Posted by kcchongnz > Mar 17, 2013 07:10 PM

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I will start with the first one, Kumpulan Fima 

Yardstick 1: ROE 
Kumpulan reported an earnings of 81m, or EPS 30.5 sen for the year ended 31/3/2012. With its net asset backing per share of 2.07, ROE is about 15.5%, good. 

Yardstick 2: Cash flow and free cash flow 
The cash flow from operations (CFFO) is 131m. This is 110% of its earnings of 116.5m. This shows its good quality of the earnings. After spending 26.4m in capital expenses, there is a free cash flow (FCF) of 105m left which Kfima used to reduce debts, pay dividends etc. This FCF is very high at 22% (>>5%) of its revenue. In fact this magnitude of FCF has been consistent in the last few years. 

Yardstick 3: PER 
Kfima is trading at 1.85 at the close of 15/3/2013. With EPS of 30.5 sen, the PE ratio is only about 6. Is this PE high or low, bearing in mind of its good quality earnings as reflected in its cash flow? 

Yardstick 4: Dividend yield 
Kfima paid a dividend of 8 sen for the last financial year, or a dividend yield of 4.4%, higher than the FD rate. This dividend is paid through the FCF, not from borrowings or additional share issues. And what do you think of its likely future dividend in view of its abundant FCF, higher or lower? 

Yardstick 5: NTA 
The net asset backing per share of Kfima is 2.07 compared to its price of 1.85. Half of its assets, or about RM1.00 is hard cash. Don’t you think Kfima has quality asset backing? 

Kfima seems to meet all the criteria of Cold Eye as an investment. Isn’t it hard to find such a company in Bursa. No wonder Cold Eye said below when somebody asked him about kfima on 16/3/2013 in his presentation. 
KFIMA 千万别卖（看清楚，不是“买”）

5 Rules of Investing by Cold Eye - Introduction

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