/12/2018 2:38 PM
qqq3 this young man choi worried IPP lose money....

corporate finance is worried how to complete the deal.....

u see...huge difference between book man and practical men.....
07/12/2018 2:56 PM
qqq3 this young man choi worried IPP lose money....

corporate finance is worried how to complete the deal.....

u see...huge difference between book man and practical men.....

actually not true....previously I just keep quiet.....but even old man sifu that KC from NZ missed the main point in all his writings about Jaks......

actually old man KC not any smarter not any better than young man choi.
07/12/2018 3:00 PM
Choivo Capital by my calculation it works.

By kyy's it don't unless, we have rate hikes of like 3% per annum.
07/12/2018 3:00 PM
qqq3 d by qqq3 > Dec 7, 2018 12:51 PM | Report Abuse X

no rights issue....I guarantee u....

They will have to dispose assets...including some or all of its stake Vietnam plant if terms are acceptable...actually, not bad one.....if they can arrange a sale but keep the EPCC profits which have been agreed upon...about $ 250 million remains....This share can still fly if they strike the right deal.
07/12/2018 3:03 PM
Icon8888 Jon, what does warren Buffett say now ? Buy or not buy ?
07/12/2018 4:03 PM
qqq3 lurker

now it is 50 sen
everybody very smart in writing eulogy

to me....those didn't sell above 70, too late to sell
those bot recently,, look to sell around 70.

others may want to keep and fight....well, its a huge IPP, 30% of 1.2 GW is a big deal for tiny little Jaks. Market cap $ 400M......It offers huge gearing effect for shareholders of Jaks. Its a US$ 2 billion project. If it works out, rewards are tremendous.

yes, immediate horizon, there will be cashflow problems for Jaks but gearing of .25X is manageable, back to the drawing board for them.......u weight that against potential reward from balance of EPCC profits about $ 250 million, ....with NTA $ 1.50 and .25 X gearing, eulogy is too early.

at 50 sen...eulogy ? what is the point?

buying the warrants at 25 sen? don't be silly when u can buy the shares at 50 sen......
07/12/2018 4:03 PM
kcchongnz Posted by qqq3 > Dec 7, 2018 03:00 PM | Report Abuse
this young man choi worried IPP lose money....
corporate finance is worried how to complete the deal.....
u see...huge difference between book man and practical men.....
actually not true....previously I just keep quiet.....but even old man sifu that KC from NZ missed the main point in all his writings about Jaks......
actually old man KC not any smarter not any better than young man choi.


Old man KC? All of us grow old. And I don't think you are younger than me.

You kept quiet? It is because you don't know much about Jaks power plan, besides shouting sailang and margin from RM150+.

I missed the main point? What point. You don't even have the faintest idea what the main point is to invest in Jaks.

How are you t compare with me? You are just thousands light years behind.

How are you comapred with Choivo?

You can't even smell his fart, although you are 40 years older and a self-claimed "accountant". Serious, you are thousand miles behind him in knowledge, experience and in humility.
07/12/2018 4:15 PM
Choivo Capital If not sure, don't buy.

But im a stupider version of him. So i still studying. If drop more, 1% position can lah. See what happen from there.

on the other hand, got so many other things. Really no idea ler.

This money im not sure if its for me to make or lose.

===
Posted by Icon8888 > Dec 7, 2018 04:03 PM | Report Abuse

Jon, what does warren Buffett say now ? Buy or not buy ?
07/12/2018 4:17 PM
Shinnzaii coal demand already shortage in vietnam and causing coal thermal power plant supply of electricity power cut...do you still think coal thermal power plant profitable in long run? or vietnam government invest in solar, wind and LNG power plant to replace coal thermla power plant?
07/12/2018 4:21 PM
kcchongnz Posted by qqq3 > Dec 6, 2018 11:23 PM | Report Abuse
so are u going to write an apology or not? better still with revisions and new thread.

Jon was trying hard to write something to share for those who owns Jaks or contemplating to buy Jaks.

Apology? For what?

You should be the one profusely apologize now as you have led many people lost a fortune shouting margin and sailang when Jaks was trading at RM1.50+.
07/12/2018 4:24 PM
qqq3 kc...why all air only but no substance....? be like me lah...talk with substance one.....
07/12/2018 4:26 PM
kcchongnz Posted by qqq3 > Dec 7, 2018 04:26 PM | Report Abuse
kc...why all air only but no substance....? be like me lah...talk with substance one.....

KC no substance and qqq3 got substance.

I give you a suggestion. Get your analyst son to read all my articles on Jaks and your articles on Jaks. Then ask him who got substance.

A good test on whether his "accountant" dad really got any substance in finance and investment, and how is he compared with an engineer.
07/12/2018 4:30 PM
qqq3 my son? don't involve him...no need.....anyway , have not met an analysts which is my equal...except Tong of Edge....
07/12/2018 4:39 PM
kcchongnz Posted by qqq3 > Dec 7, 2018 04:35 PM | Report Abuse
my son? don't involve him...no need...He is on holiday in Bangkok....anyway , have not met an analysts which is my equal...except Tong of Edge....

Oh My God!!!!

Well, I think I better just totally ignore you. It just a plain waste of time. You are from another Planet, But before I do that, I just borrow what somewhat who had met you and knows you very well as below,

"Dear fake accountant qqq3,
I am very mean and cruel to you in order to be kind to all the i3 community by exposing you for what you are. You are a fake accountant, a fraudster, a backstabber, a bootlicker, an ass-kisser, a shameless manipulator and good for nothing low life parasite feeding newbie and even super-investor Mr. Koon with manipulated information for you owe self benefit.
By exposing you and hitting at your conscience, I am trying to save the i3 community from your bad influence/evil and if possible save your soul/conscience too if you still have one inside you. Now I can say for sure your soul/conscience is beyond saving.
Can you now please prove to i3 you are a real accountant and tell us when you met Mr. Koon and for what purpose? I shall rest my case."
07/12/2018 4:46 PM
qqq3 kc...

actually your performance worse than young man choi....

Young man trying to prove viability of the ipp by extrapolate here extrapolate there...U trying to calculate IRR in vacuum.....How is more silly?

corporate finance is worried how to complete the deal..... refer to capital commitment for the project...

u see...huge difference between book man and practical men....
07/12/2018 4:46 PM
qqq3 kc...

actually your performance worse than young man choi....

Young man trying to prove viability of the ipp by extrapolate here extrapolate there...U trying to calculate IRR in vacuum.....Who is more silly?

corporate finance is worried how to complete the deal..... refer to capital commitment for the project...

u see...huge difference between book man and practical men....
07/12/2018 4:47 PM
qqq3 Posted by i3lurker > Dec 7, 2018 01:21 PM | Report Abuse

PN17 coming if no action taken, Chinese like this very much.
========

crazy talk....with so much assets,, where got PN 17....?

huge positive current ratio, huge assets....where got PN17?....what concerns Jaks is not creditors/ bankers liabilities....but its own commitment for Vietnam venture.

Material Commitment
Save as disclosed below, there are no material commitments incurred or known to be
incurred by the Group that has not been provided for, which upon becoming
enforceable, may have a material impact on the financial results/position of the
Group:-
There is capital contribution contracted but not provided for in respect of shares
subscription in the joint venture, JAKS Pacific Power Limited, amounting to
approximately USD110.14 million or * RM456 million, using exchange rate of
USD1 : RM4.1405 as at 28 September 2018.

* about 30% is cash commitment, rest being EPCC profits
07/12/2018 4:48 PM
qqq3 qqq3 > Dec 7, 2018 03:03 PM | Report Abuse X

d by qqq3 > Dec 7, 2018 12:51 PM | Report Abuse X

no rights issue....I guarantee u....

They will have to dispose assets...including some or all of its stake Vietnam plant if terms are acceptable...actually, not bad one.....if they can arrange a sale but keep the EPCC profits which have been agreed upon...about $ 250 million remains....This share can still fly if they strike the right deal.
07/12/2018 4:49 PM
ks55 Fake accountant.

Do you know that when share market not doing well like in 1997/98, the very first thing the broker house did was to dismantle the Research Department.

Your son's job is at risk now.
Donald Duck tsunami is coming wave after wave...........
07/12/2018 4:51 PM
Zhuge_Liang A bully will receive bad karma, it is just a matter of time only.
07/12/2018 4:54 PM
qqq3 ks...let him worry about it when time comes...not like u , cross road also worry sick.....
07/12/2018 4:54 PM
qqq3 bully...where I got bully? I just stating my opinion.....with reasons.
07/12/2018 4:55 PM
qqq3 kcchongnz > Dec 7, 2018 04:46 PM | Report Abuse

I just borrow what somewhat who had met you and knows you very well as below,

=======

met me? no no no...Never met that psycho and OCD patient SS Lee.
07/12/2018 4:58 PM
Shinnzaii Yes...fly awhile for special dividend declare from disposal of asset then going down...then park low lorh
07/12/2018 4:59 PM
qqq3 ks...fake accountant can talk strategic issues, capital commitments, and accountant terms very good already......

u? what u good for?
07/12/2018 5:05 PM
qqq3 ks...I really don't care if u are rich like Warren Bufalo......but fake accountant can talk strategic issues, capital commitments, and accountant terms very good already......
07/12/2018 5:10 PM
ks55 Can you sleep tonight?
DJ going to sink again tonight just like yesterday, and Tuesday.
07/12/2018 5:12 PM
qqq3 me? I could have sold off my trading positions at almost breakeven .....but I choose to fight...At the top, it is good to react fast...at current levels, often react too fast is a mistake.....
07/12/2018 5:34 PM
VenFx JON bro,

Why not trying to shake some light out for PADINI ...
Be it FA or TA , i'm sure PADINI worth to for discussion.

i'm looking forward for somewhere at 3.00 or below .
WHAT SAY U ?
07/12/2018 5:47 PM
Choivo Capital Venfx, padini have some very interesting moats. I had once worked with them.

But it has always been too expensive for me. Haha. Maybe now, can see again.
07/12/2018 6:27 PM
Choivo Capital Below Rm3, i can look.
07/12/2018 6:28 PM
janetchiam8 My personal investment principles are simple and very sound based on which I had managed to avoid many pitfalls and financial losses :

Avoid those with
1) complicated business models
2) poor financials especially companies with high gearings
3) businesses relying on projects/contracts with LONG GESTATION PERIODS
during which many unforeseen and serious business/economic/financial
problems/uncertainties can arise.

Item (3) above is relevant for JAKS
08/12/2018 12:33 AM
sogeking Aiyoyo
08/12/2018 1:22 AM
hollandking well, whether it be 50% discount or etc, things can go very wrong if co. keep diluting shares. No ending one.
08/12/2018 9:14 AM
hollandking so the question is how much co. going or willing to dilute.
08/12/2018 9:14 AM

(CHOIVO CAPITAL) An analysis into my 2018 Stock Pick results.

Author: Choivo Capital   |  Publish date: Wed, 5 Dec 2018, 9:52 PM


Well, this is a repost, as things got a little out of hand in the comment section there. Another lesson for the year, arguing with people online is a zero value add, and assymetrically negative activity. 

Lesson learnt.

 


For a copy with better formatting, go here.

An analysis into my 2018 Stock Pick results.

 

Overview

Well, 2018 was a fantastic year personally. Unlike 2017, when I felt so much stress when buying stocks. This year, most purchases were done knowing they are likely to be very profitable, and replete with opportunities to purchase are either the same prices despite an improvement in fundamentals, or at increasing discounts!

However, for many, I imagine it was likely to have been incredibly painful. Unless one is a very shrewd trader, or a truly inoculated value investor.

After the incredible rise of the mid-caps of KLSE in 2017, and the non-stop bull run of markets worldwide.  Most have predicted 2018 to be another bull year. Me included.

However, as always, we humans are often fools extrapolating the now into the future with zero understanding of natural feedbacks.

Thankfully, whether I thought it was going to be a bull year or bear year meant little. As I don’t operate based on macro views, but rather from the bottom up.

From a year of zero volatility in 2017, to a year of maximum volatility in 2018.

There was a trader in the US nicknamed “50 cent”, who went from having a negative USD200m trading P/L, from buying out of money options VIX (volatility index tied to CBOE) consistently throughout 2017, who in the space of 3 days, turned that into a profit of USD200m in 2018. A swing of USD400m

Most have “Turkey before Christmas” thinking, selling options on the put options on the VIX. This man has “Drill for oil and pray for cash to last long enough to find a well”.

Oddly enough, my stock picks for the 2018 competition, far outperformed my portfolio, with a drop of 1.77% versus a drop of roughly 12%. For now at least. The year is not over.

However, my guess is that, my actual portfolio contains significant amount of middling opportunities, compared to the 2018 competition picks, which contained a higher concentration of good ideas. And one fundamentally very stupid adventurous pick.

Why do a review now instead of the end of the year? Well, I have some time. That’s about it.

As I look back upon my picks last year as well as the thought process that went into picking them. I can’t help but feel very foolish reading the reasoning for some of them. A huge improvement from 2017, but still naïve. Here’s to hoping I feel the same way in in 2020 for my 2019 picks.

Let’s start.

 

Portfolio and Picks

https://klse.i3investor.com/servlets/pfs/99220.jsp

 

 

  1. RCECAP 30% (Gain10.25%)

Why this company? Well, Read this.

Lets talk about RCE CAPITAL (RCECAP)

Thankfully, I was smart enough to put the most money in my best and surest idea. The gain this year is just a happy coincidence. I would probably be happier if it fell 30% or something. Not if I opened my account everyday though!

 

 

  1. AEONCR 15% (Gain 19.21%)

I picked it last year as well.

An analysis into my 2017 Stock Pick Competition Results

The thinking is mostly the same, except I have a much better understanding of why they can charge such rates and increase revenue and profit so strongly each year.

To understand a little on the valuation of financial institutions, read here.

The valuation of financial institutions. And why Coldeye is wrong on MBSB

What’s so special about this company. Here’s a hint. Motorcycles!

This along with RCECAP, along with their very heavy weighting, saved my hide from my stupidity when picking for this competition.

 

 

  1. TIMECOM 15% (Loss 7.6%)

An analysis of TIME dotCom Berhad (“TIME”)

I'm happy with this one, as i wrote here in my fund update.

2018 – 6 month Update and Memo to my Investors.

It was a blockbuster year for TIMECOM. Even with Gorbind breathing down on everyone’s necks. Only thing was when i picked it, it’s was slightly higher than fair value, not cheap.

Now, it’s about fair value. I’ll probably pick it again this year, but in a smaller portion due to better opportunities in the market.

I’m particularly proud of this one, as it was my first deep research, and it’s quite a feeling to be vindicated, research wise at least.

Having said that, my mistake in relation to this pick in my portfolio, is that I bought too much at a less that attractive price in 2016, and thus couldn’t average down. And in 2018, when they were better opportunities, I did not sell it off for those opportunities.

However on the second, i am not so good an investor, that I can handle the emotional turmoil of shifting position and watching it go up the moment I have sold. Nor am I so certain in the difference in opportunity cost, as I was certain blockbuster quarters were coming, which may push up the price.

There I go speculating again despite knowing its likely to be a bad idea in the long run for me. Haha. Still weak and foolish.

But, that’s room for improvement, that’s the target for 2019.

 

 

  1. FAVCO 8% (Loss 9.68%)

Oil and Gas play. FAVCO is not a bad pick, nor were valuations bad. Management is great. Not a bad idea to have some in your portfolio.

For my 8% size, Dufu and Ahealth were in the running. But I decided against them for some reason. Probably cause I’m stupid.

SOP was a consideration as well. Well thank god i didnt pick it. But i did buy a 1.5% position for my portfolio. Hahaha. Probably time to top up.

 

 

  1. LIIHEN & LATITUDE (8% each) (Loss 14.21%,13.48%)

A postmortem of my wood based export picks.

As above. In real life, I sold my Liihen at RM3.2 for another company. Holding Latitude as it has a better cost base and lack that labour problem.

No idea why I didn’t pick Dufu or Ahealth. Whether here or real life. Ahealth was probably because it was a little expensive..

But LIIHEN and LATITUDE were also in hindsight expensive coming off record years.

 

 

  1. PLENITUDE 8% (Loss 3.22%)

Not much to explain. One of the best net asset plays in KLSE. And like all net asset plays, don’t hold more than 3%, because you’re not a liquidator, neither does one have infinite patience.

My NTA plays total about 20% of portfolio is real life. Although many of them a mix with earnings. They are by and large property development companies.

I'm thinking about reducing the percentage, considering how cheap earnings are now. But TROP or OSK at this kind of prices. Very hard. Much less KSL.

 

 

  1. DNEX 8% (Loss -40.77%)

Last year, I said this about SAPRNG

“By far my stupidest decision. I bought it, because i thought oil was too cheap, and should go up in price in 2017, and being a complete idiot, the only company i could really think of in a pinch was SAPRNG, so i picked it without even looking in the financial statements.

Thankfully, i never touched this in my personal portfolio.”

This year, I improved upon my previous year stupid mistake by studying the financial statements. However, when I bought it, it was not cheap at all. In fact, it was far more expensive than DUFU or even AHEALTH. And like SAPRNG, i did not really understand it, or have confidence in its ecpected value, beyond a "probably good" gut feeling.

Thankfully, I did not buy this for my personal portfolio. Unfortunately, neither did I buy DUFU or Ahealth.

 

 

Personal Portfolio

As you guys are probably aware, I’m not the kind to share my picks too willingly, much less explain them. I’ll just describe them in abstract, my thought process, as well as where I went wrong. I’ll be focusing mainly on the mistakes.

  1. About 2-3% of my losses (12%), are due to my purchase of warrants in LAYHONG, GADANG and INSAS. Despite being very small positions of about 4% in total. Tells you a lot about the sheer drops. 

    The only saving grace, is that I was at least conscious enough to know they have speculative elements in the, and thus sized them as if I was gambling, albeit more exuberantly than I would have liked.

    These are mostly unforgivable mistakes. Layhong, was an adventurous pick. Gadang and Insas, well. We’ll see I guess. But I wish I bought more of the shares instead to be honest.

    More of my thoughts are here.

    Much ado about warrants!

    They still have at least a year plus or 2 before finishing, so who knows. Might even be worth a top up.

 

  1. At one point this year, my biggest pick RCECAP fell to RM1.1. At that moment, I was so very close to selling all my LATITUDE, LIIHEN and TIMECOM to throw it all into RCECAP. 

    I felt that at that point, given the respective valuations. It was a good idea. But I didn’t. To be fair, LIIHEN was also damn cheap then at 2.3. But the rest, no excuse. If I did so, I would have been able to turn what was then a 26% position to 65% position., at the lowest price of the year.

    However, price movements do not dictate whether I was right or wrong. Good things happen to bad decisions, and bad things happen to good decisions. Realistically, i can only control and improve on my thought process. Mr Market can offer whatever price it wants at any point in the day.

    So i'll review that instead. And in terms of thought process, I don’t think it’s my stupidest mistake of the year.

     

    In 2017, I was a lot more active (and my broker a lot happier), however, all it did was cost me money (transaction cost), cause me constant emotional turmoil and weaken the only edge I have in the market, which is patience and the ability to estimate the intrinsic value. Unable to make good decisions, my returns despite looking good, should have been much better.

    After a month or two of that headache. I stopped looking at my portfolios and the i3 website. I also happened to read this statement where Buffet and Munger said to look at your companies as private holdings. And so i decided to do that.

    So, I forced myself to never sell, unless there is a large shift in fundamentals or if its now close to fair valued far higher. 2 transaction a month. My remisier can’t even buy a meal from my transaction cost! Haha.

    I aim to improve on this in 2019. But we’ll see.

 

  1. And the stupidest one, but the least financially painful one. 

    One of the companies I seriously thought about in the last month or two was ALLIANZ. It was a great business, management is great and there is a lot of room for growth.

    Seemed very undervalued at 6 PE (this is just a tool used to explain more easily. To understand how to value insurance companies, read this,

    The Art Of Valuing Insurance Companies and why Teh Hong Piow is a god (LPI), )

    and I chalked it down to the low dividends. I built a 4.5% position with margin finance, before I realized my error.

    They have preference shares that are changeable on a 1:1 basis with the ordinary shares. Considering the dilutive effects, PE goes to 12. Which is more like fair value.

    This was because i used to just breeze past the share capital note, along with what i considered to be non-key areas.

    I instantly queued to sell everything and just eat the coupled hundred loss (including transaction cost). And after selling it all, it promptly went up above my purchase cost in an hour or so.

    Hahahahahaha Ces’t la vie. Thus is life.

    Remember, read everything!

 

 

Conclusion

I hope this was as useful to you reading it, as it was to me writing it out. And if you’re one of those people who are looking for my flaws and mistakes to rub in my face (not surprising, considering my behavior here this year, along with the number of people I’ve insulted).

Here is your ammo. Please do so persistently. I'd hate to forget my mistakes. It would be great if someone could remind me of them constantly and preferably for free!

Allow me to apologize if I do not take the time out of the day to reply. There is a country song I like,

“If the phone doesn't ring, it's me”

Take my silence as my reply. Also, i'd like to be on better behaviour moving forward. To better control my contempt, derision and disgust. It has probably cost me more than i would like.
 

====================================================================

Facebook: Choivo Capital
Website: www.choivocapital.com
Email: choivocapital@gmail.com

 

  meridian33 likes this.
 

(CHOIVO CAPITAL) Lets talk about RCE CAPITAL (RCECAP)

Author: Choivo Capital   |  Publish date: Sun, 2 Dec 2018, 7:27 PM


For better formatting, visit RCECAP 


After much consideration, i decided to share out my famous RM5,000 research. Which due to very few having seen it, is more famous for the price tag than the content. Despite the price tag being said mostly out of jest. I was however, serious about not giving it out for free.


Having said that, people outside of my investors have seen it, by virtue of having provided me value equivalent to that amount via their critiques, and their sharing of their own ideas with me, rather than actually paying the amount. 


I firmly believe that the best ideas should be kept secret. As good ideas don't come by often. This is clearly not shared by people in our forums such as davidtslim etc.


The reason more likely than not, is because its not a good idea to begin with, and they wanted to capture the profit without needed to be right by frying up the shares before they are proven right or wrong, thereby locking in the profit.


Its quite amazing for people like davidtslim to be wrong on every single one of his articles, on Hengyuan, Masteel, Lionind etc. And to still be profitable.


For more information on the above, please refer to 

The unique characteristics of the Malaysian Equities Market

The art of being a quarter predictor.


So, why did i change my mind?


They are two reasons,
 

  1. Its difficult for someone to understand how you think, unless they see a full bit of research. And to do so using "Google", "Facebook" etc is not good enough, as everything have already been said about those companies. One can very easily accuse you of plagiarizing it from others.


    With the opening of my site, and me deciding to start looking for investors seriously, or at least build a trail where potential investors can read and find me 3 years down the line.


    I have to pay something.



     
  2. With the sharp drop in equities prices in the last few months, coupled with me turning it into 32% of the fund. RCECAP have ceased to be my best opportunity, and even if it was, i can't buy more without risking my sleep. At the end of the day, its what you do not know you do not know that kills you.


    Back in late 2017, with equity prices so high, this was one of the best opportunities i can see. Currently, with prices of so many great companies falling 40-60%. I can actually find equally good investments for my fund. I've stopped buying anymore for the fund 2 months ago.


    And so the effect to my investors and myself is likely to be minimal, if any.

 


As always. Criticism is always preferred. I'm more interested in finding out where i'm wrong, or where you have a different perspective, than mere agreement.


I'm here to invest, via the pursuit of truth and make money. I'm not here to protect my intellectual reputation. If i turn out to be an idiot on something fundamental, its best to find it out now. 


Lets begin. 

 

RCE CAPITAL BERHAD (KLSE: RCECAP - 9296)

 

Recommendation

We are long RCE Capital Berhad (RCECAP – 9296), with intrinsic value estimated at RM2.61, offering 73% upside from its current price of RM1.50 on 31st December 2017. At the current price, the company is trading at 6 P/E and 0.97X Book.

 
 

Business Description

RCE Capital Berhad principal activity consist of the provision of personal financing to government employees in Malaysia through its wholly owned subsidiary RCE Marketing Sdn Bhd (RCEM). 


Unlike typical financing arrangements, RCEM employs a unique distribution and collection mechanism. Under non-contractual arrangements that RCE has with various cooperatives and foundations, loans are channelled to these organizations for lending to their end-borrowers who are government employees, via a personal loan scheme with direct salary deduction.


As of 2017, loans are channeled to the cooperatives, Yayasan Ihsan Rakyat ("YIR") and Yayasan Dewan Perniagaan Melayu Perlis Berhad ("YYP"), through whose body, it manages the lending to government employees. Loan repayments are done through direct salary deductions.


 

Overview

RCECAP’s business focuses on giving personal loans to goverment servants in the B40 (Bottom 40% Earners) segment who often cannot get loans from conventional banks.


This additional risk is remunerated via higher interest rates (average effective rate of loans is 15%) and mitigated by the low loan sizes (average size of RM15,000) and most importantly, the nature of its repayment process.


The company borrows money at 4.5%-6% (via loans from banks, bond issuances, or securitzation of the loan book) and loans them out to the government servants at roughly 15% to 20%. Net of impairments, the company makes roughly 6.5% return on assets. The second highest in Malaysia


As they are a financial institution, and have much more predictable cashflows, they are also able to leverage up significantly higher than non-financial institutions safely. The company is currently leveraged 2.5 times. Giving them return on equity (return on every additional dollar invested) of roughly 16.5%.


Most non-deposit taking financial institutions can leverage up to 5 times safely. This would indicate “industry normalized” return on equity of 33% return on equity which is quite impressive.


Another thing about financial institutions, is that they are essentially perpetual growth engines. Banks generally grow in line with the economy. When people have higher income, they tend to borrow more, rather than less. This proves accurate up to a point. With the difference being the rich tend to borrow more for investments.


The low-end civil servant borrows to buy a Proton, the mid-end engineer, borrows to buy a Honda and the manager borrows to buy a BMW.


To understand further about the development of credit, and how the US went from being a nation of net-savers to net consumers (and how most of the world is following in those footsteps), read “A Piece of the Action: How the Middle Class Joined the Money Class” by Joseph Nocera.

 

Investment Thesis

  • Favourable Industry Dynamics and unwinding of biggest competitors

    Remuneration of government employees have grown from RM16 billion in 2000 to RM78 billion in 2018 or CAGR of 9.2% per annum. RCE Capital Berhad loan book of RM1.4 billion consist of only 1.4% of the RM100 billion market for personal loans to government employees.



    Since 2013, its biggest competitors (Bank Rakyat and MBSB) have been unwinding their loan books, with their growth tapering, or stopped altogether. On the other hand, the loan book of RCECAP have been growing at CAGR of 7.7% from 2015 to 2018.


    Why? Well, referring to the report by Maybank


    “In 2009, MBSB burst aggressively into the personal financing space, with a 4-year CAGR (2008-2012) of 169%, and its personal loans portfolio ballooned from just MYR342m in 2008 to MYR17.8b by 2012. Competition among the players heated up and soon, institutions were extending personal loans of up to 20-25 years in tenure (as opposed to 5-7 years for loans extended by the commercial banks).

    Concerned over the rise in household debt, which stood at 82.9% at end-Mar 2013, BNM announced several restrictions in July 2013 that included: 1) a maximum tenure of 10 years for personal financing and 35 years for residential and non-residential properties; and 2) prohibition of pre-approved personal financing products. We understand that it also encouraged banks and NBFIs to comply with a debt/service ratio (DSR) cap of 60% for urban borrowers with income of 



    RCEM’s loan book was marginally impacted, declining 2% in FY14, but the biggest impact was to its bottom line. A decision was made to revalue its receivables that were up to 25 years in duration, in light of the shorter tenure imposed by BNM. This resulted in higher provisions and a plunge in RCE Capital’s net profit to just MYR10m in FY13 and MYR13m in FY14, from MYR101m in FY12.”



    Basically, after that happened, everyone had to make provisions and got burnt. MBSB took on a kitchen sinking exercise that lasted 3 and a half years. Their biggest competitors then decided to focus more on home, corporate/commercial financing. With MBSB taking up a banking license.


    Due to the unwinding or non-growth of its competitors’ loan books in this sector, they can make higher quality loans, resulting in Non-Performing Loans (NPL) falling from a high of 15.7% in 2012 to roughly 4% in 2018, with the NPL of new loans made after the change in credit assessment averaging just under 2%.


    Even in banking, the words of Seth Klarman rings true.


    “Where to best apply your focus and skills depends partially on where others are applying theirs. When observing your competitors, your focus should be on their approach and process, not their results. Short-term performance envy causes many of the shortcomings that lock most investors into a perpetual cycle of underachievement. You should watch your competitors not out of jealousy, but out of respect, and focus your efforts not on replicating others' portfolios, but on looking for opportunities where they are not.”


 

  • Skin in Game

    One of the best things about financial institutions is that, if the company is properly managed, it can be very hard for things to go wrong.



    As the income is recurring and largely predictable, if one manages their cashflow, loan requirements, risk models and actuarial tables well, money comes in like clockwork, every single day, on the dot.


    In addition, as the product is cash and well, everything in the business is basically cash. The companies are thus by nature, much more efficient at putting money to work.


    One avoids the inevitably lower returns that come from conservatively managed companies with robust cash balances. No matter how competent they are.


    The risk of bad capital allocations is also lowered. As there very little need for large capital expenditures (relative to the equity), which looking at the average, is anything but equity accretive.


    To obtain above average results, the management only needs treat the money as their own, be conservative, check twice and ensure that the risk taken in giving out loans is generously compensated.


    Given the requirements above, it’s clear that financial institutions that perform better, are likely to be owned by private companies or individual. Rather than a CEO hired by a state owner.


    And this is backed by research done globally. As per research by Marcia Millon Cornett, Lin Guo, Shahriar Khaksari and Hassan Tehranian on June 2005


    “The impact of state ownership on performance differences in privately-owned versus state-owned banks: An international comparison”


    The research stated, and I quote: 



    “We find that state-owned banks generally operated less profitably, held less core capital, and had greater credit risk than privately-owned banks prior and the performance differences are more significant in those countries with greater government involvement and political corruption in the banking system”


    RCE Capital Berhad have 61.5% of the shares being held by Tan Sri Azman Hashim, via his 100% owned company Cempaka Empayar Sdn Bhd.



    For more anecdotal and local examples, one can also refer to anecdotal evidences of the share prices and profitably of banks with strong private influence, such as Public Bank and Hong Leong Bank. As well as other privately-owned financial institutions such as Aeon Credit Service Berhad and Elk-Desa Resources Berhad.


    These companies have had profitability growth and share price increase far higher than the average state held financial institution such as Maybank etc.

 

 

  • Customer base consist primarily of B40 government employees.

    RCECAP’s business focuses on giving personal loans the B40 (Bottom 40% Earners) population and government servants who often cannot get loans from conventional banks.



    This additional risk is remunerated via higher interest rates (average effective rate of loans is 15%) and mitigated by the low loan sizes (average size of RM15,000) and most importantly, the nature of its repayment process.


    Unlike other loans, as these are loaned to government servants, this allows the company to make direct deductions on the salary. Every month, RCE Capital gets paid before the borrowers even sees their salary. There is a 1-2 month delay for the first deduction.


    In addition, as the guarantors are also often government servants, in the event the original borrower cannot make the payment, the Company will simply deduct the salary of the guarantor, providing a second layer of safety.


    In addition, Malaysians have historically had low financial knowledge or education. A study by Asian Institute of Finance (AIF) found only 28% of respondents confident of their financial knowledge.


    This is despite our natural human propensity to overestimate our own abilities as seen in another study where 80% of respondents considered themselves in the top 50% quartile when it came to driving ability.


    This lack of financial knowledge is particularly prevalent in B40 individuals, with most being unable to differentiate nominal and effective interest rates. Instead, focusing on monthly instalment amounts and upfront payments. They look at cashflow and their ability to meet them, not the interest rate charged. This allows the company to structure the loan to charge high interest over a very long period of time in exchange for lower payments.


    This ability allowed the company to make higher than usual profits. RCECAP have the second highest ROA in the industry at 6.11%. Most banks have ROA of less than 1.5%.


    As RCECAP can obtain loan repayments via salary deductions, they are able to issue personal loans much faster than the typical banks with no collateral down, giving them an edge.


    One of the ways the company sell these loans, is to have an officer bring all the paperwork to the client and complete the relevant checks proceed with loan disbursements within a day, or in some cases, in a few hours. To be able to issue loans so quickly without affecting loan quality is quite an edge.

 

 

Catalyst  

  • Increased Dividends

    Given the increased profitability and financial standing, the company have enacted a policy of paying out 20-40% of earnings. Dividends this year have risen to 7 sen a share (27% payout), compared to 3 sen a share previously. 

     

 

  • Time and increasing earnings

    Time is the friend of a good investment and the enemy of the bad one. Given the current valuations and the economics of the business, a purchase of the stock would likely be a good investment.



    At the end of the day, behind every stock is a company. And increased earnings result in
    higher valuations. With earnings steadily rising, and likely to be resilient. One can probably expect a good outcome.

 

Key Risks
 

  • Slowdown in remuneration or job cuts by the government.
    In Malaysia, we are well known to have a fat civil service, with the GE14 elections coming up, one would naturally worry about a downsizing in the civil service.



    However, allow me to point out that, historically worldwide, no government has ever cut the civil service, despite how bad things may become. And no government that has won office and cut the civil service have ever been re-elected.


    Government servants in the US are among the best paid worldwide with average salaries of USD70,000 per annum, with productivity per employee being almost lower than Greece.


    In San Jose, California, City Councils and politicians would rather cut down infrastructure maintenance and issue bonds just to meet ever increasing payrolls. Even quasi dictatorships like Venezuela, which is currently facing inflation in the millions of percentage points, have not yet started firing government employees.


    For more information, read this


    California and Bust


    In Malaysia, the incentives are even stronger, with government employees being the single largest voting base. Our current prime minister, Najib won the last election by fattening the civil service.


    In the event PH wins the election (which I consider to be more than likely), they are not so foolish to ever consider that. Tony Pua have said the same many times over the years, and Mahathir is more than aware of the reality of the situation.


    At best, they can only freeze higher and lower increments. Which given the valuations, is more than priced in.


    The real risk, is in B40 government servants, leaving the civil service in large number to join the private sector. But this is highly unlikely for a few reasons.


    The kind of lifestyle afforded by being in the civil services, is very different from that of the private sector. In addition, that “1 hour breakfast, 2 hour lunch, 1 hour tea break” (not counting the smoke breaks etc), is likely to have slowly eroded the employability of the average B40 civil servant.


    To top it, civil servants also need to put in their 30-35 years to get the maximum pension. To leave before that period, is to lose almost everything.


 

  • Mismatch of cashflow
    Given the high leverage, management of cashflow is key. In the last financial crisis in 2008, other than,



     - The wanton abandon of standards in writing housing loans
     - The extremely high leverage of investment banks


    The reason the crisis happened and either bankrupted or destroyed the equity layer of banks in America and in other parts of the world is due to mismatching of the cashflow.


    This usually means taking out short term loans to buy long term assets. Needless to say, when one does business this way, the inability to roll over loans (or obtain new ones) and liquidate assets at reasonable prices quickly, can spell disaster.


    Historically, RCECAP have obtained financing via term loans from Ambank (where Tan Sri Azman Hashim, the owner of RCECAP, holds 12.97% shares).


    In recently years, it has shifted its financing from term loans to Sukuk Issues (bonds, but Islamic). These bonds were created via the securitization of the loan book, and the interest payment is paid out from the interest income received from the loan book. There are a few benefits to this.


     - Payment schedule is stretched out over a longer period.

     - Interest rates are now fixed, not floating, with a negligible increase in interest cost.

     - Borrowings is secured against the loan book instead of the company. Limiting exposure. Having said that, if a scenario where the loan book is taken away due to the inability to meet interest payments occurs, we are likely to be in trouble as well. Just a little less if it were a term loan instead.


    The downside to using a Sukuk, is that increasing deposits are needed to secure every drawdown of the sukuk. Resulting in less efficient but safer capital structures.


 

  • Inability to access CCRIS
    Currently the company is still unable to access BNM’s CCRIS system. The reason given being BNM’s priority in providing this access to other larger providers.



    However, the Company mitigates this by referring to CTOS reports. Which is arguably just as good and used by financial institutions.


    Another reason for the increased profitability is due to their own proprietary credit scoring system created in 2013, that helped to better sieve out customers profitably.


    We do not have details on this system, as the information is naturally P&C.


 

  • Other unquantified risks
    Prior to 2011, RCE did business with primarily KOBENA, KSB and KOWAJA. Post 2011, the business relationship with those 3 cooperatives have been terminated, and RCE now has two new business partners in YIR and YYP.



    In addition, in 2012, KOWAJA had to temporarily cease giving out personal loans, this affected the profit and revenue somewhat. The reason is not known.


    Currently the probabilities and effects of a change in partner/partners as well as potential for cessation of loan notices being given is also not known.

             

 

Valuation 


The average loan duration in RCECAP is about 7-8 years, with average loan size of RM15,000. At the current P/E of 6. Given the quality of the loan book, one can deduce that the company is currently selling at less than liquidation value.


Given the high-quality loan book (6% ROA compared to the typical less than 1.5% for most banks. A conservative PE of 10 appear to be fair, with other companies like Elk-Desa Resources Sdn Bhd and Aeon Credit Services Sdn Bhd, having P/E’s of 12 and 11.


To understand more about the valuations of financial institutions, kindly read the below article.


The valuation of financial institutions. And why Coldeye is wrong on MBSB

 

 

Update:


As expected, Pakatan Harapan won the elections. It may have been better if they have lost in the short term for RCECAP, but over the long term, it should still be a net postive.  For my thoughts on these, you can refer to,


PH Win, I Called It!! Whats next?


The Malay Tsunami and the effects of elections on the economy (and by extensions, the market)


In relation to the things that will directly affect the company, our current prime minister, have reiterated our view, that the civil service cannot be cut. Or in the words of Tony Pua “Unthinkable”.


The 17,000 government servants/political appointees that will be let go is by and large high-income earners. With Tun Mahathir, stating that the B40, if any will be spared.


In any government, the lowest income groups are the last to be fired, if ever. As they consist of the largest demographic. Votes are one man one vote. Not one dollar one vote. Thankfully.


With the new government in place along with a much higher earnings base I do not expect, growth to continue as strongly as they did in prior years.


However, given that valuations are still at liquidation value, despite the increase in profits and the doubling in dividends. This sheer margin of safety, means that the difference in price to intrinsic value is still very attractive.


Disclaimers: 
Refer here.
 

====================================================================

Facebook: Choivo Capital
Website: www.choivocapital.com
Email: choivocapital@gmail.com

Labels: RCECAP
  8 people like this.
 
probability Finally, i have achieved what i wanted....Jon's recommendation without taking out 5k from my pocket... he he

I like it. Keep it up Jon!
...........................


sifu Jon, any idea...why the revenue dipped after 2010 by almost 50% by year 2014?
02/12/2018 7:51 PM
Choivo Capital BNM was afraid of housing debt being too high and started 2 rulings.

1) a maximum tenure of 10 years for personal financing and 35 years for residential and non-residential properties

2) prohibition of pre-approved personal financing products. We understand that it also encouraged banks and NBFIs to comply with a debt/service ratio (DSR) cap of 60% for urban borrowers with income of MYR5k/month and sub-urban borrowers with income of MYR3k/month.


Back then some personal loan was at 25 year tenure or so, this meant all the borrowers had to call in or restructure the current loans.

Needless to say many could not pay back the new amounts, and thus, they had to impair.
02/12/2018 7:56 PM
Choivo Capital Unlikely to keep it up to be honest. Unless the new position also reach maximum size.
02/12/2018 7:56 PM
Choivo Capital Not a buy call, got equally good investments in the market now.
02/12/2018 8:06 PM
feimah Wow very good research.
Do you have the insight on asset ratio between deduction at source and non deduction at source?
02/12/2018 8:51 PM
soojinhou Thanks for sharing. But I' sure you pissed off those who paid the 5k hahaha
02/12/2018 9:06 PM
qqq3 stock market very easy one......

any stock also can trade...good bad ugly also can trade as long as price and situation is right.

BUT GENUINE INVESTORS SHOULD LOOK FOR

Good management, good business and good numbers in that order......

if it does not look right, don't get involved...much easier than analysing KYY comments.......

the next question is....u want to be contrarian or you want to join the crowd.....


see....its easy....but this ss guy is weird because he doesn't seem to have a clue....so he goes off talking about any thing every thing except stock market........
02/12/2018 9:13 PM
Choivo Capital Haha nobody paid 5k. usually they invest in the fund.

or we just talk and if i think they're critique will be of value, i'll share.

====
soojinhou Thanks for sharing. But I' sure you pissed off those who paid the 5k hahaha
02/12/2018 21:06
02/12/2018 9:16 PM
Choivo Capital Not sure how you mean.

However, they can only deduct up to 60%.

====
feimah Wow very good research.
Do you have the insight on asset ratio between deduction at source and non deduction at source?
02/12/2018 20:51
02/12/2018 9:18 PM
feimah RCECAP’s business focuses on giving personal loans the B40 (Bottom 40% Earners) population and government servants.
What is the loan exposure % between B40 and govt servants?
02/12/2018 9:23 PM
Choivo Capital They only give to government servants if im not mistaken.

Some say certain GLC staff can get loans from co-ops as well. But i never asked.

good catch.

===

Posted by feimah > Dec 2, 2018 09:23 PM | Report Abuse

RCECAP’s business focuses on giving personal loans the B40 (Bottom 40% Earners) population and government servants.
What is the loan exposure % between B40 and govt servants?
=====
02/12/2018 9:29 PM
feimah Thanks for your speedy reply. It is a good piece of work you shared here.
02/12/2018 9:32 PM
Flintstones Good. Finally some quality article being posted on i3.
02/12/2018 9:37 PM
supersaiyan3 Good one.

However, under the present government, anything could happen. That's the risk premium.
02/12/2018 9:38 PM
Sslee Dear all,
Repost my comment from other blog:
Dear Fabien Extraordinaire,
In the world that reward mediocre, pretender and half hearted effort. A raw diamond, rare talent and passionate work are indeed a very rare to find and when one comes along into i3 community we should welcome him and if possible give him some constructive critical review and help in polishing this raw diamond into a shining star.
Jon is young, well read, knowing his subjects well, articulate, passionate and has the fire/braveness inside him to confront establishment with out of box idea and fresh air. These are the qualities New Malaysia needed the most from our Y&Z generation with critical thinking that can make an impact for the betterment of society and country.

Yours question:
Koon+ Bee + Choi = an awesome team a world champion
My take on the above is the team would not happen and it won't work.
Simple reason being their investment philosophy and thought process is vastly different from each other.
Their brain is wired in a very different way.

My take: In the place I work now there is this statement from our President Director;
Our Key Driver: People
We believe in developing a high performance team this is greater than the sum of its parts. Our team members contribute their unique backgrounds and cultural experiences to ensure high quality products to our customers.

It is because of vastly different thought, investment philosophy and across three different generations that will make this team awesome. Of the three, someone has told me Mr. Koon’s brain had already been hard wired for so long and impossible for change but reading Koon’s latest humbling article of JAKS Forced Selling. Please don’t count Mr. Koon out from this team yet.

Thank you
03/12/2018 8:57 AM
Choivo Capital Thanks Sslee.
03/12/2018 11:20 AM
joekit its just a small growing company. nothing to shout about... dont bet too big on it.
03/12/2018 3:43 PM
Choivo Capital Yeap. They are some additional risk i did not disclose, as i was too lazy to write. But its not a fantastic company. Merely good. But at this price. Well.
03/12/2018 4:12 PM
TakeProfits Jon, may be the stock not that exciting. Hopefully the main shareholder need to do something about the share price. Haha. I don't hold any Rce...at moment?
20/12/2018 8:14 PM

(CHOIVO CAPITAL) Remember Croesus

Author: Choivo Capital   |  Publish date: Sun, 2 Dec 2018, 2:28 AM


One of my favourite articles from KCCHONGNZ, illustrated the story of Croesus. He was a Greek king, who was also the first to issue gold coins. He was one of the richest and most powerful men on earth at the time.

Croesus, secure in his happiness, his wealth and his power, asked the oracle Solon, if he was the happiest man in the world.

Solon's response that three had been happier than Croesus: Tellus, who died fighting for his country, and the brothers Kleobis and Biton who died peacefully in their sleep after their mother prayed for their perfect happiness because they had demonstrated filial piety by drawing her to a festival in an oxcart themselves.

Solon goes on to explain that Croesus cannot be the happiest man because the fickleness of fortune means that the happiness of a man's life cannot be judged until after his death.

Within a few years, Croesus suffered the accidental death of his son, the suicide of his wife upon the fall of his city, and lastly, lost a war to the Persians, became a slave and was burned on a pyre.

Our track record is not done until we are dead.

And today, we read a post by a person, who despite all that has occurred, is probably still very wealthy and have a great life. But whose recent predicament, bears some similarity to that of Croesus.

 

 

 

 

A brief letter to Koon Yew Yin

 

Dear Mr Koon Yew Yin,

 

I’ve always been accused as someone who does not know his place. Someone who is “Boh Tua Boh Suay” or (No Big No Small) and a more than a little arrogant.
 

Well, they are truths in those accusations, and what I’m about to write will likely provide further evidence to these, admittedly partly accurate accusations. However, I felt compelled to write this, mostly for my own reflection and reminder, and partly for the possibility you might read it.


I know you are a busy person, so I’ll get right to the point.


When I first started investing seriously in KLSE markets circa 2016, your blog was one of the few I finished. I always felt you were a relatively sharp person, but having read buffet, graham and the rest since i was 12, and thus being an inoculated value investor, i always felt that the picks might have been a little off. Nevertheless, being younger and greedy, I decided to take a flyer on them.


It took me tuition fees of RM1,000-RM2,000 (Chinwell and Gadang) before i regained some of my sense, another RM3,000-RM4,000 to learn not to listen OTB blindly (Gamuda-WE) (we are different people with different philosophies), and another RM5,000-6,000 to understand the foolishness of short term trading, speculation and the aversion towards realizing a loss.


All of which are well worth the money, and the few months spent learning them.


The best way, is to properly learn and study all the greats thoroughly before we start investing. The second best is to lose some money and learn via experience while one is young not that rich. The third, is to lose a lot, or go bankrupt (not too badly) at an age where one still has a chance for a comeback.


Mr Koon, you are 85 years old. By my calculations (done in my head for 5 seconds), you should have lost at least RM60million or so on JAKS. Most of which are realized, some unrealized. Which should be the bulk of your investment gains for the last 5 years.


Despite being the former founder of IJM, Mudajaya and Gamuda. I am sure these are still a very significant injury to your finances.


From your recent article, I was heartened by your willingness to share your failures as well as some of your learnings from this recent event.


However, I must be frank. For RM60million or so. I’m not sure you have gotten your money’s worth.


As you’re likely to have other priorities and commitments that may prevent you from properly furthering your education in investing, via reading (for the record, I’m a big fan of learning vicariously through the experience and failures of others when it comes to money).  


Here is a list of quotes on investing I find most intelligent. The thing about quotes or sayings, is that they often encapsulate the essence of the topic.


https://choivocapital.com/quotes-on-intelligent-investing/


However, It would be better if you read the books, and see these ideas fully expanded along with the examples.


Here is a list.


https://choivocapital.com/2018/11/28/investment-books-to-read-and-why-you-should-read-more/


If you can’t find any of them, let me know, and I’ll send you a soft copy (or a hardcopy when I drop by Ipoh sometime next month).


They will cost your far less than RM60 million, but for someone of your stature and wealth, they’ll be worth a lot more than that.


You may contact me at choivocapital@gmail.com or ask Mr OTB for my contact. I have your contact, but I’m not one to impose uninvited.
 

PS: In your writings, you often said how you do not know how to read financial statements. I concede that the ability to read financial statements does not guarantee success in investing or speculating. God knows audit firms are filled with investment failures.


However, if you’re unable understand financial statements, then you go through your investment career like a one–legged man in an ass–kicking contest. You’re giving a huge advantage to everybody else.


Imagine how much better of an investor you would be, if you spent the one or two days learning to do so.


If you’d like, I am open to giving you’re a quick lesson over 2-3 hours when I’m in Ipoh.

 

Regards
Jonathan Choi

====================================================================

Facebook: Choivo Capital
Website: www.choivocapital.com
Email: choivocapital@gmail.com

  2 people like this.
 
John_Lee Jon Choivo,

You just dont get it that a business is a team game; the leader of the pack will not and does not need to know everything or be skilled in every aspect. Keyword TEAM. I attribute this to you being a small scale guy who hasnt seen the world out there.

Note: If you take KYY's words literally that he doesnt know how to read financial statements, then it really shows your limited ability to comprehend and interpret.

Back to reading financial statements. I have read some of your many postings in i3. Honestly, I find your accounting technical skills rather limited (in fact flawed many times) and your interpretations of financial statements generally average. You claim that you have an audit background. I dare say that you are not a product of the Big 4. (Yes, it shows.) Maybe a 2nd tier firm or maybe a medium sized. And you certainly did not spend a long time in audit - probably left after you obtain your MIA membership. Senior or Assistant Manager level at best. You do not show the skills, knowledge and maturity of at least a Big 4 manager. I stand to be corrected.

And I can tell that you are not trained at an investment bank. Again, I stand to be corrected but I am pretty confident.

What you write in i3 (with quotes and names throwing of so and so here and there) may impress the average layman. Some of us here who live in the financial industry however will not buy into your boasting and 'lagak pandai'.

There is nothing wrong with you writing your opinion in 13. It is after all a public site. But you should learn to handle your ego and arrogance. It is quite a pain to read your downright rude postings.
03/12/2018 12:59 PM
probability your quote below:

"Investment: The purchase of a security at a price at a significant discount to the value of all its future cash flows discounted to present value."

...........

Until all the future cash flows takes place the so called 'investor' by your definition is just a trader (calculated gambler) who is waiting for the valuation to match his perceived intrinsic value as per his predicted Future Cash Flows (FCF) based on his present knowledge of the business.


There are no certainty his estimated FCF will take place as per his prediction.


Investors are just traders who are predicting future cash flows (relative to different investment options) by sitting on their purchase for a slightly longer period relatively and ignoring - being less sensitive to recent information changes.

As much as trader who makes mistakes on their valuation, investors have the same odds of doing so equally.

...................................

Now, when one (person x) comes an enlighten the market with new information on the relative valuation of these investments as per x's perception, market appreciates this by reflecting the probable value of these investment based on this newly acquired knowledge (perception).

Perhaps in the near future another person y will enlighten differently and market will start valuing these investment back as it was earlier.

And then again in a distant future, person z may come and enlighten differently...

Until the future takes place and all these future cash flows happens no (traders or 'ínvestors') is certain who was right...x, y, z or the axxhole that never listened to any of these new information providers.

Now where is ethics involved here and where is the difference between investment and trading?

Its all just about being more intelligent than the other.

when someone come and help you to become more intelligent, a little appreciation and humbleness wont do any harm.
03/12/2018 2:31 PM
probability and what these x,y and z gains for the information they shared...is none of your bloody business...why bother? nothing is free man....

you are always free to scrutinize the information they shared..and chose to act or not to act according to your new perception..
03/12/2018 2:38 PM
Choivo Capital This is not business, this is investment. Unless you run a hedge fund that is doomed to underperform the index, you don't need that many staff. If you're good, 4 people can probably handle about USD200billion,

There is two things you need to note. Acccounting and Investing have very different requirements.

What is true and fair in terms of accounting, is often inaccurate in describing the economics in the business. Its trade offs, that have no easy solutions.

I dont remember writing much about accounting standards beyond MFRS9 for financial institutions. Whose audits i have zero experience with.

My previous audit firm (i resigned 3 months ago) has a bigger audit department than Deloitte. And i was scored pretty damn good in performance reviews before leaving. I also got an offer from PWC for AM last week (which i turned down). Audit firms dont pay much. ;)

Thank god i wasnt trained at an IB. I would be an utter IYI, intellectual yet idiot then. Working under fucked up incentives that are net negatives to society.

Lets have some fun, show me a five year projection that you made, and compare it to the actual. Lets see how much of your time and brainpower did you waste.

Or how these fools do valaution using industry average. Really? IHH is 50PE, when it can barely make 4% ROE much less ROA using peak results.

Or how past price trends and volatility mean anything in terms of risk.

Thank god for IB's and their training of their analyst in financial models. Along with economic departments in universities. They contribute to the inaccuracies in the market that allow people like me to profit off.

On the ego and arrogance. I concede i am definitely a little of both.

But do note confuse my contempt for hypocritcal, sewerage rats as ego/arrogance. I am both capable as judging someone as both brilliant and disgusting.

I dont know you well enough, but you seem to be an one of the latter.

Now, if you have crticism on my thought process and analysis. Be specific and elucidate.

====

And I can tell that you are not trained at an investment bank. Again, I stand to be corrected but I am pretty confident.

What you write in i3 (with quotes and names throwing of so and so here and there) may impress the average layman. Some of us here who live in the financial industry however will not buy into your boasting and 'lagak pandai'.

There is nothing wrong with you writing your opinion in 13. It is after all a public site. But you should learn to handle your ego and arrogance. It is quite a pain to read your downright rude postings.
03/12/2018 12:59
03/12/2018 3:04 PM
Choivo Capital Yeap having read your other comments.

Definitely an IYI. Lots of intelligence. Low common sense.

At the rate you're going on, i would strongly suggest you take you money out and buy fd along with the chinese index.
03/12/2018 3:09 PM
probability Jon, after my message above, and if you still could not grasp , i would need to conclude you are hopeless liao...having serious mental issues as said by others.

Pointless to have any interaction further.


Posted by soojinhou > Dec 3, 2018 06:54 AM | Report Abuse

Great to know that your contempt for everyone else other than yourself extends to professional analysts too. Let me remind you again that there are multitude of products like mutual funds, unit trusts, low cost etfs and fixed deposits for the uninitiated, uninterested and the risk-averse. We are not babysitters and no one guarantees a positive outcome from forecasts. In fact, analyst reports, either from i3 amateurs or investment bank professionals are pretty transparent in their thesis and valuation. While I have my reservations for professional analysts and fund managers, I'm not about to call them sewerage. You have some serious mental issues boy, and your language reflects your immaturity.
03/12/2018 3:24 PM
Choivo Capital You remind of people who go around studying and argueing about the exact day seneca was born, instead of just obtaining the maximum value by reading his philosophy.

The difference is this.

The figures given by these quarter predictor analyst in malaysia, are often unusually optimistic and far above the actual economic power of the company. And to often to do so with precision which end up to completely wrong.

And these quarter predictors, usually have their own motives hidden. Or at least not obvious.

I have no problem if someone bets their own money on the pop etc.

But i find it despicable when people try to manipulate the crowd to be stupider than it already is. One can argue, what's the use of fools except to be taken advantage off?

Well, nothing wrong with that. But i reserve the right to find you disgusting, and state so.

Now do note, i am not saying that is david etc.

But he sure comes close, knowingly or unknowingly.

I don't get why you or sjh, seems to think i have to consider people like david etc etc as angels of the market or somthing.

I find them a bit more ethical that people like "Spartan" or whatever name they appear by.

In any event. I'm done. There are few things less productive than arguing or dicussing things with someone online, that result in zero new insight formyself.

====
Posted by probability > Dec 3, 2018 03:24 PM | Report Abuse

Jon, after my message above, and if you still could not grasp , i would need to conclude you are hopeless liao...having serious mental issues as said by others.

Pointless to have any interaction further.
03/12/2018 3:39 PM
probability Even for investors to make money, he needs fool who cant value the future cash flows as good as he does...

What makes you certain that market (or crowd you said) is full of fools and that people like David can generate unrealistic optimism?

Market is ever changing and dynamic...it can be very efficient too.

So, stop these unsupported bias you have for certain methodology of investment and criticism on others...

as you simple do not have the facts to prove your judgement is more correct than the others.
03/12/2018 3:44 PM
probability what prevents me from saying investors have their own hidden motives to find a market which are stupid...they seek stupidity so that they can buy cheap?

Why cant i say the same to investors...despicable manipulate with ill intentions to take advantage of others?

stock market is about a calculated bet on future value...

whoever comes and helps with whatever financial and investment tools or business knowledge...are totally to be welcomed.

if they provide wrong information.. its the duty of the readers to highlight these for the benefit of all the readers including self.
03/12/2018 3:52 PM
Choivo Capital Wahseh, your reading comprehension really nothing to say.

I have nothing against people who trade, i do so a little myself.

Yes, if an investor sees a wonderful company, but spread rumours that its going bankrupt etc to buy cheaper.

That is despicable as well.

People who try and provide just knowledge, well they are of course to be welcomed.

But if someone writes an article espousing the wonder of a certain company. They are to be viewed with scepticism. Track the incentives!

Yes, i called out, yours and stockraider foolishness. Davidtslims, and that fella who went around predicting lionind earnings.

However, that is apprently not acceptable, by the fellow interested parties. You forget how you and raider sabo 3iii everyday ah?

You forget how SJH thought i was being very unfair to the guy who wrote the lionind article.

I quote

“The whole article consists of extensive network of data points taken from numerous sources, it took the author tremendous effort to piece together the whole picture. For that, his effort should be commended, not belittled.”

Waseh, challenge his arguements equal belittled.

For writing an article for which he will benefit very well financially from the goreng, even if it was completely wrong.

I should commend him.

Look if it was his own private research, then yes. I'll commend him and be in awe of the work done. He did it for his own curiosity, and he held it close to his chest, because he is so certain its a fantastic bit of research. So good, he don't want people to buy.

You think i give the rcecap research because my heart gold meh? No choice mah! And not going to be bad for me mah!

In any event, i'm done with this topic. Its of zero value to me, to continously piss off people here. And is probably a net negative.

An investor just wrote me saying that he was scared of asking me a question on some of the larger picks, because he didnt want to get sabo. As if i have some agenda on not wanting the any errorsor misjudgements to surface, allowing me to sell and save everyones money.

That is definitely not the result im looking for.
03/12/2018 4:07 PM
probability why you still cant understand...

during the point of writing an article, nobody knows the future...

its just a prediction..

even now i would repeat the same level of optimism on Hengyuan if the settings (the circumstances then) are exactly the same now...

The macroeconomics / business environment can change very fast...

If the settings remained exactly as it was during the writing of the article...investors would have gained tremendously when it takes place as predicted.

There were no certainty that their writings content would not be true during the time of writings.

If you with some special abilities could somehow have the foresight and see the error in these articles...should just give your counter arguments why you think their judgements were incorrect during that time itself and prove .

There is no point talking about it later after it happened.

There was no mechanism to predict their judgement were wrong at the time the articles were written.

It proves nothing by saying all the articles written by David turns out wrong.
03/12/2018 4:23 PM
Choivo Capital Dear Probability,

I must say, you have a way of getting me to reply to you haha.

Yes, the macro can change very quickly.

An intrinsic value consist of many factors. The management, the economic moat of the business, its pricing power etc etc

One of them being the cost of goods, as well as the price they can get for the goods they sell, which naturally fluctuate. Espeacially for commodity companies.

But as stated above, the intrinsic value is more than just the change in value in the price of certain goods, that resulted in a temporary increase or decrease in economics.

For example, HY is going to have a record breaking quarter. Does that mean it changes the intrinsic value by a larger amount? No. Unless that record breaking quarter is very resilient and going to persist to eternity.

That is clearly not the case for pretty much 99% of the companies in bursa.

Just because your son fail one exam, does that mean he go from genius to retard? No mah.

At best these temporary fluctuations, account for less than a 10% change all the future cash flows of the business discounted to present value. Or the real economics of the business.

Likewise, they are some events, that at first glance appear to have no effect on earnings. But represent a complete shift in the fundamentals, and can kill a company in 2 years or less. Look at star.

But these quarter predictors, act as if that is the case. Come on, how does it make sense to pay RM1.6 at all for masteel, Rm3.4 for Annjoo or RM20 for HY?

Now, HY was probably very very undervalued at RM2. But at RM7-10. It was probably above fair value d.

now, one can argue, some of these quarter predictors, probably didnt know better.

Well, their stupidity (malicious or innocent) resulted in some very bad outcomes for many people.

I guess its more of hate the sin, love the sinner.

In that respect, im definitely deficient.
03/12/2018 4:40 PM
John_Lee Jon Choivo,

You think too highly of yourself.

Good luck to you.
03/12/2018 4:51 PM
soojinhou He's just here to cari makan lah. He put down others so he can lift himself up. If not how to appear knowledgeable? OK lorr, it's his right to do that, it's an open forum.
03/12/2018 4:53 PM
probability For example, HY is going to have a record breaking quarter. Does that mean it changes the intrinsic value by a larger amount? No. Unless that record breaking quarter is very resilient and going to persist to eternity.

..................

(P): How did you conclude that the record earnings was going to be one time event and will not be the norm going forward at the time of the results?

what is the underlying mechanism that it wont be so....

and why did the market assume so and gave a price of RM 19?

..................

That is clearly not the case for pretty much 99% of the companies in bursa.

(P) : really? there are no companies that continue growing their earnings after such events?

..................

Just because your son fail one exam, does that mean he go from genius to retard? No mah.

(P) : how did you manage to link a son performance with a business performance...they are equally erratic?



I think you argument above arise from a highly debatable opinions....

you should focus on giving such arguments when such an article or unrealistic optimism arise in the future...so that its beneficial at that time...it certainly have no use now.
03/12/2018 4:56 PM
i3Value Hahaha. You all actually bother to reply to this Jon. He cannot see that what he do is exactly what he accuse other of doing. People blog is to pump and dump. He blog is to share his knowledge with the world. Hahaha. His vision is see himself only
03/12/2018 5:00 PM
i3Value No need argue with this kind people like Jon. You cannot win one. He will write something super long to justify to himself, not to you. He only live in his own world. And he need to always justify to himself that he is correct. That is why he must write long long. Deep inside he has very big insecurity. That why must show the world like he very good
03/12/2018 5:03 PM
i3Value I find so funny that this fellow so cocky want to sell service to Uncle Koon by writing open blog. Really no shame. He sure think hard a few days to write the letter to Uncle Koon. "Wah this time my opportunity come liao! KYY lose money. Is desperate. If i offer help him make money he sure think about it".

He didnt realise the whole laugh. He just made himself look so silly.
03/12/2018 5:09 PM
Choivo Capital Its a metaphor. Some events that happen are one off and have little bearing on the company's or the person's life in general.

first time 100 mark for maths. Well thats good, but that does not mean he will be nobel prize winner. The probability just went up by 0.5% or something.

You son took his first hit of heroin. Well. This one is likely to have a huge effect. His intrinsic value just went down at least 30%, even if he seems fine for the next 3 months.

=====
Just because your son fail one exam, does that mean he go from genius to retard? No mah.

(P) : how did you manage to link a son performance with a business performance...they are equally erratic?





They are. Probablity is low. 1% of bursa companies is about 9.

There are probably around 10 or less who have consistently maintained high ROE and ROIC for the last 20 years, coupled with increasing earnings. We use this as proxy to "record earnings for life".

as a whole, corporate earnings growth cannot exceed gdp growth for any significant amount of time, without having very very inequal outcomes. Like what happened in the US from 1970-now.

===
That is clearly not the case for pretty much 99% of the companies in bursa.

(P) : really? there are no companies that continue growing their earnings after such events?






Markets are dynamic, crack spread do not stay fat all the time. Comodity prices do not stay high all the time. Even when its really hard to get like cobalt and lithium

If its expensive, people will find alternatives.

If crack fat, people delay maintainence, increaseing supply, lowering spread.

If crack thin, people do maintainence now, decreasing supply, fattening spread.

The only questions is, how good is you plant to begin with. I wrote this so many bloody times, and i can't rmbr how many times, i, ricky and 3iii got called pondan.

Same thing with steel etc etc.

====
(P): How did you conclude that the record earnings was going to be one time event and will not be the norm going forward at the time of the results?

what is the underlying mechanism that it wont be so....

and why did the market assume so and gave a price of RM 19?





So how do we counter this? When intrinsic value can shift so much or so little, whether up or down?

Improve thinking process.

Margin of safety, and being conservative loh. Ben Graham 101.
03/12/2018 5:09 PM
i3Value Think properly lah Jon. Uncle Koon is billionaire. He lost this money heart a bit pain only. Wont affect his wealth much. At his level of wealth, he only not happy losing and ego kena knock.

You totally dont understand other people's thinking. Only your way to think is correct, right?
03/12/2018 5:11 PM
Choivo Capital I3value.

Yeah, i'm always wondering if im wrong.

And i always write long long so that people can see my thought process and hopefully poke holes in them and show me to be a fool.

Its better to find out you are one, than to actually be one and not know.

I dont write to share knowledge with, though if one found it helpful, i am pleased.

I write to crystlize my thoughts, to organize my thinking better. Writing is like thinking, but on steroid.

As for an audience. I'm fine with a few, with one or with zero.
03/12/2018 5:12 PM
Choivo Capital And you got your facts wrong. He is not a billionaire, but a millionaire.

Right now after that burn, he should still have about RM100m, but barely. I doubt he has Rm200m.


====
Posted by i3Value > Dec 3, 2018 05:11 PM | Report Abuse

Think properly lah Jon. Uncle Koon is billionaire. He lost this money heart a bit pain only. Wont affect his wealth much. At his level of wealth, he only not happy losing and ego kena knock.

You totally dont understand other people's thinking. Only your way to think is correct, right?
03/12/2018 5:13 PM
probability Ok Jon, looking at your feedback below...i can say you have a very different world which you are living as someone just said.

I must be living in my own world (unreal) as perceived by you.

Very difficult to bridge this two world...

At least i managed to get a glimpse of your world (dont wish to be there frankly)..

may be we can discuss again when either of our world comes a little closer in the future..

bye for now


Posted by Jon Choivo > Dec 3, 2018 05:07 PM | Report Abuse

Its a metaphor. Some events that happen are one off and have little bearing on the company's or the person's life in general.

first time 100 mark for maths. Well thats good, but that does not mean he will be nobel prize winner. The probability just went up by 0.5% or something.

You son took his first hit of heroin. Well. This one is likely to have a huge effect. His intrinsic value just went down at least 30%, even if he seems fine for the next 3 months.

=====
Just because your son fail one exam, does that mean he go from genius to retard? No mah.

(P) : how did you manage to link a son performance with a business performance...they are equally erratic?





They are. Probablity is low. 1% of bursa companies is about 9.

There are probably around 10 or less who have consistently maintained high ROE and ROIC for the last 20 years, coupled with increasing earnings. We use this as proxy to "record earnings for life".

as a whole, corporate earnings growth cannot exceed gdp growth for any significant amount of time, without having very very inequal outcomes. Like what happened in the US from 1970-now.

===
That is clearly not the case for pretty much 99% of the companies in bursa.

(P) : really? there are no companies that continue growing their earnings after such events?






Markets are dynamic, crack spread do not stay fat all the time. Comodity prices do not stay high all the time. Even when its really hard to get like cobalt and lithium

If its expensive, people will find alternatives.

If crack fat, people delay maintainence, increaseing supply, lowering spread.

If crack thin, people do maintainence now, decreasing supply, fattening spread.

The only questions is, how good is you plant to begin with. I wrote this so many bloody times, and i can't rmbr how many times, i, ricky and 3iii got called pondan.

Same thing with steel etc etc.

====
(P): How did you conclude that the record earnings was going to be one time event and will not be the norm going forward at the time of the results?

what is the underlying mechanism that it wont be so....

and why did the market assume so and gave a price of RM 19?





So how do we counter this? When intrinsic value can shift so much?

Margin of safety, and being conservative loh. Ben Graham 101.
03/12/2018 5:19 PM
i3Value You write so long for what? Go straight to the point. Only people with no confidence but still want to show smart keep repeat and repeat. And then write long long throw in technical terms and want other believe to see you as smart. You think still in university need to score point for essay?

----------

Posted by Jon Choivo > Dec 3, 2018 05:12 PM | Report Abuse

I3value.

Yeah, i'm always wondering if im wrong.

And i always write long long so that people can see my thought process and hopefully poke holes in them and show me to be a fool.

Its better to find out you are one, than to actually be one and not know.

I dont write to share knowledge with, though if one found it helpful, i am pleased.

I write to crystlize my thoughts, to organize my thinking better. Writing is like thinking, but on steroid.

As for an audience. I'm fine with a few, with one or with zero.
03/12/2018 5:23 PM
Choivo Capital You must have failed your reading comprehension.

"i3value is a retard."

That statement is useless mah. must support with reasoning and example mah.

unless for you, you only need that to make your conclusions lah.

In that case youre an analyst's dream. Just say "buy", you rush to sailang!

====
Posted by i3Value > Dec 3, 2018 05:23 PM | Report Abuse

You write so long for what? Go straight to the point. Only people with no confidence but still want to show smart keep repeat and repeat. And then write long long throw in technical terms and want other believe to see you as smart. You think still in university need to score point for essay?
03/12/2018 5:27 PM
i3Value You are his stomach worm? How you know?

Your brain really got big problem. People's wealth you know?

"Right now after that burn, he should still have about RM100m, but barely."

Can see your thinking. You know how much Uncle Koon got? You sure dont know what! But also you can write like his bank statement is in front of you.

----------

Posted by Jon Choivo > Dec 3, 2018 05:13 PM | Report Abuse

And you got your facts wrong. He is not a billionaire, but a millionaire.

Right now after that burn, he should still have about RM100m, but barely. I doubt he has Rm200m.
03/12/2018 5:27 PM
Choivo Capital Alright. If you say so, it must be the case.

I've reread what i've written a few times, and it still made sense to me. I have no idea how its a completely different world.

But, that must really be the case. I'm planning to read market wizards just so if i can see it better.

Probably going to get a headache, but for the reference experience, no choice.

===

Posted by probability > Dec 3, 2018 05:19 PM | Report Abuse

Ok Jon, looking at your feedback below...i can say you have a very different world which you are living as someone just said.

I must be living in my own world (unreal) as perceived by you.

Very difficult to bridge this two world...

At least i managed to get a glimpse of your world (dont wish to be there frankly)..

may be we can discuss again when either of our world comes a little closer in the future..

bye for now
03/12/2018 5:28 PM
Choivo Capital Its called an educated guess.

It uses the same thought process that one needs to go through life, value shares, intereact with people.

You either lack it, or you're purposely ignoring it.

Im not sure which is worse.


====
Posted by i3Value > Dec 3, 2018 05:27 PM | Report Abuse

You are his stomach worm? How you know?

Your brain really got big problem. People's wealth you know?

"Right now after that burn, he should still have about RM100m, but barely."

Can see your thinking. You know how much Uncle Koon got? You sure dont know what! But also you can write like his bank statement is in front of you.
03/12/2018 5:29 PM
i3Value Everyone also say this Jon live in different world. But then to Jon, he is the only one correct. Everyone else living in wrong world, everyone brain is short curcuit, no one else read as much as him, only Jon is correct.

----------

Posted by probability > Dec 3, 2018 05:19 PM | Report Abuse

Ok Jon, looking at your feedback below...i can say you have a very different world which you are living as someone just said.

I must be living in my own world (unreal) as perceived by you.

Very difficult to bridge this two world...

At least i managed to get a glimpse of your world (dont wish to be there frankly)..

may be we can discuss again when either of our world comes a little closer in the future..

bye for now
03/12/2018 5:31 PM
Choivo Capital When people like you say something like that.

Im not sure to be comforted to worried. On one hand, the crowd is defintiely stupid, having gone through the statistics at a friends brokerage firm.

On the other hand, i'm constantly worried, because there is no way im right all the time. But for some reason, its almost never the people i meet in real life who show me that, but those i can only meet in books.

Oh well, good luck to us both i guess. Dont be another statistic in my friend brokerage.

You know the ones who win big ones, margin and sailaing, lose even more. Then diam d, no trade for a few months while pay back debt.

Before after sometime, start back again same pattern.

I noticed you said this is a new account after awhile. Good luck!


=====
Posted by i3Value > Dec 3, 2018 05:31 PM | Report Abuse

Everyone also say this Jon live in different world. But then to Jon, he is the only one correct. Everyone else living in wrong world, everyone brain is short curcuit, no one else read as much as him, only Jon is correct.
03/12/2018 5:37 PM
i3Value As usual, call names again. Show your low level of intelligence, Jon.

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Posted by Jon Choivo > Dec 3, 2018 05:27 PM | Report Abuse

You must have failed your reading comprehension.

"i3value is a retard."

That statement is useless mah. must support with reasoning and example mah.

unless for you, you only need that to make your conclusions lah.

In that case youre an analyst's dream. Just say "buy", you rush to sailang!
03/12/2018 5:37 PM
Choivo Capital Comprehension fail again.

Student mistakes an "example", for an "accusation".

May be due to deep held insecurity.

Alright this is low, its like insulting children. It only brings me down.

Ciao!
====

Posted by i3Value > Dec 3, 2018 05:37 PM | Report Abuse

As usual, call names again. Show your low level of intelligence, Jon.
03/12/2018 5:39 PM
i3Value This is call the need to get people praise you and agree to your thoughts. Obviously major insecurity deep inside.

----------

I write to crystlize my thoughts, to organize my thinking better. Writing is like thinking, but on steroid.
03/12/2018 5:42 PM
i3Value Your writing style is always try to attack others but you leave a way out for yourself when people criticise you. So obvious. Want to insult others but yet scared other people see you lowly. This is call snake. Not smart or intelligent.

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Posted by Jon Choivo > Dec 3, 2018 05:39 PM | Report Abuse

Comprehension fail again.

Student mistakes an "example", for an "accusation".

May be due to deep held insecurity.

Alright this is low, its like insulting children. It only brings me down.

Ciao!
03/12/2018 5:46 PM
i3Value There we go again. You so sure of yourself obviously you will never see anything wrong with your own thoughts lah.

----------

Posted by Jon Choivo > Dec 3, 2018 05:28 PM | Report Abuse

I've reread what i've written a few times, and it still made sense to me. I have no idea how its a completely different world.
03/12/2018 5:49 PM
Choivo Capital When the person disagreeing is you, i'm naturally more confident of my conclusions.

If it was say kc, or ricky, or 3iii. I will need to think much deeper about the tradeoffs and my perspective.

Look, if you're going to crticize, be specific and elucidate.

Do you mean i leave a way out, or i have considered most factors well?

Look, its very easy to prove me wrong. Like my recent rcecap piece.

Just show me its overvalued, or my thinking on the economics is completely wrong.

Show me if they are hiding impairments elsewhere, cash is not real, valuations actually very high. Etc etc.

Thats it.

====
Posted by i3Value > Dec 3, 2018 05:49 PM | Report Abuse

There we go again. You so sure of yourself obviously you will never see anything wrong with your own thoughts lah.
03/12/2018 5:58 PM
i3Value Insult, insult, insult. Call names. That your nature.

Again clear signs of insecurity and lack of self confidence.
03/12/2018 6:06 PM
i3Value What do you think?

You think only you know what you are doing but others cant see?

Aiyoh.......... You really think you are the smartest person in the world right?

----------

Posted by Jon Choivo > Dec 3, 2018 05:58 PM | Report Abuse

Do you mean i leave a way out, or i have considered most factors well?
03/12/2018 6:08 PM
i3Value Why ask me talk rcecap to you? I didnt even mention rcecap. This is not even your rcecap blog.
03/12/2018 6:10 PM
Choivo Capital Brother,

Do you even see the accusations you levied against me in your very first message to me? As well as every subsequent one?

My gosh, it really is true. people are most blind to their own flaws.

Haha, dont get your panties in a bunch. Now you just look bad to be honest.

And i look even worse for intereacting with you, to deign your insults with a reply.

Its really true. Never argue with a fool. They'll pull you down to their level and beat you with experience!

====
Posted by i3Value > Dec 3, 2018 06:06 PM | Report Abuse

Insult, insult, insult. Call names. That your nature.

Again clear signs of insecurity and lack of self confidence.
03/12/2018 6:12 PM
i3Value This so funny. You reply my accusation of you being insulting by throwing more insults.

Your brain ok?

I quote you:

“My gosh, it really is true. people are most blind to their own flaws.”
03/12/2018 6:20 PM
Ayoyo Jon is still very raw.. Eventually, one way or another, he will learn.

Let's celebrate each other's flaws by making peace with our own intentions if coming to i3 in the first place.. To get trading ideas

In any event, if one still couldn't release their angst, consider jacky chan's reply to Chris tucker in Rush Hour

CT: how are you always so cool?

JC: that's because I don't argue with stupid people. Everytime I get into one with them, I just reply, 'You're Right!

CT: that's so wrong, man. You'll be a pussy to take shit lying down

JC: You're Right
03/12/2018 6:55 PM
PotentialGhost Fool always ignore he is a fool , same as sorcai Jon
03/12/2018 7:14 PM
PotentialGhost I3value why you want argue with an idiot?Let idiot show off and we just like watching comedy.
03/12/2018 7:21 PM
Choivo Capital Potential Ghost.

Unlike you, i did not lose money in jaks until cry father and mother.

In fact, i might be buying some soon at such potentially wonderful discount!
03/12/2018 7:23 PM
PotentialGhost Dunno this beggar Jon got 100k or not , laugh died me.
03/12/2018 7:28 PM
i3Value Jon, you have a habit taking note of forumer lose money. And then you use it to hit them. Leveraging on other people misery and losses is not cool. Very low
03/12/2018 7:31 PM
i3Value Jon Choivo always tell people go put money in FD. I want to ask Jon. Your returns this year more than FD or not?

If not, maybe you also better off putting money in FD
03/12/2018 7:34 PM
calvintaneng Calvin thinks Jon Choivo is many times better than Plp qqq3

He has input that has value

And because he is young with built in Ben graham inoculation he shall find the right path to investment success

After many have gone bankrupt Jonathan Choivo will still be around for a very long time

CHEERS!!!
03/12/2018 7:39 PM
Outliar Referring yourself in the 3rd person -.-
03/12/2018 10:42 PM

(CHOIVO CAPITAL) Fund Update - We now have a credit facility.

Author: Choivo Capital   |  Publish date: Sat, 24 Nov 2018, 1:18 AM


Dear Investors and IOU Holders,

 

Unlike my usual extremely long letters. This one will be relatively short as it is a brief update on some of the changes I’m making to the fund.

Previously, I’ve stated that zero leverage will be used. However, I’ve recently signed up for credit facilities of XX with Maybank Investment Bank. This is roughly 27.8% of the current fund size of XX.

Now, make no mistake, there are very good arguments for one to maintain a zero-leverage policy. There is a saying I particularly like from Charlie Munger.

“There is only 3 ways for a smart person to go broke. Ladies, liquor and leverage.”

However, having thought about it very deeply for the last few months, I’ve finally decided to go through with the process (you should read my flip-flopping text messages with my extremely patient remisier).

There are a few reasons for it, and I’ll elaborate about them in full. Before we continue, here are some salient details. Please consider it as an official update and communication.

 

Overview

Current CDS Account: XX

Pledged CDS Account: XX

Portfolio Value of CDS Account: XX

Portfolio Value of Pledge CDS Account: XX

A certain number of shares with a value of XX have been transferred to the Pledged CDS Account to obtain the credit facility of XX. Interest is 4.95%.

So why did I apply for credit facilities for the fund? There are a few reasons.

 

  1. To take advantage of the current fall in prices for equities.

As many of you may be aware, equities globally have seen a sell off, with many markets showing drops of more than 20%. Putting us officially in bear market territory.

The KLSE market, or more specifically the “BURSA MALAYSIA MIDS CAP INDEX” (which consist of companies listed in the BURSA with Market Capitalisation of RM200m to RM2bil and is roughly 84% of our portfolio) have fallen from 17,338.5 to 13,063, or 24.65%.

Meanwhile, the portfolio on a fund unit basis have only fallen by 12.6%. This is an outperformance of 12.05%. Those of you who have purchased additional fund units during the year would likely have obtained better returns on an internal rate of return (IRR) basis.

So, what does this all mean?

This means a fantastic insurance company that is growing at roughly 6% percent per year is only selling for 6 times current year earnings or 16.67% earning yield.

A wonderful petrol retailing, and refinery company is selling for only 5 times of its highly depressed current year earnings or 20% yield.

Profitable and dividend giving steel manufacturing companies selling for less than the net cash value or working capital. Buy the cash in their bank accounts, along with some inventory. The factory, land and everything else give you for free!

Property development companies selling at 70% discount to its book value or 5 times earnings. Why buy houses at 15% off, when you can buy them at 70% off!

In many of these cases, we can buy shares in these businesses at prices far below the cost of setting them up! And they also possess wonderful economic moats, which takes ingenuity, blood, sweat and tears to develop. All of which we are now getting for free!!

And I think having credit facilities ready would allow us to get more aggressive as prices potentially fall further and thus lowering our investment risk.

 

 

  1. Why not raise funds from current/new investors instead of getting credit?

The reason is twofold. As I’ve always said, in this fund, the safety of your capital comes first and foremost. I would rather lose clients than to lose clients’ money. This is doubly true for our IOU holders.

I’ve previously indicated that I would not accept principal guaranteed funds beyond 50% of my equity. And this is something that is ironclad. Because I believe this is the only way I can ensure my ability to pay back the money invested and the trust given no matter how bad things get. With the guaranteed principals currently quite close to that limit, headroom for further fund raising is limited.

The second reason is that, despite the lock period and the penalties that are in place in the event of an early withdrawal. This is not something I intend to enforce except for the direst of situations. At the end of the day, this fund is mainly a test run, and you’re all close friends or family.

As you may have noticed, I’ve added significant funds in the last month or so to take advantage of the cheap equity prices. It was around that moment, when I realized that I was all in and would not be able to fulfil any sudden withdrawals (like the one that has taken place this year) without selling stock that is extremely cheap. This is not a situation I would want to be in, or have the fund be in.

By utilising the credit facility, I would be able to keep significant savings to meet any sudden withdrawals without affecting the fund.

Having said that, I would not recommend selling your fund units at the current time and prices. I’m always more than happy to buy out anyone here. But it’s not my goal in life to benefit financially from the misfortune or the temporary suspension of intelligence from my friends, family and partners.

 

  1. Done correctly and conservatively, leverage can be good.

For many here, you may know someone who has lost a lot of money or gone bankrupt in the 1999 Asian Financial Crisis, or the 2008 Financial Crisis.

Personally, my grandfather bought shares using borrowed money near the peak just before the 1999 Asian Financial Crisis. During the crisis, he lost roughly one hill worth of rubber plantation to pay back the loans.

Decades of hard work gone over a moment of stupidity and greed.

Most people in the stock market use borrowed money very aggressively, especially since investment banks allow you to borrow roughly 300% of your capital. For example, our fund of XX, would be able to obtain credit facilities of XX if we wanted to.

However, if one did so, it would only be a matter of time before one goes bankrupt. At 300% debt to equity ratio, the values of one’s stock only needs to fall 30% before you lose it all.

And in times of crisis, the market can fall by 50-60%. We would go from having XX to owing the bank XX.

Even Berkshire Hathaway, one of the greatest and most financially stable company in the world fell by 50%. Google fell from USD346 to USD 155. Imagine being forced to sell it then, and then still owe the bank. Google today is almost USD1,068, even after the 18% drop recently.

Never forget the 6-foot-tall man who drowned crossing the stream that was 5 feet deep on average. In investing and in life, it’s not sufficient to survive on average. We must also survive on the bad days.

The real danger about margin finance is not just because its borrowed money, but because if certain conditions are met, the bank can force you to sell equities at prices you do not want sell.

However, if done correctly and conservatively, it can function just like a typical loan, with no possibility of forced selling.

With that in mind, I’ve decided that credit of roughly 30%-50% would be very conservative, especially with markets already down 25%.

So how does it work?

When borrowing money, the investment banks have this rule called a “Margin of Finance” (“MOF”) rule. MOF is basically the net borrowings over the portfolio value. Don’t worry about understanding it for now, I will provide you a table you can see and play with if you wish.

In our case, Maybank Investment Bank would borrow us money up to 60% MOF.

Margin Call is at 72% MOF, where they will request for top up.

Forced selling is at 85% MOF, when the bank will sell your stock for you, regardless of the price, because at 100% MOF, you would have lost it all, and the banks want their money to be safe.

 

 

 

For our more curious IOU holders and investors, below is a link.

https://docs.google.com/spreadsheets/d/1RbxBuvY3h70giCbJPwN6P7tY_MnIyyBSY0XXUgGGMXI/edit?usp=sharing

Based on the table above, our loan of XX starts us off at a very comfortable NEGATIVE 56% MOF.

The markets will need to fall an additional 75% from the current 24.6% drop, before the fund will need to meet any cash calls.

And in the event the 75% drop does happen, a deposit of just XX will bring us back to safety. Which I am very confident of meeting given the ample savings I have.

Incidentally, when Warren Buffet had his own fund or partnership. He too used credit facilities of roughly 35%.

What does a 75% drop mean for us in terms of stock prices?

It means, you can now buy property development companies that pay out dividends of effectively 24% per year at roughly 90-95% discount to revalued book value.

It means that the petrol retailer and refinery company is now selling at 1.5 times earnings or 66.7% earnings yield.

Being long term stock buyers, very few things would be better for us than such incredibly low price.

I would be taking out the special bottle of whiskey (and selling to buy more stocks!) , for any purchases then is virtually guaranteed to make a profit. The profit is earned the moment a bargain is bought, we just must count it later.

Having said that, the nature of borrowings, not matter how small, still results in the probability of bankruptcy going from zero to non-zero. But having considered things very carefully, those are odds I’m willing to take.

 

  1. Will this result in any additional charges to the fund?

In short, yes. However, it will be very minor.

Our current transaction cost is: RM8 or 0.09% whichever higher. Plus 0.1% stamp duty and 0.03% in clearing fees.

Purchases in the pledged account is: RM12 or 0.38% whichever is higher. Plus 0.1% stamp duty and 0.03% in clearing fees.

As I tend to buy in small numbers when topping up, we are likely to incur only the additional RM4 per transaction. Which considering my past buying or selling history, works out to RM8-RM12 extra per month.

In addition, the investment bank also charges RM2 to collect dividends on our behalf. Which is also why I’ve only transferred out biggest 5 holdings to the account. No point spending money that can be saved.

However, one of the benefits of a nominees account, is the ability for the bank to help us in in participating in any corporate exercises such as subscribing for right issues etc for a nominal fee of RM10 plus cost. These exercises are usually quite tedious and require a lot of form filling, stamp buying, driving around, going to the post office and making sure the company secretary gets everything.

There is also 0.5% stamp duty on the credit facility obtained along with RM10 for each company’s shares transferred. But these are refundable.

The only cost here is the RM60 charged to the fund for the opening of the account.

And in exchange for all this, we now have RM70,000 at 4.95% that we can use to purchase companies yielding 16-20%. Pretty decent deal.

 

 

Conclusion

Our more perceptive investors or IOU holders, would have noticed and wondered why not all the stock is transferred.

The reason is simple. At the end of the day, the safety of your capital is paramount. The XX is roughly 140% of the total third-party funds. I believe this provides an adequate buffer.

Also, we would be saving roughly RM60 a year in dividend collection cost, plus any additional RM4 transaction incurred in the event I sell anything. That is at the very minimum 12 plates of garlic chicken rice at Sunway!!

In addition, as your fund manager, I don’t think I will be using the full facility unless truly fantastic opportunities occur. For a day to day basis, only 50%  or XX will be used. In the event it exceeds this amount, I’m likely to pay it back down via my own deposits.

There is also likely to be a change in the report presented whenever a new deposit is placed. But I promise it will be clear, concise and easy to understand.

As always, if you have any questions, just call or text me.

====================================================================

Facebook: Choivo Capital
Website: www.choivocapital.com
Email: choivocapital@gmail.com

  2 people like this.
 
CharlesT No worries, u either make more or lose more only
24/11/2018 7:10 AM
lizi bad market use margin meh? uptrend only use margin ma....low can go lower woh...
24/11/2018 8:56 AM
Alex™ Lol. 5k fee hehe...

Revised: we need more commission, give us more money to give u fd rate return
24/11/2018 9:17 AM
paperplane I know thw mkt Monday. Its either up or down
24/11/2018 9:36 AM
deMusangking paperplane, 4 sure urs tonite will not go up!!!!!

hahaha
24/11/2018 9:37 AM
value88 It is correct to use margin financing in bad market in order to capture the opportunity.
Using margin in bull market means buying more stocks at its peak price and that guarantee downfall.
24/11/2018 9:39 AM
value88 I differentiate bear market into "small bear" and "big bear". Small bear means market down by >20% but less than 50%. Big bear means market down by >50% just like 1997/8 and 2008 crisis.

In big bear market, investor better sell every stocks and run even making a loss because there are a lot more to fall and the bear period will be long.
In small bear market, investor should accumulate undervalued stocks to capture opportunity and wait for better days ahead.
24/11/2018 9:43 AM
value88 I think what happens now is small bear. Hope I am right..
Many analysts and economics also think we will not be in recession in coming one year. Hope they are right..
24/11/2018 9:45 AM
Flintstones Very impressive Jon Choivo. You can manage your full time auditor job dabbling in the markets everyday?
24/11/2018 10:05 AM
Nelson Yoong only use margin fund after market crash like early 1999 and end of
2008 and early 2009 but only person with experience and patient and no itchy finger,i already standby coupled of millions from maybank ready for next market crash (don`t kown when,akan datang)
24/11/2018 10:18 AM
newbie5354_ Jon Choivo sifu can you elaborate name of the stocks referred? Is it SP Setia for property? Petrol retailer should be either HRC or Petron true? As for HRC so margin financing behind drop from RM 19?

It means, you can now buy property development companies that pay out dividends of effectively 24% per year at roughly 90-95% discount to revalued book value.

It means that the petrol retailer and refinery company is now selling at 1.5 times earnings or 66.7% earnings yield.
24/11/2018 10:21 AM
Nelson Yoong hopefully market not like end 2000 to 2003,dripping slowly but big CRASH!!!
24/11/2018 10:23 AM
lizi haha....newbie...

Posted by value88 > Nov 24, 2018 09:39 AM | Report Abuse

It is correct to use margin financing in bad market in order to capture the opportunity.
Using margin in bull market means buying more stocks at its peak price and that guarantee downfall.
24/11/2018 10:26 AM
CharlesT If i were jon i will buy more airasia....jon is this what u r going to do?
24/11/2018 10:46 AM
CharlesT At one time jon asked me to lend him money so that he can buy more airasia...i scared so i no reply pretending never see his message...

I no scare airasia no up but i scare airasia up but jon never pay me back only
24/11/2018 10:49 AM
newbie5354_ Jon Choivo Maybank margin financing rate is 4.95%? How fast can get approval?
24/11/2018 10:53 AM
qqq3 lizi..actually value88 and choi is perfectly correct

"It is correct to use margin financing in bad market in order to capture the opportunity.
Using margin in bull market means buying more stocks at its peak price and that guarantee downfall."

want to make some real money , want to make a name for yourself, must take some risk.....better still focus and sailang and margin at times....some more, margin during a hot market no use one.....sooner or later lose back every thing plus interest......margin at times like this, can keep the winnings.
24/11/2018 10:54 AM
qqq3 Life is a gamble
Have guns will travel
the winners become emperors.
24/11/2018 11:00 AM
qqq3 when losing money
must double down

that is what all great men do
including Baring Brothers
including Najib and 1 MDB....
including Warren the Buffalo.

lose become prisoners., win become emperors.

fair.
24/11/2018 11:10 AM
newbie4444 qqq3 I thought you support KC Chong no margin financing method why here said different thing?

Posted by qqq3 > Nov 24, 2018 11:00 AM | Report Abuse
Life is a gamble
Have guns will travel
the winners become emperors.
24/11/2018 11:15 AM
qqq3 u make me laugh only....because the reality is the direct opposite.


newbie4444 > Nov 24, 2018 11:15 AM | Report Abuse

qqq3 I thought you support KC Chong no margin financing method why here said different thing?
24/11/2018 11:19 AM
lizi qqq, so far i have been very successful in sailang using margin during uptrend...same like doing business, u must know when to attack and when to defend...have some business sense plz.
24/11/2018 12:51 PM
paperplane Tonite my lanjiao up and up, shiok shiok
24/11/2018 12:54 PM
sell AA go holland? Why everyday drop?
24/11/2018 1:01 PM
3iii "There is simply no telling how far stocks can fall in a short period. Even if your borrowings are small and your positions aren't immediately threatened by the plunging market, your mind may well become rattled by scary headlines and breathless commentary."

But for a levelheaded investor who's not deep in debt during a market crash, there are "extraordinary opportunities," Buffett added.

In an interview with CNBC on Monday, Buffett suggested that greed was a primary driver of margin debt.

"Borrowing money is a way of trying to get rich a little faster, but there are plenty of good ways to get rich slowly," Buffett said. "And - you can - you can have a lot of fun while you're getting rich as well. My partner, Charlie, says that there's only three ways that a smart person can go broke. He says, 'liquor, ladies, and leverage.'"



https://www.google.com.my/amp/s/amp.businessinsider.com/warren-buffett-on-margin-debt-for-stocks-investing-2018-2
24/11/2018 8:46 PM
3iii https://www.gurufocus.com/news/703636/follow-warren-buffetts-advice-stay-away-from-debt-
24/11/2018 9:18 PM
qqq3 lizi...then why u post....

Posted by lizi > Nov 24, 2018 10:26 AM | Report Abuse

haha....newbie...

Posted by value88 > Nov 24, 2018 09:39 AM | Report Abuse

It is correct to use margin financing in bad market in order to capture the opportunity.
Using margin in bull market means buying more stocks at its peak price and that guarantee downfall.
24/11/2018 9:30 PM
qqq3 3iii...u worry too much.
24/11/2018 9:32 PM
qqq3 for new kid on the block, wishing to establish the brand.....of course must be willing to do stuffs others do not do.

willing to hunt at the edges, not just happy to hunt in the middle.....

hunt at the edges where the grass is greener and can grow fat ( like Jho Low).....
24/11/2018 11:56 PM
Learner King slowly and slowly finally this joker is reveal himself...as i always said his reason here is just to find a water fish and promote his fund. I wonder how many idiots invested into his fund until the next JJPTR case explode. Haha
25/11/2018 1:46 AM
3iii >>>>Posted by qqq3 > Nov 24, 2018 09:32 PM | Report Abuse

3iii...u worry too much.<<<<


Never. Sleeps very well.

But I am long term .... very very greedy. :-)
25/11/2018 2:03 PM
Choivo Capital I'm no longer an auditor.

But oddly, i think i was much more hardworking back in the day when it came to stocks, rather than now, when i have comparatively more time.

I think its mainly because i've already all the annual reports in KLSE. So now, im more focused on expanding/refining my thinking and finding blind spots. Which comes from reading books that are not annual reports, meeting wiser people and living life a little more.

=====

Flintstones Very impressive Jon Choivo. You can manage your full time auditor job dabbling in the markets everyday?
24/11/2018 10:05
25/11/2018 6:22 PM
Choivo Capital Haha CharlesT,

As you can see below, its a joke ;) I'm just going to assume things got lost in translation over the internet, instead of any malicious intent.

Having said that, i must thank you for saving me a couple thousand in JAKS-WR by reminding me its an order form. If not for you, i would have only found out potentially a few hours later or even a day after. Which would mean i was unlikely to have been able to sell it all for a small profit.

Allow me to return the favor by answer the Airasia question seriously.

Airasia is currently 2.41% of the fund. And i'm definitely open to increasing it to 5%-7% of the fund. However, this position increase is only after other positions are increased.

Which i should be able to with the financing in place.

The thing about airasia is, its an incredible business that was a pioneer in certain practices in the airline industry, which makes it currently, the airline with the lowest CASK in the industry, currently at 2.02 US Cents Ex-Fuel. This is compared to 2.34 US Cents Ex-Fuel back in 2014.

Given the standard inflationary pressure of about 4% per annum. This is utterly incredible. The last few years, they have maintained it around there.

What are some of the measures they did to get such low CASK?

The main one is when they pioneered the method of buying hundreds of planes upfront over a long period, enabling them to get in some cases 30-50% discounts and the ability to modify the planes to their own specs. They then leased these planes to their affiliate companies across ASEAN.

They bought the planes so cheap, that they can actually make a profit selling it AAC Aviation in the sale and leaseback. Which is almost reminiscent of the deal Sapura did with Seadrill on the floating rigs. Except in this case, Airasia, like Seadrill is getting the good end of the trade.

The sale makes sense for AAC because interest rates in the US is so low and in the reach for yield, airasia can probably give them an IRR of more than 7-10% on the planes, and still make a profit on the sale due to how cheaply they were bought.

I personally have no preference in regards to them holding the planes or not. But i'm leaning slightly to holding the planes.

The problem now for them is, this method of operation, is copied everywhere now, with many players ordering hundreds of planes upfront as well. So for once, AIRASIA will be having very serious competition from the likes of LION AIR etc.

But at a normalized PE of about 6-7 times earnings, and a big dividend coming up. One would argue it is more than priced into the current price of the company.

========
Nov 12, 2018 12:38 PM | Report Abuse

Sneaky jon doubled position at 2.71.

Price go holland mai go holland loh. We can go visit amsterdam smoke some pot.

Go from holland to africa also can. We can go visit lion and eat lion meat burger.

As long as investment thesis don't change, i can buy till 10% of portfolio. But bolui!

Unker, want sponsor my airasia position boh hahaha

========

CharlesT If i were jon i will buy more airasia....jon is this what u r going to do?
24/11/2018 10:46

CharlesT At one time jon asked me to lend him money so that he can buy more airasia...i scared so i no reply pretending never see his message...

I no scare airasia no up but i scare airasia up but jon never pay me back only
24/11/2018 10:49
25/11/2018 6:42 PM
3iii Jon Choivo

You should be spending 80% of your time reading about companies esp the annual reports.

20% of time spend on refining your philosophy and strategy is adequate.
25/11/2018 6:43 PM
Choivo Capital You are not wrong. This was something i considered very deeply.

However, as you can see in my reasoning above, i think 30-40% margin is conservative enough.

I intend to constantly pare down the borrowings. When market gets hot, i expect the margin loan to be fully paid off and not utilized.



=====
3iii "There is simply no telling how far stocks can fall in a short period. Even if your borrowings are small and your positions aren't immediately threatened by the plunging market, your mind may well become rattled by scary headlines and breathless commentary."

But for a levelheaded investor who's not deep in debt during a market crash, there are "extraordinary opportunities," Buffett added.

In an interview with CNBC on Monday, Buffett suggested that greed was a primary driver of margin debt.

"Borrowing money is a way of trying to get rich a little faster, but there are plenty of good ways to get rich slowly," Buffett said. "And - you can - you can have a lot of fun while you're getting rich as well. My partner, Charlie, says that there's only three ways that a smart person can go broke. He says, 'liquor, ladies, and leverage.'"
25/11/2018 6:44 PM
Choivo Capital I've spent my 80% far ahead of time. Haha

Does not mean i don't read any more. But its more on maintaining the database in brain for KLSE.

If i were to read in bulk again, ill probably start with SGX. Im currently at the letter "C" for it.

But its a more leisurely pace than last time for sure.

===
3iii Jon Choivo

You should be spending 80% of your time reading about companies esp the annual reports.

20% of time spend on refining your philosophy and strategy is adequate.
25/11/2018 18:43
25/11/2018 7:34 PM
Fabien Extraordinaire Jon, noticed u kept asking ppl to put money in FD and China index.

what's ur intention, really? lol..
26/11/2018 2:41 PM
Choivo Capital Haha yeah.

I don't think much explanation is needed. You yourself can observe the demographic and the quality of investors here. Its probably better for them.

I've recently sat down with a friend, whose family owns a brokerage in Malaysia. A quick hint, it has the lowest transaction cost around for cash. And he stated that less than 25% make any money. Those that beat FD, even less.

Even the US market retailers are flowing in bulk to ETF's and Indexes.

China index is also one of the best for the next 10-30 years imho. If you studied a little about human history and why some societies made it, as well as the securities markets there.

====
Fabien Extraordinaire Jon, noticed u kept asking ppl to put money in FD and China index.

what's ur intention, really? lol..
26/11/2018 14:41
26/11/2018 2:52 PM
Learner King Dont dare to answer to my comments anymore ah? Joker or should i say Clown Jon Choivo...kakaka
30/11/2018 12:12 PM

(CHOIVO CAPITAL) The Art Of Valuing Insurance Companies and why Teh Hong Piow is a god (LPI)

Author: Choivo Capital   |  Publish date: Sun, 28 Oct 2018, 1:46 AM


My most popular post on i3 is currently,

 “(CHOIVO CAPITAL) The valuation of financial institutions. And why Coldeye is wrong on MBSB”

In it, I stated that, In general, most companies fall into 3 categories when it comes to valuations. They are

1.     Any company other than those in the other 2 category.

2.     Banks and Non Deposit Taking Financial Institutions. 

3.     Insurance companies.

And created a rough guide on how to value financial institutions and what to look.

It was only recently I found the time to properly study how to value insurance companies, and do my own research on Malaysian Insurance Companies.

I originally planned to release this at the end of December, the same time as my previous financial institution article. 
But I figured, what the heck, market is bad, most retailers are in “No Eye See” mode, anyway. The only ones left in i3, tend to be more thoughtful, and these are the people I want to identify and interact with more.


For those interested in really studying the insurance indstry, I would suggest you start by reading every single letter by warren buffet from 1957 to 2018. It’s about 3,300 pages. When you’re done, you will wish it was 10,000 pages.

Berkshire is after all the biggest reinsurance company in the world, and GEICO is the second largest car insurance company in America. They are also the most profitable insurance companies in the world. You will learn a lot.

Let me warn you first, this will be long. Insurance companies like banks have many hidden complexities, and to think you can just roughly value it is a mistake. There is a reason why many funds refuse to buy shares of insurance companies.

My nickname is Jon Lohsoh, and I intend to live up to it!

So let’s start.

 

Overview on insurance industry

The insurance industry is a very unique kind of business. Like banks, it is a little similar, in that the business in one way or another, consist of creating money out of thin air.

In the case of an insurance business. It like this. The insurance company hands over a piece of paper to the customer. The customer signs the paper and gives them back the paper and a stack of money.

Needless to say, the nature of it, is therefore one of a highly competitive commodities business.

Now the money received, is in more ways than one, a loan. And the goal of an insurance business, is for the cost of the loan to not be higher than the average borrowing rate, or better yet, the risk free rate. The best of the best insurance companies, actually make money on the borrowed money. IE, people pay them money to borrow them money.

This borrowed money, in the insurance industry is called “Insurance Float”. For Malaysian companies, we can easily derive this by taking the net insurance liabilities. They are various categories in the balance sheet (both asset and liability) side that relates to the insurance float, and you basically need to get the net figure.         

And the profit or loss (usually loss) on this float, is seen in the “Combined Ratio”, which is essentially the profit or loss over the net premiums earned. A combined ratio of lower than 100, means the float is profitable, a combined ratio of more than 100 means the float is unprofitable.

Another tool people often use in valuing the insurance business, is identifying the “Cost of Float”. This is essentially the insurance loss or profit, over the insurance float. It is recognized as a %.

This float is then used to invest in financial assets, to earn a higher return than the cost of the borrowed money. This is how most insurance companies make their money. Historically, almost every insurance company loses money in their insurance business and make it in the investment business.

A tool we use to try and identify the investing acumen of the insurance company, is “Investment Return on Float” which is the investment income divided by the insurance float.

And we thus reach our second part. There are two parts to an insurance business.

  1. The insurance business
  2. The investment business.

Let’s dig into them.

 

Investment Companies – Insurance divisions.

There are various types of insurance businesses with various products. But by and large they mainly differ in these key areas.

 

  1. Duration of contract and Counterparty risk

Depending on the product, travel insurance or reinsurance. The contract could have effects that last from either a few hours, or for a few decades.

Usually insurance like travel tend to have very short periods, vehicles, health, fire, life etc is usually one year.

While reinsurance contracts can sometimes last for decades. And the main risk here is counterparty risk. The longer the period, the higher the probability that the other party would not be able to pay up.

This is why we have things like T+3 in stock markets etc, because if it is T+120, the likelihood of the person being unable to pay becomes much higher.

Therefore, for things like reinsurance insurance, or catastrophe insurance. The thing most people look for is absolute financial strength. And this is the edge that Berkshire Hathaway has. The top 5 largest insurance premiums in the world were written by Berkshire.

Back in the day, people never really focused so much on the financial strength of the company, and tended to go for the lower offer. And since this is a business where someone signs a piece of paper and hands you over USD100million. Competition is naturally very cutthroat. With more and more people willing to take higher and higher risk.

And often, when these contracts turn out to be bad, and the Company is bleeding money. They are then forced into two choices.

  1. Go bankrupt
     
  2. Write more insurance contracts at ANY price, just so that more money can come in to cover the shortfall. Needless to say, the new contracts are even worse, and it’s a matter of time before the bleeding is too much for new contracts to cover.

    The insurance industry also has boom and bust cycles. So when one person is bleeding, the others usually are to. And when everyone is doing the same thing. Writing at any price to cover the increasing bleeding.


    When things end. You get catastrophic results. Which is why the insurance industry is in more ways than one much more regulated now.

 

  1. The size of average premiums

For things like travel insurance etc, they tend to be very small.For things like reinsurance, they tend to be huge, with one or two, reaching premiums in the billions of dollars.

This result very different kind of risk for each company. Most is elaborated in the point above.

 

  1. Predictability of the risks

For most of the products, the risk involved is very well known due to the sheer amount of data.

Car, health insurance, life insurance etc etc. All of these come with commonly available and well known actuarial tables.

The only edge most insurance companies of this kind, is to have an inherent business structure that cannot be beaten, economies of scale, better cost control, network effect and strong management.

What is strong management?

Any listed company will be subject to expectations of consistent growth in top line and bottom line. However, as the insurance industry is very cyclical like the stock markets. There are times, you must be willing to write nothing if the premium is wrong.

To allow your revenue and profit to drop by 50% or even 80%, because people are not paying you the right price for the risk being taken.

Many insurance bosses, know this, but needless to say, very few listed bosses dare to do this, other than Warren Buffet.

How about the rest? Network effect, Economies of Scale etc?

http://qr.ae/TUhTOV

I would strongly suggest you read this answer by Glenn Luk. It’s a brief study on GEICO, Warren Buffet’s car insurance company.

However, for the reinsurance business, special insurance and catastrophe insurance, large data samples are often not available.

What is probability of a hurricane hitting texas, and how has global warming affected your odds?

When selling catastrophe insurance, did you price in terrorist attacks? Or bio attacks? Berkshire lost USD2.1 bil in 9/11.

How much is Micheal Jordan's leg worth, and what kind of premium should we charge?

Very interesting question. And for these, you need extremely good management with a deep understanding of probabilities and risk. 

 

 

Investment Companies – Investment divisions.

What about the investment portion of the business?

For many insurance companies, your ability to invest this float is make or break. If managed extremely well, you can turn USD17 a share to USD300,000 a share.

Berkshire Hathaway would not be where it is today, if Warren Buffet did not go into insurance companies and buy/develop so many of them.

He values the float so highly, that if someone offered him USD60 billion in cash (an asset), for the insurance float of USD 60billion (a liability in the balance sheet), he would say no.

Most insurance companies need to keep most of their float is low volatility and very safe investments, such as bonds, treasuries, government debt, fixed deposit etc. Not much return really.

One of the key advantage an insurance company can have here, is to have a strong parent company, with AAA rating, which would allow them to loan money at low rates, and also invest more freely into things like stocks, entire business etc

Unless it is a reinsurance company, chances are, if you’re talking about a standard issue insurance company etc, this is like to be the division that has the highest risk, because your ability to know what the money is being invested in is very limited.

In 2008, a small subsidiary of AIG, called AIG Financial Products Corporation, basically sold insurance on Collateralized Debt Obligation (CDO) and Mortgage Backed Securities (MBO) at stupid prices, thinking they were really worth AAA. The profit from this was considered free money, and was not that significant for the group.

In addition, the company also bought a lot of these MBO’s and CDO’s because they were considered to be as safe as AAA bonds and recognized as such in the financial statements.

AIG lost USD 99.2 billion in 2008, and was essentially sold and nationalized by the government via an issuance of warrants amounting to 80% of the company.

Companies like Allianz, Manulife etc lost money as well during the crisis, but not as much.

This is really the main risk of investing in insurance companies these days.

 

Conditions unique to Malaysian insurers.

Unlike our American counterparts, our Bank Negara here, actually take steps to regulate the pricing instead of allowing a full on competition to the bottom and further. Ie, the Tariff Structure.

General insurance, car insurance etc is priced based on a table given by Bank Negara. This means in Malaysia, it’s mainly a question of who has the better business structure, economy of scale and cost control instead of who can offer stupider pricing.

This is also why Malaysians pay a little bit more on average for car insurance. At least when you have not fully gotten your NCD. Our system rewards those who are safe drivers very well.

Having said that, since July 2017, BNM have been deregulating the car insurance, general insurance and life/family insurance. So things are looking interesting.

Also, life and health insurance have very low penetration in Malaysia with less than 50% of the population having coverage. So it’s to an extent a growth industry.

 

Valuation

If you’ve read this far waiting for a “Rule of thumb” to value insurance stocks. Unfortunately, I cannot give you any. There are too many factors. It’s a lot more qualitative than most.

You need to judge the “Combined Ratio”, “Insurance Float”, “Cost of Float” and “Investment Return on Investment Float” over a long period.

As well as various qualitative aspects, such as the business, the character of the management, its track record, the leverage and other things. All of which are far from easy.

And if you’re done with the above. The general rule of thumb, is somewhat similar to most companies.

ROE needs to be high enough to cover the cost of capital. And assuming it’s a fair decent one, below 1X book is probably cheap, and above 2x book is probably a bit expensive.

However good things are sometimes worth paying for, as I’ll show below.

 

Table for most insurance companies in Malaysia.

Here is a valuation table i made for most insurance companies in Malaysia approximately a month ago. It should prove useful as an initial starting point in valuing insurance companies.

Do note pretty much every bank in Malaysia have insurance operations, but other than Maybank, I could not extract meaningful data from their annual reports. In the case of BIMB, their insurance arm, Takaful is listed.

The biggest insurer in Malaysia by far is Maybank Etiqa.

Here is a link for your reference, and drive whatever conclusions you may.

https://docs.google.com/spreadsheets/d/1F4vx59k-F3h0McE7O4by0alhzM3M0UK_-LpgqPxJpq0/edit?usp=sharing

Why no pictures you ask? I have no idea why i cant post pictures into i3 for some reason. refer to the link above.

You may be wondering why certain insurance companies like MAA or E&O etc are not in? Its simple, the extraction takes alot of time.

Some companies are obviously rubbish, some companies have insurance operations, but is already disposed and classified under discontinued operations or asset held for sale. and some i like alot, so im not showing it.

On MNRB, i think its probably rubbish. I don't see why any insurance company worth a damn, would ever need such an insane right issue, when dividend have not been paid for a couple years to begin with

My guess, they fucked up their loss reserves/contract liabilities estimation or something, and now need capital to cover up the hole. 

The right issue is to recapitalize the retakaful and reinsurance business. This business is largely global, with competitors coming from overseas. I doubt MNRB is in any shape to compete with Berkshire Hathaway.

As said previously, management is key in insurance business, and MNRB does not look like it has a good one to me. 

One may then say, but its so cheap at 20% of book! They are better companies selling for cheaper now. If your book is rubbish, it will naturally be cheap.

Expenses wise, its roughly in line with other insurers.

But a major red flag for me, is they deferred RM320m payment of credit facility to Ambank. What kind of reinsurer are you, if this kind of payment also need to defer.

In reinsurance, you name and ability to pay is gold. For people to know, that you will be alive when everyone else dead to pay is one of the most important factor for a reinsurance company.

 

 

Why LPI and Tan Sri Teh Hong Piow is a god

From the table above, you may have, noticed a very significant outlier in LPI. Which has on average made a profit of 15% on its insurance float, and 28% investment gain on insurance float for the last year.

The reason why LPI excelled so much on the insurance front, was mainly because prices were fixed. And Tan Sri Teh Hong Piow, running LPI like how he runs PBBANK. Only writes insurance that is profitable, ie, from people who are likely to not cause much problems only.

He is willing to give up market share for profitability.

In addition, from conversations with LPI customers, one of the reason they buy LPI, is due to tie ups with PBBANK in certain areas, fast claims when anything happens, and its Tan Sri Teh Hong Piow. As long as its profitable, he can be flexible and understanding.

And like all companies Teh Hong Piow, cost is controlled by nobody business. Most banks and insurance companies undergo billion ringgit IT upgrades, and office refurbishment, new buildings (Affin’s new building is going to cost 13% of its Market Cap).

While PBBANK and LPI still uses pen and paper for some areas, extremely old furniture etc.

How great it is to an early PBBANK and LPI shareholder.

Just in case you’re wondering why LPI investment income is so high. Unlike most insurance companies, roughly 80% of the float is in equities, instead of Malaysian bond/treasuries or unit trust.

And most of the equity held is Public Bank Shares.

“The secret to investment is to find places that is safe and wise to be highly concentrated.” – Charlie Munger.

Teh Hong Piow clearly understands that.

Is LPI cheap? Well. It’s around fair value. I’ll leave it at that. I won’t say why, as the fun part is finding out on your own.

Also, I’m tired. Haha
 

Conclusion

I hope this was as useful to you as writing this was for me. I definitely learnt something new when crystalizing my thoughts. A company I thought wasn’t that great turned out to be fantastic.

As always, do let me know you thoughts. Especially if you think I’m wrong, or you have very different perspectives from me.

====================================================================

Facebook: Choivo Capital
Website: www.choivocapital.com
Email: choivocapital@gmail.com

Labels: LPI
  6 people like this.
 
CharlesT 15% guarantee? U only guarantee yr good friends 4.5% return a year woh...r u too mean to yr friends?
28/10/2018 10:29 PM
CharlesT Or too demanding on me?lol
28/10/2018 10:31 PM
CharlesT I hope yr good friends / investors dont come to i3 n see all these...
28/10/2018 10:32 PM
Choivo Capital Warren still made unbelievable amounts of money on % and actual basis though.

How skillful one must be, for a "mistake" to still be so profitable!

And how many people don't even have a chance to make this mistake!

At the trough of 2008, cash percentage of portfolio is at all time high. Everybody wants to hold cash, nobody wants to buy stock despite how cheap everything was.

I understand that i cannot predict where market is going to go. I may have some opinion, but i do not allow it to affect my investing in a material way.

All i know is. If it think as an investment, its cheap enough, i will buy. If the price drop i should buy more, after checking my research again and seeing if anything have changed.

Do i actually buy more? Well depends on a few factors
1) Do i have cash?

2) What investment is it? Good net asset plays (my limit is 3%), Extremely cheap stuff (2%), Wonderful companies (3-30%).

3) What other opportunities are in the market? For example, RCECAP was fantastic when everything was overpriced. Now, its still pretty good, but i didn't buy more, because it is 30% already, and many other things have fallen to a price where its as good as an investment.

An argument could even be said that i should sell and buy others, when
i think the other is a better investment. But this is a quirk of mine.

I used to be very agile, but i found that every action i took was more emotional than logical, especially when prices fell or went up afterwards. And i couldn't really tell if it was an emotional or logical decision until a long time after the decision was made. Which makes it even more suspect.

So i decided, i will be even more careful when buying, requiring high discounts to fair value. And after i buy, i cannot sell unless there is a material detrimental change in fundamentals, or prices have gone up to a level where i don't think its as attractive as an investment.

Maybe one day, when my thinking is clearer and more experienced, i'll start selling cheap investments for even cheaper investments. But not yet i think.

So yeah. For example, MNRB, if it was this price at the start of the year, yeah, i would buy some. But this price when everything is cheap, does not look as attractive, unless CharlesT agree to guarantee capital and 15% return, with us splitting 50/50 any profit above 15%.

======
Posted by KLCI Going Holland > Oct 28, 2018 10:18 PM | Report Abuse

Jon ah, I ask you lah, when you identified a stock to be undervalued, how much more it fall only you buy more ah?

Warren buffet also say in 2008 he bought in a bit too early liao before it bottom out, so how are you going to prevent yourself from making master Warren's mistake?

Say for example a counter way way below it's fair value liao... but still keep falling lah
28/10/2018 10:36 PM
CharlesT Anyway just for your info, even cpteh also managed to get more than 100 waterfish for his cohort 1 to 10 in the first 2 years..but since then till now he has zero participants since 2014 i think

U at least can write much longer essays than n dare to charge rm5000 per tips where cpteh only charge rm500 per head.

So u should be able to earn more money from the fee ( not fm the stock mkt)...also not bad lah
28/10/2018 10:40 PM
Choivo Capital Its in essence a loan, and that is their opportunity cost.

I'm alot better than them at investment, and have a much wider view of the opportunities at hand.

My opportunity cost is therefore much higher. If i want 8%, i can just buy SPB tmr. That is 10% d.

Or even certain REITS in SG, selling below book, yielding 7% in SGD. Which is very different than RM.

Or buy a watch and sell it 3 weeks later for 10% gain.

Or borrow some money at fund societies.

This is not an investment for you or me. This is a bet. And i have to bear the risk of you disappearing. Anything can happen. I trust you, but i'm not stupid.

Which reminds me, 15% interest to be paid upfront. Haha

I will sign an agreement to hold for a minimum of a year, unless instructed to sell by you. You can close the investment anytime you want.

So if it shoots up 50% and you want close then, i'm ok.

=====
Posted by CharlesT > Oct 28, 2018 10:29 PM | Report Abuse

15% guarantee? U only guarantee yr good friends 4.5% return a year woh...r u too mean to yr friends?
28/10/2018 10:42 PM
Choivo Capital I can get a lawyer friend to draft up the agreement and get it stamped etc.
28/10/2018 10:43 PM
BankNegaraMalaysia Choivo, funds not tutup already ke? Why still accepting de now? I want join can ah? I just need to print money, kikiki
28/10/2018 10:46 PM
CharlesT Aiyo i saw yr terms n condition to yr investors so i offer a much better terms to you n then u ask for much more n talk abt all these..

Yr terms to yr investor: guaranted 5% n profit sharing 60:40
My terms to you:guaranted 8% n profit sharing 50:50

N u ask for 15% guarantee..
28/10/2018 10:48 PM
Choivo Capital I will show these comments to them.

Because it will be the fund's money (includes their investment) that is used for this arrangement.

If anything, this shows how thorough i am, along with the margin of safety i require for any trade or investment.

If i was my investor, i would be very heartened with this agreement.



You know what ill adjust it for you, above 15%. 30% profit me, 70% profit you.

If it goes up to 50% (which is your conservative estimate), ill make 25.5%, you'll make 24.5%. About an even split.

If it goes up higher than that, which in your mind it should, since 50% gain is a conservative estimate, you will make a lot more than me.

Contact me on fb if you are interested.


=====
Posted by CharlesT > Oct 28, 2018 10:32 PM | Report Abuse

I hope yr good friends / investors dont come to i3 n see all these...
28/10/2018 10:51 PM
BankNegaraMalaysia CharlesT, mari liao, he sense you rich fella wakakaka
28/10/2018 10:51 PM
CharlesT Anyway i kepo a bit..u entered into any agreememt with yr good friends/ investors?
28/10/2018 10:51 PM
Choivo Capital Only the investment fund.

I did bet money with them for malaysia elections, trump, brexit, mayweather pacquiao etc. After losing 5 figures, they all stop betting with me d. And invest money instead ahahaha.

====
Posted by CharlesT > Oct 28, 2018 10:51 PM | Report Abuse

Anyway i kepo a bit..u entered into any agreememt with yr good friends/ investors?
28/10/2018 10:53 PM
CharlesT Yr logic is very cute...if above 15% 30% profit yrs n 70% profit mine
If 50% profit 25.5% yrs n 24.5% yrs??
28/10/2018 10:54 PM
CharlesT 24.5% mine?
28/10/2018 10:54 PM
CharlesT 50% is not my conservative estimate lah its my aim...u very naughty n sneaky
28/10/2018 10:55 PM
Choivo Capital Yeah. After 50% gain, you start to gain a lot more than me.

My base is 15%. 30% of 35% (50-15) is 10.5%. My capital is guaranteed.
Total is 25.5%

Your base is 0%. 70% of 35%(50-15) is 24.5%



Now if it rise 60%.

My base is 15%. 30% of 45% (50-15) is 13.5%. My capital is guaranteed. Total is :28.5%

Your base is 0%. 70% of 35%(50-15) is 31.5%


I'll be nice, transaction cost for buying and selling i eat. Hahaha
28/10/2018 10:58 PM
Choivo Capital Haha, you know where to find me. I hope MNRB goes well for you.

Lets go get coffee, i'll tell you my favorite insurance investment in malaysia, in exchange for advice and critique from old timer like you.
28/10/2018 11:02 PM
Choivo Capital Aiyo, then like that be my investor loh!

And make money when i make agreements like this! Hahahaha

=====
Posted by CharlesT > Oct 28, 2018 11:03 PM | Report Abuse

Very sneaky biz man.

If compare to yr terms to yr investor leh? Seems quite a big difference woh
28/10/2018 11:03 PM
CharlesT Jon , frankly speaking i dont trust you loh...but still can go out for a drink lah..lets c
28/10/2018 11:04 PM
Choivo Capital Haha alright.

meatboneteafriend@gmail.com, can email here to plan logistics.

Or if you know OTB, ask him for my number. We can whatsapp and plan logistics there.

====
Posted by CharlesT > Oct 28, 2018 11:04 PM | Report Abuse

Jon , frankly speaking i dont trust you loh...but still can go out for a drink lah..lets c
28/10/2018 11:05 PM
CharlesT Becoming yr investor for 4.5% return pa meh....better invest in myself...my record for past 10 years is much higher than that woh
28/10/2018 11:06 PM
CharlesT Ok lah hope to hv a kopi time with u one day in future...but hv to meet cpteh first coz he invited me several times since years ago
28/10/2018 11:07 PM
qqq3 choivo....

have u check with SC whether it is permissible for you to advertise here in i3 or not?

to me....u can be charged under the Securities Industry Act......
28/10/2018 11:09 PM
Choivo Capital True.

See how your opportunity cost higher than my investors because you're willing to spend hours studying.

They not willing mah, they rather go focus on career, family, hobbies or other thing mah.

So its either FD, Index, or me loh. Hahaha

====
Posted by CharlesT > Oct 28, 2018 11:06 PM | Report Abuse

Becoming yr investor for 4.5% return pa meh....better invest in myself...my record for past 10 years is much higher than that woh
28/10/2018 11:10 PM
qqq3 don't play play with Lim Guan Eng....this is now Malaysia baru.
28/10/2018 11:10 PM
Choivo Capital Yeah license is needed for fund management activities.

Currently, its not really a fund despite me saying so.

For large investors, i just run their account for them. And i don't charge fees. All gain all loss they keep. They just promise to keep all the money in for 3 years, and reinvest all the div.

People who give me money directly to put into fund, is more like loan or IOU, with kickers.

Just to be clear with people here. Not advertising a fund. I repeat, NOT ADVERTISING A FUND. Even if you want give money directly, ill only accept small sums.

Because my goal is to build a 5 year track record with third party certification, before i start a fund.

If cannot build good track record, aiyah, invest my own money can d.

====
Posted by qqq3 > Oct 28, 2018 11:09 PM | Report Abuse

choivo....

have u check with SC whether it is permissible for you to advertise here in i3 or not?

to me....u can be charged under the Securities Industry Act......
28/10/2018 11:15 PM
qqq3 under the SIA, people cannot just go to forum and ask for investment money from the public......

-you need a licence
-you need a prospectus
-you need approval from bank negara and SC

u have to watch out for the definition of "public"

life not so simple one.
28/10/2018 11:19 PM
qqq3 OTB got away with it so far . He says he is remisier. My understanding of remisier licence is he is not permitted to do what he do...but its his life, not mine.
28/10/2018 11:24 PM
qqq3 go get yourself a CFA and work in the industry a few years.....
28/10/2018 11:38 PM
qqq3 of course...there is no law against a few friends and family members pooling resources together to manage a hedge fund......
28/10/2018 11:40 PM
qqq3 classical world of the world....Newtonian physics, deterministic, B Graham world, classical economics

modern view of the world......quantum nature, probabilistic, uncertainty principles....
28/10/2018 11:45 PM
KangWee wakao qqq3 one hit see blood leh
29/10/2018 8:18 AM
Sslee Dear hollandking,
Hope you like this view from atom to universe.
https://www.youtube.com/watch?v=0whBJui7zmY
Human is able to rule the planet earth because we are the only species that able to us our limitless mind to imagine and hence able to inspired (thro’ story telling, writing and speech) to unite us in millions for better or for worse. The same imagination helps us in discovering many theory of Physic, chemistry and biology for the advancement of science. Our imagination helps us to create the rules of god and rules of law so that our conducts are complied with certain rule for mutual benefit and humanity. Our imagination helps us to create value in piece of paper thus create value and commerce. Our conscience helps to guide us to be ethical and finally the vastness of universal and our inescapable final destination death helps us to have humility.

Dear qqq3,
I am disappointed with you despite numerous explanations by KC you still remain clueless as of what value investor about and where you get the information, “last 12 months, the value investors lost until father mother cannot recognise.....”
Value investors are the hardworking people going thro’ the annual financial report, getting relevant information from internet and make some assumptions as of what the future earning look like then we classified the stocks as growth stock (reasonable PE with solid cash flow and increasing revenue) or value play stock (Low PE with solid assets) we then allocated a certain capital to each of the stocks. We are flexible in selling some of these stocks when we feel that the stocks already achieved our TP and we carried out periodic review and make some rebalancing on our holding when opportunity or our assumption had change to valid an adjustment.

I had never used any derogatory word to hit at any person before and you are the first and hopefully the last. Know why? Posted by hollandking > Oct 29, 2018 12:29 AM | Report Abuse
If you are intelligent enough, u will have a clue

Thank you
29/10/2018 9:20 AM
qqq3 ss

whether high turnover, low turnover...stock market not for you.....
29/10/2018 9:38 AM
qqq3 osted by Sslee > Oct 29, 2018 09:20 AM | Report Abuse

stocks already achieved our TP
=======================

the biggest problem is the part dealing with tp........buy with conviction....bull market makes a lot of money. Bear market lose a lot of money.
29/10/2018 10:39 AM
newbie8080 Dear Jon Choivo ,

Do you think LPI can excel further since you're saying that the company still running on obsolete underwriting system, pen & paper,ect?
Ultimately, using technology brings advantages and cost benefits and failure to innovate will only bring disaster to itself.

What do you think?
29/10/2018 12:28 PM
Choivo Capital PBBANK and LPI is known to have one of the worst IT systems in banking and insurance.

But people dont lose money in banking or LPI because it system is bad. They lose money because they have no common sense. The give bad loans or write bad insurance.

The IT systems of LPI and PBBANK is good enough to get the job done. Some banks want to spend millions to automate one small part.

PBBANK etc just say, its ok, just continue.

PBBANK and LPI, or basically Teh Hong Piow, understands the importance of Return on Incremental Capital. They dont just simply do IT system upgrade because backside itchy.

Many banks willing to do IT upgrade like crazy, why? The money is not theirs. Their is no big boss with high skin the gamme.

Berkshire Hathaway is a USD500 billion conglomerate. Their HQ got less than 20 people. WArren buffet does not use excel, he does not have a bloomberg machine.

Ajit Jain turned Berkshire Reinsurance, from zero float in 1985 to USD49 plus billion today. He has less than 30 staff.

When it comes to banking and insurance. Its the people behind it that is aboslutely key, not so much the tools.

LPI can still excel further. As long as Teh Hong Piow is alive, and the culture is absolutely ingrained in the employees. With the future CEO being someone who has signifcant skin in game.

There is still plenty of places to grow. But the stock is really expensive on a quantitative basis.

Also berkshire hathaway is now 11PE. After earnings grew 67% in Q2.

====
newbie8080 Dear Jon Choivo ,

Do you think LPI can excel further since you're saying that the company still running on obsolete underwriting system, pen & paper,ect?
Ultimately, using technology brings advantages and cost benefits and failure to innovate will only bring disaster to itself.

What do you think?
29/10/2018 1:02 PM
newbie8080 Dear Jon Choivo,

There's rumours within the PBB group that Tan Sri The may step down next year from all his current positions.


Any comments on the future of the group of companies?
29/10/2018 2:26 PM
3iii >>>>
newbie8080 Dear Jon Choivo,

There's rumours within the PBB group that Tan Sri The may step down next year from all his current positions.


Any comments on the future of the group of companies?
29/10/2018 14:26<<<


Is this something new that no one in the market knows of?

If yes, this will affect the share price.

If no, and everyone has known of this (since it has been announced), the price has reflected this news in the market already.
29/10/2018 3:36 PM
Choivo Capital The market has known for some time he will leave. But i think on the official announcement there will a small drop.

I would not be worried about retirement, as i doubt tan sri is the type to just relax in retirement.

I'll start to worry upon his passing, about a year after. Having said that, i hope he lives a long long long long life. Even though i dont own any pbbank and lpi shares. Maybe i should buy some even if its abit expensive.

===
newbie8080 Dear Jon Choivo,

There's rumours within the PBB group that Tan Sri The may step down next year from all his current positions.


Any comments on the future of the group of companies?
29/10/2018 14:26
29/10/2018 6:28 PM
newbie8080 Thanks for the insight
29/10/2018 8:15 PM
Jarklp Jon, you can't simply compare credit, life and general insurance business in the analysis. The nature of their business is completely different.

General insurance companies rely on insurance/underwriting income, life insurance companies rely mostly on investment income. It is unlikely to see a positive "cost of float" for life companies unless they sell only pure protection plans like reinsurers. All life companies in Malaysia are selling mostly investment related plans like investment linked and profit-sharing plans. Protection plans are relatively small in their portfolio. LPI and Tune are showing positive "cost of float" because they are general insurance companies and of course their claim ratios are good.

No doubt LPI is one of the best managed general insurance companies in town. They have a relative high fire(which is highly profitable) insurance from PBB and relatively small motor insurance (which is not that profitable). They have the best combined ratio in town. In fact, they are also the one under a lot of pressure under de-tariff environment as many will start cutting price to get into their fire insurance portfolio.

For composite insurers like Allianz, Etiqa, MNRB and Takaful, you need to breakup the account into life/general and analyse it separately to get a better picture.
29/10/2018 11:02 PM
Choivo Capital Dear Jarklp,

You are right. Life is way way way more competitive, and therefore the goal is to get it below average borrowing cost, and make the investment income.

Are you in the insurance industry? I would love to ask a few questions regarding some queries i still have.

Its only a rough guide after all.
29/10/2018 11:05 PM
Jarklp What do you like to find out? if i can answer...LOL
29/10/2018 11:29 PM
Choivo Capital Do you mind sending and email to meatboneteafriend@gmail.com or look for me on fb.

We can talk further there. Better yet, let me buy you coffee. :)

Or just drop your email here, and ill email you.
29/10/2018 11:35 PM
Learner King Still not stop trying to cheat water fish ah jon choivo? Hahaha
30/10/2018 5:15 PM
Unlevered Jon, do u go beyond annual reports to obtain the necessary quantitative data? Just curious haha
30/10/2018 7:29 PM
Alex™ Alex water fish reporting in~
30/10/2018 7:36 PM
Choivo Capital For individual company research, i do try if its something i really like.

But these days, everything is so cheap, and obviously good. A quick analysis will do.

====
Unlevered Jon, do u go beyond annual reports to obtain the necessary quantitative data? Just curious haha
30/10/2018 19:29
30/10/2018 10:49 PM

(CHOIVO CAPITAL) Much ado about warrants!

Author: Choivo Capital   |  Publish date: Sat, 27 Oct 2018, 1:43 AM


One of the things I’ve been thinking about recently, is how does one invest or speculate in warrants intelligently?

Is it even possible for the purchase of warrants to be considered to be an investment?

The main reason for this, this year is the first time, I’ve bought some warrants to be held, instead of a quick punt, and the position is more than nominal. And also because they are all down a minimum of 40%. Hahaha. The warrants I purchased this year, their size, current price and loss is shown as below.

Layhong-WA: RM0.320. It is 1.85% of portfolio on a cost basis, and is now down 50%.

Gadang-WB: RM0.275. It is 0.82% of portfolio on a cost basis, and is now down 40%. The best performer! Haha

Insas-WB: RM RM0.210. It is 1.95% of portfolio on a cost basis, and is now down 65%. The biggest position and the worst performer. Clearly my best decision!

Well, let’s reflect. Or at least, bear with me as I put my thoughts down in words and crystalize my thoughts.

 

 

What are warrants?

Warrants are essentially pieces of paper that grant you the option to buy shares at a certain price in a certain point in time.

And historically, they are very popular in under developed markets, where people do not have an understanding in terms of earning per share, or intrinsic value per shares.

Where instead, market participants consider stock splits good things, and warrants to be free gifts from management, as if remuneration.

Needless to say, I’m generally not a fan of companies that do a lot of warrants. I’m sure that if one were to do a study, companies that issued a lot of warrants in the Bursa are likely to be rubbish.

However due to their nature, they can sometimes be severely under-priced, or severely over-valued.

As there is a fixed timeframe. It is also acutely speculative.

In addition, if you actually buy an investment bank issued warrant, FROM an investment bank. You might be retarded. Buy it from stupid people who bought from IB and have to sell cheap. Not IB who make a profit the moment they sell.

 

 

Interesting aspects of warrants.

Warrants are in more ways than one very similar to options. They are intrinsically levered instruments, because a much smaller sum is needed in order to get an option to buy a large amount of shares.

As prices are mostly correlated to the share on a nominal basis (they do fall off in an extreme manner once the mother share goes below the conversion price), but off a lower base, this results in significantly higher movements on a percentage basis.

This extreme swings, results in investor psychology going absolutely insane. As they rise higher, with 200% gains being normal on a stock that has risen 30%, the majority  of market participants start to feel the fear of missing out, while those who already have it feel like a genius, both then keep buying and result in severely overpricing.

Likewise, in a downturn, they fall a lot more. And as it falls, people start to become acutely aware of the limited timeframe, which induces a certain panic, as you now can’t help but wonder if the price will ever go up, or if sentiment will ever change (making the error of extrapolating the now into the future). This coupled with the extremely fast drops, result in panic selling at any price, or shocked holding at any price (me probably lol!), and thus it spirals down.

What I’m trying to say here is. The conditions that allows one to invest or speculate in warrants intelligently tend to be very limited. 

Statistically, logically and mathematically sound homeruns in warrants mostly comes from bear markets. Its mostly in these markets, that one 
will be able to buy these warrants using sound decision making profitably. The rest of the time, any profit is likely to be extremely speculative, and well, adventurous. Ie, more gambling and feeling, than cold logic.

 

 

The biggest mistake people make in buying warrants.

If you notice how most market participants here think of warrants, the most common way is looking at premiums. We often start by looking at how close is the premium, relative to the time, or if better yet, if it’s at negative premium.

But I think, this is a completely wrong way of looking at warrants. When premiums are low, this is precisely the moment when most warrants are most expensive.

For example, there are so many times, when GAMUDA-WE and GENTING-WA was negative premium, ie selling at a discount to the mother. Currently, GAMUDA-WE is down 70% and GENTING-WA is down 99%.

However, at RM4.8-RM5, or RM9.5. Both companies were already valued richly and priced to perfection. Even the conversion price, despite being lower than the current price, is arguably overvalued. Both companies were also at record earnings.

As my 500% trader friend says, it is at these times, when the easy money can be made. But you must realise, it is trash you’re holding. If you’re not decisive and clear about who you are and what you’re holding. Easy money turns into grenade faster than you can react.

When premiums are low, this is often because the warrant have already risen greatly (often multiple times) up to the share price. Unless the share price is still significantly undervalued compared to its intrinsic value. The warrant is in more ways than one, priced very close to perfection with huge downside.

And usually the shares are not undervalued, as they are currently having record breaking earnings year, mostly due to external macro factors, instead of the inherent improvement in quality and economic power of the business. These earnings are castles in the sky.

This is doubly dangerous, when the current valuation, is not that far off from its exercise price. When it goes from "in-the-money" to "out-of-the-money", the drop will scare your pants off if you have significant amounts in it.

I believe this is how most retailers get burned. Gamuda-WE, Prlexus-WA, Genting-WA, Tguan-WA, Ekovest-WB etc

Warrants with high premiums on the other hand, if bought correctly, have a two factor undervaluation. The main reason why warrants have high premiums, is because they are out of the money.

And often, in bear markets, these warrants are out of the money, because the current valuation given to the shares are so low! This is the first undervaluation.

The second undervaluation comes when, people look at the large premiums, and therefore completely ignore it, despite the significant tenure left, and with the conversion price being an undervalued one!

 

 

Speculating/Investing and valuing warrants intelligently

How do we do the above then? Well, I think there are two ways to go about it. One is the investing way, the other is the speculative way.

The methods or process comes from very different kinds of financial instruments. The first being extremely long dated share options, the other being 3-6 month options.

 

The investing way

Most people do not know this but, back when Warren Buffet did not have as much capital (Still billions, but not 100 billion), one of the methods he used to buy shares, was to make extremely long dated options on stocks. This was because there were times, he wanted to make sure he had very comfortable levels of cash, while not wanting to miss out on some opportunities.

He would essentially sign a contract to buy a certain amount of shares, at a certain price, at say 2-5 years from now. His thinking was, if the price of the shares was below the price agreed, he would have been able to buy the shares are a discount to the price he was willing to pay, and therefore the option being burned was not a problem, since he was getting a discount anyway.

But, if the price of the shares was above the price he agreed to pay. This was fantastic, since now he would again be getting a discount!

The essence here is, “The conversion price plus the price of the warrant needs to be the price you would have been willing to pay regardless. And the price of the warrant, must be the price you would have been willing to pay for the value of time or lower”.

 

The speculative way

There is a fund called Cornwall Capital in the US. This fund was started in 2002 with USD110,000. Before 2007, it had turned that into USD30 million or so. In 2007, it bought a certain number of insurance on CDO’s which returned 80 times, and turned USD30 million into USD110 million.

One of the way they did it, was too look for highly asymmetric investments worldwide, regardless of markets.

For example. The stock of a Korean company is currently USD 50. There is a piece of news, coming out in 3-6 months that will either make it worth nothing, or USD 100. Odds are about 50/50

Call Options on the stock at USD60 (to buy at this price), was selling at USD 4 dollars a share.

The expected value of this trade is

Worst case: Loss of USD 4 – 50% odds. Value is: USD4 X 50% = -USD2

Best Case:  Gain of USD36 – 50% odds. Value is: USD4 X 50% = USD18

Expected value = USD16 or 400% gain over USD4 investment.

Or, for example, I thought that Donald trump was going to be elected, as most of the interactive news online seem to indicate that (Hillary’s post was filled with more angry face than “Likes”, and if they can’t even win online, there’s no way they are winning the rust belts etc. And the vast majority of votes is in coastal cities, but the US is similar to Malaysia, you can get the big votes, but if you don’t win in enough areas, you have nada).

However, the market seem to think that Hillary is definitely winning, and so I through a friend, I had him help me buy a little put options (sell at a certain price) for PESO (Mexican Currency) that is denominated in RMB.

Needless to say, I doubt I can ever beat that trade in my life.

The essence here is: “Find bets or investments where the market have a decidedly very different views from you, with highly asymmetric payoffs due to the levered nature of instruments. A certain fixed timeline or catalyst is preferred. If a catalyst or fixed timeline can’t be found, a long enough timeframe may be enough.”

 

 

Criteria’s and valuation warrants in KLSE markets.

So how do we make the above lessons work for us? The one's i can think of is as such.

Let’s begin with the most basic requirements.

  1. The company from whom the warrant is issued, must retain a significant portion of its earnings. If all or most earnings are paid out instead of reinvested, the probability of the stock price increasing would be significantly lower.
     
  2. The longer the tenure, the better. More than one year is preferred. In bear markets, warrants with 4 year tenure, can be priced as if only a few months is left.

The other criteria’s are

  1. The conversion price plus the price of the warrant needs to be the price you would have been willing to pay regardless. And the price of the warrant, must be the price you would have been willing to pay for the value of time or lower.
     
  2. Find warrants of companies, whose prospects and future, the market have decidedly different views from you, and thus have severely mispriced them and thus have severely depressed valuations, with warrants being out of the money.

 

Needless to say, very few warrants meet these criteria. And I can even think of one or two in my current holding that is less than perfect.

 

 

Conclusion

Having said so much, I have to concede that this is a topic I’m likely to not be as experienced as many of the grizzled sifu’s here. And am therefore likely to be wrong in parts, or even completely

Kindly correct me if you think I’m wrong, or if you have a very different ways of looking at things.

In addition, tell me about warrants you find interesting after reading this article!

 

====================================================================

Facebook: Choivo Capital
Website: www.choivocapital.com
Email: choivocapital@gmail.com

 

  2 people like this.
 
henry888 Warrants are tricky and most of the times investors get caught. In most cases, warrants are over-priced. As adducing from my experience of observing style of price movements, warrants usually move faster than mother shares. That is how investors might get caught when they buy the warrants when price of mother share dropped and when price of mother share up, price of warrants are not moving and this is particularly so when warrants are going to expire. But advantage of warrants is with small capital, you can invest in a blue chip and conversion at later times when you have enough capital and the price of mother share is worthy to convert. However, i will not prefer those warrants on 'cash settlement' basis and with maturity date in less than a year (so called the called warrants). These called warrants are alike casino type and terms and conditions are in favor of the issuance banks and should not be promoted in Bursa. Note : just my own opinion only without prejudice to relevant parties.
27/10/2018 5:52 AM
lizi If stock also cannot make money, forget about warrant...this is the usual advice i give to people who ask me about warrant.
27/10/2018 7:30 AM
mansaham1972 Bukan saja waran yg menjunam teruk tetapi mother pun semua hancur .skg cuma cari peluang terbaik utk dpt balik untung dgn ambil peluang bila trend waran menaik di lain masa..semua pelabur terbakar skg.
27/10/2018 9:24 AM
Alex™ Btw due to depressed market condition, I now offer rm1k subscription fee only
27/10/2018 9:37 AM
lizi Back to mother share la, mother share can up or not also dont know, how to make money on warrant leh...lol...
27/10/2018 9:45 AM
BankNegaraMalaysia Kasi lu capital control your warrants become trash wakakak
27/10/2018 1:45 PM
probability wei Syed Sadiq wants you all to give free tips on warrants liao.....

if you ask tips you have to pay....but will teach you freely

now i understood why sifu KC always say:

"there is no free lunch in Bursa!"
27/10/2018 2:58 PM
probability only 'free teaching' exist....
27/10/2018 3:09 PM
probability Jon, one suggestion as a topic for your next article.....

try to explain what is your justification for having portfolios with 2% capital on a particular stock?

you have almost 2% on every stock...thats like a portfolio consisting 50 stocks!

and if you have 2% on stock X and 2% on stock Y...does that mean your confidence/knowledge or mismatch between your IV calculated vs Price (safety margins) the same on each?

how do you measure your confidence?
27/10/2018 3:17 PM
Learner King Only pandai tulis...after write so long than admitted ownself dunno anything. As usual stupid choivo... kakaka
27/10/2018 3:19 PM
probability and why 2%....why not 0.5%?
27/10/2018 3:22 PM
newbie911 When u will conaider cut loss? Or will hold until out of value?
27/10/2018 3:30 PM
Choivo Capital Probability,

My number one stock is 33%. Number 2 is 20%. Then a few is 3-10%.

Top 3 is 60% of portfolio.

Those below 3% or 2% or less.

Is those where i think its a good buy, but i'm not as confident, and still thinking, or building up position.

Or one of the great net asset plays. Were i usually buy 1% to start, than average down up to another 2% in stages, say 0.5%, 0.5% etc. Usually i keep a maximum of 2-3% in one individual net asset play, unless its fantastic, than maybe abit more.

There are like 10 or so of them, which make up more than 25% of portfolio.

These days, don't average down so much, because everything is so cheap. Too many other options.

Here is an extract on diversification i really like.

https://klse.i3investor.com/blogs/PilosopoCapital/163383.jsp

====
Posted by probability > Oct 27, 2018 03:17 PM | Report Abuse

Jon, one suggestion as a topic for your next article.....

try to explain what is your justification for having portfolios with 2% capital on a particular stock?

you have almost 2% on every stock...thats like a portfolio consisting 50 stocks!

and if you have 2% on stock X and 2% on stock Y...does that mean your confidence/knowledge or mismatch between your IV calculated vs Price (safety margins) the same on each?

how do you measure your confidence?
27/10/2018 3:35 PM
Choivo Capital Depends if you're investing or trading i guess.

Layhong warrant for example, i really like it, so as it falls, ill buy more, but in stages and not more than 3-4% of portfolio.

waiting for 10 or so before i top up i guess.
=====
Posted by newbie911 > Oct 27, 2018 03:30 PM | Report Abuse

When u will conaider cut loss? Or will hold until out of value?
27/10/2018 3:36 PM
Unlevered If a warrant has high premium, does that mean the market expect the mother share to have high probability of going up. My thought on warrants trading at discount is that mother share might be overvalued. What do u think Jon?
27/10/2018 5:14 PM
Bapaklangkau http://www.theedgemarkets.com/article/bnm-governor-wants-option-use-capital-controls-%E2%80%94-ft

Capital control come everything die !
27/10/2018 5:17 PM
Choivo Capital I'm probably just as inexperienced as you, but lets try and learn together.

Alot of it depends on the market sentiment i guess. If its a bull market, it could be that people expect the price of the mother to further go up.

If its a bear market, the mother may have fallen too fast for the warrant to catch up, or the mother have fallen below conversion price.

If there's a discount, chances is its overvalued. But some warrants, if you got the time, you can go and buy it, convert it and sell the shares. The process however takes sometime and cost a certain amount, so, it may not tighten as fast.

But alot of time, if there's a discount, its often because its not within the general radar as well. GAMUDA-WR back in the day fell in that category, before OTB and some others raised attention to it.


=====
Posted by Unlevered > Oct 27, 2018 05:14 PM | Report Abuse

If a warrant has high premium, does that mean the market expect the mother share to have high probability of going up. My thought on warrants trading at discount is that mother share might be overvalued. What do u think Jon?
27/10/2018 5:26 PM
3iii Advice by Benjamin Graham on convertibles

Our general attitude toward new convertible issues is thus a mistrustful one.

We mean here, as in other similar observations, that the investor should look more than twice before he buys them.

After such hostile scrutiny he may find some exceptional offerings that are too good to refuse.

The ideal combination, of course, is a strongly secured convertible, exchangeable for a common stock which itself is attractive, and at a price only slightly higher than the current market.

Every now and then a new offering appears that meets these requirements.

By the nature of the securities markets, however, you are more likely to find such an opportunity in some older issue which has developed into a favorable position rather than in a new flotation.

(If a new issue is a really strong one, it is not likely to have a good conversion privilege.)


Benjamin Graham
The Intelligent Investor
28/10/2018 8:20 AM
3iii Tips for investors in warrants


FIRST, investors should never invest all their investment capital in warrants.

Generally, we do not advise them to invest more than 10 per cent of their total investment capital in warrants due to the high-risk and high-return nature of warrants.

Retirees should also not use retirement funds needed to maintain their lifestyle to invest in warrants, as they generally have a lower risk tolerance.

Investors should also be disciplined about taking profits and cutting losses
28/10/2018 8:28 AM
3iii Warrants versus Stocks


If you are optimistic about a stock, the most direct investment strategy is to buy the stock.

However, some investors may choose to buy a related warrant instead.


Pros: Limited investment amount.

The biggest advantage of warrants is the leverage effect, which allows you to invest with less capital for the same return, as compared with stock trading.

The lower capital required for warrants means that, in case there is a market downturn, the loss will be limited as compared with investing directly in the stock.

In fact, in a number of major setbacks in the past, even giant blue chips fell sharply. Buying warrants instead of stocks can help minimize one's exposure to such market risks.


Cons: Time constraint

Of course, warrants are not without their shortcomings.

It takes a lot of time to understand the factors that may affect warrant prices before one can master the leverage effect to one's advantage.

Investors must get to know that warrants are subject to the time constraint.

The price of a warrant may change along with the implied volatility and dividend payout of its underlying and interest rates.

Even if you get the underlying direction right, you may still fail to reap the expected return.

In case you get it wrong, you should stop the loss.

Never sit on your holdings like a stock investor does to wait for a rebound. The price of a warrant will be dragged down by not only a falling underlying price, but also a declining time value.



Additional notes:


Warrants are derivatives.

They are an alternative investment to their underlying, and vice versa.
Warrants can never be an absolute substitute for their underlying.
Do manage your portfolio flexibly by investing in warrants and/or their underlying in light of the market conditions and outlook, as well as your own risk tolerance.
If one gets the market wrong, one will lose more from warrants (actual loss over investment cost) than from stocks.
That means the leverage effect of warrants is a double-edged sword. (Investors must take caution.)
The investment cost for warrants is lower than that for stocks, but they are more volatile.
Hence, their rate of potential gain or loss is much higher than their underlying.



Summary:

Warrants are a leveraged investment tool.
Don't foreget that the leverage effect can mean more profit, but also more loss.
So do limit your investment amount in warrants
28/10/2018 8:36 AM
3iii Aeon Credit issued bonds that can be converted to equity in the next few years recently. For those who are looking at this convertible bond, here are some facts to guide your thinking on this investment.




Market price of convertible bonds

The market price of a convertible bond is a
- combination of estimated true current investment value
- plus a premium for the current value of conversion privilege, if any.

This premium varies with
- the estimated opportunity to make a profit,
- the length of time the privilege runs and other factors.




The greatest care must be taken in buying convertible bonds.

The most common mistake is to look too closely into
- the size of the premium or
- the closeness of the conversion price on the bond to the current market for the stock into which it can be converted.


###You should look first into the stock for which it can be exchanged.###
- If you care to make a profit, this must go up.
- You must start by being fundamentally bullish on the equity.
- Only then can you look into the mathematical factors governing the price of the convertible bond.
28/10/2018 1:31 PM
3iii Warrants: Days to Maturity


Warrants can be classified accordingly to the length of their remaining days to maturity.

Short term warrant: Warrant with less than 3 months to maturity
Medium term warrant: Warrants with 3 to 6 months left to maturity
Long term warrant: Warrants with more than 6 months running to maturity.


Whether it is long-term or short-term, ITM or OTM, a warrant is after all a leveraged investment instrument.

Be cautious in funds allocation and stop-loss arrangements.

Do not get carried away by the potential return without considering your risk tolerance.


For example:

A general investor may consider a medium-term warrant with around 3 months running to maturity and a strike price around 5% above or below the underlying price.

More aggressive investors may go for OTM warrants with a shorter maturity.

For conservative investors, they may choose ITM warrants with a longer maturity.



The warrant price tends to be positively related to the length of maturity.

In theory, the longer the maturity, the more room for changes in the underlying price will be.

Given the greater chance for the warrant to be exercised, the warrant price will tend to be higher.

No matter for call warrants or put warrants, the warrant price tends to be positively related to the length of maturity.

Besides, a warrant expiring in 6 months is less affected by time decay than one expiring in 3 months.

Warrants with a longer maturity will see their time values fall slower, while those with a shorter maturity will see their time values fall faster.
28/10/2018 1:38 PM

(CHOIVO CAPITAL) Trade Wars, Bear Markets and Getting Trapped.

Author: Choivo Capital   |  Publish date: Thu, 25 Oct 2018, 11:13 AM


Well, what a couple weeks it has been. Whatever paper gains from the previous bounce, have been paid back in full and more.

From peak to trough, the Bursa Malaysia MIDS index (Companies with Market Capitalization of RM2bil to RM200m) have fallen by 30%. I believe this is much more representative of the retailer experience.

The entire Malaysian market, as per the Bursa Malaysia EMAS index, have fallen by 14.4%

Well, let’s reflect.

 

There is a few reasons why this is happening for example,

  1. Rising interest rates in the US due to deleveraging by federal reserve causing an outflow from foreign markets into the US.
     
  2. Equities in general being somewhat inflated since the start of the year, with record gains in 2017. These days every market is correlated in terms of short term performance. If China sneezes, everyone catches a cold.
     
  3. In Malaysia, some small measure can also be attributed to the breath holding waiting for the new budget, and our new and more austere government.
     
  4. But most of all, it is due to the current trade tensions between US and China.


 

Trade War Between the US and China

For the last few decades, the US have historically run a trade deficit. And this has the effect of spreading prosperity of the world at the expense of the US, and no other country have seen a bigger effect of this than China.

In exchange for running this deficit, countries worldwide, via the Mashall’s Plan (US version of One Road One Belt back in the day) and the agreement from the Arab’s to use USD when trading oil, have started treating the USD as the reserve currency of the world. Even today, most trade and debt is denominated in the USD.

This enabled the US to withstand shocks that would kill most countries. And build up debt that would have bankrupted almost any country by now.

Having said that, historically, China have always played dirty. For at least 2 decades, they have been hacking US companies and government organizations in an organized manner in order to steal Intellectual Property.

Keith Alexander, a former NSA director has called it the greatest transfer of wealth in history.

Instead of having to pay the hundreds of billions or trillions of dollars for R&D as well as the decades needed for tehnology to develope, this theft of IP has allowed Chinese industries to become instantly competitive and steal businesses from US. And now, many of these businesses have even been bought over by Chinese companies.

To top it off, while the US does not charge much tariff to China (and much of the rest of the world). But, China on the other hand charges a lot of tariff on US goods such as milk etc, in the name of protecting their own industry.

For the most part, most US presidents, for lack of a more concise way of explaining, have no balls. They just allowed China to go this way without calling them out.

Enter Donald Trump. The first US president with balls. He called out china and imposed some long overdue tariffs and taken steps to equalize this relationship. Correctly identifying, that China has a lot more to lose than the US.

 

So how will this end?

Right now, people seem to think this will last forever. But remember, this is a money problem. Unlike Israel and Palestine, this is not a race, emotional or religious problem, which forever cannot be solved, because no one is willing to compromise, otherwise they go to hell.

If they were fighting over Taiwan of something, I will be worried. That one, there is no way handle correctly, as it’s an emotional problem.

But this, it is just a money problem, can discuss. My guess, China will need to stop acting like a samseng little brother, and they will need to find a face-saving way for Xi JinPing to do this.

Historically, if you look at global money arguments, Weimar Germany in 1925, Greece etc. Within 2 years or less, problem settled. This is a much smaller problem.

My guess, give it a couple months to a year max, and everybody happy again. Except, I’m perfectly fine for it to run 2-3 years or even 10 years. I can just keep buying, trap me in wonderful companies selling for 4PE please!


 

Bear Markets and Getting Trapped

One of the things I love about bear markets, other than the constant discounts, is that bear markets forces one to be very honest with yourself.

People who bought stocks at high prices, after suffering massive losses. Is forced to finally admit, that they knew pretty much nothing about what they bought.

Some, take it as a signal to start studying a lot more, like a friend of mine, who decided to turn over his portfolio to me, while he goes and spend 3 months reading and studying.

Others, start to think of stocks, not as somewhere to make money, but where you can only lose money. They stop caring about whether any money will be made, rather whether of their capital can be saved.

They decided to get out at any price.

It is in markets like this, you have no choice but to determine if you’re a trader of investor.

My 500% trader friend, is up 20% this year. He keeps very tight cut loss, and as it’s a bear market, he only trades technical rebounds etc when he is sure about it.  And when asked if he’s going to start investing, he answers, “I need to be willing to lose the big money buying stocks cheap, if I want to be able to make and keep the easy money in bull”.

Me on the other hand, on a fund unit basis, am down 18% this year. Still way ahead of the MIDS index, so I’m satisfied. Most of my investment this year is also at much lower fund unit prices, so my actual loss is much lower.

The one thing about investing versus trading. Is that if one is an investor, one must be willing to get trapped. Because there is no cut loss. In fact, as prices fall, you need to buy more. Investing is inherently “Trappy”.

While in trading or speculating, because one is gambling and don’t know the real value of what one holds, or knows its real value is far below the quoted prices. A cut loss is essential.

The problem is when traders or speculators think they are investors, and what is a trade, turns into a mediocre investment.

And as prices fall and the investment becomes more and more attractive on a risk reward basis.

His trader mind is unable to process it, as ultimately, he can only see the number on the screen. Before he capitulates at sells at the bottom. The worst possible time.

Oh well, if one does not go bankrupt or die, life and the markets will teach you all that you need to know.

 

 

Conclusion

To my fellow investors, good luck, I hope the traps we are in are warm and cozy! Remember the immortal words of Howard Marks:

To succeed in investing, you need 3 things

  1. The ability to estimate the intrinsic value of an investment
  2. The ability to hold and buy more as prices fall
  3. You have to be right.

There is a Latin saying I really like “Gradatim Ferocitas”. Step by step ferociously. To move quickly and purposefully, without compromising on your due diligence, and not skipping a single step.

Research deeply. Check and double check twice. Buy and do something else.

If you’re wondering if prices are going to fall further. Ask this. 5 years from now, are you going to wish you were more aggressive or more conservative?

Are you a seer who can (or thinks they can?) predict where prices will go? I don’t think so, since you’re not a trader.

If you're scared (i feel nervous too), buy slowly.

And for those like me who have lined up financing. Remember, safety and survival is paramount. Go slow and check even more!

====================================================================

Facebook: Choivo Capital
Website: www.choivocapital.com
Email: choivocapital@gmail.com

  4 people like this.
 
Choivo Capital I don't judge by portfolio. But by thinking and thought process.

Yours is very lacking and weak.

I KYY also fire not a problem.

While a friend with less than 20k portfolio, when he talk, ill listen and discuss with him.

Your brain really is muddled honestly. You need to go do something else.

======
Posted by qqq3 > Oct 25, 2018 02:24 PM | Report Abuse

choivo, so u think I write rubbish because I say my portfolio is small?

well, I rather prefer everyone here think I am a small guy.....less pressure on me.....


I am not looking for business after all....
25/10/2018 2:26 PM
qqq3 Should add.....Addiction to US$ is the new opium.......China need to quickly get out of the US$ addiction......I believe one day China will be able to say to Americans....sorry, you need yuan to buy stuffs from China.
25/10/2018 2:31 PM
qqq3 choivo, as long as u are judging by what I write....I got no problem.....

I am good enough to know myself.....
25/10/2018 2:36 PM
qqq3 I am not here to convince chiovo or bear....I am here to entertain myself....and of course, I am confident of myself....
25/10/2018 2:38 PM
qqq3 do whatever u want chivo....u want a good image a value investor image.....go ahead.....

I just want to know how long u can last........lol....
25/10/2018 2:41 PM
Junichiro In trade wars , everyone loses. As one economist in US admitted, China is not so dependent of US as the US would like her to be.
25/10/2018 3:15 PM
qqq3 rationalising and confirmation bias.......

everyone is entitled to their rationalising and confirmation bias.......

but who can do critical thinking?
25/10/2018 3:21 PM
qqq3 Bear Market > Oct 25, 2018 03:20 PM | Report Abuse

Answer : So nobody loses then! You said in trade war, everybody lose but then you contridict by saying china not so dependent on US! So you are saying this trade war is meaningless! Well, this is a great divorce between US and China! US will get their cheap fix from elsewhere! China don't have to import 100 billion from US! It's final! But Aseans are winners! So no, there are winners as well!
===========

history of the world full of American mistakes....Trump is the latest but not the only one.

as for Asean ...if world trade shrinks, it cannot be good.....stock markets......stock markets are monkey see monkey do....stock markets are not Gods....stock markets goes by perceptions.
25/10/2018 3:28 PM
Junichiro Nobel laureate,Joseph E. Stiglitz said:

"First, macroeconomics always prevails: if the United States’ domestic investment continues to exceed its savings, it will have to import capital and have a large trade deficit. Worse, because of the tax cuts enacted at the end of last year, the US fiscal deficit is reaching new records – recently projected to exceed $1 trillion by 2020 – which means that the trade deficit almost surely will increase, whatever the outcome of the trade war. The only way that won’t happen is if Trump leads the US into a recession, with incomes declining so much that investment and imports plummet."

If the US is sucked into a recession, will Asean win ?
25/10/2018 3:54 PM
godhand Posted by qqq3 > Oct 25, 2018 02:41 PM | Report Abuse

do whatever u want chivo....u want a good image a value investor image.....go ahead.....

I just want to know how long u can last........lol....
____________________________________

i dont think u need to worry about him. If he can uphold his principle he will do well. its very hard to see him lose judging by his stock pick
25/10/2018 4:04 PM
CharlesT Jon this year hv to break yr piggy bank to pay yr guaranteed profit of 4.5% to yr parent n uncle auntie ah?
25/10/2018 4:07 PM
lcwin Good toughts everyone. Let me share my 1 sen view.
USA have no good manufacturing base for more than 20 years already. Their manufactured goods is generally below par compared to most european , Japanese n koreas items. China have been exporting lot of goods to USA thats true BUT most of the goods have very low value added to it. If China reduced export to USA the impact will be felt across the world incl USA as probably 90% of the export value is imported.
USA is essentially a war mongering nation and a death Merchant. Their arm industry is second to none and every President will creat a war to revitalist USA arm industry coffers. Look into the recorded history... any excuse to start a war is their motto.
IP wars ok.Do you know how outdated is the IP laws? 17 years IP protections n renewed based on certain updates etc. Nowdays unlike 50 years ago thing change in a year or two why 17 years? Things like ABS why give patent? most driver last time modulate the brake to achieve ABS effect ..common sense mah and the list goes on.
Don't forget history. USA with the European war mongers plundered China about 100 years ago. Is that fair?
25/10/2018 4:44 PM
qqq3 I don't even know who is this child choivo...why should I bother or worry for him? I couldn't be bothered......
25/10/2018 5:03 PM
qqq3 China is in full agreement with icwin....China is united....no way China will kow tow....just no way.


China can tighten its belts, no big deal.....who will survive? can the fat cowboys survive?
25/10/2018 5:12 PM
lcwin USA is good at twisting and turning like a snake so I think they will survive but in about 25 years we will see a new world order. WE deals with chinese companies for more than 10 years and their knowhow change is incredible. For US companies they are more reliable compare with the chinese but inflexible and extremely expensive. The USA is prop up by the artificially high value of its currency
25/10/2018 5:35 PM
qqq3 Should add.....Addiction to US$ is the new opium.......China need to quickly get out of the US$ addiction......I believe one day China will be able to say to Americans....sorry, you need yuan to buy stuffs from China.

my million $ question...so when will that day arrive? maybe soon after Make in China 2025 is achieved.....
25/10/2018 5:48 PM
Choivo Capital 3 year lock unker! With bullet structure.

Roughly 2 more years to go. Its like margin finance, but cheaper and more secure!

My parents are in their own account, where i manage for zero fees, all gain and loss they keep. The money is too big for me to guarantee. Im very careful with theirs, and its somewhat more diversified with low concentration caps.

I dont take money from extended family.

Guranteed is only friends.

===========


CharlesT Jon this year hv to break yr piggy bank to pay yr guaranteed profit of 4.5% to yr parent n uncle auntie ah?
25/10/2018 16:07
25/10/2018 5:59 PM
CharlesT 3 years lock? Meaning to say 4.5%×3 years= 13.5% by end of 3 years?

If yr funds made short of 13.5% by then u hv to break yr piggy bank n pay to yr friend investor?
25/10/2018 6:03 PM
CharlesT U hv good friends....
25/10/2018 6:04 PM
3iii >>>>
moneySIFU Good sharing, Bro Jon.

At the peak, I have 90% of total funds invested in stock market in the whole 2017 until the last theme play of steel stocks in last August~September.

Since then, I cash out all my funds & converted into FD after doing nothing for 6 months & sitting in the securities accounts earning little interest.

Currently, I have less than 10% funds made available for stock market.

My record for this year was loss of 25% & was able to reduce the loss back to 10%, very much thanks to Lay Hong.

For the whole 2018, I have been nervous & in fear about the prospect of the stock market, the stock pick 2018 results proved I am right.

But I trust there are always chances to spot good trading/investing opportunities individually.

Hope I can buy some good stock at very cheap price, slowly & progressively.<<<<


MoneySIFU

What are your investment objectives?
When do you hope to achieve these objectives?
25/10/2018 6:30 PM
Choivo Capital Yes i agreed to buy at a predetermined price per unit.

The structure is highest FD rate in msia (4.5% in this case). Capital guaranteed. Any gain above 4.5%, 60% is mine, 40% is yours.

Well, they dont have somewhere much better to put. Im offering higher than FD (a little) and they think im worth putting money on.

One guy rolled his forward (even though i offered to buy him out), as he was the first, and only a year in that case.

He also tripled his investment, even as prices fell.

Yeah, they are great people. Hard to find such friends.

====
CharlesT 3 years lock? Meaning to say 4.5%×3 years= 13.5% by end of 3 years?

If yr funds made short of 13.5% by then u hv to break yr piggy bank n pay to yr friend investor?
25/10/2018 18:03

CharlesT U hv good friends....
25/10/2018 18:04
25/10/2018 6:36 PM
3iii >>>Remember the immortal words of Howard Marks:

To succeed in investing, you need 3 things

The ability to estimate the intrinsic value of an investment
The ability to hold and buy more as prices fall
You have to be right.<<<<



The company must be within your circle of competence to assess and value.
Stay with quality.
Be able to value the stock using conservative assumptions.
Never stray outside of circle of competence.
25/10/2018 6:37 PM
qqq3 there is no co-relationship between writing and performance......

or even between writing and actual decisions and choices.....lol...
25/10/2018 6:38 PM
3iii qqq3

Those wth a good investing philosophy and strategy should do well in their investing .. in general.

Better to acquire these investing knowledge early.

Sometimes, these knowledge may not ensure you high returns in your investing but at the least, you can be assured of not losing too much in not knowing what you are doing.

After all, the risk of investing is yourself and Warren Buffett rightly pointed out - risk is not knowing what you are doing.
25/10/2018 6:44 PM
qqq3 3iii...yes wallen the bufalo is rich....mistaken to think wallen wannabes will be as rich.....
25/10/2018 7:33 PM
qqq3 3iii

a lot of success failure is due to birth...where and when born, to whom born......the era of investing......

large success is luck....moderate success is hard work, skill and talent....I already got the skill and talent, now just a bit of hard work.......lol.....
25/10/2018 7:36 PM
qqq3 come to think of it....if every analysts, every fund manager believes value investing according to the Bufalo is the way to go.....how can that lead to success?
25/10/2018 8:34 PM
qqq3 the habit and the character to make money....that belongs to KYY....not to Kc Chong from NZ......

stock market very simple one.....giant returns come from focus, very focused, put all the eggs in one basket......

another problem...what colored egg? the battle is between safety and hoped for returns......what characteristics u want?
25/10/2018 10:10 PM
CharlesT Jon if i were yr friend i see the greatest risk as you n not the stock mkt
25/10/2018 10:14 PM
teareader818 I think Choivo is in the midst of an experiment. At the end, if he wins, he will feel well prepared to handle billions next time.
25/10/2018 10:19 PM
CharlesT He has good friends n his friends has low expectation of 4.5% per annum
25/10/2018 10:21 PM
teareader818 It's nice to be mentioned in the same breath with Rodgers, Lynch or Buffett.
25/10/2018 10:31 PM
3iii >>>
qqq3 3iii

a lot of success failure is due to birth...where and when born, to whom born......the era of investing......

large success is luck....moderate success is hard work, skill and talent....I already got the skill and talent, now just a bit of hard work.......lol.....
25/10/2018 19:36<<<


Think risk, reward, absolute total return.

Concentrated focused investing in few stocks.

High probability event.

A lot of hard work + luck.




But when you revealed you are a trader with a high turnover of your portfolio, it is unlikely you are practising what you write. Simple reason: Not easy to find many such opportunities over a short term. You will be happy to find a few of these, maybe 2 or 3, in a year.


Short term investment performance is an imposter. You can only know how good a person’s investment is when you know them personally and you know their investing performance over the long term.


For example, an 80 year old man still has almost all his wealth in the stock market even today. He is a multi-millionaire and his wealth is all from investing in the stock market over 50 years. He owns a few homes for own use. He owns no other properties and thus no rental income because he doesn’t like the idea of being a landlord. He owns no businesss in his life. He was a teacher in his early years. This man knows the stock market and invest for the long term. His portfolio turnover is low. Without a doubt, he is a successful investor in the stock market.
26/10/2018 8:06 AM
3iii >>>>
Jon Choivo Yes i agreed to buy at a predetermined price per unit.

The structure is highest FD rate in msia (4.5% in this case). Capital guaranteed. Any gain above 4.5%, 60% is mine, 40% is yours.

Well, they dont have somewhere much better to put. Im offering higher than FD (a little) and they think im worth putting money on.

One guy rolled his forward (even though i offered to buy him out), as he was the first, and only a year in that case.

He also tripled his investment, even as prices fell.

Yeah, they are great people. Hard to find such friends.

====
CharlesT 3 years lock? Meaning to say 4.5%×3 years= 13.5% by end of 3 years?

If yr funds made short of 13.5% by then u hv to break yr piggy bank n pay to yr friend investor?
25/10/2018 18:03

CharlesT U hv good friends.... <<<<



Effectively, A is telling B:


Give me your money to invest.

This capital will be lock in for 3 years.

I will guaranteee your capital and also pay you simple interest of 4.5% per year for each of the 3 years.

I will be using this money to invest in a high risk business (the stock market).

Should I make money > 4.5% for that year, B has 40% of the profit above the hurdle rate of 4.5%.

Should I lose money in my businesss for that year, B will still has his capital intact and 4.5% interest added.




Risk-reward to B.

Reward
Capital guarantee
3 years of interest comparable to risk free interest from bank.
Potential 40% share in profit that is > 4.5% return for that year.

Risk
A not able to repay his capital and interest.
No asset to back up this payment in event of non payment.
(Perhaps, B thinks in the event of non payment, A’s family is rich enough to bail A out)



Risk-reward to A

Reward
Staring a business in fund management.
A small step in his start of a journey.
A is confident of his investing ability.
(But please note: short term performances are imposters. Need to know the person well and his long term performance record).
Able to increase his AUM by offering his capital and interest guaranteee to his friends.

Risk
Possibility of loss.
Shortfall at 3 years and unable to pay redemption.
Reputation irreparably shattered which may take years to repair.
Luck maybe against him, though he is super-good.
26/10/2018 8:57 AM
Pewuf the blog started really nicely but ended up with the writer promoting himself as a fund manager...apalah...working for which fund house ?
26/10/2018 10:53 AM
Choivo Capital Myself.

Fund is closed for guaranteed. As i only gurantee up to 50% of my equity.

Ill only manage new ones if its unguranteed in the fund, or in your own account. In this case. FOC. All gain and all loss you keep.


====
Posted by Pewuf > Oct 26, 2018 10:53 AM | Report Abuse

the blog started really nicely but ended up with the writer promoting himself as a fund manager...apalah...working for which fund house ?
26/10/2018 10:55 AM
Choivo Capital Correct. The greatest risk is i run away with the money. Which is why they are close friends and they know my family.

The second greatest, is i am unable to pay back. Which is why i limited to 50% of my equity. And why it has long tenures. Usually 3-5 month before, i will check with them if they intend to withdraw or rollover, so i can better plan the cashflow.

On the low expectations, i dont make promises i cannot fulfil, even if it gets me more money. Money is just numbers on a screen for me anyway.

Some are not investors, who would have put in FD anyway. But they trust me, and think i may make them more money. So they put it with me.

Some are value investors like me, and having studied properly, they decided they don't want put in the effort required to be good enough.
So they put with me.

All consider the probability of satisfactory outperformance to be adequate.

It would be a disservice to consider it as low expectations.

=====
Posted by CharlesT > Oct 25, 2018 10:21 PM | Report Abuse

He has good friends n his friends has low expectation of 4.5% per annum

Posted by CharlesT > Oct 25, 2018 10:14 PM | Report Abuse

Jon if i were yr friend i see the greatest risk as you n not the stock mkt
26/10/2018 11:41 AM
Up_down CharlesT. 我地要見識下大蛇屙屎.
26/10/2018 11:54 AM
qqq3 Posted by 3iii > Oct 26, 2018 08:06 AM | Report Abuse

For example, an 80 year old man still has almost all his wealth in the stock market even today.
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a bell curve effect.....bell curve effect not good enough for me...I am a fighter and I love the challenge.
26/10/2018 12:16 PM
Learner King Haha this joker is just a tin kosong in investment beside he got a really good writing skill. In the end he just want to promoted himself and waited for water fish give him all their life saving. Hahaha
26/10/2018 12:24 PM
qqq3 Posted by 3iii > Oct 26, 2018 08:06 AM | Report Abuse

For example, an 80 year old man still has almost all his wealth in the stock market even today.
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a bell curve effect.....bell curve effect not good enough for me...I am a fighter and I love the challenge.

shares climb a mountain slowly and falls in an instant.....testing all the buy and holds to the limit......

in the west,. people already given up on stock picking and everybody rather give money to mutual funds with huge diversification..... I think this is suitable for 95% of the people.

I consider myself the 5% elites.
26/10/2018 12:39 PM
Choivo Capital Learner king,

Really rare for inherently stupid people like you to still be in the market. Most retailers are stupid, but you're in a class all of your own.

I think its because you know you're stupid, so you hang on to your betters, like myself, instead of thinking for yourself. Not a bad way i guess.

In the end, the most important thing in the market, is to know your limits and how stupid you are.

When you want to be learner god? Then you can be promoted to just being stupid!

I'm really looking forward to that day!

Your failure to see the structuring of the incentives and what they drive is just astounding hahaha.



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Posted by Learner King > Oct 26, 2018 12:24 PM | Report Abuse

Haha this joker is just a tin kosong in investment beside he got a really good writing skill. In the end he just want to promoted himself and waited for water fish give him all their life saving. Hahaha
26/10/2018 12:43 PM
qqq3 young people like this choivo is idealistic, one dimensional, lack experience......I will leave him alone to find his own life.......

nothing to do with me.
26/10/2018 1:44 PM
Learner King Haha just say whatever u want stupid jon.... i making few millions profit this year and i have sold out waiting for market to crashes. So i got time to play u this con man. Kakaka
26/10/2018 3:26 PM
Choivo Capital You convert to rupiah is it? hahahahaha

Aiya, i don't like bullying children. Even if they're lying.

I think you need to take medicine. Now you're not just stupid, but siao like khatu d!

Dun later think 10million rupiah is 10million usd and put deposit for felali ooo.

Sure burn deposit d!

Let me know if you need borrow money for medicine. I very kind one.


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Learner King Haha just say whatever u want stupid jon.... i making few millions profit this year and i have sold out waiting for market to crashes. So i got time to play u this con man. Kakaka
26/10/2018 15:26
26/10/2018 4:19 PM
Learner King Haha u jealous is it stupid jon? Poor thing hahaha
26/10/2018 4:57 PM
qqq3 Choices and decisions in stock market are not related to what people say and write......

in stock market, choices and decisions people make are related to habits and character.

habits and character are more reliable indicators of what people do in stock market.

stock market, full of talk east go west, talk 3 talk 4., full of BS and full of beating round the bush.....and depends on the agenda of the writer.

remember....Jho Low can make himself sound like an investment guru.....Jho Low can even fill his talks with Confucian ethics, Christian sayings, Koran verses.....and of course Warren Buffett sayings........Jho Low can also quote here quote there....part of his arsenal.
26/10/2018 5:19 PM
rajachulan I appreciate reading these informative writing...

but allow me to add few things if I may...

The ability to estimate the intrinsic value of an investment <--- I work this number every year myself, so I know them, that is why I never trust them...

The ability to hold and buy more as prices fall <--- I dont intend to do this. you wont even know what happen in next 5 days, so forget about next 5 yrs...do you know how company make up their great grand 5 yrs plan? ha!

You have to be right. <--- no one know except the bloody management deciding the numbers... not even me can tell you... one thing sure.... everything is alright!... but sadly from the management point of view...

not here to oppose value investing, but to tell you what happen behind the screen...the choice is yours...

check Buffet 'investment'... which 'famous' return from a company which he hasnt sent his own team 'managing' the company 'himself'?

I know this i3 is probably set up by Value investment follower and supported mostly by value investor...

but to fellow retail investor, please do your homework, and if you think the current investment method is not working out... learn to adapt and change to prosper...gdluck
03/12/2018 9:43 AM
Choivo Capital Haha rajachulan,

Thanks for taking the time. We'll find out in time i guess,
03/12/2018 9:52 AM
rajachulan Yeah Jon, sincerely, I do admire your honesty in highlighting those 3 really important points in summary section... which I believe most of the retail investor has little ability to meet them all...

and that the reason why many people out there are still very dependent on others research paper, views, news, article and worst, tips in investment...

I do really appreciate and enjoy reading informative article like yours and icon8888 and someone, sorry I cant remember the name, who wrote few article on layhong few months ago (almost tempted to put money on it, but trend forbid)...

but still, I hope retail investor can find their own way to decide where to put their own money...
03/12/2018 10:09 AM