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Author: TRV Stock Analyzer   |   Latest post: Mon, 18 Nov 2019, 10:10 PM

 

[TRV] Formosa Prosonic Industries Berhad (FPI)

Author: TRV Stock Analyzer   |  Publish date: Mon, 18 Nov 2019, 10:10 PM


FPI is one of the leading manufacturers of high quality sound system in Malaysia. It has widened its products range over the past few years from conventional speaker systems to smart audio systems and musical instrument components.
 
See pictures below for our simple analysis and valuation on FPI.
 
Click on the link below for full TRV Stock Analyzer for FPI
 
 
Click on the link below for full TRV Stock Analyzer for FPI
 
 
 
Labels: FPI
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[TRV] Altman Z-score

Author: TRV Stock Analyzer   |  Publish date: Mon, 14 Oct 2019, 9:16 PM


The Altman Z-score is based on five financial ratios that can be calculated from data found on a company's annual report. It uses profitability, leverage, liquidity, solvency and activity to predict whether a company has high probability of being insolvent.
 
See how this score is calculated and see the example for JAKS, SAPNRG, HEIM and INARI.
 
Would you implement this in your stock analysis?
 
 
 
 
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[TRV] British American Tobacco (BAT)

Author: TRV Stock Analyzer   |  Publish date: Fri, 27 Sep 2019, 4:02 PM


 

BRITISH AMERICAN TOBACCO (BAT) - Non-Syariah & Unethical Stock (but with sticky customer)

Potential Catalysts for BAT

1. Regaining market share from illegal cigarette trade

Government appears determined to intensify enforcement efforts against illegal cigarettes to bring back forgone tax revenue.

The government has also invested RM700 million in scanning equipment that will be used at Malaysia’s entry points by end of 2019. Cargo scanners at entry points will increase efficiency and effectiveness of detecting contraband entering into the country.

 

2. Regulation on e-cigarettes and vaping
 

The e-cigarette and vape market in Malaysia remain unregulated. The health ministry will table a bill on the usage of tobacco, vape, electronic cigarette and shisha in Parliament by March 2020.

Tighter regulations would likely reduce supply of e-cigarettes and vape products as small private brands may not be able to comply. Higher compliance cost will be favorable to existing alternative cigarette products such as heat-not-burn(HNB) brands like IQOS by Philip Morris and Glo by BAT.

*Source - BAT report by Insider Asia.

 
 
 

 

 

Labels: BAT
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[TRV] KLSE stocks with high Piotroski score, high ROIC and low EV/EBIT.

Author: TRV Stock Analyzer   |  Publish date: Sun, 29 Jul 2018, 9:01 PM


What is Piotroski score?
--------------------------------
The Piotroski score is a discrete score between 0 - 9 which reflects nine criteria used to determine the strength of a stock. The nine criteria covers the areas of profitability, capital structure/financial liquidity, and operating efficiency. 

For every criteria that is met the company is given one point, if it is not met, then no points are awarded. The points are then added up to determine the best value stocks. 

Piotroski regards any stocks that scored eight or nine points as being the strongest.

 

_______________________________________________________________________

 

The Piotroski score is a discrete score between 0-9 which reflects nine criteria used to determine the strength of a firm's financial position. It is used to determine the best value stocks, nine being the best. The score was named after Chicago Accounting Professor, Joseph Piotroski who devised the scale according to specific criteria found in the financial statements.

In 2000, he wrote the paper, Value Investing: The Use of Historical Financial Information to Separate Winners from Losers. It was this paper that outlined 9 fundamental ranking criteria for picking winning stocks. Using his stock picking criteria, he was able to theoretically average 23% annual gains between the years 1976 and 1996. During 2010 as the market sprang back to life, his strategy worked over 5 times better than his previous average.

Piotroski's F-Score involves nine variables from a company’s financial statements. For every criteria that is met the company is given one point, if it is not met, then no points are awarded. The points are then added up to determine the best value stocks. Piotroski regards any stocks that scored eight or nine points as being the strongest.

It should be noted that the nine criteria covers the areas of profitability, capital structure/financial liquidity, and operating efficiency to decide whether or not a stock has solid financials, and if those financials are getting better. Therefore, a stock that had an F-score of eight or nine would pass, and so was considered financially strong and would be expected to perform well in the future. In general, the Piotroski screener may have a slight intrinsic bias for value stocks, as high-growth companies may fail on the Cash Flow and Share Dilution criteria.

The Criteria

Here are the nine criteria that are used, and why.

Profitability

Piotroski awarded up to four points for profitability: one for positive return on assets, one for positive cash flow from operations, one for an improvement in return on assets over the last year and one if cash flow from operations exceeds net income. These are simple tests that are easy to measure. Because the requirements are minimal, there is no need to worry about industry, market or time-specific comparisons.

  1. Positive Net Income (Return on Assets > 0)

Return on Assets (ROA) is calculated by dividing Net Income by Total Assets, so this in effect measures if the company had positive net income (or profits). It's a straightforward test: financially sound companies should be profitable.

  1. Positive operating cash flows (Cash Flow > 0)

Cash flow is another (and many believe better) way to gauge earnings, and measures how much money is going in or out of the business. A positive cash flow ensures that the company is generating enough cash from day-to-day operations in order to continue its day-to-day operations. A firm can have a positive net income but negative cash flow, which is why this criterion is included on top of ROA>0. Additionally, cash flow is harder to manipulate under GAAP than Net Income is.

  1. Higher return on assets than the previous year (Return on Assets > Last Year's Return on Assets)

This equation measures whether or not the firm is improving its profitability. If the company was less profitable this year than last, it could signal that there are financial troubles to come.

  1. Quality of earnings. Operating cash flows greater than net income (Cash Flow > Income After Tax)

This equation also measures profitability and is meant to weed out any stocks that may be playing accounting tricks in order make their earnings appear larger than they are. Because income has had taxes and depreciation subtracted from it, cash flow is generally larger than income. If it's not, then it means that the firm may be shifting earnings forward, thus misrepresenting them in the long run.

Capital Structure

Piotroski awarded up to three points for capital structure and the firm’s ability to meet future debt obligations: one if the ratio of debt to total assets declined in the past year (change in average), one if the current ratio improved over the past year (change in liquidity) and one if the company did not issue any additional common stock. Since many low price-to-book-value stocks are constrained financially, he assumed that an increase in financial leverage, a deterioration of liquidity or the use of external financing are signs of increased financial risk.

  1. Lower debt than the previous year (Long-Term Debt/Total Assets [now] < Long Term Debt/Total Assets [1 year ago])

This ratio targets capital structure. Piotroski was looking for stocks that were decreasing their debt, increasing their assets, or both. In other words, cases where the ratio of long-term debt to total assets would be decreasing. Taking on more debt, while not an inherently bad sign, increases its financial risk and may signal that the company is not generating adequate cash flow.

  1. Higher current ratio than the previous year (Current Ratio [now] > Current Ratio [1 year ago])

The Current Ratio is the Current Assets divided by Current Liabilities, and is used to gauge the liquidity of the firm. If a company is liquid, then it can easily pay its debts. The higher the ratio, the more liquid the firm (though if it's too high, that can signal other issues, like an inefficient use of capital.) Like every accounting ratio, this one does not tell the whole story, but by requiring an improving current ratio, this criterion ensures that passing companies will have an increased ability to meet its financial obligations.

At this point, point 5 and point 6 seems similar dealing with assets and liabilities, so why are they both needed? Essentially, they deal with different timelines of financial security. Point 5 (Long-Term Debt/Total Assets) looks at a longer time line, and thus deals with solvency, whereas point 6 (Current Assets/Current Liabilities) uses a shorter timeline, and thus deals with liquidity. A solvent firm has a positive net worth, whereas a liquid firm is able to pay all of its current bills, and both are important for financial health.

A company can be solvent (total assets greater than long-term debt) but still have a liquidity problem, meaning it doesn't have enough cash (or easily sellable assets) on hand in order to pay its bills. However, because a solvent company has a more manageable debt load, it's better able to borrow against its assets to raise cash in the short term. On the other hand, a company can be insolvent (long-term debt greater than assets), but still have enough cash or liquid assets on hand to meet all its short-term obligations. While this company would be able to carry on with business as usual, it could be headed for financial distress further down the road. Piotroski was looking for companies that had a low degree of financial risk in both the short and long runs.

  1. Less stock dilution than the previous year (Shares [now] < Shares [1 year ago])

This criterion also targets the capital structure by only letting in companies that have not issued any common stock in the past year. In addition to reducing the value of an investment, share dilution can signal that the company can't cover its current liabilities, which is another sign of financial distress.

Efficiency

The remaining two elements examine the changes in the efficiency of operations. Companies gain one point for showing an increase in their gross margin and another point if their asset turnover has increased over the last fiscal year. The ratios reflect two key elements impacting return on assets.

  1. Higher gross margin than the previous year (Gross Margin [now] > Gross Margin [1 year ago])

Gross Margin (or Gross Profit Margin) is the percentage of revenue that's left over after paying the costs of producing the goods sold. By weeding out companies that weren't able to increase their gross margins in the past year, this criterion selects companies that are becoming more efficient and thus are expected to be more profitable.

  1. Higher asset turnover than the previous year (Sales/Total Assets [now] > Sales/Total Assets [1 year ago])

The final criterion in Piotroski's score screens for an increase in Sales/Total Assets, also known as asset turnover. An increasing asset turnover ratio signals that the company is able to generate more sales with their assets, and thus is also a measure of efficiency.

Screening for both measures in the form of an increasing gross margin ensures that the company is able to keep costs under control, whereas screening for increasing asset turnover ensures that the company is able to grow their sales relative to their assets

It's important to note that rather than screen for stocks against a hard value (Gross Margin > 10%, for example), most of this screener's criteria compare metrics against their values from a year prior. This is advantageous because many metrics have wildly different ranges depending on the industry or sector of the company, but by using criteria based on relative values, this Piostroski screener is able to pull from all corners of the market.

Conclusion

All of the Piotroski criteria target stocks are increasing their profitability, increasing their efficiency, and reducing their debt. More efficiency means more profit, and more profit means higher earnings, and those are rewarded with a high stock price. Piotroski’s segmentation of firms by financial strength continues to be helpful in identifying both potentially attractive stocks as well companies to avoid. Generally, the higher the F-Score, the greater the average portfolio return.

Get Piotroski F Score calculated automatically with TRV Stock Analyzer.

 

 

 

 
calvintaneng Better don't miss INSAS BHD.
This one will outrun and outdistance all.
29/07/2018 9:19 PM
Goh Kim Hock Thanks for this nice valuable article.
29/07/2018 9:23 PM
Armada An Quantum Leap Stock In 2019/2020 Thks TRV research for such quality listing.
29/07/2018 9:28 PM
paperplane Wow. Not many knows pitroski score except for scholars in Investment field
30/07/2018 6:29 PM
paperplane But piotroski score should be used consistently to monitor the scoring over periods, which might tell more stories
30/07/2018 6:33 PM
kendrickt Great read, I guess just like other metrics, this should be used alongside other metrics and monitored over time. The score does provide great angles to look at a stock. The actual score will only change when the qr is out, but it's great practice to figure out how news/information about the company will impact the score between quarters.
30/07/2018 9:13 PM
TRV Stock Analyzer Welcome @gohkimhock , @VenFx , @paperplane , @kendrickt
30/07/2018 11:25 PM
probability good to see Lion-In there
30/07/2018 11:26 PM
TRV Stock Analyzer @paperplane @kendrickt

Yeah you are right, Piotroski F score need to be view in a longer time period, monitoring the changes in the score to look for turnarounds.

This score is great tool as it covers most of the important aspect in financial analysis. A stock with high score and reasonable valuation definitely warrant a deeper look into it.
30/07/2018 11:29 PM
paperplane Yup! You must have read a lot to introduce this piotroski score. I would suggest try also Altman Z
31/07/2018 12:38 AM

[TRV] Petron Malaysia 59th AGM Notes

Author: TRV Stock Analyzer   |  Publish date: Mon, 25 Jun 2018, 4:45 PM


The following notes are reproduced from the presentation by Faridah Ali, Head of Retail Business and Q&A from fellow shareholders.

Financials

Revenue increase 36% due to higher oil price and higher sales volume.

Total sales volume increase by 9% from 32mil barrels to 34.9mil barrels.

The management mentioned that the breakdown of earnings for each segment, i.e. refinery, retail and commercial varies each year depending on the contribution of the refinery. From the slides below, the company provided the break down for the marketing and refining segment.

Net income increased 70% due to higher refinery margin and higher other income (RM 65.6mil from compulsory land acquisition by the government).

In 2018, estimated CAPEX is RM340mil from which about RM160mil for retail while the rest are for refinery. Total CAPEX estimated to upgrade the refinery to meet the EURO5 requirement by 2020 is estimated to be about RM600mil which will be funded by internally generated fund and debt.

View full financial for PETRONM from TRV STOCK ANALYZER here:

http://bit.ly/TRV_PETRONM

 

Port Dickson Refinery (PDR)

In 2017, crude producer cut back production and this lead to 23% increase in crude oil price. The price of the finished product increase at a faster rate resulting in higher refining margin.

In Q1 2018, crude oil price continues to rise due to higher demand and tension in the middle east. However, the refining margin is lower.

Refining margin for PETRON is provided in the slides below:

Plant utilization rate in 2017 is 57% with average production of 50,000 barrel per day. There will be a scheduled plant shut down for 40 days in Sept 2018.

There is no plan to increase the refinery production capacity at the moment.

Refinery profitability depends on the refinery margins and optimization of the refinery.

 

Retail business

Retail business continue to grow by network expansion and effective marketing strategy. Total retail market share grew from 19% to 20.5% in Q1 2018.

Petron group established a total of 40 new stations in 2017. 14 new stations are under Petron Malaysia Refining & Marketing Bhd (PMRMB) while 26 new stations under the sister company – Petron Fuel International (PFI). Currently there are 18 new stations that are completed and will be open by end of the year. Target to have 50 new stations for 2018.

There may be 2 potential divestment due to compulsory acquisition by government in this year. First is from a highway project in Tanah Merah, Kelantan while the second divestment is related to LRT3 project in Bukit Tinggi, Klang.

The recent government action to freeze the fuel price has no impact on the margin for Petron. The current Automatic Pricing Mechanism is still in place. However, with higher fuel subsidy due to rising of fuel price, it may affect the company’s cash flow due to subsidy receivables from the government.

Currently Petron owns more than 600 petrol stations, in which 320 stations are own under PMRMB (the listed entities) while the balance is owned under PFI (wholly owned by Petron Corp, Philippines). About 12% of total market share belongs to PMRMB’s stations while the balance belongs to PFI.

The decision on petrol station to be parked under which company is based on the terminal servicing the petrol station.

Petrol stations drawing fuel from terminal such as Kuantan and Pasir Gudang which is PMRMB affiliate terminals will be parked under PFI.

This structure was inherited from Exxon-Mobil. PMRMB was Esso Malaysia which is under Exxon Corporation. While PFI was Mobil Petroleum International.

 

Commercial business

Higher demand for industrial fuel and LPG contributed to higher sales. More new key account mainly in aviation, manufacturing and power plant.

Sales volume in aviation grew with increasing demand in air travel. In 2017, Petron secured 5 new accounts to fuel domestic and international flights in KLIA and KLIA2. These new accounts are Xiamen Airlines, Qantas, Tiger and Scoot which contribute about 4% to the revenue.

 

View full financial for PETRONM from TRV STOCK ANALYZER here:

http://bit.ly/TRV_PETRONM

 

 

 

 

Labels: PETRONM
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Cyberkien "There will be a scheduled plant shut down for 40 days in Sept 2018." Do u have the exact date ?
15/11/2018 10:10 PM
TRV Stock Analyzer Hi @cyberkien, the exact date was not mentioned during the AGM. They only mentioned that there will be a scheduled plant shut down.
16/11/2018 3:34 PM

[TRV] FAVCO - Growing through acquisition

Author: TRV Stock Analyzer   |  Publish date: Tue, 17 Apr 2018, 9:06 AM


FAVCO is a leading provider of cranes, comprising of 2 international brands namely Favelle Favco and Kroll. They offer a full range of cranes includes Offshore, Tower, Wharf and Crawler Cranes. They provide cranes all over the world, with the reputation of building 9 out of 10 of the world tallest building out there.

Recently, FAVCO has proposed to acquire 70% stake each in Exact Automation Sdn Bhd, Sedia Teguh Sdn Bhd, Exact Analytical Sdn Bhd, and Exact Oil & Gas Sdn Bhd. The companies, which are primarily involved in the provision of engineering services, industrial automation solutions, and specialised equipment mainly for the oil and gas industry, reported a combined audited PAT of RM15.3 million for the financial year ended Dec 31, 2016.

FAVCO believes that this proposed acquisition of the target companies will enhance and widen the earnings base of the company. It will also provide synergies to its future business growth.

FAVCO had a huge drop is the revenue for FY 2016 and TTM. This is due to the company's high exposure (~70%) to the O&G sector.

However, we can see a steady increase in both operating and net profit margin. The company may have a certain level of moat hence the ability to maintain its margin even in the oil crisis.

The SG&A expenses are pretty stable at the range of 8% - 12%

FAVCO generates positive OCF (orange bar) for the last 10 FY with positive FCF (green bar) in 9 FY.

The earning quality is good with OCF (orange bar) higher than net profit (blue bar) in most of the year.

In the last 5 FY, most of the net profit is converted to FCF. Favco is a company which generates strong cash flow.

With strong cash flow, FAVCO has been consistently reducing its debt level (red bar) and increasing its cash level (green bar).

The balance sheet is liquid with almost RM360mil cash and RM30mil debt. Part of the cash will be used in the recent acquisition.

It's ROE is at 11.8% and ROIC at 25.6%.

At current price of RM2.47 it gives an earning yield of 36.9%.

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See how you can get these beautiful fundamental chart with just a click at:
http://www.trvanalyzer.com

 

 

 

 

 

Labels: FAVCO
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