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Sslee blog

Author: Sslee   |   Latest post: Fri, 15 Feb 2019, 07:58 PM

 

THE PREPCEPTION OF GROWTH (High PE Trap): QL

Author:   |    Publish date:


Dear all,

This article is my response to Mr. Philip article: THE PERCEPTION OF P/E or: How I learned to fear my Wife

https://klse.i3investor.com/blogs/phillipinvesting/190569.jsp

Before I start, I would like to take this opportunity to thank my wife for taking good care of our children as I have to admit I am an absentee father. My wife becomes a full time housewife when she needed to leave her job to take care of our children. I consider my wife as smart, frugal and prudent. She knows where to get value for money things for daily necessities and for the CNY. Move fixed-deposit among banks to get maximum FD interest rate. She even appeals to relevant parties and make financial contribution so that all our children (straight A for primary school exam) able to be enrolled into: https://en.wikipedia.org/wiki/SMJK_Kwang_Hua,_Klang

SMJK Kwang Hua is a grade A school that has a 3660 students, 151 teachers and 12 support personnel. Many hundreds of the students graduate with minimum 6A in SPM exam compare with my 5A MCE exam in SMJK St’ Michael Alor Setar where less than 5 achieved  better than 5 A.

School Motto:

  • Kejujuran '诚'(Honesty)
  • Ketekunan '勤'(Hardworking)
  • Jimat cermat '俭'(Frugality)
  • Keazaman '毅'(Dedication)

In contrast look at many irresponsible men because of “Face must have” and living in debt to support their luxurious lifestyle that they can ill-afford. So to all the successful men out there give thanks and credits to the women behind your success, your mother and wife. I salute all the women that make this world wonderful.

Definition of High PE or growth trap: Growth, again, has little meaning without any reference to the future return of the business. Growth is only good if it is above the cost of capital. Let’s do some calculation on QL:

PE ratio= 6.87/0.127 = 54.1

Net profit growth rate (FY18) = (206,236/195,921-1) = 5.26%

PEG ratio= 54.1/5.26 = 10.28. Is this good?

Note: Net profit growth rate (FY17) 2%. (FY16) 0.35%

Nothing falls faster than a growth stock that suddenly stops growing. But relax QL top 30 shareholders (Rich daddy) controlled 74.42 % of shares.

Quote: “My wife has calculated the terminal value and cash flow possibilities for this company for the long term” Let’s start to calculate intrinsic and terminal value at year N for QL.

d = Discount rate, a = Land and building appreciation rate, N = termination year N

QL:

Non-current assets (RM 2,073,315,000) consist of:

  1. Property, plant and equipment: RM 1,705,224,000
  1. Land and building: RM 543,148,000. Intrinsic value RM 543,148,000 X (1+a)^N/(1+d)^N
  2. Farm building, Boat, Plant, Machinery, Vehicle, Fitting, Work in progress and etc: RM 1,162,075,000. Intrinsic value as zero at end of life span N + DCF(Net profit generating from this non-current assets)
  1. Investment properties: RM 22,731,000. Intrinsic value RM 22,731,000 x (1+a)^N/(1+d)^N + DCF(Rental income)
  2. Prepaid lease payments: RM 57,600,000. Intrinsic value as zero at end of life span N
  3. Intangible assets: RM 10,617,000. Intrinsic value as zero at end of life span N
  4. Biological assets: Plantation development expenditure RM 133,681,000. Intrinsic value as zero at end of life span N + DCF (Net Plantation income)
  5. Investment in associates: RM 131,257,000
  1. Indahgrains Logistics Sdn. Bhd: Malaysia operating of warehouse an warehouse management (29.87%)
  2. Boilermech Holdings Berhad Malaysia: Manufacturing, repairing and servicing of boilers (43.67%)
  3. AB Hatchery Sdn. Bhd: Malaysia Hatchery and culturing of shrimps (40.83%).

Intrinsic value of associates = (29.87% of Market Cap of Indah grain at year N)/(1+d)^N + (43.67% of Market Cap of Boilermech at year N)/(1+d)^N + (40.83% of Market Cap of ABC Hatchery at year N)/(1+d)^N + DCF(Dividend received)

  1. Deferred tax assets : RM 2,172,000
  2. Other receivables; RM 10,033,000. Intrinsic value RM 10,033,000 /(1+d)^N

Current Assets (RM 1,252,603,000)

  1. Biological assets (Livestock): RM 133,213,000
  2. Inventories: RM 376,289,000
  1. Raw materials: RM 92,753,000
  2. Manufactured and trading inventories: RM 282,903,000
  3. Net realisable: RM  633,000
  1. Current tax assets: RM 25,273,000
  2. Trade and other receivables: RM 383,986,000
  1. Trade receivables: RM 313,836,000
  2. Other receivables: RM 70,150,000
  1. Prepayments and other assets: RM 22,530,000
  2. Derivative financial assets:  RM 242,000
  3. Cash and cash equivalents RM  304,028,000
  1. Cash and bank balances:  RM 250,772,000
  2. Deposits with licensed banks: RM 39,971,000
  3. Liquid investments: RM 13,285,000
  1. Assets classified as held for sale: RM 7,042,000

Non-current liabilities (RM 646,255,000)

  1. Loans and borrowings: RM  548,204,000
  2. Trade and other payables: RM 208,000
  3. Employee benefits: RM 6,282,000
  4. Deferred tax liabilities: RM 91,561,000

Current liabilities (RM 788,732,000)

  1. Loans and borrowings: RM 465,920,000
  2. Trade and other payables: RM 283,040,000
  3. Derivative financial liabilities RM 34,339,000
  4. Current tax liabilities: RM 5,433,000

Note:

Interest expense of financial liabilities: RM 48,645,000

Interest income of financial assets: RM 7,906,000

 

Mr. Philip may I know what is the final result from your wife calculated terminal value and cash flow possibilities for this company for the long term?

It is okay to assume a high growth rate, so long as it is sustainable growth, based on sustainable business and marketplace fundamentals.

RM (,000)

 

31/3/18

31/03/17

31/03/16

31/03/15

31/03/14

31/03/13

Revenue

3,263,830

3,012,026

2,853,924

2,707,767

2,457,186

2,146,307

  YoY %

8.36%

5.54%

5.40%

10.20%

14.48%

10.26%

NP to SH

206,236

195,921

192,079

191,400

159,929

131,706

  YoY %

5.26%

2.00%

0.35%

19.68%

21.43%

0.23%

NOSH

1,622,627

1,247,904

1,247,660

1,247,838

1,159,746

832,260

Tot borrowing

         1,014,124

             923,787

            773,535

            756,991

           654,276

           603,610

Equity to owners

         1,792,600

         1,748,306

        1,591,653

        1,426,583

       1,285,768

           890,781

Gearing

0.566

0.528

0.486

0.531

0.509

0.678

ROE

11.50%

11.21%

12.07%

13.42%

12.44%

14.79%

Cash flow

 

 

 

 

 

 

Net Operation

             298,632

             305,988

            251,375

            225,110

           274,146

           119,066

Net Investment

           (331,836)

           (293,850)

         (170,986)

          (277,429)

         (179,905)

         (191,979)

Depreciation

             123,729

             110,076

              96,407

              86,436

             76,256

             64,156

CAPEX/Acqisition

             338,887

             315,473

            238,108

            261,943

           188,259

           188,703

Is above growth rate considered as high growth rate? Is above business able to achieve sustainable growth, based on sustainable business and marketplace fundamentals?

Look into some comments in financial report 2018 to judge whether the growth is sustainable growth, based on sustainable business and marketplace fundamentals

1. For the period under review, QL’s fishery units in Kota Kinabalu were deeply affected by low fish cycle caused by unusual post-El Nino events, where a trail of storms followed. Compounding that, recent super typhoons in tandem with prolonged Northeast monsoons also adversely affected fishery activities. In Endau, the lower fish catch was compounded by a stronger Ringgit. The overall effect was a lower contribution from the fishery operations at this unit.

Three years ago, we commenced our prawn aquaculture activities to diverge from solely depending on fishing activities. In Kudat, the upstream activity challenges reported in the last financial year have been overcome. This Kudat prawn aquaculture unit is now in the recovery phase after the prawn disease outbreak last year.

QL produced 140,000 tonnes of surimi,surimi-based products, frozen fish and fishmeal. This is comparable to the 135,000 tonnes produced in the prior year and is the optimal output quantity for the operating MPM assets as at FY2018.

 

2. QL owns a 1,200 hectare mature palm oil estate in Sabah, as well as 15,000 hectare plantation ( 9,000 hectare mature) in Eastern Kalimantan, Indonesia. The third revenue pillar, POA, remained the smallest contributor to Group revenue. This division is most susceptible to weather patterns. The excessive rainfall, sustained El Nino stress and acute labour shortage in East Malaysia during the year resulted in lower fresh fruit bunch (FFB) yield as well as oil extraction rates.

The severe negative effects were slightly offset by the increased harvest thanks to the maturing profile of our planted estates in Indonesia. We initially anticipated POA activities to produce135,000 metric tonnes of FFB in the financial year under review. However, the high rainfall dampened production to 127,000 metric tonnes. Nevertheless, this was still a 27% higher in FFB production compared to the 100,000 metric tonnes harvested in FY2017. While the increase in FFB production provided more activities for the mills, the oil extraction rate (OER) was affected by the wet weather in Indonesia and severe labour shortage in Sabah. At the same time, Boilermech Holdings Berhad experienced slower business activity resulting from a poor order book, a hangover since FY2016. The CPO prices traded at about RM 2,500 per metric tonne in FY2018 did not provide the silver lining. Despite these challenges and the weaker CPO price in FY2018, the turnover increased by RM35.5 million from RM351.8 million to RM387.3 million while PBT increased from RM24.9 million to RM27.9 million. The contribution of Boilermech Holdings Berhad, an approximately 44% equity stake associate company has been taken into account in this performance. Boilermech’s contribution was lower due to weaker demand in the palm industries.

 

3. Operations in Indonesia rebounded healthily. With vigilance and effective vaccination programmes, productivity of the layers has normalised. The Vietnamese unit has also seen gradual increment in production and plans are being mulled to build a new layer farm facility in a new location to double production capacity. Approval for the commencement of this new business and farm has been granted by the Vietnamese authorities. The regional operations lay close to 1.5 million eggs per day. On the feed raw material front, the entry of new players saturated the market, causing intense competition and adversely affected sales and margins. The current intense competition due to market saturation from new entrants in feed raw material is likely to continue in the next financial year.

 

4. As part of QL’s outlined strategy to grow downstream via long-term scaleable businesses, QL is also the master franchisee of the FamilyMart convenience store chain in Malaysia. FY2018 marks a full year of FamilyMart operationsin Malaysia and the rapid expansion for the brand from Japan. By adopting the concept of konbini and providing convenience in particular with ready-to-eat food, FamilyMart created waves wherever it opened. As at 6 July 2018, there are a total of 50 FamilyMart stores in Malaysia. We aim to hit 89 stores by 31 March 2019 with the opening of an additional 50 stores, gearing towards fulfilling our promise of 300 stores in five years (FY2022).

Overall, actual performance in terms of key store operating key performance indicators (KPIs) such as gross margin, average ticket count and ticket size are meeting expectations.

http://www.investlah.com/forum/index.php/topic,79417.0.html

Family Mart: Japan Vs Taiwan. So can Malaysia Family Mart do better than Taiwan where like Family Mart Taiwan needs to pay franchise fees to Family Mart Japan.

5. Business outlook: Under Conserve are three businesses where we will maintain our foothold in. We will retain our strong base in surimi and fishmeal processing, two units which are facing limitations of marine catch resources and rising material cost. Another business where we will maintain is palm oil activities as this is a business where multiple facets of pressures are at play, from ever rising cost of production, severe labour shortages, long gestation period to compliance and environmental consciousnes. Livestock Farming and layer business is capital hungry but the return on investment is not as fast and attractive.  Our anticipation of the short term economic outlook, within FY2019, will be a neutral to bearish.

Thank you

P/S: Free quote from Buddha

Praise and blame, gain and loss, pleasure and sorrow come and go like the wind. To be happy, rest like a giant tree in the midst of them all. - Buddha

Do not believe in anything simply because you have heard it. Do not believe in anything simply because it is spoken and rumored by many. Do not believe in anything simply because it is found written in your religious books. Do not believe in anything merely on the authority of your teachers and elders. Do not believe in traditions because they have been handed down for many generations. But after observation and analysis, when you find that anything agrees with reason and is conducive to the good and benefit of one and all, then accept it and live up to it.- Buddha

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Labels: QL

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Chart Stock Name Last Change Volume 
QL 6.98 +0.08 (1.16%) 580,400 

  SS Loh likes this.
 
(S = Qr) Philip But you can't escape one undeniable fact.

Insas main profit driver is only from 1 activity, dividend of inari and sales of inari share to provide profit. However it uses those earnings on activities such as funding fintech(numoni) which is not competitive, dome cafe, which is non competitive, sengenic which sounds interesting but does not contribute anything. Nothing they do has shown any formn of growth that should award it a big share price increase.

On the other hand, you also cannot avoid:
Ql started in a industry with high capex and low margins. And yet it's management has used every cent of those earnings and embarked on organic growth in their core management competence by investing in new businessess that are wildly successful. It started from feedmill trading and venture into integrated livestock which is bigger than layhong today.. then it venture into palm oil plantations right before the palm oil boom of 2007. Then it venture into marine catch and surimi becoming one of the biggest integrated marine industries in ASEAN. Then now it is venturing into retail by franchising with family Mart, a convenience store concept with better margins and management than 7-11. At each point it uses its earnings to the best possible growth.

Why should you try to punish excellence and reward incompetence.

I am reminded of the story of the old man who couldn't wait for the goose who layed golden eggs to hatch into more golden geese. He grew frustrated when the golden eggs turned into chickens. He started selling the eggs, then when grew frustrated that the eggs were dropping so slow, he decided to kill the goose to get everything inside.

He found nothing.
19/01/2019 09:40
qqq3 the final test is in the eating.....its price in 1 year, 5 years from today....compared to Insas.......hahahahaha.


I started the conversation without knowing how many shares Philips has but by saying I like QL shareholders generally and Philips specifically...he has all the intellectual capacity, knowledge and character that I expect in a QL shareholder that he has since shown in abundance.

This is a share for genuine long term shareholders who have great faith in the people behind it and in the business model, not for novices.
19/01/2019 09:47
(S = Qr) Philip And to answer you final long question with a simple explanation:
Look at the latest quarterly report. At the back page they give the seasonal or cyclical factors of 0.28.

Last quarter ql did the highest revenue sales ever. The growth of family Mart is explosive as expected (89 stores Vs 20 dome cafes wth better earnings and profits.), Recovered sea food catch, recovered prawn disease, recovered poultry livestock ( compared to layhong culling), and incoming Christmas revenue and sales figures.

What do you think the results of ql will be in the December quarter. You can calculate and estimate that.

What will insas results be in the latest incoming quarter. Do you think they will outperform?
19/01/2019 09:47
lazycat don't buy tkk piggy bank and ql
buy penta and mbmr , both of this stocks have dark horse potential

mbmr closed 2.57 , it is likely to go at least 3 this year - 16% gain
can ql gain 16% to RM8 by year end? very unlikely but not impossible

odd wise , mbmr have higher chance
19/01/2019 09:55
stockraider U NEED TO ASK THIS VERY INTELLIGENT QUESTION WHY INSAS IS MUCH SUPERIOR THAN MOST OF THE BLUECHIPS & GROWTH STOCK MAH ?? :

Posted by stockraider > Jan 18, 2019 08:19 PM | Report Abuse X

U ask yourself what type of earning power ??
When Nestle earnings yield is less than 2% pa based on PE above 50%...even u put monies in fixed deposits u get an earning power of 4% pa mah....!!

If u buy insas got earning power as Pe less than 10x...earning yield already exceed 10% pa mah...!!

Margin of Safety for those who are invested in Nestle, DLady, PBB, Petdag and HEIM, as explained and taught by Benjamin Graham, the father of value investing.
:thumbsup: :thumbsup:

In the ordinary common stock, bought for investment under normal conditions, the margin of safety lies in an expected earning power considerably above the going rate for bonds.

Over a ten-year period the typical excess of stock earning power over bond interest may aggregate 50% of the price paid.

This figure is sufficient to provide a very real margin of safety— which, under favorable conditions, will prevent or minimize a loss.


stockraider
9093 posts
Posted by stockraider > Jan 18, 2019 08:31 PM | Report Abuse X

U need understand what is real earning power loh...!!

Insas ROE only 4% pa....but based on rm 2.54 u generating eps of Rm 0.10 pa loh....!!

so if u buy insas at rm 0.70 u r getting yield of 14% pa....this is what we call earning power loh...!!


stockraider
9093 posts
Posted by stockraider > Jan 18, 2019 08:49 PM | Report Abuse X

Nestle ROE very terror 120% pa with NTA of Rm 3.00 it generate earnings of Rm 3.60....but u need to buy nestle for Rm 140.00...so ur earnings yield is less than 2.6 % pa loh...!!

Now u compare nestle 2.6% pa v insas 14% pa, u ask who got more earnings power leh ??
Of course Insas mah...14& pa warnings yield even kindy student understand 14% pa is more than 2.6% pa mah..!

But growth proponent may argue, nestle have growth woh ??

Raider ask very logical question loh...how much growth & for how long nestle need to grow from 2.6% pa to catch up with insas yield of 14% pa even, if u assume insas has no growth at all loh...!!

The answer is very long and very uncertain when nestle can catch up mah...!!

An english old saying a bird in hand is better than 2 in the bush mah...!!
Insas yield is already there with 14%pa...now u want to speculate nestle yield 2.6% pa can catch up, but when leh ??

Thus insas has definitely has higher margin of safety than nestle loh..!!


Posted by stockraider > Jan 18, 2019 05:59 PM | Report Abuse X

The beauty of Insas....!!

1.CASH IS THE KING- IF U BELIEVE....THEN U MUST BELIEVE IN INSAS HATHWAY A TRULY WARREN BUFFET STOCK LOH...!!

2. SUP SUP SUI INSAS GENERATE SUSTAINABLE PE ABOUT 6X BEATING AEONCR WITH PE 12X BY A MILE.

3, INSAS PAYS 2 SEN DIV...THIS DIV YIELD EVEN BEAT NESTLE N QL DIV YIELD BY A MILE LOH...!! U NEED TO UNDERSTAND WHY NESTLE & QL CANNOT EVEN PAY DECENT DIV COMPARE TO INSAS LEH ?? THIS IS BCOS THESE SO CALLED GROWTH STOCKS WITH PE ABOVE 50, CANNOT GENERATE GOOD CASHFLOW, THEIR PROFITS ARE STUCKED IN EQUIPMENT, DEBTORS AND INVENTORY WITH SUBJECT TO IMPAIRMENT, WHEREAS INSAS MAKE ITS MONEY IN CASH N JUST SUP SUP SUI LOH.....
19/01/2019 14:22
stockraider UNLIKE THIS MR LONG, THIS SSLEE HAS READ AND UNDERSTAND AND COMMENTED THE BUSINESS OF QL VERY WELL LOH, WHEREAS THIS MR LONG UNDERSTAND THE BUSINESS OF INSAS LOH....!!

THESE CORE BUSINESS OF INSAS IS HIGHLY PROFITABLE ESPECIALLY IN THE FINANCIAL SECTOR MAH...!!

INSAS MAIN BUSINESS IS NOT INARI ALONE IT COMPRISES OF;

1. STOCKBROKING, INVESTMENT & ADVISORY.
2. MONEY LENDING & LEASING
3, INARI AS AN ASSOCIATE
4. MANY OTHER BUSINESS

INARI ONLY CONTRIBUTE ABOUT 25% PROFIT TO INSAS THE REST ARE MAKE UP BY A BIG CHUNKED OF FINANCIAL SECTOR PROFIT SECTOR CONTRIBUTION LOH....!!


Posted by 10154899906070843 > Jan 19, 2019 09:40 AM | Report Abuse

But you can't escape one undeniable fact.

Insas main profit driver is only from 1 activity, dividend of inari and sales of inari share to provide profit. However it uses those earnings on activities such as funding fintech(numoni) which is not competitive, dome cafe, which is non competitive, sengenic which sounds interesting but does not contribute anything. Nothing they do has shown any formn of growth that should award it a big share price increase.

On the other hand, you also cannot avoid:
Ql started in a industry with high capex and low margins. And yet it's management has used every cent of those earnings and embarked on organic growth in their core management competence by investing in new businessess that are wildly successful. It started from feedmill trading and venture into integrated livestock which is bigger than layhong today.. then it venture into palm oil plantations right before the palm oil boom of 2007. Then it venture into marine catch and surimi becoming one of the biggest integrated marine industries in ASEAN. Then now it is venturing into retail by franchising with family Mart, a convenience store concept with better margins and management than 7-11. At each point it uses its earnings to the best possible growth.

Why should you try to punish excellence and reward incompetence.

I am reminded of the story of the old man who couldn't wait for the goose who layed golden eggs to hatch into more golden geese. He grew frustrated when the golden eggs turned into chickens. He started selling the eggs, then when grew frustrated that the eggs were dropping so slow, he decided to kill the goose to get everything inside.

He found nothing.
19/01/2019 14:38
qqq3 raid, don't pollute the place every u go....
19/01/2019 14:49
stockraider i thought u r the biggest polluter ??

Posted by qqq3 > Jan 19, 2019 02:49 PM | Report Abuse

raid, don't pollute the place every u go....
19/01/2019 14:49
Sslee Dear Mr. Philip,
INSAS intrinsic value:
Non-current assets (RM 795,054,000) consist of:
1. Properties, plant and equipment RM 161,405,000 consist of:
A. Motor vehicle: RM 127,065,000. Using DCF for 5 year and resold at year 5. Intrinsic value (resold value)/(1+d)^5 + Sum DCF for 5 year. Note: (FY2018) pretax profit: RM 242,000
B. Machinery, renovation, office equipment: RM 4,725,000. Zero value at end of lifespan (N year).
C. Land and building: RM 29,615,000. Intrinsic value RM 29,615,000 x (1+a)^N/(1+d)^N
2. Investment properties: (Land, building) RM 198,304,000. For property investment, the Group invested in shop offices which generates rental yield. The Group has two (2) blocks of 11 story (54,277 sq ft) signature offices in Mid Valley which was bought 17/18 years ago which is generating rental yield and high capital gain. Intrinsic value RM 198,304,000 x (1+a)^N/(1+d)^N plus DCF (Net Rental income) x Sum{(1+g)^N/(1+d)^N
(FY018) Rental income RM 3,433,000 fair value gain RM 2,404,000
3. Available for sales Investment: (Quoted and unquoted investments/securities) RM 45,022,000. Intrinsic value (realizable investment at year N1)/(1+d)^N1 plus DCF (dividend)x Sum{(1+g)^N/(1+d)^N. Note: (FY2018) Dividend RM 290,000. Gain on disposal RM8,972,000
4. Held to maturity investment: (Bonds) RM 5,352,000. Intrinsic value at maturity year N2. RM 5,352,000 x (1+i)^N2/(1+d)^N2
5. Associate company: (Carry amt + Goodwill) RM 357,628,000 consist of:
A. Inari (19.1%). Carry amt: RM 202,691,000. NP to INSAS (FY 2018): RM 44,482,000. FY (2017): RM 48,604,000. Intrinsic value as (19.1% of Market Cap of Inari at year N)/(1+d)^N plus DCF (dividend) x Sum{(1+g)^N/(1+d)^N. Note: Dividend (FY2018)RM 40,147,000. (FY2017) RM 26,714,000
B. Ho Hup (12.2%). Carry amt: RM 42,676,000. NP to INSAS (FY 2018): RM 3,876,000. (FY 2017) RM: 5,804,000. Intrinsic value as (12.2% of Market Cap of Ho Hup at year N)/(1+d)^N plus DCF (dividend)x Sum{(1+g)^N/(1+d)^N
C. Melium (43.4). Carry amt: RM 14,870,000. NP to INSAS (FY 2018): Negative RM 3,065,000 (FY2017): Negative RM 493,000.
D. Winfields (40%). Carry amt: RM 17,984,000. NP to INSAS (FY 2018): Negative RM 2,434,000. (FY2017): RM14,321,000
E. Others: carry amt: Negative RM 569,000. NP to INSAS (FY 2018): RM 4,512,000. (FY2017): Negative RM (7,430,000)
Note: Considered Sum (C, D and E) with zero intrinsic value at end of N year and Burn rate for development/ start up cost of free cash flow negative 4,000,000 x Sum{(1+g)^N/(1+d)^N} plus DCF (dividend)x Sum{(1+g)^N/(1+d)^N
Total: Carry Amt: RM 277,652,000. Goodwill: RM 79,976,000. NP to INSAS (FY2018): RM 47,341,000. (FY 2017) RM 60,916,000
6. Intangible assets (Stock broking dealer’s license): RM 26,047,000. Intrinsic value (proceeds from dealer’s license sold at year N3)/(1+d)^N3) plus DCF net profit x Sum{(1+g)^N3/(1+d)^N3}. Note: (FY2018) Pretax profit: RM10,000,000
7. Deferred Tax: RM 2,834,000. Note: Unutilized tax losses RM 71,256,000. and unabsorbed capital allowances are available for offset against future taxable profit.

Current assets of Net Cash or cash equivalent (Current assets – Total liabilities = RM 860,912,000)
1. Trade receivables RM 376,481,000
Insas Credit & Leasing Aggregate amount of outstanding loans: RM 208,135,000. Income earned from the money-lending for FY2018 is RM 23.0 million.
2. Financial assets at fair value through profit or loss RM 236,562,000:
Quoted securities, at market value
- in Malaysia RM 57,744,00. Gross dividend RM 2,750,000
- outside Malaysia RM 178,818,000, Gross dividend RM 6,797,000.

The balance cash equivalent: RM 249,869,000 plus ability to borrow will make INSAS a force to reckon with in picking value for money securities in Malaysia or Outside Malaysia during Bear market.

Thank you
19/01/2019 15:48
stockraider SSlee,

Mr Long is highlighting the PNL of insas...but u r responding on the balance sheet for what ??

I think even , if u respond directly on insas overall earnings yield against QL earnings yield...insas still beat QL flat mah...!!

The main reason QL is overvalue mah...so the earnings & growth of QL does not justify the share price mah...!!

Posted by Sslee > Jan 19, 2019 03:48 PM | Report Abuse

Dear Mr. Philip,
INSAS intrinsic value:
Non-current assets (RM 795,054,000) consist of:
1. Properties, plant and equipment RM 161,405,000 consist of:
A. Motor vehicle: RM 127,065,000. Using DCF for 5 year and resold at year 5. Intrinsic value (resold value)/(1+d)^5 + Sum DCF for 5 year. Note: (FY2018) pretax profit: RM 242,000
B. Machinery, renovation, office equipment: RM 4,725,000. Zero value at end of lifespan (N year).
C. Land and building: RM 29,615,000. Intrinsic value RM 29,615,000 x (1+a)^N/(1+d)^N
2. Investment properties: (Land, building) RM 198,304,000. For property investment, the Group invested in shop offices which generates rental yield. The Group has two (2) blocks of 11 story (54,277 sq ft) signature offices in Mid Valley which was bought 17/18 years ago which is generating rental yield and high capital gain. Intrinsic value RM 198,304,000 x (1+a)^N/(1+d)^N plus DCF (Net Rental income) x Sum{(1+g)^N/(1+d)^N
(FY018) Rental income RM 3,433,000 fair value gain RM 2,404,000
3. Available for sales Investment: (Quoted and unquoted investments/securities) RM 45,022,000. Intrinsic value (realizable investment at year N1)/(1+d)^N1 plus DCF (dividend)x Sum{(1+g)^N/(1+d)^N. Note: (FY2018) Dividend RM 290,000. Gain on disposal RM8,972,000
4. Held to maturity investment: (Bonds) RM 5,352,000. Intrinsic value at maturity year N2. RM 5,352,000 x (1+i)^N2/(1+d)^N2
5. Associate company: (Carry amt + Goodwill) RM 357,628,000 consist of:
A. Inari (19.1%). Carry amt: RM 202,691,000. NP to INSAS (FY 2018): RM 44,482,000. FY (2017): RM 48,604,000. Intrinsic value as (19.1% of Market Cap of Inari at year N)/(1+d)^N plus DCF (dividend) x Sum{(1+g)^N/(1+d)^N. Note: Dividend (FY2018)RM 40,147,000. (FY2017) RM 26,714,000
B. Ho Hup (12.2%). Carry amt: RM 42,676,000. NP to INSAS (FY 2018): RM 3,876,000. (FY 2017) RM: 5,804,000. Intrinsic value as (12.2% of Market Cap of Ho Hup at year N)/(1+d)^N plus DCF (dividend)x Sum{(1+g)^N/(1+d)^N
C. Melium (43.4). Carry amt: RM 14,870,000. NP to INSAS (FY 2018): Negative RM 3,065,000 (FY2017): Negative RM 493,000.
D. Winfields (40%). Carry amt: RM 17,984,000. NP to INSAS (FY 2018): Negative RM 2,434,000. (FY2017): RM14,321,000
E. Others: carry amt: Negative RM 569,000. NP to INSAS (FY 2018): RM 4,512,000. (FY2017): Negative RM (7,430,000)
Note: Considered Sum (C, D and E) with zero intrinsic value at end of N year and Burn rate for development/ start up cost of free cash flow negative 4,000,000 x Sum{(1+g)^N/(1+d)^N} plus DCF (dividend)x Sum{(1+g)^N/(1+d)^N
Total: Carry Amt: RM 277,652,000. Goodwill: RM 79,976,000. NP to INSAS (FY2018): RM 47,341,000. (FY 2017) RM 60,916,000
6. Intangible assets (Stock broking dealer’s license): RM 26,047,000. Intrinsic value (proceeds from dealer’s license sold at year N3)/(1+d)^N3) plus DCF net profit x Sum{(1+g)^N3/(1+d)^N3}. Note: (FY2018) Pretax profit: RM10,000,000
7. Deferred Tax: RM 2,834,000. Note: Unutilized tax losses RM 71,256,000. and unabsorbed capital allowances are available for offset against future taxable profit.

Current assets of Net Cash or cash equivalent (Current assets – Total liabilities = RM 860,912,000)
1. Trade receivables RM 376,481,000
Insas Credit & Leasing Aggregate amount of outstanding loans: RM 208,135,000. Income earned from the money-lending for FY2018 is RM 23.0 million.
2. Financial assets at fair value through profit or loss RM 236,562,000:
Quoted securities, at market value
- in Malaysia RM 57,744,00. Gross dividend RM 2,750,000
- outside Malaysia RM 178,818,000, Gross dividend RM 6,797,000.

The balance cash equivalent: RM 249,869,000 plus ability to borrow will make INSAS a force to reckon with in picking value for money securities in Malaysia or Outside Malaysia during Bear market.

Thank you
20/01/2019 00:03
rajachulan salute the effort Sslee
21/01/2019 12:49


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