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Author: Choivo Capital   |   Latest post: Sat, 6 Jul 2019, 5:16 PM

 

(CHOIVO CAPITAL) Solving the Malaysian Property Overhang Problem within 2 years.

Author: Choivo Capital   |  Publish date: Sat, 6 Jul 2019, 5:16 PM


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

Solving the Malaysian Property Overhang Problem within 2 years.

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Since 2014, the property development industry has been in the doldrums, with property overhang in Malaysia hitting a peak of RM19.86 billion in 2018.

 

Interestingly, Johor reported RM36.75 billion worth of unsold property (including commercial units), which is oddly higher than the entire Malaysian Property overhang value. They likely use different methods of computation, which I will not go through as its not relevant.

 

However, I think most of the unsold property in Johor is from those crazy china property development companies, so the effect should be pretty contained. Who on earth would ever buy a 1mil condo in JB, that is built on reclaimed land in the outskirts, crazy.

 

Like most Asian countries, property prices here are extremely elevated due to,

  1. Low home deposit rates of 10% or less. Pre-2008 crisis, in western countries, deposits to purchase a house was typically 20-30%.
     
  2. Long loan tenures of 35 years.

     
  3. The Asian predilection towards property due to the ability to leverage up 10X, and the good fortune bestowed upon the previous generation (who bought in urban areas), due to the geometric increase in population density in urban areas over the last 40 years.

 

This resulted in property in developed countries, selling at prices which indicate yields far below the risk-free rate. Without AirBnB, you are likely getting at best 3-4% yield. Which is utterly insane when Housing Loan is 4.8% and FD at 4.2%.

 

The key thing to note here is, the desirability of the property is not the problem, it’s the affordability.

 

 

 

Solving the Problem

So, how do we solve this? Well, it’s pretty straightforward. Nothing sells as well as “Greed” and “Hope”. Mix those two in and add a sprinkle of “Financial Engineering”.

 

Per year, Magnum and Berjaya Toto, sells about RM8 billion worth of lottery tickets. This does not include the illegal lottery sales in Malaysia.

 

Many of you are likely to be able to guess where i'm going at by now. Now, here is how I would go about it.

 

  1. The government is to create a SPV, that is allowed to sell Lottery Tickets (We won’t call it that, I’ll explain later). Except the prizes are houses.

    Allow property developers to sell (on consignment) properties they are unable to sell to the company, at cost plus 3% and/or 25% lower than bank valuation prices. For the sake of illustration, let’s say,

    Bank Value: RM1,000,000

    Price paid to developer: RM750,000 




     
  2. Make the odds such that it’s a zero-profit venture. And the key thing here is, to declare the value of the property, which will be the prize, at the Bank Valuation. Thus making it, technically, a positive Expected Value bet. Example,

    Bank Value/Prize: RM1,000,000 house

    Price Paid by SPV to developer: RM750,000

    Value of Tickets Sold: RM760,000 (additional 10k to cover cost)


    With this structuring, one can now market this as a Positive Expected Value Bet, which no lottery in the world can do.

    IE, if you think the bank valuation is the right price, you are statistically ensured of making a profit, if you buy enough tickets. Thus, making it a “wise” financial decision.

    If the government wants, they can even add in an escalating odds feature (tied to your IC), where the more tickets you buy, the higher your probability of winning a higher value property.

    And if you won a property, the value of the property is set off against the total value of your ticket purchases, with a cap of zero, removing the escalating odds, unless you start buying more tickets again.

    In addition, for those immensely unlucky individuals who spent tens/hundreds of thousands buying tickets without winning, they are given the option to set off value of the tickets bought, against the value of the house they want to buy directly from the pool.

    Properties won, cannot be sold for a period of 3-5 years.

 

 

The problem with the property market, now, is not that people don’t want to buy property. They can’t afford to buy it, and/or they don’t want to be tied down with a 30-year loan.

 

With this, suddenly it’s buying a house is not about getting bogged down with a 30-year loan. But to buy RM100 worth of tickets a month. Which turns it from “serious” money into “fun” money. And there is a lot more of the money in the fun category.

 

And if the marketing is done properly,

  1. Strong Emphasis on the positive EV of the bet across all the local newspapers and online news portals.

     
  2. EVERY win is splayed across the newspaper or online news portal with happy reactions from the winners etc.

 

I don’t see why it would not be possible to sell at minimum RM10 billion worth of houses in a year. Especially since the youth market, which this Malaysian lottery companies have been completely unable to capture, would be likely to buy the bulk of it.

 

However, how do we make it RM20 billion in sales? 

 

 

 

Tapping into the Halal Market.

For this idea to really work, we need to access into the remaining 75% of the population in a legal way.

 

Make no mistake, Gambling (“Maysir”) is illegal under Islam. However so is earning interest (“Riba”).

 

Currently, every single Muslim in the world owe a debt to Anwar Ali. He was the man who changed "interest" to "profit on investment". Before he did so, banks worldwide were so very sensitive to Muslims religious scruples, that they made sure to not pay interest on any deposits.

 

It’s amazing what a simple bit of linguistic gymnastics can do.

 

What are “Sukuk” bonds, except for asset backed/secured bonds? Which Malaysia was the first to issue, before most of the other Islamic countries followed suit. If one wants to see the full extent of the creativity in linguistics gymnastics, just take a read at a Sukuk Prospectus.

 

So how can the government do it?

 

Well, first of all don’t call it a lottery ticket, call it a lucky draw (“Cabutan Bertuah”). 

 

For something to be a lucky draw, it needs to have a characteristic where whatever is bought, would be the same price if it didn’t have the “lucky draw” aspect. The tickets/vouchers need to be given after a purchase. 

 

It can therefore also be structured to be a lucky draw (“Cabutan Bertuah”) as such,

 

  1. Donate to the government and get a lucky draw voucher. If you want you can continue holding the voucher to the lucky draw, if you don’t want, you opt to not take the voucher.

     
  2. Joint venture with companies where they can sell special edition/limited run goods (different taste, design etc) which include a number of these lucky draw vouchers or incorporate these vouchers into their products. Again if you want, you can opt to not take the vouchers.

    Companies that sell essential goods and fast-moving consumer goods are essential.

 

 

And most of all, at no point, do you ever want to bring any aspect of religion into it and start up unnecessary discussions. Keep it purely secular.

 

The goal is to make it such that it would be easy to make the leap. People with different religious interpretations can just as easily choose not to buy the special goods. 

 

 

 

 

 

The Downside

Unless I’m mistaken, ASB once did this lucky draw (cabutan bertuah) thing, for motor vehicles. However, some people complaint that it was haram, and it was brought to an end.

 

If the government were to do this, and be foolish enough to say that it is Halal, it would be political and religious suicide, where you will start a whole new competition to see who is the most religious and can denounce this the loudest.

 

In addition, if these currently frozen properties were released into the market, it would likely to accelerate the depression of property value to its real value due to demand to buy property outright drying up.

 

It should further accelerate once the 3-5 year freeze is over.

 

However, it is likely to be gradual instead of sudden, as there is no major liquidity crunch beneath it.

 

There is a big difference between, everyone had a 30-year loan they can’t pay and are forced to sell a property, and someone who won a house in a lottery and in no rush to sell, but wouldn’t mind the money.

 

 

 

 

 

Conclusion.

This was a fun thing to think about, but I doubt it will ever be implemented, as the execution needs to be done perfectly, and probably by a privately held SPV, for it to not trigger all the religious and political minefields that litter around and on it.

 

Having said that, if the government actually plans to do it properly and in line with the essence of the idea detailed here, and avoid most of the political and religious minefields,

 

I have no doubt we can do RM20bil in sales in the first year.

 

Disclaimers: Refer here.

 

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

  johnyeoyeo likes this.
 
probability Bring indians from India...they dont mind getting half the salary of malaysian and work double the hours...they are more knowledgeable and competent too..

Surely malaysian businesses will become more profitable
08/07/2019 5:30 PM
ks55 The first chief executive of Hong Kong, Tung Chee-wah, did the right thing with his housing policy in 1997, aiming for at least 85,000 flats a year in the public and private sectors, a home ownership rate of 70 per cent within 10 years, as well as a reduction in the average waiting time for public rental housing to three years.

However, he caved in under public opinion (from people already owned a property) and pressure from property tycoons like Li Ka-sheng and others to hold property price firm amid the Asian financial crisis. So the plan was shelved.

Otherwise, you will not see Hongkong coffin homes that need 2 generations to pay off the mortgage.

Malaysian govt should take this opportunity to let housing price fall to a more affordable level, without any dampening policy or subsidy.

Let the housing price find its own equilibrium, where supply and demand crosses.
Let those fly by night developers pack and go home.
Let the flippers go bankrupt.
AND let the fittest survive..............
08/07/2019 5:33 PM
probability So that the 1% rich can fatten their pocket further

As long as majority suckers are there...they can hv fun
08/07/2019 5:34 PM
ks55 https://www.scmp.com/news/hong-kong/politics/article/2150463/no-hong-kong-housing-crisis-if-ex-leader-tung-chee-hwa-had
08/07/2019 5:34 PM
ks55 If we had followed reason instead of the masses ... today’s housing problem would have been resolved.

Statement by former chief executive Leung Chun-ying



BUT Govt of the day prepare to let Maybank lose money?
Is govt prepare to let developers close shop?
Is developer prepare to put up more low to medium cost housing like HDB flats?
9 millions willing buyers (from 26 to 38 yo) just waiting for a suitable house to call home. Is govt deaf? Are developers blind?
08/07/2019 5:49 PM
Sslee Dear ks55,
https://www.youtube.com/watch?v=FAKE_IMzT2s
Martin Jacques: Hong Kong is a typical colonial economy; it is not a competitive economy, it’s a monopolistic economy. It basically preferred or empowered the tycoons to run Hong Kong to divide up the spoils between themselves above all in the field of property where most of the money was made. So this is an oligopolistic and monopolistic economy.

Thank you
08/07/2019 6:09 PM
ks55 Simply there are too many people complaining houses are beyond reach.
Govt also like to say the same so as to put up PR1MA, Rumah Selangor Ku, and so on and so forth.

Is HDB flat expensive?
They are simply given for 'free' to all eligible!
Is private housing in Singapore cheap?
But there are still so many buying up as investment after they bought first HDB flat.

Singapore houses are not cheap, could be 5 to 10 times more expensive than Malaysia. But no one complain they could not get married because of housing problem!

AND NOW is Malaysian housing expensive?
Up to you to gauge yourself.
If you choose to buy a house with mortgage up to 30% of your household income, it is not expensive.
If you want to buy a house that take you 2 generations to pay off your mortgage, you are simply wearing hat too big for your head!

All in all, I would say it really depends on your mentality whether you are kiasu, or down to earth.......
08/07/2019 6:18 PM
stockraider THAT IS PRECISELY THE BUSINESS MODEL OF SINGAPORE, THEY BRING HIGH GRADE TALENT THAT CONTRIBUTE TO PROGRESS OF SINGAPORE LOH..!!

AS A RESULT SPORE ARE COMPETITIVE AS IT HAS UNLIMITED QUALITY INTERNATIONAL TALENT FROM CHINA, INDIA, EUROPE, USA , AUSTRALIA ETC AND CREATE TALENT QUALITY COMPETITIVE JOBS, COMPARE WITH MSIA THAT CREATE LOW SKILL PAYING JOB FOR BANGLA, NEPAL, BURMESE, INDON ETC LOH....!!

YES OPEN UP LIKE SPORE, IS ALSO THE BUSINESS MODEL FOR PROGRESS AND SUCCESS MAH...!!

Posted by probability > Jul 8, 2019 5:30 PM | Report Abuse

Bring indians from India...they dont mind getting half the salary of malaysian and work double the hours...they are more knowledgeable and competent too..

Surely malaysian businesses will become more profitable
08/07/2019 6:48 PM
stockraider U r out of point loh....!!

A local fellow want to buy a house should consider the advantage or cost & benefit of rent v buy mah...!!

Take for example a Double storey house in bandar utama, costing Rm 1m can be rented for Rm 2.3k per month, whereas if they buy it will cost Rm 7k a month and this is based on financing over 35 yrs loh..!!

Thus it is much better to rent Rm 2.3k per month instead of buying instalment Rm 7k per month loh...!!

Save up the diff , & u can buy insas to hedge against inflation n participate with economy growth loh...!!

The reason why it is chaper to rent is that the landlord is subsidizing your accomodation loh...!!

You need to be businesslike, when handling finance in a savvy way loh.!

Posted by i3lurker > Jul 8, 2019 6:58 PM | Report Abuse

stockraider already mentioned

rent

do not buy

KISAH BENAR EXAMPLE, GENUINE example Bangsar double storey house

MV = RM1.6 million to RM2 million

local family offers RM1,500 rental per month

Bangla offers RM2,500 rental per month

who you want to rent to?
of course Bangla lah, they stay 30 person per house that's problem belong them.

so RM2,500 X 12 = RM30,000 per year

= 30,000/2,000,000 = 1.5% yield per year...

of course stockraider says rent lah

bloody stupeed to buy is it not?

why buy? put FD better lah
08/07/2019 7:09 PM
probability aiyo raider..singapore citizens are like shareholder of the businesses set up there...they dont compete for wages with the foreigners..

they milk them!

olders citizens already have established assets...and their younger generation net worth is being enriched by reducing/maintained population..
08/07/2019 7:37 PM
probability i think malaysians (majority) will not be able to compete with even bangla..if given fair chance to compete...

dont let the malaysian become slave in their own country in the name of competitive business.. no harm raising wage at the expense on ROE...it does not reduce your competitiveness...as the majority business compete internally within Malaysia

malaysia have all the resources to ensure a wealthy nation...provided managed well and wealth is evenly distributed..

education, skills and competency is something the citizens definitely need to improve...but not at the expense of foreigners getting all the benefit they can get as a citizen
08/07/2019 7:45 PM
stockraider Cannot be like that loh....even Singapore msia supply alot of talent tho them mah......!!

Msia also export talent to USA, UK, China, Taiwan, Australia, Spore etc mah....This is bcos so msian are really good loh...!!

We should further develop them mah...!!

If msian cannot compete dieloh....some more u want to have high pay how leh ??

U cannot get high pay if u do not try hard loh...!!

So u need to be good , if no good develop ur skill lah...u think spore in 1965 very good meh ?? No better than msia mah....!!

But they are determine to improve mah....msia should be like that loh..!

Cannot compete is no excuse, need good attitude to learn how to do well loh.....!!


posted by probability > Jul 8, 2019 7:37 PM | Report Abuse

aiyo raider..singapore citizens are like shareholder of the businesses set up there...they dont compete for wages with the foreigners..

they milk them!

olders citizens already have established assets...and their younger generation net worth is being enriched by reducing/maintained population..


probability
10185 posts
Posted by probability > Jul 8, 2019 7:45 PM | Report Abuse

i think malaysians (majority) will not be able to compete with even bangla..if given fair chance to compete...

dont let the malaysian become slave in their own country in the name of competitive business.. no harm raising wage at the expense on ROE...it does not reduce your competitiveness...as the majority business compete internally within Malaysia

malaysia have all the resources to ensure a wealthy nation...provided managed well and wealth is evenly distributed..

education, skills and competency is something the citizens definitely need to improve...but not at the expense of foreigners getting all the benefit they can get as a citizen
08/07/2019 8:23 PM
probability aiyo raider...though i dont have the numbers with me...i can tell that the country's gdp per capita ratio to the average (majority population) wage earners's wage...would be having a steep difference...

the argument is more on what can be done to distribute the wealth..

all the natural resources money is going into a few crony pockets

this is not good for malaysia
08/07/2019 8:29 PM
stockraider I read the malay T10 numbers is even higher than the chinese T10 loh...!! This is bcos the govt benefit the elite Malay the most loh..!

If there is unequal distribution of wealth, they need to help their own people by giving training better and increasing their competitive attitude loh..!!

We cannot be simply increasing pay forever loh...!!

If u increase pay without increasing productivity means inflation will hit us loh....!!

This is what happen this few yrs, when everyone complain, that things all gone up price and higher cost of living loh...!!

Cost of living Up why leh ??
Govt Simply impose increase salary.
Corruption not under control.
Discrimination social engineering
Wastage, doing unnecessary things that does not generate productivity.
Giving Free monies; by giving free monies thru brim, subsidy etc loh...!!
Ringgit collapse bcos msia cannot compete loh....!!

So simply give more salary and freebies without much effort on the recipient or increasing productivity will make thing worse for the country loh....!!

ONE WAY PROBABILITY CAN DO TO IMPROVE WEALTH IS THAT, U DONATE PART OF YOUR WEALTH AWAY LOH...!!
But u think carefully lah...we have been doing that all this for a long time...bcos govt take ur monies but benefit the malay loh..!!

1. More university for the malay
2. More school for the malays.
3. Mosque and religious funding for malays

All these our children do not benefit but after 60 yrs of wealth transfer, their progress are still backward loh...!!

Posted by probability > Jul 8, 2019 8:29 PM | Report Abuse

aiyo raider...though i dont have the numbers with me...i can tell that the country's gdp per capita ratio to the average (majority population) wage earners's wage...would be having a steep difference...

the argument is more on what can be done to distribute the wealth..

all the natural resources money is going into a few crony pockets

this is not good for malaysia
08/07/2019 8:51 PM
stockraider Your suggestion does not help loh...!!
Make things worse loh...!!
Do not be emotional, i think u r frustrated loh...!!


Posted by i3lurker > Jul 8, 2019 8:54 PM | Report Abuse

Felda Settler Chef Wan says...……...

Quote “Back home, many of my fellow Felda settlers sell off fertiliser subsidies given to them by the Government, and when they receive dividends, they marry two or three times and ‘breed like cats’! unquote (from News Straits Times

wow!

I never knew that!! ..... They obviously need help!

Solution as follows:-
I propose that we now waive off all their outstanding loans from the Gobermen and hereby approve another RM1 million loan per head (babies included) interest free and convert to outright grant after 2 years.

Every Raya will have bonus too
08/07/2019 8:56 PM
7300 recession looming....150yrs deutche bank can see n started with asia,the deep cuts until to 2022 is no play play for next 15-20 years cycle huge ballons bust,
08/07/2019 11:43 PM
7300 not like US wolf, German are straightforward n sharp....mana soros?
08/07/2019 11:46 PM
stockraider Sochai u go n donate more money loh...!!

Talk very easy mah....!!

The non bumi have been donating so much money to the other races for past 60 yrs since independence loh...!!

But they need to buck up and improve for the greater good of msia, cannot always depend on handout loh....!!

U need to study better economics loh...!!

Posted by i3lurker > Jul 10, 2019 1:37 PM | Report Abuse

Problem with Malaysia is that people never studied economics and selfish racist people unwilling to give money to other races even though giving money to other races will help themselves.
10/07/2019 7:36 PM
VSOLAR Sailang Margin All In No no no need more people to work harder to contribute more to the country hahah
10/07/2019 7:39 PM
probability the capitalist like raider want you sochais to work hard for him ma...lol!
10/07/2019 7:40 PM
VSOLAR Sailang Margin All In it's okay can make back the money from his bad investments wakakaka
10/07/2019 7:50 PM
probability Humans have to learn from honey bees...the Queen (capitalist) and worker bees (wage earners)...lives together in a ~ fair society...they share their harvested honey together...independent to who brought more honey...they take care of their eggs, larva and pupa together...they know in which portions to share royal jelly with the queen..

obviously the queen bees knows to appreciate its worker bees..

they seem to know 'the balance'...

unlike human capitalists...that greedy ones ma....if they can get away with enslaving others ...they will....they dont mind squeezing the workers till their last drop of blood for their return on equity ma...

lol!
10/07/2019 7:50 PM
stockraider Simple question Raider ask probability loh ??

Are u willing to donate 20% of your wealth to these people and set aside lesser for your family members leh ??

Are u willing to pay 15% more in everything u buy compare with lesser this people pay leh ??

Are u willing to finance 50% increases in wages at the expenses of 20% increase of all good & service for all malaysian leh ??

Are u willing see continue wastages like building excess school,university, mosques , hospitals using all the tax payers monies that u and your children will never use bcos of its poor quality leh ??

If that is the case, it is not the time for all msian to be productive & work hard and make use of the limited resources efficiently mah..!!

If in order to improve the country, entail change of all msian people attitude & motivation, in order to be a go gather, do u not want to support this positive change leh ??

Thus simply increase pay without productivity is not the answer loh....!! U need to better the society 1st & not handout mah...!!

Posted by probability > Jul 10, 2019 7:40 PM | Report Abuse

the capitalist like raider want you sochais to work hard for him ma...lol!
10/07/2019 7:57 PM
VSOLAR Sailang Margin All In raider you trying to be racist here? No good
10/07/2019 7:59 PM
probability raider...we are not talking about donation here...i have no objections for workers to raise their competence level...

i am talking about giving 'pay' (A) fair to the 'cost of living' (B)...

remember B is actually where the business make their money...and its from business is where the A is formed...

A and B magnitude must be balanced...you cannot raise B and squeeze on A...

thats pure enslavery
....................

think about the maths above deeply...

i know the economics of money flow deeper than you can think
10/07/2019 8:04 PM
probability business make money B based on the populations basic consumption (cost of living)...

if you dont give them pay A...at the same magnitude level....you as business owner (capitalist) are basically siphoning their hardwork to your own benefit..
10/07/2019 8:07 PM
stockraider We are the victim & is still being discriminated...not racist loh..!!

Coming to minimum pay...a foreign bangla employee will cost an employer all in cost of rm 1600 per month inclusive of levy whereas the local will cost the employer about rm 1350 per month but why employer still willing pay more for the foreigner leh ??

This is bcos the foreigner are hardworking and has good working attitude whereas the local are soft, lazy and has bad work ethics loh...!!

One foreigner can do about 2.5 worker jobs loh...!!

Thats why raider say we must buck up loh....!!

It is not exploitation mah....!!

Posted by Mr Jho Heavenly Petron & GCB & ECONBHD > Jul 10, 2019 7:59 PM | Report Abuse

raider you trying to be racist here? No good
10/07/2019 8:08 PM
probability the subject we are discussing here (as far as i am concern) its none specific to malaysia or the inequality between races wealth distribution based on their hardwork or competence...

its about the general issue of the 99% poor everywhere..in the world

all their fucking hardwork right from the age of 5 till 26 and till they retire is siphoned by the capitalist (1%)...

their earnings will never catch up with the cost of living which their strive for all their life.....cost of living is a moving target ...and illusion..lured by the capitalist...which they will never attain...

they will never attain financial freedom they imagined they will
10/07/2019 8:14 PM
probability simply because as much as their pay is raised by the business they work for..their consumption cost is raised even higher..so that the business will make more money (from the net difference)....

this tension of stretch is inevitable..in a capitalist economy...but the tension can be relaxed if the capitalist cares...and if the worker demand a better pay..an lesser cost of living..

its a purely a mindset thing that can be cultivated ...if the workers act in unison
10/07/2019 8:18 PM
stockraider As raider say no use u simply give higher pay without productivity improvement mah...your barang price will also increase to compensate loh...!!

Take Australi chap fan will cost Rm 50 per plate compare to here Rm 7 per plate loh...do u want this to happen in msia leh ??

The other thing, if msian minimum pay is Rm 8000 month same as australia u think msia can compete with Thailand, Vietnam, Philipine, Indonesia & mynmar and sell n produce more than them leh ??

All these asean countries are quietly laughing at our stupidity to have such a high salary loh...!!

The business owner put their capital,entrepreneurial and management effort at risk, thus they need to be given fair return loh...!!

They can always move to another country loh...!!

The business owner is not exploiting, as they put in alot of tears, sweats and capital at risk try to promote & develop the country loh..!!

In addition they also paid alot of taxes mah...!!

Posted by probability > Jul 10, 2019 8:07 PM | Report Abuse

business make money B based on the populations basic consumption (cost of living)...

if you dont give them pay A...at the same magnitude level....you as business owner (capitalist) are basically siphoning their hardwork to your own benefit..
10/07/2019 8:22 PM
stockraider Why those workers do not build & create wealth leh ??

This is mainly, Bcos of poor financial management loh....!!
Imagine a worker can make Rm 7000 a month but they over spend Rm 8000 month........how to build wealth leh ??

U need to save & save mah...like make Rm 7000, u spendlah Rm 5000 a month loh..!!

This means need to downgrade your immediate standard of living in order to build capital mah....!!

To build wealth, the paramount importance is not actually how much u make but how much u save mah.....!!

If read rich dad v poor dad book, this is what happening to the whole world loh..!

In order to be successful u need to breakout from your poor dad mentality and join the rich dad mentality and change our attitude to live loh..!!

Posted by probability > Jul 10, 2019 8:14 PM | Report Abuse

the subject we are discussing here (as far as i am concern) its none specific to malaysia or the inequality between races wealth distribution based on their hardwork or competence...

its about the general issue of the 99% poor everywhere..in the world

all their fucking hardwork right from the age of 5 till 26 and till they retire is siphoned by the capitalist (1%)...

their earnings will never catch up with the cost of living which their strive for all their life.....cost of living is a moving target ...and illusion..lured by the capitalist...which they will never attain...

they will never attain financial freedom they imagined they will
10/07/2019 8:34 PM
VSOLAR Sailang Margin All In probability you should be the next Prime Minister really, I will vote for you. You have the exact same ideas as me, just that I can't put it in words as coherently as eloquently as you.

The fundamental source of the problem is greedy capitalists! Need so much money for what?
10/07/2019 8:40 PM
VSOLAR Sailang Margin All In I think one of the main reason for Malaysia employees to be unmotivated and can't work in a productive manner is because of the low wages. It's just like you work so hard but you still earn peanuts. Why not just go overseas to work, where you can earn more and can earn more in terms of purchasing power?
10/07/2019 8:41 PM
VSOLAR Sailang Margin All In stockraider please don't bullshit, Australia chap fan where got RM50? Spewing lies again. Full of lies and shit lah really !
10/07/2019 8:43 PM
stockraider Why bill gates, warren buffet, quek leng chan, robert kwok....not bcos they really want to just make alot of monies in which they already have more than enough, it is bcos monies look for them mah...!!

Success build success loh....!! This means they cannot help it loh....business just look for them mah...!!

These people donate alot of monies....but after donating alot....the monies again come looking for them loh...!!

One thing...u need to do something productive to breed success...u cannot sit down & shake leg, hoping u will be rich.

U need work hard, creative, skillful and rational b4 success look for u loh.....!!

In addition...if u earn monies....u must save up monies to create more productive capital mah...!!
10/07/2019 8:49 PM
stockraider after currency conversion about there loh...!!

Thats why alot of people cook ownself loh...!!

Posted by Mr Jho Heavenly Petron & GCB & ECONBHD > Jul 10, 2019 8:43 PM | Report Abuse

stockraider please don't bullshit, Australia chap fan where got RM50? Spewing lies again. Full of lies and shit lah really !
10/07/2019 8:50 PM
zhen wei & JP Malaysia = low wages
10/07/2019 8:53 PM
stockraider Already explain why salary cannot be high loh...!!

The other thing, if msian minimum pay is Rm 8000 month same as australia u think msia can compete with Thailand, Vietnam, Philipine, Indonesia & mynmar and sell n produce more than them leh ??

All these asean countries are quietly laughing at our stupidity to have such a high salary loh...!!

It is all about productivity loh...!!

Posted by zhen wei & JP > Jul 10, 2019 8:53 PM | Report Abuse

Malaysia = low wages
10/07/2019 8:56 PM
zhen wei & JP Demand> productivity > efficiency.
10/07/2019 9:06 PM
stockraider Remember if u go on the basis of high pay....the export industry will kaput and thus msia economy will kaput too loh...then one day ur grand daughter or great grand daughter may need work as a maid to spore, thailand, hk, vietnam to save and feed your family.

Just be very careful loh...!!
If u make the industry not competitive loh....!!

Posted by zhen wei & JP > Jul 10, 2019 9:06 PM | Report Abuse

Demand> productivity > efficiency.
10/07/2019 9:21 PM
VSOLAR Sailang Margin All In Why i see Singapore higher wage, but export industry no kaput, instead Malaysian need to go Singapore to become waiters (your perceived low class jobs btw). Why Australia with the highest minimum wage in the world doesn't have their export industry kaput? I think Malaysia is really a low wage country problem. Wawasan 2020 become high wage country leh, how high can it go I wonder, got 5 months left. Fresh graduates can barely get 3k (it's in Ringgit mind you!)
10/07/2019 10:24 PM
probability one can understand the views i had expressed above if you view the arguments in a closed loop economy (a single country where there is no export or import involved) where business exist interdependently within this economy to cater the needs of its citizens.

(you need not confuse by bringing cheap labor or competent workforce from foreign country into the equation)

within a closed loop economy, composite work done by all worforce = composite consumption of all workforce

competitive advantage of a worker (competence) would only make him deserve a salary relatively higher than less competent workers within the same country

the competent work force would enjoy consumption at the magnitude he earns..and thus deserving luxury items ( a bigger house , better car, better brand shoes, clothes and watches relatively)

this relative differential in competence would have at most extreme case be in the ratio of 40% very competent and 60% less competent..

it could never ever stretch to the observed 5% rich and 95% poor workforce to an extent that this 95% poor is unable to afford even the BASIC CONSUMPTION needs (an average house , an average car, education, children etc).....

despite these younger generation are inheriting cumulative workdone by their predecessor citizens

such an extreme stretch of maldistribution (unevenness) in consumption capability (consumption power) within the same country can only be done...caused by:

the bullying capitalist
........................
10/07/2019 10:49 PM
stockraider Correctloh...why spore leh ?

Singapore is the most competitive economy in the world mah....!!

They have skillful workers and make more high tech products, pharmauceutical, petroleum industry, there have great tourism industry with superb openness with various cultural of the world, there are hub connecting the world, then their education are superb quality loh...!!

The govt servant very small size and very efficient and most importantly they is not much corruption & wastage leh ??

If U compare to msia chehkai..youth define 30 or 40 also big arguement loh...also education very low standard, corruption high, wastages here & there....all the rich do not even use govt services such as university, secondary school, hospital etc bcos perceive very poor standard loh...!!

Again the people very backward talk about politic like race & religion and royalty to further divide the people. Alot of interference with free flow business even concert also cancel...the authority no brain loh...!!

Btw in spore u still can get Kai fan at SGD 2 to 3 whereas msia u get Rm 5 to Rm 8 loh...!! The inflation in spore not that high at all loh...!!

Yes salary is high, when u convert from SGD to MYR...but dollar to dollar...the price of basic necessity not expensive and cheap loh...!!

But car are extremely expensive alot of people do not own these assets loh..!! The public is taking bus and rail, which are super efficient & reasonable cheap mah...!!

The highest investment item for sporean is property...owning a HDB apartment is a commitment for a lifetime and consider very expensive n just like msia mah..!!

But in Msia u still can buy cheap cheap flat & apartment costing Rm 100k to Rm 300k, thus msia is cheaper.

Having say that Spore can afford to hava a minimum salary of Rm 6000 bcos they are highly efficient & most people work very hard loh..!!


Posted by Mr Jho Heavenly Petron & GCB & ECONBHD > Jul 10, 2019 10:24 PM | Report Abuse

Why i see Singapore higher wage, but export industry no kaput, instead Malaysian need to go Singapore to become waiters (your perceived low class jobs btw). Why Australia with the highest minimum wage in the world doesn't have their export industry kaput? I think Malaysia is really a low wage country problem. Wawasan 2020 become high wage country leh, how high can it go I wonder, got 5 months left. Fresh graduates can barely get 3k (it's in Ringgit mind you!)
10/07/2019 10:56 PM
stockraider I like to correct your wrong perception especially in msia loh....!!

Msia

1}T40 consist of about 15% of the population loh...!!

2) M40 consist of about 40% of the population mah..!!

3) b40 consist of about 45% of the population loh..!!

Where got 95% income control by 5% of the population leh ??

'it could never ever stretch to the observed 5% rich and 95% poor workforce to an extent that this 95% poor is unable to afford even the BASIC CONSUMPTION needs (an average house , an average car, education, children etc).....
despite these younger generation are inheriting cumulative workdone by their predecessor citizens

such an extreme stretch of maldistribution (unevenness) in consumption capability (consumption power) within the same country can only be done...caused by:
the bullying capitalist'!

THE MAIN REASON FOR YOUR WRONG IMPRESSION ARE DUE TO THE COMPLAIN BY THOSE GREEDY WHO WANT TO BE RICH BUT NOT PUTTING IN THE NECESSARY EFFORT?

Thus giving u a wrong impression that business owner is exploiting but in fact they do not.
The business owner put their capital,entrepreneurial and management effort at risk, thus they need to be given fair return loh...!!

They can always move to another country loh...!!

The business owner is not exploiting, as they put in alot of tears, sweats and capital at risk try to promote & develop the country loh..!!

In addition they also paid alot of taxes mah...!!


Posted by stockraider > Jul 10, 2019 8:34 PM | Report Abuse X

Why those workers do not build & create wealth leh ??

This is mainly, Bcos of poor financial management loh....!!
Imagine a worker can make Rm 7000 a month but they over spend Rm 8000 month........how to build wealth leh ??

U need to save & save mah...like make Rm 7000, u spendlah Rm 5000 a month loh..!!

This means need to downgrade your immediate standard of living in order to build capital mah....!!

To build wealth, the paramount importance is not actually how much u make but how much u save mah.....!!

If read rich dad v poor dad book, this is what happening to the whole world loh..!

In order to be successful u need to breakout from your poor dad mentality and join the rich dad mentality and change our attitude to live loh..!!
10/07/2019 11:13 PM
VSOLAR Sailang Margin All In You sure or not, you see the top management salary compared to those normal executives... Then you can clearly see the imbalanced distribution of wealth generation with regards to value creation of the employees already. You work 60 hours, I also work 60 hours, just because you worked longer or have better connections to get to the top then you deserve to be paid 100 times or even 1000 times more than a normal executive, this doesn't make a lot of sense to me. What I see is the wealth gap keeps on widening in Malaysia because of these greedy capitalist. That's not how a nation progresses, if you want to have advancement the government need to put in place policies that helps to narrow the wealth gap!
10/07/2019 11:25 PM
stockraider If u do donkey work surely u does not deserve high pay, compare with some other guy who huge value add to the the enormous wealth creation of the company mah...!!

Posted by Mr Jho Heavenly Petron & GCB & ECONBHD > Jul 10, 2019 11:25 PM | Report Abuse

You sure or not, you see the top management salary compared to those normal executives... Then you can clearly see the imbalanced distribution of wealth generation with regards to value creation of the employees already. You work 60 hours, I also work 60 hours, just because you worked longer or have better connections to get to the top then you deserve to be paid 100 times or even 1000 times more than a normal executive, this doesn't make a lot of sense to me. What I see is the wealth gap keeps on widening in Malaysia because of these greedy capitalist. That's not how a nation progresses, if you want to have advancement the government need to put in place policies that helps to narrow the wealth gap!
10/07/2019 11:41 PM
VSOLAR Sailang Margin All In then you are dead wrong, work in Australia do donkey jobs get paid $20/hour. In malaysia if you are a 'professional' can barely make RM10 per hour.
10/07/2019 11:45 PM
stockraider Thats why australia economy not robust, like singapore loh...!!
Bcos misallocation of resources loh...!!



Posted by Mr Jho Heavenly Petron & GCB & ECONBHD > Jul 10, 2019 11:45 PM | Report Abuse

then you are dead wrong, work in Australia do donkey jobs get paid $20/hour. In malaysia if you are a 'professional' can barely make RM10 per hour.
10/07/2019 11:48 PM
stockraider Remember if u work in australia, u can forget about of year end bonus and performance incentive loh...!!
U just rely on your fixed salary loh....!!

Bcos majority of the co think that, they have been over paying fixed overall salary to their staffs, thus bonus and performance incentive as reward is unheard of mah......!!

But not in spore & msia loh....!!
10/07/2019 11:54 PM
7300 another 3 yrs to down,2 years to sideway n 10 years to stabilised
14/07/2019 10:13 PM

(CHOIVO CAPITAL) The Black Swan Hidden in RCE CAPITAL (RCECAP)

Author: Choivo Capital   |  Publish date: Sat, 15 Jun 2019, 3:57 PM


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

The Black Swan Hidden in RCE CAPITAL (RCECAP)

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

 

I never really expected this day to come, or for me to do it in such circumstances (I would have preferred selling it for much more). However, over the last week, I cleared my entire position in RCECAP.

 

Normally, I wouldn’t be inclined to explain to the public why I did so, however, as I had written the article below, i felt morally obligated to do so.

 

Lets Talk About RCE CAPITAL

 

Make no mistake, the management is great. I am personally very happy with how the company is managed.

 

Investor Relations is very forthcoming and easy to speak with. In addition, the Credit Culture facility (now cancelled) gave me a peek in terms of their thought process when it comes to how they consider risk/reward for each loan.

 

A 10% credit facility to a company giving out personal loans at 11% in Singapore. What a deal!

 

This is incredibly attractive, since the risk-free rate in SG is like 1.5-2%, while Malaysia’s is like 4%. In addition, RCE makes roughly 6.5% net on their loan books (second highest in Malaysia, the first is Elk-Desa), 10% would be unbelievable.

 

And due to the sheer impossibility of having impairments of less than 1% doing personal loans, it seemed extremely likely that RCECAP would have been able to takeover the entire company for a song when they inevitably failed to meet the interest payments in full.

 

If RCE’s impairment rates for its Malaysian books is comparable as a benchmark (its not), RCE would end up owning both an SGD loan book paying out 6.5% net, AND a SG Personal Loan company.

 

Pretty decent deal. No surprise it didn't work out, you'd have to be a fool of the highest degree to take the other end of that deal.

 

Its not the kind of a mindset you want in a venture capitalist, but definitely one you want in an financial institution.

 

 

 

The Black Swan

Despite waxing lyrical about the company in my previous company and in the paragraph above, I still sold my position as the fundamentals have changes somewhat last Saturday.

 

In my opinion, the real risk that lies in RCE Capital was in the political aspect, and this was one aspect I have always tracked very closely, along with the civil servant loan market.

 

It was last Saturday when something caught my attention.

 

8/6/2019 (THE STAR) - Civil servants spend more than half of salaries on repaying debts

8/6/2019 (THE STAR) - What is Angkasa

8/6/2018 (THE STAR) - Syndicated loan scam 

13/5/2018 (THE STAR) - Be wary of Angkasa loan offer, civil servants told

 

In just one day, 3 unflattering articles on co-operative loans appeared on “The Star” (and I also found an unflattering article written in May). Nothing about what they said is unknown.

 

Chances are, you only went for a Koperasi's loan because you can’t get one from Bank Rakyat or MBSB, and so there is almost no way that you would get a full payout. A 20-30% haircut is normal and stated in the contracts.

 

However, like the process of making sausages or industrial farming, its one of those uglier things that people don’t talk about.

 

To make it so public felt a little like the ground moving. Especially since “One particular prominent Malaysian cooperative” sounded like “Yayasan Dewan Perniagaan Melayu Perlis Berhad” which is funded by RCECAP. They are the biggest Koperasi after all.

 

Just 4 days later this appears.

 

13/6/2019 (THE STAR) - Probe on loan scam, co-operative commission acts

 

I cleared the rest on that day.

 

 

 

Why does this matter?

One of the things I always tried to find out, was who owns these Koperasi's.  However, it had proven quite difficult.

 

The thing one should note is, these Koperasi's, if active with good volume, are an incredibly lucrative businesses.

 

Their job is just to take a commission for each loan given, with no skin in game since they don’t hold the loan book.

 

Often, it’s the financial companies backing them, like RCECAP that is even doing the sales and credit vetting.

 

They are wholly disposable if not for their ANGKASA codes (which are needed to do direct salary deduction). And RCECAP or the other financial companies are essentially just renting the codes.

 

I had previously naively assumed that it was run like a typical ko-operasi/savings & loan, where depositors have shares equal to the amount deposited. However, recently, I’ve learnt from my ex-banker friend, that this is not really the case.

 

For cooperatives, there are about 800 licenses, and only about 30 are significant business. Back in the day, the government used to give out a Koperasi license/ANGKASA code to UMNO Division heads, and it was (and still is) a good source of income for the party.

 

And “Yayasan Dewan Perniagaan Melayu Perlis Berhad” the biggest one which is funded by RCECAP, is apparently owned by Dato' Sri Dr. Shahidan bin Kassim (I don’t have proof), the UMNO warlord who was accused of child molestation, but was ultimately given a discharge not amounting to an acquittal by the Kangar Sessions Court for the allegation of molesting of an underage girl after the victim retracted her report, for one reason or another.

 

In addition, my friends in MOF have also indicated to me that the government being unhappy about Koperasi personal loans by civil servants and they are thinking of ways to solve it.

 

These news feels a little like positioning before the big whacking.

 

 

 

 

What actions could the government take?

Well, so what actions could the government take to reduce the loans?

 

The more common ones are as follows and was done in 2014.

  1. Decrease the personal loan length from 10 years to say 5 or less.
  2. Lower the proportion of civil servants’ personal loans, in the loan portfolio of banks, making it harder to loan money or buy Sukuk from companies like RCECAP.
  3. Lower the maximum salary deduction / garnishment from 60% to 40% or so.

 

In 2014, the losses from MBSB and lower profit in RCECAP, is due to these companies in being a bit cheeky and giving out personal loans that have actual lengths that are longer than what was allowed. The plan was to keep it off the system first, and to extend the tenure say 5 years down the line.

 

However, there was a directive from the top disallowing this method, despite all the loans given out, resulting in the massive impairments. After that lesson, they all started to toe the line.

 

As the above methods apply to future loans and not current, it would not have any impact on the current loan book unlike 2014 but would affect growth.

 

However, there is are two other methods, I don’t think too many have considered.

  1. Making koperasi’s pay a high lease for the codes, ensuring most koperasi’s shut down.
  2. Opening access for these codes to deposit taking financial institutes such as Maybank, CIMB etc. The banks have been lobbying for access for a long time.

 

Done in combination, especially the second method, would ensure that civil servants get a better rate (since Maybank etc have way cheaper cost of funds, and can accept a higher NIM), and indirectly (this is important as you can’t just take away the codes unless they broke the law) killing off ALL Koperasi’s since they have a cost base and marketing / eyeballs disadvantage.

 

Given that this is a Pakatan Harapan government, they are incentivized to shut down these Koperasi’s and further cripple UMNO’s source of funding, and to top it off, they can couch it as being it betting a good deal for the civil servants and the people (which it actually is).

 

Of course as EPF is a majority holding in MBSB and MOF owns Bank Rakyat, its not like there is no cost to it. However, EPF & PNB etc also control and hold CIMB, Maybank etc, its more like a left hand to right hand transaction. 

 

This changes the dynamics completely.

 

 

 

Conclusion

Given this change in fundamentals, the valuation in RCECAP changes quite significantly. Realistically, there is a good probability that RCECAP is now only worth its current loan book, which pays out 6.5% net.

 

Well, if I’m only buying the loan book, I’d like a 30-50% discount to book.

 

These days, with the sheer amount of opportunities globally. For example, Kraft Heinz and Intel is only trading at 6 and 10PE respectively, with earnings yield over Enterprise value something like 11 and 13 times, not a bad price at all.

 

It has become increasingly difficult for me to justify holding RCECAP, especially with the change in fundamentals.

Sucks to not be able to take that lovely 5 cent dividend though.
 

Disclaimers: Refer here.
 

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

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

 

 

Labels: RCECAP
  2 people like this.
 
teareader818 I know of a Public Sector Cooperative where a civil servant in applying for a personal loan has to obtain signed sureties from two ELIGIBLE members, which at times, can be hard to come by. I don't know whether this condition applies to all cooperatives. It seems that those running the cooperatives, who are usually ex-civil servants, tend to treat them as their own personal banks. Expect another government bailout if things get critical.
15/06/2019 5:16 PM
Choivo Capital Yeah guarantors need to be civil servants usually. And if the original lender don't pay, direct deduct from the guarantor salary.

How do you mean by critical, and why would the PH govt bailout?
15/06/2019 5:25 PM
chamlo Under stingy PH govn hard to get pay rise or BSH reduce. So loan defaulters will increase?
15/06/2019 5:32 PM
cyeec2000 If civil servants loan provision is good bussiness, mbsb would not exit to be full fledge islamic bank and bank islam claimed to intend to reduce this exposion.
15/06/2019 6:38 PM
Choivo Capital He says it cracked its skull 5 months ago, i say it got influenza last saturday, and may get worse as the hospitals nearby are shit.

I was right when i bought it, when i held it, and when i sold it.
15/06/2019 7:52 PM
joekit Maybe after you threw all your shares in rcecap then the share price will start moving up...hahahahaha....that happens all the time....hahahaha.....
15/06/2019 10:24 PM
teoct OK.

Thanks anywhere for sharing.

Happy weekend all.
15/06/2019 10:24 PM
Choivo Capital Hahahahah possible. No idea lah. This was a fundamental buy.

It may be worth thinking as a trading buy, if i were ever to pick up trading tendencies.

====
joekit Maybe after you threw all your shares in rcecap then the share price will start moving up...hahahahaha....that happens all the time....hahahaha.....
15/06/2019 10:24 PM
15/06/2019 11:50 PM
(HK1997 again) Philip I think the mark of good investor is someone who never stops learning something new every day, improves his thought process and absorbs new mental models.

In a nutshell the points you made are all facts which made me not invest in rce capital. And you are right, it may not happen today, it probably won't happen this year. But 5-10 years from now, it will definitely change.

I'm not a good predicter of time. But I believe I'm an ok judge of long term trends. All I can say is don't be disheartened if once you sell your shares the price goes up for a little while. In the end the long term is what matters.
16/06/2019 12:56 AM
(HK1997 again) Philip As for Intel, my advise is to not invest in it. Intel the name is very different from intel the company.

For tech companies the ability to pivot, to push new technologies and to efficiently push your team to be more efficient than the competition means everything.

In every single way Intel has underperformed. For a company that was the leader in semiconductors advances it has declined in many uninspiring ways. Intel inside today means expensive and lower quality.

Intel missed mobile.(tsmc & foxconn took over).
Intel missed graphics. (AMD turned their fortunes on gpu processing).
Intel's 10nm wafers were years late to the party, while competitors with smaller R&D budgets were able to produce further advancements than intel.

For me it's all about the node race. And it has proven that the bigger company with larger resources does not seem to have the competitive advantage that smaller companies have.
16/06/2019 1:15 AM
(HK1997 again) Philip I think the best advice I could give new investors is to first look at the business itself, then into the price. Because the price fluctuates whole the business model rarely changes, if you can monitor the good businesses, when the right price comes you will not hesitate to put all your money in.

But buying a stock based on PE, NTA alone can prove very dangerous if you do not understand how the businesses got it's lending status the way it had.
16/06/2019 1:21 AM
Choivo Capital Thanks phillip,

I'm still studying intel. So i have not casted my full line

One thing to note is this. Its not so much about the node (which is very important) but also about the architecture.

Why is Nvidia Turing, which is on 12nm, still vastly outperforms AMD's which are on 7nm, in terms of power and efficiency?

That is the thing i'm banking on.

In every major area intel is in, they are the market leaders, whether servers and CPU.

And i severely doubt AMD can ever beat intel in CPU or nvidia in GPU. They simply dont have enough money, and they dont make enough money to reinvest into R&D the same way intel and nvidia does.

Now, Intel is planning to go into graphic processing, a market where the leader Nvidia makes 30% roe, and unbelievable amount, because they simply had no decent competitor.

Intel knows what its takes to do architecture, they make the vast majority of CPU's and would be more than capable of making graphics cards that are more compatible with their CPU's. And with the margins available, they would be more than able to sell cpu and gpu jointly.

Is it probable that they can achieve this? I think more likely than not. I still have some studying to do though.

However, at 10PE, i think i'm willing to take a position on it, and build it further as my confidence level increase, or maintain it if it doesnt.
16/06/2019 2:58 AM
Investee Hi, why did you mention that the Credit Culture facility is now cancelled? Is it announced?
18/06/2019 10:11 AM
Choivo Capital Yes. It was announced.
18/06/2019 4:01 PM
Investee Bro, Can share link? Can't seems to find it
18/06/2019 8:20 PM
Choivo Capital http://malaysiastock.biz/Company-Announcement.aspx?id=1137558
18/06/2019 8:25 PM
soojinhou Give you a like even though you are an arrogant asshole since you spent time to follow up on your buy calls, and that benefits the investment community.
18/06/2019 8:36 PM
eleh Nice reading. To be frankly i also noticed that few news by KPDNKK that indicated in TV which saying all those koperasi is giving misleading info when all gov servant apply loan last year.

https://www.youtube.com/watch?v=xEGhkS__sg0&feature=youtu.be
18/06/2019 8:40 PM

(CHOIVO CAPITAL) A Look At OPENSYS (M) Berhad (OPENSYS)

Author: Choivo Capital   |  Publish date: Sun, 9 Jun 2019, 2:47 AM


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

A Look At Opensys

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

 

Well, its been sometime since I last wrote. And well, it was mostly out of me being a little lazy, more focused on my reading, as well as some self-reflection in terms of my investing and how I go through life in general.

 

In any event, I decided to get back in the groove of things with this bit of research I did for OPENSYS (M) Berhad.

 

The reason i’m sharing this is due to,

  1. Better or similar opportunities in the market, especially globally, given the fall in prices recently.
     
  2. I’ve already bought my position. For the record, it’s a smallish position mainly due to me finding opportunities elsewhere.

 

In addition, I also felt that as most of my insight was already stated out in bits and pieces by others via blogpost or comments, with some stretching back to 2015. It would not make much difference for me to share my research.

 

As always, criticism is preferred.

 

OPENSYS (M) Berhad (KLSE: OPENSYS - 0040)

Recommendation

We are long OPENSYS (M) Berhad (OPENSYS – 0040), with intrinsic value estimated to range from RM0.273 to RM0.664 per share. This represents a range from, a downside of 11% to an upside of 118% from the current share price of RM0.305.

 

 

 

Business Description

OPENSYS (M) Berhad principal activity consist of assembling and maintaining machines/providing solutions relating to,

 

  1. CRM Machines (2012 onwards)
  2. Cheque Truncation System (CTS)
  3. Payment Kiosk

 

Prior to 2012, the company’s main business consists of providing cheque processing services by selling and maintaining the CTS machines, which via image processing, converts cheques and standing instructions into electronic fund transfer instruments, with as much as 80% operational cost savings to banks at less than half the price of traditional systems, as there was no need for the physical movement of cheques.

 

They also provided non-cash-dispensing self-service kiosks that allowed customers to make deposits of cheques and cash, pay bills and renew insurance premium and subscription plans using cash, cheques, credit and debit cards.

 

In both areas, they are both the cost, product and market leaders. However, both industries are currently in a period of contraction.

 

Cheques used to be the only/easiest way to provide multiple approvals for certain payments, however, these days, most banks have made special approval tokens, that can be given to multiple individuals and only have payment made when all relevant parties have given approval via those tokens.

 

As for Payment Kiosk, most of these with online and electronic payments, not much point going to a branch to use a computer, when you can do so at home.

 

The company makes money by selling the machines at a gross profit margin of 10 - 15% and charges an annual maintenance fee of 10 – 12% for the machines. The main portion of the profit comes from the maintenance services which have much higher margins.

 

In 2012, they embarked on a new area of growth via CRM Machines, an industry which many would also consider a declining industry, but I digress.

 

 

 

 

Investment Thesis

 

 

  • Cash Recycling Machines are the best product/solution based on first principles.

Compared to other solutions, such as Cash Dispensing Machines and Cash Deposit Machines, Cash Recycling Machines offer roughly 30% savings in operational cost and capital expenditure.

 

The logic is quite straightforward, you now only need one machine, and as the machine can both accept and dispense cash, the amount of times you will need someone to come and either collect/refill the money will naturally reduce by around half.

 

 

  • Cash will continue to consist of the bulk of payments (by transaction count) globally for a long time.

Other than Sweden, cash is still widely utilized worldwide making up 85% of global transactions by volume.

 

Now, naturally most will point to China, where cash is used increasingly less due to the proliferation of QR codes.

 

The question we need to ask is, are situations like these the rule or the exception?

 

Despite the systems used by Alipay etc being the best technologically (highest capacity and processing speed) and having the lowest cost. Why is VISA and Mastercard still the mainstay globally?

 

Why do people still use credit cards and debit cards instead of e-wallets like Alipay etc? The reason is two pronged.

 

Firstly, the Chinese population was severely under-banked back when Taobao etc was launched by Alibaba etc in 2003 and 2004. Alibaba then introduced Alipay as a solution process payments on that platform.

 

With the sheer growth in these online shopping platforms which very quickly captured the bulk of the market for both suppliers and customers.

 

This resulted in most people in China having and using an Alipay account, before they even had a bank account, much less a debit or credit card.

 

Other than car loans, housing loans and corporate loans, the people of china completely skipped this process of being banked by traditional providers.

 

This meant there was no momentum or vested interest stopping banks or financial providers from going cashless.

 

The second reason is, till today, Alipay does not charge even 0.01% in transaction cost for any of the more than USD6 trillion processed each year. They make money from the fact that the vast majority of the Chinese people actually keep their savings and current accounts on ALIPAY, and buy their money market funds, fixed deposit and other financial products.

 

This meant that most merchants are more than happy to use ALIPAY. This is clearly not the case in Malaysia or most countries.. Most e-wallets merely serve as aggregators for other payment services such as Master, Visa etc, which charge a fee from 0.15% to 2% depending on the type used.

 

Good luck having vendors swallow that, especially since they can’t charge more for people paying using debit/credit cards, pursuant to a new BNM ruling. And let’s not forget the monthly fee to rent a merchant processing machine, which Alipay does not charge.

 

I don’t see my favorite hawker ever taking payment via visa anytime soon.

 

Currently, most e-wallets are going on a tear bleeding money like crazy to acquire customers. Touch N Go went from making RM20m a year to losing RM40m a year just from trying to acquire customers. The only reason most people have in using the current e-wallet services (Grab, Boost etc) is due to these customer acquisition promotions.

 

At some point, the Softbank etc venture capital money is going to run out, and these companies are going to need making money. I bet they will run out of money before people stop using cash.

 

 

  • The Opensys Edge

Currently, OPENSYS is the market leader in CRM machines, with 80% of the market share.

 

Most people may not know this, but CL Systems was the first in 2011 to introduce a self-service cash recycler machine. OPENSYS only thought started going through the process of qualifying for providing the machines in 2012 and sold their first machine late 2012.

 

Despite giving their competitors a head-start, by 2016, OPENSYS still obtained an 80% market share of the CRM Market, with the remaining 20% shared by CL Systems, NCR and Diebold Nixdorf.

 

This out-performance can be attributed to a few reasons,

  • For most banks, the Cash Deposit and Cash Dispensing Machine runs on two different computer systems, the difficulty then lay in creating the software to combine these two channels into one. OPENSYS was the first to do that.

 

  • This business is similar the rubber glove business, in that the maintenance and capital expenditures machines consist of a small portion of the Bank’s cost, with service, quality and technology being the focus of the banks, assuming the pricing is similar.


    In these areas, OPENSYS is easily the best, with the two most kiamsiap and China-man banks in Malaysia, Hong Leong Bank and Public Bank adopting their CRM machines en-masse.

 

  • This one is purely anecdotal, however, unlike CL Systems, NCR and Diebold Nixdorf, OPENSYS/OKI is a local business run by local Chinese.


    The other 3 are MNC’s whose base of operations are in Hong Kong, America and Germany, with the Malaysia business is run by one of their local branches.


    Well, I would bet my money on the local Chinese with skin in game, being a lot more driven than some Ang-Moh manager here on work holiday.

 

 

 

 

 

Catalyst

 

 

  • High probability of tripling to quintupling the profit related to Software Solution & Services

Recently, Bloomberg just reported that for the first time in a long time, the number of ATM’s have fallen by 1% globally.

 

What Bloomberg does not tell you, is that their ATM count consist of 4 different types of machines. They are, Cheque Deposit Machines, Cash Deposit Machines, Cash Dispensing Machines and Cash Recycling Machines.

 

Given the 30% savings operational maintenance and capital expenditure, banks are often replacing two machines (cash dispensing and cash depositing) with one cash recycling machines. Share of these machines have increase from 34% to 38% compared to the previous year.

 

They are currently roughly 17,500 (2017) Cash Dispensing and Cash Depositing machines in Malaysia, with growth expected to be roughly 5% per annum. To be conservative, let’s assume growth to be zero.

 

20% of them consist of CRM machines, with OPENSYS having 80% market share. They had installed a total of 2,500 and 3,200 CRM as of 2017 and 2018.

 

Most ATM and CDM machines were likely to have been bought before 2015, when OPENSYS is going around making banks aware of the technological and cost benefits of CRM’s, having started selling to Hong Leong and Public Bank, as well has having passed trials for other banks.

 

As most banks in Malaysia are now fully aware of the technological and cost benefits of CRMs and are planning to replace their machines CRMs when their equipment reaches the end of their life-span, which are typically 8 to 10 years. (Other factors such as end of vendor support for software operating systems, regulator changes and compliance to international standards, may shorten the replacement cycle for ATMs and CDMs.)

 

We can safely say the bulk of the remaining 80% of non-CRM, Cash Dispensing and Cash Depositing Machines in Malaysia will be replaced within the next 5 years.

 

Given OPENSYS’s ability to hold 80% market share within 2 years, despite giving their competitors a 1-year head start, it seems highly likely that they will be able to maintain this market share as the remaining machines are replaced.

 

Giving a potential 5X growth in maintenance revenue and earnings in 5 years, or 3X growth, assuming that the remaining 80% is evenly split between Cash Dispensing and Cash Depositing machines, and they are converted to CRM Machines on a 2 to 1 basis.

 

Ie: One Cash Dispensing and one Cash Depositing machine, is converted into one CRM Machine.

 

 

 

 

Key Risk

 

 

  • OPENSYS may not be able to maintain the market share.

Currently OPENSYS have sold CRM machines to every major bank in Malaysia, however, the bulk of the machines are sold to Hong Leong Bank, Maybank and Public Bank.

 

It is a little odd, why the rest of the banks seem to be a little slow in adopting the CRM compared to those two banks who are replacing the machines very aggressively. Especially since so many Cash Dispensing and Cash Depositing machines are so old.

 

It could be the typical GLC “take your time” attitude, or it could be a matter of solving the software programming to tie up both cash dispensing and cash depositing computer systems.

 

 

  • Forex Risk

Profits from the sale of the machines do get affected by forex risk, as purchase is denominated in JPY. However, this is not the bulk of the value of this Company in our opinion.

 

 

  • The Company is unable to maintain non CRM related Software Solution & Services revenue and profit

The non CRM related Software Solution & Services revenue and profit may well fall exceeding the gain in CRM related ones.

 

I don't think the revenue related to kiosk is significant, however, we may very well be proven wrong. 

 

 

 

 

Valuation

For our valuation, extremely conservative assumptions will be taken, and four different  scenarios will be performed, common assumptions are as follows.

  • 0% Growth in Total number ATM and CRM machines (Consensus is 5% growth).
  • Discount Rate of 4.5%.
  • All un-allocated Expenses and Income relate to “Software Solution & Services” (SSS).
  • 20% of Machines are CRM, remaining 80% is equally split between Cash Deposit and Cash Dispensing Machines. (Cash Dispensing Machine is likely to be far more than Cash Deposit Machine)
  • Tax Rates of 24%.
  • Zero profit from CRM Machines (This is the most onerous and unlikely one).
  • The market values OPENSYS at a PE of 10 in 5 years.

 

 

Scenario 1

Profit 5 years from now is calculated by taking the 2018 SSS Profit, less all un-allocated income and expenses. A corporate tax rate of 24% is then applied.

 

The remaining 80% Cash Deposit/Dispensing Machine are all converted into CRM Machines (essentially X5).

 

2018 SSS Profit: RM20,293,304
Less: 2018 Net Unallocated Income and Expense: RM(13,743,823)
Equals: Profit Before Tax: RM6,549,481
Less 24% Corporate Tax - Profit After Tax: RM4,977,606
Profit After Tax in 5 Years when remaining 80% Machines Converted to CRM (X5): RM24,888,028
Market Capitalization in 5 years (10PE): RM248,880,280
Discounted at 4.5% for 5 years: RM197,700,306
Price per Share: RM0.664

 

 

 

Scenario 2

This scenario is the same as scenario 1, except, the remaining 80% Cash Deposit / Dispensing Machine are all converted into CRM Machines on a 2 to 1 basis (essentially X3).

 

It assumes that if a branch has one Cash Deposit Machine and one Cash Dispensing Machine, it will be converted to one CRM Machine. This is quite unlikely as banks usually convert both to a CRM.

 

2018 SSS Profit: RM20,293,304
Less: 2018 Net Unallocated Income and Expense: RM(13,743,823)
Equals: Profit Before Tax: RM6,549,481
Less 24% Corporate Tax - Profit After Tax: RM4,977,606
Profit After Tax in 5 Years when remaining 80% Machines Converted to CRM on a 2:1 basis: RM14,932,817
Market Capitalization in 5 years (10PE): RM149,328,170
Discounted at 4.5% for 5 years: RM118,620,183
Price per Share: RM0.398

 

 

 

Scenario 3

This scenario is a much more conservative.

 

The profit 5 years from now, is calculated by taking the "Incremental net profit before tax growth related to CRM SSS only", that is then added to the current 2018 SSS Profit, less all un-allocated income and expenses in 2018. A corporate tax rate of 24% is then applied.

 

"Incremental net profit before tax growth related to CRM SSS only" is calculated by taking only the difference in SSS profit in from 2012 to 2018 (first machines sale is in late 2012, maintenance service revenue kicks in on 2013), less the proportioned (based on % of the 2012-2018 difference, on 2018 SSS Profit) un-allocated expense and income.

 

The remaining 80% Cash Deposit/Dispensing Machine are all converted into CRM Machines (essentially X4).

 

This scenario this amount assumes that the non CRM related revenue and profit is maintained.

 

However, it also severely understates the growth in in CRM related revenue and profit, as the gain in CRM related SSS profit is more than the net difference, due to the fall in cheque processing SSS profit from 2012 to 2018.

 

It sounds a bit confusing, but you can better understand it from the working below.

 

Difference in 2018 and 2012 SSS Profit: RM10,698,078
Less: Proportioned Un-allocated Expense And Income: RM(7,245,370)
Equals: Profit Before Tax from CRM only: RM3,452,708
Profit Before Tax from CRM only in 5 Years when remaining 80% Machines Converted to CRM (X4): RM13,810,833 (A)

 

2018 SSS Profit: RM20,293,304
Less: 2018 Net Unallocated Income and Expense: RM(13,743,823)
Equals: Profit Before Tax: RM6,549,481 (B)

 

(A+B) Less 24% Corporate Tax - Profit After Tax: RM15,473,839
Market Capitalization in 5 years (10PE): RM154,738,390
Discounted at 4.5% for 5 years: RM122,917,841
Price per Share: RM0.413

 

 

 

Scenario 4

This scenario is the same as scenario 3, except, the remaining 80% Cash Deposit / Dispensing Machine are all converted into CRM Machines on a 2 to 1 basis (essentially X2).

 

It assumes that if a branch has one Cash Deposit Machine and one Cash Dispensing Machine, it will be converted to one CRM Machine. This is quite unlikely as banks usually convert both to a CRM.

 

Difference in 2018 and 2012 SSS Profit: RM10,698,078
Less: Proportioned Un-allocated Expense And Income: RM(7,245,370)
Equals: Profit Before Tax from CRM only: RM3,452,708
Profit Before Tax from CRM only in 5 Years when remaining 80% Machines Converted to CRM (X2): RM6,905,417 (A)

 

2018 SSS Profit: RM20,293,304
Less: 2018 Net Unallocated Income and Expense: RM(13,743,823)
Equals: Profit Before Tax: RM6,549,481 (B)

 

(A+B) Less 24% Corporate Tax - Profit After Tax: RM10,225,722
Market Capitalization in 5 years (10PE): RM102,257,220
Discounted at 4.5% for 5 years: RM81,228,951
Price per Share: RM0.273

 

 

 

 

Conclusions

Needless to say, if one were to properly take into account in the valuations,

  1. The consensus 5% growth in total number ATM and CRM machines.
     
  2. The profit from CRM Machines over five years fully paid out as dividend amounting to RM115,200,000:
    • Selling price: RM72,000 per machine
    • 12.5% margin
    • 12,800 machines - remaining 80% not yet converted to CRM, assuming same market share.

 

Valuations are likely double at minimum. However, im quite the risk averse person who believes in erring strongly on the side of caution. Feel free to do the math if you have the time. 

 

In addition, for those who are unaware, i am not in the business of doing quarter prediction analysis. The total revenue and profit for Opensys is likely to be quite lumpy, from the ESM/Hardware sales.

 

The main goal for this bit of research, is to show and understand the SSS revenue and profit for the CRM business. 

 

Do let me know if you have any comments.

 

Disclaimers: Refer here.
 

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

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

Labels: OPENSYS
  bursadiary likes this.
 
calvintaneng Good and thorough writeup. Thumbs up.

For today also visit www.chick.com

Btw.

Banks do put cash collecting and dispensing in petrol stations, shopping complex or places where there is heavy footfalls. As space will be limited and rent going up it will be cost effective to install one rather than 2 if one can do the job of 2
09/06/2019 8:35 AM
teoct Morning Jon, thank you for this sharing.

One question, what is your timeline for your forecast, one year, five years?
09/06/2019 9:51 AM
Choivo Capital teoct,

i expect 5 years for or so for complete conversion for all non crm to crm's.
09/06/2019 10:52 AM
Choivo Capital Another potential risk is

https://www.socash.io/

But i dont really see how it will become the norm.
09/06/2019 11:00 AM
teoct Sorry, i meant timeline for your prediction on the share price.
09/06/2019 11:12 AM
Choivo Capital No idea.

Do note its not a target price, its the range of values i consider the company to be worth today.


====
Posted by teoct > Jun 9, 2019 11:12 AM | Report Abuse

Sorry, i meant timeline for your prediction on the share price.
09/06/2019 11:14 AM
teoct There are currently more and more entities joining the e-wallet race. Eventually there will be a shake out.

Personally, will eventually use it as looking for change is most annoying and I am from the dinosaur age.

Reason why in China, Alipay and the others have not charge for the terminal and transaction fee is because they earn interest on the float (that is before money is credited to the merchant accounts). China central bank is proposing changes to this as technically the float money belong to the many merchants. And also the many users balance, no interest paid (unlike banks saving accounts).

I am not sure of Bank Negara rules on this.
09/06/2019 11:23 AM
abang_misai sounds desperate
09/06/2019 12:32 PM
Choivo Capital Short Sell loh.

I must be the first person to write a "Long Article" while telling you potential downside 20%.

Manage to get out of dayang?
09/06/2019 12:44 PM
bursadiary Very conservative valuation!!

Why?
1. CRM sales are material starting only in 2014 and peaking in 2015 until 2018 (see table ESM revenue >RM50m)!!
2. Opensys provides 3 year free maintenance period. It means maintenance profit started only in 2017!! (see table SSS margin)
3. Maintenance profit margin is north of 80%!! Just ask any software maintenance guys. There is almost zero cost. Majority fixed labor cost.
4. PE ratio should >15x because earnings growth potential >30% for next 3 years and recurring income is >80% of profit!!
5. Free cash flow > net profit. Very little capex for a software business. Some value in property bought few years back!!

Opensys is easily worth >RM300m market cap (<RM100m today)!! When profit double in 2 years, it will start to attract attention!! People are fixated on e-wallet today because of free cashback!! Cash is king!!
09/06/2019 1:08 PM
supersaiyan3 Good Analysis.

Personally I think the machines are not very user friendly, spit out money over and over again. (In fact I think Diebold has the best performance in that regards). But that probably doesn't matter as banks only look after their own interest.

In China, CRMs are horrible (as bad as their banking service). Their CRM gives you fake money because the machines cannot recognise fake money when it was deposited. If that happens in Malaysia, nobody would want to use CRM.
09/06/2019 1:47 PM
Choivo Capital Interesting, thanks. I didn't know that about china.

From an investment perspective, the keep spit out money thing is probably a plus, since it really helps with keeping out the fake notes.

I'm assuming Diebold is also just as effective at that, but more effective at identifying old notes vs fake notes? I never thought to test like that as i don't think it affects the economics of the business. Still its interesting to know.
09/06/2019 2:03 PM
(HK1997 again) Philip Actually one interesting point which I am trying to figure out. Opensys does not do their own R&D for these machines, and it is instead a licensed technology from OKI, Japan. The question which I could not clear up the answer to is:

1) what is the terms of the technology partnership. Is it a profit sharing deal, or just a pure franchiser/franchisee deal where OKI sets the master price and opensys sells based on the listed price to customers. What is the minimum stocks level to keep, will the system buying costs erode/increase over time, and most importantly is opensys working on their own homegrown solution in the future to compete with fintech and peers.

2) it seems your assumption of profits here are all based on pure sales only ( correct me if I am wrong). But another part of opensys sales is also based on leasing of machines as banks I believe will be far more interested in short term 1-3 year leases of the esm equipment at a higher service price, but without the hassle of buying and storing the equipment. For opensys looking at note 14 of inventory there is write down of used machines, as these machines cannot be cannibalised for new equipment or reused for other applications. There is a 10,313,089 write off of esm equipment which I assume is the leasing part of equipment that has been obsolete/ revamped. As OKI does not have a policy of taking back old machines and refurbishing I believe the difference in service actual profits will be quite substantial, as I am taking the example of my office leasing the latest xerox photocopy machine for a 3 year contract and returning it after the lease is up for a newer model, which is cheaper than buying a new machine.

In the end what will be the market size of this industry, what will be the acceptable method for it's main customer base ( fintech, direct purchase and ownership, leasing) and how clear will be the profit and revenue growth 5-10 years from now are frankly speaking quite murky for me.

I would say it is not a bad business, but neither will I submit capital into such an endeavor. Opensys has a huge market share 80%, but in a space where the total addressable market is very small. The customer base is also very niche, which is worrying all the same as some believe opensys is worth 300+ million.

Time will tell.
09/06/2019 2:54 PM
Choivo Capital Fair points phillip.

I dont think they lease machines, more like receive payment for each transaction, when it comes to the kiosk and cheques. Look at the revenue note, they dont state any lease/rental income.

I'm fine with the write offs. You see the big ones in PPE note, however, i noticed that they are mostly fully depreciated to begin with. The adjustment amounts to only about 24% of current year depreciation, so an error rate of about 2-3% per annum on a straight line basis, relatively normal.

I do however, find it odd that they disclosed the write off in inventory. Probably need to find out.

Having said that, if we perform a valuation where every division except for CRM contributes zero, ie, we only take into account CRM SSS net profit, and included the discounted net profit from CRM sale, we are still looking at intrinsic value per share of around 40 to 50 plus cents.

Pretty good, but not utterly amazing, which is why its a relatively small 6.5% position.

You may want to take a look at kraft heinz and intel.
09/06/2019 3:39 PM
qqq3 are there really outside fund managers in such propositions?
09/06/2019 6:10 PM
(HK1997 again) Philip The intrinsic value is based on a proposition that trajectories will stay current. I guess the big puzzle is to always understand if any slowdown in growth is permanent or temporary. Opensys already had a drop-off in machines sales in the latest annual report.

The usual mathematical assumption is
If 1 bottle of beer is sold at $1, then 100 bottles of beer is $100.
But in the real world if you went to the market to buy 100 bottles the price is more likely to be $90. A bigger bulk discount. As different modes of payments compete, I believe most banks will choose the option the involves the lowest cost of maintenance and financial expenses.

I believe based on slower than expected contribution over a longer period of time than expected, inclusive of increasing costs, exchange rates and competition, you will be be closer to a intrinsic value per share of 19 to 25 cents. Using your crm projection based on projected sales. But again this is projection as I am more conservative on the real number of CRM upgrades, replacements and it's maintenance in the long term.

In my opinion, the dividend payout will not match the earnings growth in the long run, as the earnings and revenue of the latest quarter will not match the expectations of further growth as expected.

It is the age old question, give out dividends now and sacrifice future growth, or withhold dividends so earnings growth can match future expectations.

It is like asking people in the 50's if credit card will ever take off, everyone believed then that credit card fraud will be it's downfall. If you told them visa would process 11 trillion dollars in payment volume in 2018 it would boggle their mind.

My personal opinion is that fintech will be a booming monstrosity, and as usage becomes more prevalent, there will be less and less OTC transactions and machine cash applications in the future. I can't remember the last time I carried a 1000 ringgit note, much less bringing the 10,000 singapore dollar note around.

I believe cash will definitely have it's place in the future, but ATM, CRM usage will definitely drop as cashless payments become more secure and easy to use.

Lightning always finds the path of least resistance to earth.
09/06/2019 6:24 PM
Choivo Capital In terms of value, electronic have far far exceed cash.

I have never carried a 1000 or 10000 sgd note out before, usually i ask them bring it to my house.

However, i think almost all of us here, visit the ATM once or twice a month at minimum. And assuming you do go out to eat, you will be spending cash.

You buy durian from uncle on the street? Cash.

Why don't i think e-wallets will make it in malaysia? Its simple. The economics dont make sense. You can't make money from e-wallets.

Why do shops accept e-wallets now? Because e-wallets are paying out subsidies to attract them, giving discounts on the vendor's goods to their customers, paid out of their own pocket.

Of course i'll help you as a vendor.

But if the economics become, i will charge the vendor 0.1%-2% when they receive payment, and due to BNM ruling as well as the fact customers wont want to swallow this, the vendor cannot pass on this cost, will i accept card or accept cash?

Unless you run incredible cash volumes, it would not make sense to rent the terminal and pay the 0.1-2% per transaction.

At the end of the day, the sheer fact is that this service is not free (and cannot be free due to economic reasons), unlike alipay in china, it will be unlikely become the mainstay, at least in terms of transaction volume.
09/06/2019 6:35 PM
qqq3 they make money or lose money.....who cares? makes any difference to dividends?

this kind of business, one year make, one year lose.

this is at best a family kind of business , marketing agent of MNC.
09/06/2019 6:38 PM
qqq3 landscape, technology, market leaders, competitions changes over night....no point.
09/06/2019 6:43 PM
qqq3 fund managers prefer some thing more solid, preferably large accessible markets, own technologies, repeatable businesses, continuous improvements, sustainable and predictable.
09/06/2019 6:51 PM
qqq3 by the way, traders like me may be interested if there is a reason to trade the share.............is there one?
09/06/2019 6:53 PM
qqq3 before that there is Dataprep and its Lityan Systems...where is Dataprep and its ATM systems now?? started with a lot of promises....same kind of business.

market cap $ 90 million looks low....but there are reasons why so low.
09/06/2019 7:03 PM
silom Choivo, it might be abit uphill task for a single vendor to capture 80% of the self service terminal market cuz some of the banks will go for multi vendors, not only opensys has CRM.
09/06/2019 8:06 PM
silom Choivo , think this paynet is aggressively transforming the local payment landscape, one of their latest brand duitnow , whether this can act something like eWallet , eg use your phone to pay at local merchant or restaurant in the future, need time to tell, just like you now holding an ATM and can withdraw at their member banks ATM. indeed you can actually pay with your ATM card - Mydebit - at the local merchant, my kid is using this. this payment switch is jointly owns by the central bank and local banks , think this group might protect their own turf for this local payment landscape or ewalllet thingy. believe the success rate can be high .

https://www.paynet.my/
09/06/2019 9:04 PM
Choivo Capital Well, opensys have captured 80% of the market now for CRM and in cheques, they hold 85% of the market.

I think they can get the bulk of the market, esp since no bank is a fan of maintaining two systems. Think of it, when a company buy IT equipment, they just all whack dell, or apple etc

Paynet has been around since 2014.

It would be interesting if banks were to allow instant transfer at zero cost instead of debit cards.

But why do so? Debit card transactions is about RM21 billion this year or about 150 million transactions for malaysia. Rates of debit card is lower of 0.21% or RM0.70 +0.01%.

For simplicity, lets just use the 0.21%. That is about RM44.1 million raked in from fees, basically free money.

For the record, that amount is more than triple the total amount of profit from the maintaining ALL ATM's (CRM etc) in malaysia (based on my working above). Its about double the revenue from maintenance services for ATM.

Lets not even talk about credit card.

Nobody is going to shoot their own RM44.1mil free money ricebowl.
09/06/2019 9:34 PM
(HK1997 again) Philip True story, I bought durians in tangkak using alipay.
10/06/2019 6:45 AM
VSOLAR Sailang Margin All In choivo living in his own sweet world
10/06/2019 7:58 AM
(HK1997 again) Philip http://www.xinhuanet.com/english/2018-08/18/c_137399728.htm

This durian seller is using alipay and wechat to receive payment from tourists.

The convenience for tourists and for himself in not needing to hold can that can be stolen by thieves is definitely a boon.
10/06/2019 9:19 AM
qqq3 investing is participating in its growth...................market growing?

market share growing ? 80% already.
10/06/2019 5:29 PM
VSOLAR Sailang Margin All In some people like shrinking market
10/06/2019 5:45 PM
qqq3 value investors have under performed all other investors long long time already.
10/06/2019 7:09 PM
equitydiary Should emphasize more on the maintenance income from CRMs which is recurring and growing. When I discuss about Opensys, most people think it's all about sales. As in the company sells a CRM and gets money, don't sell no money. What they don't get is that every CRM that Opensys sells will generate maintenance income. Opensys gives free maintenance for 3yrs. After 3yrs, Opensys charges about RM6k per machine per year. For those going for the AGM this week, can confirm with the company.
10/06/2019 9:19 PM
skyea u know this maintenance revenue thing, its like palm oil trees reaching maturity, first u have 700 machines contributing, next its 1400, then 2100, 2800 and 3500 trees generating cash for opensys, the revenue curve will go up year after year, and so will the profit curve. but now heres wwhere it gets exciting, the number of staff will hardly increase, because for 3 years when machines were under warranty, they already had to be maintained "for free" the workforce structure is already in place to support this 3200 machines, meaning after 3 years, the revenue kicks in but costs dont go up. (because no new hires are needed) every rm 1 in revenue flows directly to the bottom line, if 19 mil rev comes in and no increase in costs, the company should get close to 14-15m in PAfter tax. that is 200-300% what it is earning now.
11/06/2019 2:05 AM
equitydiary Well said
11/06/2019 11:48 AM

(CHOIVO CAPITAL) A conversation with a very wise Ex-Banker

Author: Choivo Capital   |  Publish date: Sat, 30 Mar 2019, 5:49 AM


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

 

A conversation with a very wise Ex-Banker

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

 

Introduction

 

Every time I finish writing an article, I often wonder if it was worth the time. It takes me on average 3-5 hours to flesh it out from the notes I keep and given my reading speed of roughly 100 pages an hour. That is roughly 1-2 books of worth of opportunity cost.

 

And this trade off couldn’t be clearer after I finished one of my previous post, and seeing the ensuring debacle.

 

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

 

A very wise, partially grey-haired friend of mine asked me,

 

“Why on earth do you still want to post articles or comment on that website? Given how things are for you now, you should have a good life ahead of you.

Why take the risk? And open yourself up to not just pointless personal attacks, but also potentially very serious liabilities and risk from people with malicious intent?

Especially since you can be a bit hot headed, and don’t respond well to personal attacks.

Most people you piss off can’t do much, but statistically, some of them are likely to be able and motivated enough make life a bit irritating for you

I don’t think you actually considered the risk you are taking here, and it’s definitely not worth it in my opinion.”

 

Even Mr Ooi, very kindly sent me an email detailing his previous experience in I3 and such individuals and advised me to spend my time more productively instead of spending it on the forums.

 

Advice I would be wise to listen to.

 

Well, beyond the benefits that come from the sheer act of writing and crystallizing your thoughts, as well as the ability to see how one develops over the years, by reading my previous writings. Reading back, I really do sound quite arrogant at times.

 

Why do i write? And why you should too.

 

On occasion, the writing of these articles, allowed me to hit the jackpot in terms of meeting extremely wise individuals I greatly admire and learn much from.

 

And many of these individuals, i would have never been able to find or meet otherwise, much less have 5 hour coffee sessions with.

 

And after that Dayang post, I really hit the jackpot.

 

The first was a businessman playing a chairman type role over two businesses. Like me, he is an avid reader, a great Buffet and Munger fan (he listens to the transcripts of their AGM in the car), and a fellow admirer of Lee Kuan Yew and his works.

 

He has been a Berkshire Hathaway (as well as some of the companies that Warren buys for his portfolios) investor for more than 10 years, and for one reason or another, was thinking of selling some of the shares and have me manage a portion.

 

Needless to say, I turned him down. If Charlie Munger says he will never sell his Berkshire shares, who am I to allow someone to do so for my sake.

 

And who am I to even think of accepting that kind of money and think myself capable of meeting that kind of opportunity cost.

 

We settled on him kindly paying for our meal and coffee, and giving me his time, in providing me with invaluable advice on life and my nascent money management activity.

 

In exchange for me, I provided him a link to a website where you can download almost any book you could possibly want for free, as well as where Lee Kuan Yew’s best speeches are kept.

 

As the conversation was quite personal in nature, I won’t be sharing them.

 

The second individual however, was an ex banker who had been through all 4 boom and bust.

 

He also experienced the KLSE market from the very first day. In fact, he was the person who introduced margin finance to the KLSE market.

 

The depth of knowledge and experience he had, as well as his ability to see and understand a business was incredible, and immensely insightful to me. After getting his permission, I decided to write an article on him.

 

I hope whatever written will do him justice, and is at least half as useful to you, as our conversation was to me.

 

Some people made tens or hundreds of thousands, or even millions from DAYANG. I on the other hand, hit the jackpot and met these two.

 

I think I had the better end of the trade to be honest.

 

 

The Conversation

 

Choivo Capital:

Good afternoon, Mr Ex Banker, thanks for inviting me out. I was quite surprised when I saw your email. And when you told me in those few sentences your experiences, I could not agree to meet fast enough.

 

Do you mind telling me why you wanted to meet me and your history?

 

 

 

Ex Banker:

Well, I’ve read your posts for a while, and thought they were interesting. However, the Dayang article you did, was for me, the best.

 

It wasn’t just an abstract theoretical piece but a good explanation of the cause and effects.

 

You even did the separate stages and made it applicable to the current situation. This situation with Dayang is something I had observed many many times, and you put it out in a way that was easy to understand.

 

 

 

Choivo Capital:

Thank you. I appreciate the compliment. What is your history like? You told me in your email and whatsapp that you were an ex banker, and you had experienced all 4 booms and bust of the Malaysian market.

 

What are these booms and bust?

 

You even mentioned a company Bovis Oil, which very few would have heard. I could barely any information googling it, and only found quotes of it in extracts of very old books.

 

 

 

Ex-Banker:

Well, I was a banker, and I retired in my forties, which is 20 odd years ago.

 

One of the things I am certain about is that, I was the first, if not one of the first to introduce in Malaysia was margin loans.

 

Well, the first boom/bust was in the mid-1980’s it was Tan Koon Swan and the Pan-El crisis.

 

The second was the famous black Monday in 1987. The third on was 1998 Asian crisis. And the fourth was the 2008, housing crisis. Very interesting times.

 

Well, back in those days, it was honestly quite crazy and a little bit like the wild west. I remember some small guy, with nothing but a timber mill in Sarawak, who bought over the shares of a Southern Bank at 30 sen.

 

And using illegal transfer pricing to fry the earnings, resulting in the share price increasing to more than RM 100 per shares. And it was just incredible, how every bank wanted share placement from him, which he used to fund the losses from the transfer pricing.

 

That guy in the end ran away to Shanghai in 1997 or so when he found out SC was out for him and built a theme park there.

 

So many of these shares with nothing, just go from few sen to a few hundred ringgits. It was insane. Even taxi drivers turn into millionaires in just 2-3 months.

 

 

 

Choivo Capital:

Unless i'm mistaken, that sounds like Teh Soon Seng of Aokam Perdana. How did you manage to find out about the things he was doing?

 

 

 

Ex-Banker:

Well, I was friends with an analyst who happened to be his relative. He told me, anyone in the plywood/timber mill business in Sarawak, knows for a fact that the kind of profit and margins he is posting is impossible.

Quite a smart chap.

 

 

 

Choivo Capital:

Well, what do you think of the current Dayang scenario?

 

 

 

Ex-Banker:

Well, every few years, for every bull market, we always have a new group of market taiko. In 1980’s Koo Khai Peng and Tan Koon Swan.

 

In 1990’s Samsuddin, Ishak Ismail, Teh Soon Seng, Halim Saad, So Tian Chai, John Soh Chee Wen (this guy currently in SG jail for the 2013 penny stock crash in SGX), Robert Tan, Low TH etc

 

And right now, the present taiko is Koon Yew Yin. Malaysia market is quite small after all.

 

Like how your article said, in this kind of scenario, as prices go up, you have more and more of the same type playing. And if you don’t get out early, you will be the only one standing there and playing.

 

Having been in 4 boom and bust, I can tell you everybody, no matter how smart, cunning or rich that person is, if fortune turns on him, you will need to eat humble pie.

 

Back in those days, I remember this guy was worth almost USD 3 billion, he held 5 public listed company in Malaysia, one of them HWA TAI. He died bankrupt.

 

I mean look at JAKS and EVERSENDAI, Koon Yew Yin must have lost an absolute fortune in those companies. The thing about frying these companies is that, the more you buy, the harder it is to get out.

 

You can keep buying to support the price, but your money is just paper. Try selling and see how much you can really get out.

 

 

 

Choivo Capital:

Haha, did you trade on this, and make any money?

 

 

 

Ex-Banker:

Of course, Koon Yew Yin donate money to you, why you don't want. In addition, he also gather up all the fish for you to shoot. Its free money.

 

I bought early and have sold it all off. I'm only contra trading it now, make money every few ticks.

 

Since you do kind of know how the other contra people work, how much their cost and so how they will act.

 

 


Choivo Capital:

Well, that’s interesting, i personally did do so as i don't think i would be good at it. Investment wise, what is your philosophy and what are your investments?

 

 

 

Ex-Banker:

Well I have a few rules when it comes to investing.

 

  • I only invest in Chinese owned companies, this is exclusive to Malaysia and South East Asia.
  • No GLC’s or those that survive on government contracts. Period.
  • Great industries that I can understand.
  • The founder must not be egoistical.

 

My largest investments are Nestle (original cost of RM8, kept topping up), Public Bank (bought at RM1 pre-split and kept topping up), Dialog ( bought in 2008 or so), Hartalega (bought in 2008 very near IPO), MFlour (bought recently near the bottom).

 

Overseas, I hold Visa, Netflix, IQIYI, Starbucks and a few other companies.

 

 

 

Choivo Capital:

Wow. My god, I feel jealous now. Hahahaha.

 

How did you manage to find these companies, and do you mind elaborating on your investment philosophy as well as your investments?

 

 

 

Ex-Banker:

Well since i retired in my forties, which is 20 odd years ago, I have a bit more time to spend on this than most.

 

I have always been very curious about things and investing is very fun for me.

 

I had some experience as a banker, which helped me understand businesses and the markets. And i also love of travelling, which allowed me to have a much wider perspective.  These two things helped me quite a lot in my investing.

 

Why Chinese only?

 

Well, I don’t want to be racist, but in South East Asia, unless the company is owned by a person of Chinese descent, I don’t really see it as being competitive. Just my view. As you can probably tell, I don’t invest in India.

 

No GLC’s.

 

Why? GLC’s often are inefficient or given crutches by the government. So, they will either earn a little money only, and have corruption and leaks take up the rest.

 

And if you rely on the government, well, the government giveth and the government taketh away. See MYEG.

 

Great industries I can understand with strong prospect for growth.

 

Well, I am an investor that focuses on growth very strongly. I need to be able to see it clearly.

 

Non-egotistical.

 

Well. Its not that easy to identify who is egoistical or no, but you can tell somewhat.

 

By the way, just because one is ambitious, does not mean one is egoistical.

 

The easiest way to see, is if the management or businessman like to do empire building, and trophy projects that don’t make monetary sense, or keep talking about how they want to be number 1.

 

All of which are often either equity destructive or going to kill the company at some point.

 

 

 

Choivo Capital:

Ok, that’s interesting, lets start with Public Bank.

 

This company is one that I've studied for some time, and I consider it one of the best bank in South East Asia.

 

I always find it very funny whenever people state that it has the worst IT system, while admiring its profitability.

 

Seemingly failing to understand that, it’s always about returns on incremental capital.

 

When it comes to banking, an extremely high-tech system is not needed for high returns, nor will it provide one.

 

Its all about not wasting money, and not doing stupid things, despite how much incentives bankers have to do stupid things.

 

What’s your perspective on the company?

 

 

 

Ex-Banker:

Well back in the day, when margin loans were first introduced. Lim Tee Keong and his eldest sister were some of the biggest users of it. And every single bank had to borrow money to him for fear of insulting Genting Group. Everyone wanted Genting’s business.

 

Everybody thought that the two siblings are backed by their father Lim Goh Tong, nobody expected that Lim Goh Tong would let his eldest son go bankrupt.

 

Only one bank stayed away. Public Bank. That should tell you a lot about this company.

 

If you have ever noticed, every bank usually releases their annual report after Public Bank.

 

Why?

 

They want to see what they disclose this year and what is their performance, to try and make themselves look better.

 

They are also the only bank in Malaysia to use a system of Gratuity upon retirement.

 

Some of my friends who were branch managers, when they retired, they receive RM2-4 million in gratuity payment.

 

Since they encourage employees to stay with them forever, this incentivizes them to be responsible as it its their own money, and don’t do stupid things.

 

These days most banks focus on NIM. Everyone wants a fat NIM. But do note, NIM does not include provisions. Public Bank give out loans not with a focus on NIM but minimizing the provisions, and thus focusing on the real bottom line.

 

Even their loan book profile is different. It consists mainly of vehicle hire purchase, residential, property and shoplots. Very little of it is from corporate borrowings. I can count with my hands the number of listed companies in Malaysia they borrow to.

 

So, you don’t have credit risk concentrated in just a few accounts, you also don’t have these kinds of scenario where PNB needs to bail out Maybank by buying up the entire right issue of SAPURA.

 

When they borrow for property, the bank valuation is the lowest among the banks.

 

And if you notice, when they borrow for hire purchase, the don’t do proton etc at all.

 

Why? Because resale value is how you ensure people pay back their loans. Yes, loans in Malaysia are recourse, but good luck chasing these small loans down.

 

In addition, the real money in Hire Purchase Loans, is not in the rate, its in the penalty payable for early repayment. The cars they do hire purchase for, Japanese and Continental. These are the people with money and are most likely to change car every 4-5 years.

 

There is a rule in Malaysian loans, cannot get loan from Public Bank? Go get it from Maybank etc. They have the best loan book in the country now. Although these days Hong Leong is catching up.

 

 

 

Choivo Capital:

Ok, that’s interesting, what about Nestle?

 

This one I’m really scratching my head. All these consumer goods companies globally, are starting to have their revenue and profit drop.

 

The valuation of the Malaysia’s Nestle is easily triple for their counterparts overseas. Malaysian good companies tend to become, in my opinion severely overvalued.

 

Why are you still holding this one?

 

I mean, most people that I know no longer drink Milo or eat Maggi Mee regularly.

 

 

 

Ex-Banker:

Haha for this one even my friends and relatives are asking me to sell.

 

Well, the first thing to note is this. You friends and family are Chinese. The real market for these is to the Malays. And this market is to an extent, somewhat addicted to the product. All the mee goreng out there use Maggi Mee.

 

Now on the stock price. The top 30 the shareholders are all foreign funds, not local, so there is little risk of the prices getting a beating with the new government policy to hold fewer local shares.

 

And this price, or overvaluation as you call it, is likely to remain, because of the fact there is no disruption to the earnings locally. If the company maintain their earnings, the valuation is likely to stay put.

 

Especially since the foreign funds are motivated to keep the prices up, and it does not take much money to do so.

 

In addition, in Malaysia, this share is viewed as if its US treasury bonds, when a crisis come, money floods into this stock, historically, it does not drop during a crisis.

 

 

 

Choivo Capital:

Hmm, I guess the real risk in this case is if like BAT, if the earnings take a structural hit, then the valuations and earnings will fall in tandem, giving you that RM80 to RM22 drop. I don’t really see it for Nestle.

 

What about Dialog?

 

 

 

Ex-Banker:

Well, they are in the mid to downstream which I like, and that is where the real money is. Malaysia is well located for this. Company is managed very well.

 

And for this one, when I met the CEO, I really liked him.

 

He is smart, extremely driven, very humble with no ego problems. I mean you look at his car now, it’s a 2008 Porsche Cayenne. No driver, he drives his own car.

 

The Porsche, well, when you get rich, you will change a little, the question is how long it will take for you to get it out of your system and go back to living normally. And he’s clearly over that phase 10 years ago.

 

To be a billionaire and only drive a 10 year old Porsche. Pretty good.

 

 

 

Choivo Capital:

Hmm, ok. What about Hartalega? And why not Top Glove? What’s your perspective on the current expansions being done which should inevitably lower margins.

 

I’m not sure their current capacity expansion will result in a net positive to earnings (and at least 20% per annum), if margins on the gloves they are currently selling is getting compressed at the same time.

 

 

 

Ex-Banker:

In this case, when they first listed, I could see that demand for rubber gloves will likely to be strong very strong for the next few years, it turned up to be stronger and lasted longer than i expected.

 

It had the benefit of being an essential item that cost very little, and Malaysia is uniquely positioned to take advantage of this.

 

Well, margins are always going to be compressed as a business grows and it’s a matter of ensuring that sales revenue grow faster than the margin compression.

 

Based on the low glove usages in China and other developing countries, I think there is still some way to go.

 

In addition, their new AMG Antimicrobial Glove is a best seller in Europe where it was just released.

 

When they get approval from FDA this year to market in the US, I think they will be a best seller there as well, as it’s the best product in the market, and this should drive the second round of growth.

 

Also, when it comes to Antimicrobial gloves, I don’t think if you are a hospital, you want to be going for the cheapest one, you will want the best one as long as it’s not too expensive.

 

Why not TOP GLOVE?

 

Well, I have a rule where I say I cannot invest in founders I think are egoistic.

 

The boss of Top Glove gives me a feeling he might have hints of that. The way he says “Number 1 Glove Producer” is a little off. The goal is not to be the number 1 glove producer, but to be the most profitable one.

 

They bought ASPION because, in my opinion, they just couldn’t stand HARTALEGA owning the surgical gloves segment.

 

And they paid a high price for it. They are now going to court to try and get back RM640 million, but I doubt they will get one cent. The due diligence is done, and you signed the agreement. Game over.

 

The bosses of Hartalega in my opinion is just as driven and ambitious, however, I think they are much humbler.

 

 

 

Choivo Capital:

Hmm, ok. I’m not sure I agree about the comments on Top Glove, but let’s continue to MFLOUR.

 

This one is hard for me to swallow as well, one look at the debt, I feel like fainting already. Especially since the chicken business is absolutely cut throat.

 

 

 

Ex-Banker:

You’re not wrong in the chicken market being cut throat.

 

Well, for MFLOUR, I bought it recently at RM0.4X or so, along with the warrants at RM0.1X.

 

I’ve known the bosses for a long time and they are very humble and hardworking individuals. I expected the profits to come back since the chicken prices are adjusted.

 

It’s not by accident that KFC, Texas Chicken all raise prices.

 

Most of MFLOUR’s chickens are sold to Texas and KFC, so they don’t lack demand. The real growth however, for me is going to come from the Flour factory in Vietnam.

 

Vietnam is very influenced by the French, every morning they eat croissants and baguettes.

 

There is this dish called Banh Mi that is made using baguettes or croissants. As the country gets richer, they are going to eat more of this.

 

And to top it off, there is only one other competitor in Vietnam when it comes to flour. So, for me, I’m quite happy with it.

 

 

 

Choivo Capital:

Hmm, ok. I really don’t know how to buy looking at the debt and the other opportunities in the market, but your thesis seems ok.

 

What are some of the other picks you see, locally or globally?

 

 

 

Ex-Banker:

Well, I bought NETFLIX relatively early, not for the US, which I think competition is really heating up, but for their overseas reach. The main one is India, they are number one there, and they have a strong grasp on the local content.

 

In India, even if the person is Harvard educated, they are surprisingly not really westernized.

 

The movies they watch for one reason or another must have a lot of dancing. I believe NETFLIX will dominate here, especially since I think NETFLIX can burn a lot more money than the local companies.

 

IQIYI is a recently listed company, the are the largest streaming service in China. “Yangxi Palace” was created by that company, billions of streams.

 

Losing money, but I think the future is very very bright, since like it or not, streaming will be the number one method of consuming movies and tv shows in the future, and the number one player now is likely to be the number one player, when the market decides to start making profits.

 

STARBUCKS, well everywhere I go, I see Starbucks All these youngsters drinking Starbucks all the time, even now, we are meeting in Starbucks. Its quite fun to visit Starbucks outlets whenever i travel overseas.
VISA, well, this is the only one along with MASTERCARD where it is accepted everywhere in the world, no matter where you are.

 

I remember I was meeting the CEO of UNIONPAY in Malaysia. He told me how he was the largest card services company in the world. I just pointed towards the credit card machines in the Starbucks we are meeting, and said, “That machine does not accept Unionpay”. He straight away quiet.

 

If you go around with only a Unionpay card, you will starve I tell you. I believe there is enough momentum in the west that is going to ensure people will be using VISA and MASTERCARD for a long long time.

 

 

 

Choivo Capital:

Hahaha, that is very interesting. Well, do you have any thoughts on my biggest positions, TIMECOM and RCECAP?

 

 


Ex-Banker:

Well, TIMECOM is a GLC, and I don’t invest in GLC’s.

 

 

 

Choivo Capital:

To be honest, I think most of the companies in the KLSE are probably GLC’s by virtue of them being held by EPF etc.

 

Having said that, I think you will notice by the speed and level at which TIMECOM works, its very different from a GLC.

 

What about RCECAP?

 

 

 

Ex-Banker:

Well, I read up on your RCE Research, and the few risk I think you might be under-pricing is this.

 

Lets talk about RCE CAPITAL (RCECAP)

 

When it comes to banks in Malaysia, the ones that survive a crisis, is the Chinese banks, like Public Bank or Hong Leong, where they have the best loan books, and the Chinese will always support their banks.

 

Maybank, well the Government will always support this bank. You saw that in the bailout of Sapura and thus indirectly of Maybank. CIMB maybe.

 

The rest of the lower tier banks, like RHB, AMBANK etc, all these banks will suffer as they need to rely on their own.

 

RCE is similar.

 

Like the tier two banks, RCE does not get the best borrowers, they get the low end B40 ones.

 

The managers etc, ie the best paymasters, go to Bank Rakyat. Personal loan of 4% nominal rate, on an installment basis. It’s the lowest rate in Malaysia. Then they go to MBSB and finally RCECAP.

 

RCECAP, they need to go and find customers, in exchange, they get to charge higher rates. Now their niche, may very well better compensated due to lack of attention, but we’ll see.

 

What you may be mis-pricing, is that in an all-out crisis, RCE type of borrowers will be the first level of borrowers who stop repaying. Same with all the second-tier banks in Malaysia. That NPL will spike, the question is if its priced right, and if your thesis that the B40 will not get fired even in that scenario is correct.

 

Now, where they pledge deposits for their loan books which are securitized. You like this as it indicates skin in game and thus their confidence in the quality of the loan book. I think you may have it terbalik.

 

Chances are, burnt by 2008, no investor would buy loan securitizations unless they are pledged deposits equivalent 15-20% of the bond, especially when it comes to what is essentially personal loan portfolios. And this requirement causes them to raise their standards.

 

Judging by the NPL drops, they probably tightened the quality. The question you need to ask is if you think it is properly priced in.

 

 

 

Choivo Capital:

Those are very fair points, I must admit I never considered certain risk from that perspective. Especially when it comes to the deposits pledged against borrowings.

 

Having said that I still consider it priced right, since I have not seen any government fire B40 civil servants ever. I would pay more attention to the privatization of the civil service and how it affects the company though.

 

Thank you for your time thus far, having read my articles and spoken to me, what do you consider to be my  biggest weakness investing wise.

 

 

 

Ex-Banker:

Well, I think you seem to be very much like an accountant, with a very strong focus on the figures.

 

I believe you need to be more adventurous,and some things you must feel, it cannot be measured.

 

A lot of my ideas come from my learning as I travel and my experience that comes from trying different things. It comes from instinct and the gut.

 

 

 

Choivo Capital:

Haha, to certain extent, I consider that a compliment. What is a value investor but when a contrarian meets a calculator.

 

Having said that, being in the market so long, would you not agree that most people who try to invest via feel, adventurously or gut instinct (instead of making sure the numbers make sense), usually lose money, and a lot of it.

 

Would you say that the reason this did not happen in your case, is because as an ex-banker, you’ve seen a lot more and thus is much shrewder than the average individual.

 

In addition, listening to you go through your investments, you’re clearly someone who is in the game of pursuing the truth and not the protection of ego, and is a lot more intelligent than most.

 

Do you think this saved you?

 

 

 

Ex-Banker:

Haha. Well, you are accurate in this regard.

 

 

 

Choivo Capital:

If I’m honest, I think the difference in our understanding when it comes to business, is because you’ve been in the industry much longer, I don’t have anywhere near the experience you have. These things just take time I suppose.

 

My investments are limited to what I can understand. It needs to make sense as I don’t do adventurous.

 

There is a quote I quite like from Chris Hadfield, on what it takes to be an astronaut. The same can be said for an investor.

 

“If you need adrenaline to keep you in the game that will cause your downfall. Instead what you need is measured, complete understanding of what might happen and how to mitigate the risk. You are not trying to impress anyone but stay in the game.”

 

The number one goal for me is to not lose money, as the gains your need to cover losses are far larger percentage wise.

 

When I look at the top 20 in the 2019 stock pick competition and compare it to their 2018 results.

 

Well, compounded, I doubt even half of then have made back the initial 100k principal.

 

Having said that, I do much prefer paying for earnings these days compared to one year ago. We are not liquidators after all.

 

For my top positions, I am paying for earnings. Its just a happy coincidence that some of them are below book. Hahaha

 

In any event, thanks for taking the time to meet me. I really learned a lot this time. Let me buy you coffee next time.

 

 

 

Ex-Banker:

Haha, alright. Lets meet again sometime.

 

 

 

 

Conclusion

During our conversation, we spoke a lot about my other holdings, and prospective holdings, however, I am unable to share these thus far, as I may still be buying more.

We also spoke a lot about the economy and for some of these, he went quite deeply into them, however, as they are often quite disparate, and for the sake of saving time, I’m not writing them down.

I learnt so much, that given my rate, I’m the one owing him RM1,000 for the 3-4 hours. Hahaha.

I hope this was as useful to you, as writing it down was for me.

 

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

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

 
  15 people like this.
 
paperplane Raider bro, i trust your pick. I know when you speak, you meant your words. I studied it, by reducing borrowing cost and add on impairments reversal plus extra profit, it should do well 2019 also
30/03/2019 7:32 PM
Choivo Capital 3iii,

Both of them should face npl spikes during recession. Although if you look at aeoncr, it's not that bad.

Business wise. I'd prefer aeoncr as theirs just have so much more room to growth. Motorcycles sales are growing at close to double digit each year.

And the worse off the economy the more people will ride motor. Its easily 10x cheaper including maintainence and fuel.

And the thing about motorbikes. Is that even the poor people don't like to buy second hand. They would rather get a motor bike hire-purchase at 1.5% per month to buy a 5k hike.

Rce, if I'm right. And if the ir didn't lie to me, and less than 1% of the loan book is from contract staff, should be safer during recession.

Because if economy is bad. Gov servants sure won't resign, neither will they ever get fired. And if that is the case, every month your salary cut for me.

But, unlikely to have any growth more than gdp. Esp since govt slowing down hiring.

But given the valaution. Should be ok.

Rce main risk is they don't collect the money in their own, it needs to go through angkasa and the co-ops. So there is a very clear black Swan there.

Aeoncr have a very strong team for collections. Since they rely on people actually banking in the money monthly.

Aeoncr is the better bsuienss I think. More diverse, less black Swan points.

Personally I own both. Rce is alot more than aeon though. But I'm always looking to buy more aeoncr.
30/03/2019 7:33 PM
probability myeg is a gem - blockchain is picking up

https://www.theedgemarkets.com/article/my-say-make-my-palm-oil-great-brand

As a result, olive oil is one of the most adulterated food products in the world. In 1981, more than 600 people died in an epidemic that spread across Spain. “Olive oil”, adulterated with industrial colza oil (from rapeseed), was blamed. In 2016, The New York Times warned, “Much of the extra-virgin Italian olive oil on the market is not Italian or virgin.”

To protect this high-value oil from fraud, Spain is introducing blockchain technology to trace all stages of extra virgin olive oil production and distribution.
...................
30/03/2019 7:37 PM
stockraider I notice u r very positive on HARTA despite its PE 40x still very high after the huge selldown...and your bullish comment on their new special gloves...!!

Do u not ;

1. Worry there will be teething problem on this new gloves ??
2. What if competitor like topglove & supermax just simply copied?.
3. The marketing may encounter resistance like product registration.
4. Can this new gloves the game changer to Harta ??

Maybe u can enlighthen me...i remember we make alot of monies on KESM despite 3iii bad mouth the stock, i hope we can do something successful again
30/03/2019 7:39 PM
paperplane Raider. Thts because i met both Mr. KWAN in person. After speaking to them, for me PE40, 50 also cheap. U got to know how efficient is their factories, their productions line are state of arts, can easily switch to nitrile, to natural rubber, to antimicro, anything you name it. Its their technology tht gives them the edge. I still remembered many years ago, harta introduce this nitrile. Everyone still sleeping! See where is topglov now, where is kossan now, where is supermx now?? Thniking of producing more gloves is not the answer anymore
30/03/2019 7:55 PM
paperplane Some of the gloves companies really need to think harder. Gloves is no longer huge number games. If your competitors can sell a glove killing bacteria at almost same price, with patent. You think who gonna get the winner gets all mkt shares
30/03/2019 7:57 PM
paperplane U look at how many factories top glove have, how many harta have. How efficiently both running them
30/03/2019 7:59 PM
Choivo Capital Paperplane,

What is the size of the surgical glove market in the US?
30/03/2019 8:08 PM
VSOLAR Sailang Margin All In paperplane don't promote lah... now so cheap you can buy more
30/03/2019 8:11 PM
VSOLAR Sailang Margin All In I give you a hint choivo boy, with increasing aging population globally , more people will need to go to hospital. and by 2026 the disposable glove market will reach 18.7 billion USD
30/03/2019 8:12 PM
Icon8888 Don't Everyday warren Buffett moat moat moat margin of safety etc

For example, think about the following :

“Patience... followed by pretty aggressive conduct. It is given to human beings who work hard at it—who look and sift the world for a mispriced bet — that they can occasionally find one. And the wise ones bet heavily when the world offers them that opportunity. They bet big when they have the odds. And the rest of the time, they don’t. It’s just that simple.”
30/03/2019 8:15 PM
paperplane Choivo, some info is p&c, i suggest you read more. I cant share too much details.... Easily can be find i guess. Haha
30/03/2019 8:19 PM
paperplane Invest Malaysia got tht top glov rpt right, read it
30/03/2019 8:24 PM
paperplane Heavenly punter, it's ok. Even i tell where money is, only half believe. Those half believe, only 10% will really take action. So its ok. Let the price drop so i accumulate slowly
30/03/2019 8:32 PM
paperplane I remembered topglov boss so funny. He keep saying do good, do good to society, take care staff and stay healthy. Healthy mentally and in body, can win competition. He said he plan to live over age 120, he got many good things to do.... Haha. Its kinda true also. Stay healthy macam mahathir, after your enemy die, you win all. Haha
30/03/2019 8:34 PM
VSOLAR Sailang Margin All In correct lah paperplane, like usual Malaysians hate high PE stocks hahahaha, like QL Resources and the Glove counters they don't like one... They like cheap cheap stocks wakakakaka or at least below 10 PE
30/03/2019 8:35 PM
VSOLAR Sailang Margin All In Correct lo, Malaysia only two things okay, Petronas and their gloves, other than that don't dare to say much...
30/03/2019 8:36 PM
VSOLAR Sailang Margin All In Aiyar paperplane, analyst are just there for job mah... of course lah the provide information that are not accurate in the long term mah... maybe 1 or 2 quarter it's accurate lo
30/03/2019 8:37 PM
paperplane Hehe pe low, easier to punt perhaps?? Look at kyy, he so angry perak govt spent 30mil while govt keep saying no money because 1mdb. He so furious now, hehe
30/03/2019 8:42 PM
VSOLAR Sailang Margin All In PE low for them means undervalued mah, PE < 10 confirm undervalued, PE > 10 confirm overvalued.
30/03/2019 8:46 PM
paperplane To me its history repeat again. Last time harta produce nitrile, where got ppl believe. Now all busy switching to nitrile. See?? Harta already become mkt leader. But this time, to copy this new glove, its not tht easy
30/03/2019 8:46 PM
VSOLAR Sailang Margin All In Top GLove acquire Aspion to do that mah... Overpaid for it and now want to sue people to get money back hahaha
30/03/2019 8:47 PM
probability paperplane made even raider speechless now
30/03/2019 8:49 PM
paperplane Im actually very surprised by their capital management skills. Real business man. Harta expansion mostly funded themselves. They hardly go borrow too big in capital market. You look at Topglov, thts another different story. Last yr they gear up for expansion, somemore do a stupid acquisition now trying to recoup...but still, with strong cash flow shld be Oklah.
30/03/2019 8:50 PM
paperplane Probability, your name appears again... Lol. Haha
30/03/2019 8:54 PM
VSOLAR Sailang Margin All In For me very simple, I look at their factory I like it, no lah I love the look of it. Then okay liao buy only!
30/03/2019 8:55 PM
VSOLAR Sailang Margin All In HAHAHAHAHAH I wonder what IB de analyst ???!!! HAHAHAH paperplane one day we can meet maybe August this year ^^ hahaha.

Yealor the huge improvement in benefits at a marginal cost is of course preferable mahh.... I think in the future AMG will become the common rubber gloves like today ! Yeahhh paperplane you revealing too much!!
30/03/2019 9:25 PM
paperplane I talk too much..... Hahaha
30/03/2019 9:43 PM
VSOLAR Sailang Margin All In unker, video unavailable leh!
30/03/2019 11:26 PM
Icon8888 This Jon Choivo good England

But not very sharp

In stock market, being sharp is more important than good England
31/03/2019 4:16 AM
VSOLAR Sailang Margin All In Unker Icon correct lo, England good doesn't mean good in stock market, got CFA also doesn't mean good in stock market, got years of experience but never learn also means no good in stock market!
31/03/2019 8:08 AM
stockraider King James Bible (AD 1611) (Matthew 13:44)
Again, the kingdom of heaven is like unto treasure hid in a field; the which when a man hath found, he hideth, and for joy thereof goeth and selleth all that he hath, and buyeth that field.

Jesus said, Again, the kingdom of heaven is like unto treasure hid in a field;

1) KINGDOM OF HEAVEN IS LIKE A TREASURE

2) THE TREASURE IS A HIDDEN TREASURE IN A FIELD

3) THIS TREASURE CAN BE DISCOVERED which a man having found did hide,

4) AND TO GET LEGAL OWNERSHIP OF THE TREASURE HE HAS TO SELL WHAT HE HAS IN ORDER TO BUY THAT FIELD THAT ENTITLES HIM TO LEGAL OWNERSHIP OF THE HID TREASURE in his joy about it, goes and sells all he has and buys that piece of ground.


In the natural world there are 2 groups of people

1) THE HUNTER GATHERER.

THIS MAN GOES HUNTING FOR WILD ANIMALS, BIRDS OR FISHES

HE GATHERS JUNGLE PRODUCE AND WILD FRUITS OR ROOTS

2) THE FARMER & HERDSMAN

HE DOMESTICATES AND REARS COWS, GOATS OR CHICKEN. HE ALSO GROWS FOOD CROPS LIKE RICE, WHEAT OR POTATOES AND CASH CROPS LIKE COTTON, PALM OIL OR RUBBER.

NOW FOREIGN TO THESE TWO IS THE "TREASURE HUNTER"

HE DOES NOT HUNT FOR LIVE THINGS. HE LOOKS FOR DEAD & BURIED THINGS

SO THERE IS A TYPE OF INVESTING UNKNOWN TO DAY TRADERS (THE HUNTER & GATHERER) OR THE LONG TERM INVESTOR (THOSE WHO BUY NESTLE OR PUBLIC BANK)

THIS MAN LOOKS FOR HIDDEN TREASURE!!!

AND AFTER HAVING DISCOVERED OR UNCOVERED IT HE SELLS HIS OTHER LESS PROMISING STUFF (HE SELLS ALL THAT HE HAS) AND BUYS THAT STOCK THAT OWNS THE TREASURE!!

THIS KIND OF INVESTING IS NOT FOR EVERYONE.

WARREN BUFFET INVESTS LIKE A FARMER/HERDSMAN

PETER LYNCH INVESTS LIKE A HUNTER/GATHERER

ONLY ONE PERSON QUALIFIES AS A SEEKER OF "HIDDEN TREASURE" HIS NAME IS WALTER SCHLOSS!!

LET'S SEE

The 16 factors for investing success as stated by Walter Schloss:


Price is the most important factor to use in relation to value.

Try to establish the value of the company. Remember that a share of stock represents a part of a business and is not just a piece of paper.

Use book value as a starting point to try and establish the value of the enterprise. Be sure that debt does not equal 100% of the equity.
Have patience. Stocks don't go up immediately.

Don't buy on tips or for a quick move. Let the professionals do that if they can. Don't sell on bad news.

Don't be afraid to be a loner but be sure that you are correct in your judgment. You can't be 100% certain but try to look for weaknesses in your thinking. Buy on a scale and sell on a scale up.

Have the courage of your convictions once you have made a decision.

Have a philosophy of investment and try to follow it.

Don't be in too much of a hurry to sell. If the stock reaches a price that you think is a fair one, then you can sell but often because a stock goes up, say 50%, people say sell it and button up your profit. Before selling try to reevaluate the company again and see where the stock sells in relation to its book value. Be aware of the level of the stock market. Are yields low and P/E ratios high?

When buying a stock, I find it helpful to buy near the low of the past few years. A stock may go as high as 125 and then decline to 60 and you think it's attractive. Three years before the stock sold at 20 which shows that there is some vulnerability in it.

Try to buy assets at a discount rather than buying earnings. Earnings can change dramatically in a short time. Usually, assets change slowly. One has to know much more about a company if one buys earnings.

Listen to suggestions from people you respect. This doesn't mean you have to accept them. Remember, it's your money and generally, it is harder to keep money than to make it. Once you lose a lot of money it is hard to make it back.
Try not to let your emotions affect your judgment. Fear and greed are probably the worst emotions to have in connection with the purchase and sale of stocks.
Remember the word compounding. For example, if you can make 12% a year and reinvest the money back, you will double your money in six years, taxes excluded. Remember the rule of 72. Your rate of return into 72 will tell you the number of years to double your money.

Prefer stocks over bonds. Bonds will limit your gains and inflation will reduce your purchasing power.
Be careful of leverage. It can go against you. (For related insight, read more about the value in value investing.)
31/03/2019 10:09 AM
chamlo Choivo Capital only rank 43 want to talk big? Learn to be humble haha.
https://klse.i3investor.com/blogs/stock_pick_2019/200226.jsp
31/03/2019 10:17 AM
stockraider IT IS NOT ONLY THE CURRENT LOW PE THE ONLY MATTER IN INVESTMENT.... BUT THE POTENTIAL GROWTH, THAT COMPENSATE FOR THE SHORTCOMING OF THE HIGH PE GROWTH STOCK MAH....!!

JON CHIVO IS THE EXAMPLE OF THAT HIGH PE GROWTH STOCK MAH.....!!

Posted by chamlo > Mar 31, 2019 10:17 AM | Report Abuse

Choivo Capital only rank 43 want to talk big? Learn to be humble haha.
https://klse.i3investor.com/blogs/stock_pick_2019/200226.jsp
31/03/2019 10:32 AM
calvintaneng Chamlo?

As his name is so is he in life.

You are destined to be chamlo!!
31/03/2019 11:02 AM
Apabagus choivo,the only thing that can prove your mettle is thru a stock call,nothing more nothing less,you can post blog after blog n talk to one wise man after another...but if you want respect in i3...make a stock call.Understood?
31/03/2019 12:56 PM
Apabagus One does not go into battlefield boasting how many military books one read and how many wise generals one met.Want garner respect,defeat the enemy.Understood?
31/03/2019 1:00 PM
Apabagus Najib can talk east talk west and talk till the cows come home about 1mdb.Tun M only need to ask Najib one question.."Where is the money?Show me the money"..Najib cannot answer n lost ge14.
31/03/2019 1:05 PM
VSOLAR Sailang Margin All In I make liao a call. https://klse.i3investor.com/blogs/Day3/200300.jsp
Come see, chun chun call I think.
31/03/2019 1:32 PM
3iii >>>>>

Mar 30, 2019 3:15 PM | Report Abuse

But to be perfectly honest the 90's was really the go go years when I made so much money and had so much confidence in my "trading" skills that borrowing 200k from family and friends to open up margin accounts, and getting 20-30% returns weekly for months, I fooled myself into thinking I knew how to stock pick.

Once bitten forever dead I guess.


>>>>>

Lesson:

Market can progress to the extremes due to errors in judgement and investors' sentiments.

Thus, markets can reach bull market tops to collapse from, or bear market bottoms to recover from.

Philip shared, so much good news and good feeling and yet ended in losses. This can come as a surprise to those who might not have experienced it.
31/03/2019 1:50 PM
i3gambler "In addition, the real money in Hire Purchase Loans, is not in the rate, its in the penalty payable for early repayment. The cars they do hire purchase for, Japanese and Continental. These are the people with money and are most likely to change car every 4-5 years."

The above para of this writing may not be correct.

In the past years, I have done a total of 3 early repayments with different banks/finance companies.
There was no penalty at all.

How car loan early repayment is calculated?
1) Calculate the Rebate,
2) Minus this Rebate from future total instalments, and pay it.

However, I found out that one Singapore bank does apply penalty on car loan early instalment. What it does is to minus only 80% of Rebate, in another word, the penalty is 20% of Rebate.

I am not sure, but I guess Bank Negara will not allow any bank to apply such penalty.
31/03/2019 2:48 PM
silom reading speed 100 pages an hour , not bad ..

I know a guy who said he can finish reading a few hundred pages of book within 1 to 2 hours, am not sure if he BS me but indeed he explained his technique, he read the book preface and the table of content first , he paused a few minutes to ponder , figuring out what the author is to write then he flip to the chapters to verify , once he is right, he said he complete the reading. like that also can, haha, one thing he is certainly reading for knowledge not pleasure haha
31/03/2019 5:16 PM
Choivo Capital I think the rubber glove industry reminds me of the early stage tyre industry.

Commodity, not a major cost for car manufacturers or car users.

Have higher end niche ones. To differentiate.
31/03/2019 11:35 PM
PureBULL . GLOVE theme play peaked on Sep 2018 n went into significant purebear run since.
The war on nitrile glove has just begun, thus causing the 2 giant players to go into deep correction that could lasts 2-3 years more.
harta, 100% in nitrile will stand as a BIG loser with imminent erosion of profit margin.
topglov holds the pole position in rubber glove space n will continue to do so n well. It's seriously entering nitrile in a meaningful way.

On the ground topglov has 2 strategic strengths:
i. his elder bro is full time residing in north america. he deeply understands the export mkt.
ii. all their importing clients from 120 countries r completely charmed for LIFE anytime they come to msia for factory visits.
They can expect to be chauffeur driven in the boss's Roll Royce. n will be checked into their corporate house at tg cr # 35, just next door to # 33, u know who stays there. Golfing at the 1st tee box follows everyday n nites...
01/04/2019 5:17 AM
paperplane Lucky you all not Inv bank analyst,else I vomit blood. Anyway, those analyst already let me vomit blood
01/04/2019 10:29 PM
VSOLAR Sailang Margin All In paperplane calm down, IB analyst are known to bungkus in Bursa one!
01/04/2019 10:33 PM
paperplane Now I understand,why certain people can still lose Money in stock not even their iq is 180.haha. pity the old banker who spend his time....
01/04/2019 10:41 PM
VSOLAR Sailang Margin All In hahahah correct lo. no matter how sophisticated your financial model is... In the end only the real investors can make money... Those IBs got their special model sibeh complex, but can't make money one. Dunno what's the point also!
01/04/2019 10:42 PM
paperplane Ya. Make it so complex, still lose money.... Shld fire them. No wonder lge said windfall tax. These jokers inside think they smart arse.
02/04/2019 7:57 AM
VSOLAR Sailang Margin All In Exactly.... I really don't understand the point ! That's why I will never go into an IB!
02/04/2019 7:59 AM

(CHOIVO CAPITAL) Why Board of Directors are typically toothless, and reforming it.

Author: Choivo Capital   |  Publish date: Fri, 29 Mar 2019, 11:38 AM


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

Why Board of Directors are typically toothless, and reforming it.

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

 

One of the common factors that face shareholders globally right now, is the incompetence, irrelevance (of the directors, not the structure) and in some cases, the maliciousness of the board of directors.

Depending on the maturity of the markets and the shareholding structure of the companies, the incompetence can hold different forms. They are mainly two.

 

Matured Markets – Diverse shareholdings without a major/controlling shareholder

In markets like the US, where the companies are so huge and the shareholdings so diverse, where often, companies do not have a major or controlling shareholder, the ownership of the company is often “Hijacked” by the CEO.

This “Hijacking” often stems from shareholders not taking a owner’s view towards their own holdings and casting their votes or making their voice known.

It also stems from institutional funds often only voting in accordance with the board’s wishes, although this appears to be shifting recently, with index fund providers starting push their weight around.

Without a strong shareholder, a CEO can hijack the board by recommending Directors that are likely to be pliant to his wishes.

Now you might wonder, why on earth would the current set of Directors agree to this?

It’s simple, most directors do not have skin in game beyond the shares given (not bought personally) by the Company.

In addition, for most of them, the fees from being a board of director consist of the majority their income. They are often paid 200-300k just to show up for 4-8 meetings a year.

Independent my ass.

The goal of most board of directors, is to be pliant without seeming obsequious while appearing smart, to keep their current seat and be recommended to sit other boards.

Basically, the goal is to be a friendly German Shepherd. Looks like he’s capable of guarding the house, but only needs a small cube of meat to be your friend.

And to top it off, unless you have 50.1% shares or more, you can’t force your way into the board of directors, but rely on the goodwill of the current board of directors to vote you in.

You can own 30% of the shares, and still not be given a board seat. Just ask Koon Yew Yin.

 

Immature Markets – One major/controlling shareholder

These markets, which include Malaysia, Singapore, Korea or Hong Kong for example. Where many companies are family businesses.

Sometimes, the major shareholder may have more than 51% in which case they do deserve to have control, other than in matters which require a special resolution and thus 75% agreement. If the controlling shareholder have empire building tendencies and pay themselves obscene salaries, there is not much you can do (I do have a suggestion which i will elaborate below).

However, often these shareholders do not actually have 51%, they just happened to be the founding families and through circuitous shareholding structures, as well as the hiring of pliant German shepherds as shareholders, they now hold control.

It is incredibly hard to vote them out, although recently the Chairman of Korean Air was voted out. Due to the sheer number of scandals. It really should not be this hard to vote out incompetent boards.

 

Suggestion for Reform

The one thing I believe in, is in the Iron Law of Incentives. You get what you incentivize for. Incentivize for pliant and friendly German shepherds, and that’s what you get.

Members of the board of Directors should consist of people who have their skin in the game (and deeply so), and do not actually need the fees in terms of income.

My suggestion is as follows:

  1. Director fee’s (including remuneration) should only consist of the cost of them coming to the meetings, and is capped at RM30,000.
  2. Any person with more than 5% shares and/or in the top 5 is guaranteed one seat.
  3. When giving out seats, connected persons as defined by the Companies Act 2016 are considered as one.
  4. Only after the above is done, can additional independent directors (maximum of 2) be elected.

 

Connected persons in the Companies Act 2016 is currently defined as:

  1. a member of that director’s family; or
  2. a body corporate which is associated with that director;
  3. a trustee of a trust (other than a trustee for an employee share scheme or pension scheme) under which that director or a member of his family is a beneficiary; or
  4. a partner of that director or a partner of a person connected with that director.
  5. “a member of that directors’s family” shall include his spouse, parent, child (including adopted child and stepchild), brother, sister and the spouse of his child, brother or sister.

 

Conclusion

Personally, while I may not be a fan of Koon Yew Yin and what he does, I do think he should have been given a board seat in JAKS.

At one point he was the largest shareholder with the highest skin in game, however, he could do nothing against the board of directors. With many of the directors not even having 100,000 shares, but allowed to approve private placements to front-run him (the way he handled it was also less than sharp to be fair).

This reform if done, is unlikely benefit me directly as I am very far away form 5% or top 5 shareholder in any listed company, much less my current holdings. Maybe in 10 years.

But I’m sure if this reform is taken up in one way or another, every shareholder should stand to benefit.

In the meantime, let’s all have more of an owners mindset, and actually show up to the AGM to voice any suggestions and vote.

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

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

 

  3 people like this.
 
kalteh Great article. Similar views on HKEX have always been voiced by this author which I find similarly interesting to read: https://webb-site.com/articles/hopeless.asp
29/03/2019 12:13 PM
Choivo Capital Ah david Webb, I've not read him before, but a friend recommends him to me, since i'm currently studying the HK market.
29/03/2019 12:17 PM

(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.

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

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.

 

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

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

 
Labels: DAYANG
  14 people like this.
 
VSOLAR Sailang Margin All In Still no end, what is going to happen today?
13/03/2019 7:39 AM
VSOLAR Sailang Margin All In 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.

====
(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

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

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
(HK1997 again) 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
(HK1997 again) 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
VSOLAR Sailang Margin All In 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
(HK1997 again) 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
Armada An Quantum Leap Stock In 2019/2020 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
(HK1997 again) 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
VSOLAR Sailang Margin All In 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
VSOLAR Sailang Margin All In 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
VSOLAR Sailang Margin All In 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
VSOLAR Sailang Margin All In 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
VSOLAR Sailang Margin All In 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
10215673035009552 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
10215673035009552 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
(HK1997 again) 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
10215673035009552 just marry a rich girl...solve all your worldly problems
28/12/2018 8:07 AM
10215673035009552 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 [Breaker of Speculative Investing] 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
Armada An Quantum Leap Stock In 2019/2020 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.