kcchongnz blog
V.S again? kcchongnz
This post is for sharing of knowledge and discussion purpose. It is by no means a buy or a sell call for any stock.
First I would like to qualify myself that I am no financial analyst as someone said, lack alone a “famous” financial analyst. I am also an engineer by profession which I have spent 22 years in. But I hope that shouldn’t stop me from expressing whatever views I have on OTB’s comments posted in this thread.
http://klse.i3investor.com/blogs/kcchongnz/76875.jsp
I also hope he views it as in a constructive manner, something maybe useful for his considerations as an alternative point of view as he said he is an investor in V.S. Why not? If someone tells me about his view on a stock which I am so confident of and hold a lot in my portfolio, I will be extremely happy if he alerts me of something which I need to consider. Won’t he too?
Yes, I emphasize on cash when investing in my articles in i3investor as you can read, and that is very true. But the cash if anyone who understands the language of business, he will know that the cash I mean all the time is cash flow; cash flow from operations (CFFO) and free cash flows (FCF) in particular, it is not the cash in the balance sheet.
I never recommend to buy shares of companies which have loan, although I have written so many articles about companies in i3investor. That is true too, not only company with loans but any company, good or bad, cheap or expensive, because my knowledge about the market is limited and I know very well that I could be wrong in my call, and then cursed by others who lose money following my call. What for? I earn nothing from that.
The financial market is full of unknowable and uncertainties. This is what Howard Marks says:
“The future does not exist. It’s only a range of possibilities. We have to understand that most outcomes will be determined by luck.”
Some people may make a lot of money when they make a right call. Listen to what Nassim Taleb said:
“Clearly my way of judging matters is probabilistic in nature; it relies on the notion of what could have probably happened… If we have heard of [history’s great generals and investors], it is simply because they took considerable risks, along with thousands of others, and happened to win. They were intelligent, courageous, noble (at times), had the highest possible obtainable culture in their day – but do did thousands of others who live in the musty footnotes of history:”
Having acquired some academic knowledge in corporate finance through my postgraduate study, in stuff like merger and acquisition, management and leveraged buyout, etc., I do not dislike to invest in companies with debt as alleged, not at all, knowing very well that public companies mostly use other people’s money (OPM) to do business. Company loans when properly used, can amplify returns.
Scientex is one company which I have invested in and has substantial debts as shown in my article below. It leverages up by having a leverage of 2 times total assets to its total equity, yield a nice amplified return on equity of 20.8% in 2014.
http://klse.i3investor.com/blogs/kcchongnz/56316.jsp
Scientex borrowed a total of RM340m, in comparison with the RM410m of V.S. Its debt is about 50% of its equity, in comparison to 64% of V.S. Not much difference and it is alright for both companies, no problem at all if the companies have enough cash flow to service their debt. Here are the differences.
In 2014, Scientex produces a net profit of RM151m and CFFO of RM153m compared to V.S net profit of RM46.6m and CFFO of RM46.4m. Scientex CFFO is 27 times and earnings 21 times its interest payment, whereas V.S CFFO is only 6 times and earnings 4 times its interest payment, taking interest for V.S as the average of the last three years. This has not taken into consideration that in the last three years, V.S has to spend 85% of their net operating profit after tax for capital expenses compared to 53% of Scientex.
The cash return, CROIC, (FCF/IC), or FCF over its invested capital of Scientex which I view as very important, is average of 21% a year for the last three years. But my computation of cash return for V.S is “Not Applicable” as there is no FCF for the last three years. It has some now for the last one year, and even if I take that into considerations, its average three years cash return is less than 1%.
Do not underestimate the problem of cash flow. In this article below, I used Enron as an example:
http://klse.i3investor.com/blogs/kcchongnz/76875.jsp
This was what I have written:
“Look at Enron’s four years financial performance and cash flow from 1997 to 2000 below with its net income galloped by 832% from $105m to $979m before it went belly up. This was one of the most talked about corporate scandals in the US in 2000s. Focussed on PE ratio, Wall Street sent Enron’s stock price soaring from about $30 to $100 from 1997 to 2000. However, from 1997 to 1999, the company burned all its revenues and required an additional $3b of capital expenses just to open its doors.”
Here is another well-known example. Lucent Technologies was one of the most widely held stocks in the late 1990s. It burned through all its cash flows in the late 1990s, except in 1997. In that single successful year, Lucent’s CROIC was merely 3.2%. It requires $31 just to generate $1 of cash. Just two and a half years before the share price tanked, it reported record “earnings” almost every quarters. It business eventually crumbled with its share price tumbled by a whopping 99%. Investors, many of them are savvy institutional investors were left crying without tears. No, I am not saying V.S will be the same, it most probably won’t.
And what about the return of invested capital from shareholders and borrowings?
In 2014, Scientex requires to spend just RM5 to earn RM1 whereas V.S need to spend RM15 just to earn RM1. Return of equity (ROE) of 7.3% for V.S in 2014 is certainly not good as it is way below the cost of equity. Even in its best twelve months which is the last twelve months at 10.8% is not great too as it is still below my required return investing in V.S.
A company which continues to earn high return on capital add shareholder value by keep on growing with internally generated fund, making more cash flows in the future and the company can distribute increasing dividends to shareholder. A company earning return below cost of capital will have to keep on borrowing money or asking more money from shareholders just to keep its doors opened. It can also grow itself to bankruptcy. No I don’t mean V.S is in this category.
So it is not whether a company uses OPM, but how effective the management utilizes OPM, and how risky it is. Think about if there is a severe economic downturn, or simply because Keurig finds the Chinese, or a South East Asian country produces cheaper and better coffee makers than V.S. Impossible?
Nevertheless, I do discourage individual from using margin financing to speculate in the stock market, in fact fervently. I have written a number of articles about it with a lot of examples, numbers as I find this is a very important knowledge for retail investors who have been bombarded by investment bankers, fund managers enticing them to use OPM in the hope of enhancing return. One of the articles is here:
http://klse.i3investor.com/blogs/kcchongnz/44344.jsp
“Leverage magnifies outcomes, but doesn’t add value.” As a reminder, please read what Nassim Taleb said above.
I personally would rank this as my most useful article written in i3investor for those wannabe newbie investors who think they can produce a baby in one month by making nine women pregnant at one time, best in the sense of a philosophy, not how good it was written, not some stock picking ability.
You want to compare P/E ratio with Globtronics and MPI? P/E ratio is a favourite ratio pitted by investment bankers. I have written about the pitfalls of using this metric for comparison as shown in the link here. You can dispute it if you wish with your reasoning:
http://klse.i3investor.com/blogs/kcchongnz/63417.jsp
And here is a very good comment from a commentator here:
Posted by soojinhou > May 24, 2015 08:25 PM | Report Abuse 
OTB, with all due respect to Mr Koon, I think it's a folly to compare VS with Gtronic and MPI. VS is not an electronics components manufacturer, its is more of a PCB and plastic injection EMS player. In my opinion, it doesn't require the technological expertise that the latter 2 demands. Also, Keurig is not doing well, and I don't think a cold drink machine will not be as popular as a coffee machine, simply because your soda do not have the coffee connoisseur factor. In other words, would anyone pay a couple hundred dollars for a machine to make coke? Still, VS has a wonderful run and it is wonderful profit. But in my opinion its core competency and prospect is a bit over inflated.
And bear in mind that in investing, past performance is not an indication of future success. And what Nassim Taleb said about alternate history in his quote above should serve as a guide.
No, I am not saying V.S will not improve its performance. I have no crystal ball in front of me to tell me its future. No, I never dispute V.S share price can go up to RM10, RM20, I don’t know. No, I never visit their factories, talk to their engineers, management etc. I know they won’t entertain me, but I don’t think I have to, even if they would entertain me.
I hope you take my comments in a positive manner.
K C Chong (25th May 2015)
Posted by Ooi Teik Bee > May 24, 2015 02:38 PM | Report Abuse
After reading KC Chongnz’s recent 2 articles on VS Industry as posted on i3investor.com which are not encouraging readers to buy VS, I am wondering why Mr Koon Yew Yin bought so much within the last few months to become a substantial shareholder. Is he really so stupid?
The VS price chart shows that it has gone up from Rm 2.50 to Rm 4.30 within the last 6 months.
Is he not aware that the company has increased borrowing, increased interest payment, increased receivable, poorer cash flow etc as shown in its financial report?
So, I asked him to explain to me his reason for being so bullish.
He said that although he is not an accountant, he looks at VS business operation as a business man. As long as it is selling cheaper than MPI or Globtronics in terms of P/E ratio, he is not afraid to buy it. As an experienced business man, he can imagine that if the company has tremendous increase in sale revenue, the company surely requires more borrowing to do more business. VS needs more money to pay for more raw materials.
Regarding the increase of receivables and poorer cash flow, he said that the company requires longer time to make and deliver its products to customers spread over 30 countries.
The most important consideration is how sustainable is VS’s new business in manufacturing coffee machines for Kuerig, the famous US coffee brand?
He said that during his recent site visit of VS’s 5 factories in Johore, the American Engineers from Keurig were working with their own Engineers to develop a new type of coffee machines and a new machine for cold drinks. Cold drink business is about 5 times larger than hot drinks.
Moreover, VS is only supplying about 25% of the total machines required by Keurig and the rest of Keurig’s requirement is from manufacturers from China. As labour and other cost are rising in China, VS has a better competitive advantage to gain more orders.
Mr Koon told me to look at the summary of his investment talk on 9th May 2015 when I assisted him. The talk was organized by Dali of Malaysia Finance blogspot in KL. The following is part of his speech:
My largest holding is VS Industry:
I selected this electronics manufacturing company because it is so cheap in terms of P/E ratio, ROE and other criteria in comparison with the 2 famous leading electronics manufacturers in Malaysia as shown below:
Name Half Year EPS Half Year Revenue Share price P/E ratio
Globtronics 13 sen Rm 180 million Rm 6.10 23
MPI 23 sen Rm 670 million Rm 7.00 15
VS Industry 27 sen Rm 1,010 million Rm 3.96 8
VS has a total of 9 factories in Johore, China, Vietnam and Indonesia. VS employs 15,000 workers which is more than the total number employed by MPI and Globtronics.
Their largest customers are Keurig. Dyson, Sony, Sumsung, Panasonic etc. They have been in this business for 30 years.
Mr Koon said that his VS and Latitude investment reminds him of his past performance in buying Supermax and make a kill about 5 years ago when Supermax price shot up from Rm 1.00 to above Rm 6.00 within a period of 15 months. It is similar to Latitude which shot up from Rm 1.00 to above Rm 6.00 in the last 24 months.
I will study his past performance in buying Supermax and post another article which should be useful knowledge to all investors.
Note :
It is not a recommendation to buy ... I repeat ... not a recommendation to buy, I just post Mr Koon's view why he is so bullish about VS. There are some information is useful to VS investors since he visited VS Industry during AGM.
FYI, I hold VS stocks which I bought at very low price at the beginning of 2015, you can check my posting in the below link :
http://klse.i3investor.com/servlets/pfs/41947.jsp
Final decision is yours.
Thank you.
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Discussions
3 people like this. Showing 50 of 53 comments
accurately said murali..... we really need to encourage people to develop rational argument skills.
If not it will be like our Malaysian parliment..
2015-05-25 17:53
wonder our PM can sleep peacefully? ;)
Some naturally have very thick skin....
2015-05-25 18:15
Good to see KC n OTB exchanging their ideas here.....I curi curi learn a bit
2015-05-25 19:52
One thing good about OTB besides TA n FA, is his market intelligence....really geng....
2015-05-25 19:57
Excellent response from OTB. A very different perspective and investment philosophy from that of KC, but have worked nevertheless as evidenced by VS share price performance
2015-05-25 20:04
OTB is very different from KC. Both sifus also geng. KC read widely and is backed by strong financial knowledge (real life investing performance also excellent). OTB not so academic, but he has excellent judgement when come to placing his bets. Both sifus I also like
p/s : Uncle Koon also good. He made excellent calls on Muadajaya, Jayatiasa, Rimbunan Sawit. Really geng. Respect !
2015-05-25 20:10
Icon8888, u very naughty......always make fun of our widely respected senior Koon Koon....
2015-05-25 20:57
He is also geng, from a different angle....100% went Holland....not easy though in view of the bull market we experienced last 2 years.....
2015-05-25 20:59
Quarter to Quarter revenue & profit very erratic. Its inventories & receivables rises at a much faster rate than revenue. Unless this structural weakness is addressed. Its plan for growth will entail more borrowings either cash call from shareholders or commercial loans.
EVA remain negative for the past 5 years. Hope KYY business sense on VS bear fruit this time.
2015-05-25 21:29
One persistent criticism of my way of analysis is I am basing on past financial statements, not emphasizing on future high growth. Thank you very much, that is a valid criticism and I get it again.
Yes, I fully agree that in investing in a company, it is the future which matters, not the past. But I have said this numerous times. It is just that I as a small time retail investor, does not have the additional information, like the future share price movement, the chance to talk to the management to tell us their big plan in the future, and the ability to forecast the future, like some of them do. I did say those investors who possess the above abilities make big money in the market.
So for those who wish to follow what I write, beware of this limitation of mine. I did justify why I need, or need not to have these things in the article.
I am also aware that there are criticisms that I use complicated ratios in the analysis. Thanks for the reminder. I didn’t know that cash flow, free cash flow, enterprise value, invested capital, return of capital, cost of capital are that complicated and as if they are useless to be used in investment analysis.
Just to share a comment from a participant from my course today below.
Hi KC,
After reading through your article on VS Industry, I felt obliged to share some thought as someone whom has worked in this industry for close to a decade. The company I am working for is the top 10 EMS company in the globe by revenue. This is a highly competitive industry and most if not all, operating at single digit net profit margin. Though the industry is still growing along with the growth in outsourcing trend, not all EMS companies are doing well. Top line are always challenged by low customer loyalty (remember OEMs will not outsource their core technology, there is low barrier to move to another EMS) or missed order forecast. Bottom line are always squeezed with customer demanding annual cost reduction, yield issues and etc. Hence, every companies employed various business strategy to overcome these challenges, it is hard for outsider to assess the quality of these companies, but the financial statement indeed provide a glimpse if not the full picture of how well they are being managed.
Revenue growth shouldn't be the only yardstick, there is once we have a big customer pulled out from our company to our competitor without warning, it came as a surprise, our company share dropped by 20-30% in a week. All you need is just one event like this and investor could lose money instantly. It took us two years to return to our previous revenue level. Of course our share price return to the previous level and in fact, higher than before :). Looking back, I believe having the right metrics in place to drive focus and business strategy really help my company to recover from the slump and regain the growth the momentum. My company has been able to consistently generate positive cash flow, positive economic return (ROIC > WACC) and has good interest coverage with single digit net profit margin. All these helps to build a strong financial fundamental to weather through any unexpected events. Having this metrics in place drive business strategy that focus on creating shareholder value, one good example is that my company have been focusing on high complexity low volume products, these products command higher margin and higher barrier of entry such as healthcare and life sciences products. We also have strong R&D team (sometimes outsider mix manufacturing = R&D) that contributes to sustaining bottom line as R&D business normally commands higher margin (20-30%).
Thanks for your good teaching, I am able to appreciate the metrics that my company leaders have put in place. Like you said, growth can be deceiving if it is destroying shareholder value over the long term. I am not here to challenge on others approach in be successful in stock market as everyone has their own strategy and timing certainly is one of the factor. I am just wary of VS Industry for now (from an industry insider) unless their financial data improve and prove otherwise.
By the way, I sold my Jtiasa at a loss, it certainly took me some courage to do so ( eat up loss!) but after going through your course, I really certain that this is the right thing to do. I am more confident now in making an investment, and has been making good gains through pintaras jaya, latitud and skpres.
Thanks KC. I hope that we are able to catch up :).
2015-05-26 16:22
Mr KCChong,
I think you have done a great job to most of the investors here
I think your effort have saved many investors losing their hard earned money from investing into a company with picturesque future but low cash return, negative cash flow , huge debt that need PP and ESOS to save its cash position
you had given a good comparison about the debt borrowed by VS and SCIENTX and also how efficient these two companies generate cash from the borrowing.
you had talk about Enron and Lucent Technologies stories that had made so many savvy investors and institutional investors cried no tear then .
My dear friends, it is better miss than wrong
future is full of uncertainty, KYY can run fast, OBT can run fast, his subscribers can run fast
are they have the obligation to warn you first before they start the run ?
my dear friends, it always better to put your money in the bank to earn 4% than to put the money in AH LONG hand to earn 30%
Mr KCChong, I like you, you are a good man. A man with conscience.
2015-05-26 17:57
bintang 21,
Thank you very much for your kind words. This type of comments motivates me to continue sharing the little knowledge and opinion I have. However, I need to correct one thing about your post.
V.S share price has been rising for the last few months. If someone asks me if I would invest in V.S a few months ago. I would have said the same thing, and the result would be many people who choose to follow my comments would curse me from stopping them from making money, although I don't really tell them to buy or not, but merely my take on the company's performance. Now, V.S share price appears to be still in demand. Nobody can argue about that.
So your statement that "I think your effort have saved many investors losing their hard earned money from investing into a company with picturesque future but low cash return, negative cash flow , huge debt that need PP and ESOS to save its cash position" is not correct, at least for now. In fact as I have always said, nobody can predict the future correctly and consistently, and the performance of the share price in the future. V.S share price could very well keep on rising in the near future, or it may drop.
So I have never said V.S share price will drop, or continue to rise. Never. I don't know.
2015-05-26 18:28
Posted by murali > May 25, 2015 04:42 PM | Report Abuse
You wouldnt be very rich eventually, but u can always sleep peacefully, with no guilt and no shame...
“On matters of style, swim with the current, on matters of principle, stand like a rock.”
― Thomas Jefferson
2015-05-26 18:40
Posted by bintang21 > May 26, 2015 08:01 PM | Report Abuse
KC
please be brave with your view. as you had said and it is an undeniable fact that future is full of uncertainties, no one know what is going to happen tomorrow , what more a month or a year later
Me: Yes, the future is unknowable and unpredictable, you are right. So how to be "brave" to say if a share's price will go up or go down in the future? Yes, one can base on some analysis and educated judgment, but that still won't ensure he will be right, or wrong, in his educated judgment, especially in the short term.
now many may laugh I talk nonsense to say you have saved us losing our hard earned money in investing into a not so worthy company based on its performance, who know ,one day, these are the people who are cursing themselves for not have taken your view in a positive manner.
can you dare say it won't happen?
Me: But it is true that I didn't save anyone from losing money in V.S as it is now. Have I? Whether a company is worthy of investing or not is also a matter of judgment and opinion. My judgment is I don't view it worthy of investing in V.S at this price after quite thorough analysis and feedback. Others have their opinion too. Some of them are so bullish that they think V.S will go up in price a lot more, and they seem to know a lot more of V.S than I do. As you have agreed that the future is full of uncertainties, and I have seem rubbish stocks go up like no tomorrow. So how can I be certain that V.S will not do the same thing, although I think otherwise?
KC
please be brave with your view. God has given you the knowledge to share the truth. Please continue to share with us. it is not the matter to save anyone but to tell the truth. this is what this forum is created for, isn't it ?
Me: There is one thing in investing that one must be aware of. There is no such thing as I am very "brave" about a stock, or very confident that this stock will go up by 100%,or go down by 50% in a year, say. The market may be efficient in the long run, it can go hare-wire in the short-term.
Have some humility, and not be too overconfident as far as investing is concern.
There is no "truth" what the future share price will be.
2015-05-26 20:21
bintang21,
you have a very clear mind, very explicit with your point
I give you a double "LIKELIKE".
2015-05-26 20:59
bintang21,
I guess you are a young man, still learning about the reality of life, and investing. How many times do you notice I have said,
"In Bursa, there ain't no tooth fairy".
In trading in the stock market, it is a zero sum game (and how many times I have said that too). You win from someone who loses to you. Your loss is someone's gain.
So someone who is also doing trading on the same stock as you won't help you to make money trading in the stock market, because your gain is his loss, or less gain for him, in general. You will behave the same because you are also human. So you have to always take care of yourself first.
A noble person may help the poor people, give them some money if they have none to eat. There is no noble person who will help you to make money from share trading in the stock market. That is not a noble act, helping people to make money from the stock market is not a noble act anyway in my opinion. And don't take his word if he tell you.
I also write about good companies worthy of investing and publish in i3investor, if you notice. Most of the time I have bought already before I publish them. That is also a selfish act of me. I am human too.
But one thing you should be quite comfortable if you wish to follow what I write, I mean if you trust me, that I am writing how good a company is, it is not with the intention to sell to you. That is not good, morally. By the way, if ever I publish a good company stock, I won't sell even if it has gone up by 10%, or even 20%, because I am an investor, a long-term one, and the stocks I buy and writ about generally have a wide margin of safety and hence i generally won't sell so fast unless the share price has gone up close to the intrinsic value which I have estimated, or I need money to buy better stocks.
Of course I can be wrong too in my analysis, quite often too. If I realize I am wrong, then I won't hesitate to sell it. And also as human as I am, I won't tell you to sell first before I sell.
So you can't fault anyone not helping you to make money trading in the stock market.
2015-05-26 21:10
Bintang21,there is no free lunch in this world....anyway,if u pay OTB rm960 a year n u get good tips in return....value for money.....fair trade.....at least he got proven records for last 3 years......BTW I got no money to subscribe his service.....sigh.----
2015-05-26 22:01
At least he made it clear that its his biz n u pay him for his service,if u have faith with him...
2015-05-26 22:03
"There is no noble person who will help you to make money from share trading in the stock market...helping people to make money from the stock market is not a noble act"Very well said KC!
Sharing about general principles/approaches like Warren Buffett did in his annual letters is noble though.
If one has a great insight about any particular stock, he will definitely buy all he can before telling anyone about this good deal, lest others will chase up the price and render his insight useless. Only when he had collected all he want he will then share with others, at this time others who buy will not be competing with him but helping him to push up the share price.
It is the same thing when he want to sell, he will sell first. Being human many will not publicly declare he sold the stock which he had not too long ago proclaimed to be a very "cheap" and "good" stock that had plenty of upside.
My conclusion is learn those general principles like what KC share. Be very careful when someone told you specific stock that is really great but he already bought!
2015-05-26 23:42
Posted by contemplator > May 27, 2015 12:27 AM | Report Abuse
Good analysis Mr KC!
contemplator, thanks.
I read a posting you shared on bonus issues, share split, etc below:
http://klse.i3investor.com/blogs/contemplator_bursamalaysia/77059.jsp
It is an excellent post which I recommend everyone to read.
I would like to add that these stuff like share split, "free" warrant, bonus issues can at times be very dangerous for retail investors in Bursa, where major shareholders get these "free" stuff and unload into the market with lofty prices to ignorant small time retail investors, causing the share price to plummet and hefty losses for existing shareholders.
InstaCom came straight into my mind. There are many more are in the process.
So for true investors, not traders or speculators, don't focus so much about asking the company to give bonus issues, share split, "free" warrants etc. A cake cut into 10 pieces, 20 pieces has no difference in value. This is a very simple logic. In fact for many poor performance companies, this stuff eats further into their pocket by paying investment bankers to do this stuff, and the fees is not cheap.
Liquidity from share split? A few years ago Bursa already made the "shares split" for all companies in Bursa by 10:1 by reducing the lot size from 1000 shares to 100 shares. Still not split enough? You want to invest in Nestle with RM7200? No problem, you can buy 100 shares at RM71.56. Any problem? Want to invest in Pintaras with just RM2000+? Can, just buy 500 shares.
So for real investors, don't need to tell the management to do bonus issues, share split, give free warrants etc. They know what to do best for the company, or at least suppose to. If they aren't, tell them to focus on how to improve the business of the company, how to improve margin, increase sales, collect debts, manage inventories well, etc. These are the important stuff about business.
2015-05-27 06:32
Thanks a lot KC for your well define analysis on VS , would very much appreciate if you could take another look at ELSOFT post Q1 2015 quarterly result. Please do continue your very kind effort for guiding fresh newbies investors .
2015-05-27 07:34
Another important thing to apply in share investment is on human psychology, besides all the FA, TA, goreng stories etc...To be a really successful investor, he or she must know all of these...dont confine yourself to only one or two fields only.One of the reason why OTB is so successful in the last 3 years is his market intelligence...seems nobody has ever notice so...
2015-05-27 08:19
You may call them dumb...but 10 pieces of RM1 notes seems to be more welcomed by the investors in our stock markets as compare to 1 piece of RM10 note...
2015-05-27 08:22
I do not hope for OTB to give me free lunch.
if you read carefully , in a more positive manner, I am actually telling you what you are telling me now
what I actually want to convey is if you follow someone influential like KYY and OTB into buy a less performing company like VS then:
"future is full of uncertainty, KYY can run fast, OBT can run fast, his subscribers can run fast
are they have the obligation to warn you first before they start the run ? "
I never said OTB focus on his own business is wrong
but I do hope he can share his knowledge like KC. that is my hope, the decision is his
I did not ask anyone to help me to make money in the share market, when did I ?
I know knowledge is asset, I must know which one is a good buy which one is not. the decision is mine not you. I just do the best, what I think the best with my limited knowledge, GOD decide the outcome.
am I wrong?
am I that naive that not aware "In Bursa, there ain't no tooth fairy".
please do not judge a book by its cover
2015-05-27 10:32
Mr KC, Thanks for your kind comments. Again thanks for your altruistic sharing on VS and value investing.
Value investing is indeed very fascinating.
Let's see when the time for us to apply
"Be fearful when others are greedy and be greedy when others are fearful"-- WB
2015-05-27 11:04
but I do hope he can share his knowledge like KC. that is my hope, the decision is his
Ans : I do share my knowledge here. I avoid recommend any stock here. I did talk about some stocks in I3. If I touch on the stock, the stock must be very good in FA. It is my rule.
I did talk about Frontkn, Hevea-WB, VS and etc. I call a buy on VS when the price is around 3.30. Those had listened to my call would have make money. I call a buy on Frontkn at 0.19, Hevea-WB at 1.65 and many etc. likewise, you also make money.
Please read my stock pick for 2015, please read the below link :
http://klse.i3investor.com/servlets/pfs/41947.jsp
Any reader follows my stock pick, he/she is laughing all the way to the bank. Am I not sharing my knowledge in I3 ?
Thank you.
2015-05-27 11:24
OTB has stopped active discussion in i3 because optimouse kept attacking him
If u want to blame anybody, blame optimouse
2015-05-27 11:29
Posted by tianjin > May 27, 2015 07:34 AM | Report Abuse
Thanks a lot KC for your well define analysis on VS , would very much appreciate if you could take another look at ELSOFT post Q1 2015 quarterly result. Please do continue your very kind effort for guiding fresh newbies investors .
I have written something on Elsoft based on whatever I can see from the past performance in the link here for sharing of knowledge only:
http://klse.i3investor.com/blogs/kcchongnz/74663.jsp
I as a small retail investor and also not in the industry, have no other insights, insider information, never talk to the management, no crystal ball etc. So read with cautions.
Looking at its latest financial results, it doesn't change my view as written in the article.
2015-05-27 11:42
I agreed with KC that cash flow is more reflective on the quality of earning. We must bear in mind that change in accounting didn't alter the underlying cash flows.
Some executive believe that good earnings numbers can boost the shares of their companies even if these numbers don't reflect any change in the performance of the underlying businesses. In reality, with the right level of disclosure, markets would see through manipulation of this kind.
When we try to predict future cash flows and profits, past performance becomes the foundation of credible forecasts.
2015-05-27 11:53
bro ICON8888,
you are not right this time
put down your hatred
you are a smart investor, my good brother
do not turn yourself into a mouse killer
2015-05-27 11:58
Sorry guys!
Dear Respected OTB, KCCHONGZ, MURALI and BINTANG21.
I am not supposed to intercept without permission from all. I apologize for that at first place, but, as a silent reader of this thread I hope I can raise my view from reader's point.
You can shoot me whether I am PLP or what. Just sincerely wish you take 5 minutes to understand me as a reader's stand(might not represent MAJORITY).
Dear KCCHONGZ, I must say you are very good book for us in terms of financial analysis or company's future growth analysis. I personally like your way in risk forensic although many might not like the very technical risk management discussion (personally, I enjoyed it very much).
Dear OTB and KYY, both also very practical and well versed in good TA counters. Respected Uncle will continue to replicate his success story in his portfolio. Well, FAVOURABLE or NOT FAVOURABLE need not to comment as long as he has closely communication with the business runners. Dear Readers, in any kind of learning process we just need to pick up good points and modify the NEUTRAL methods to suit our style. Tis is what we call BIODIVERSITY. For Mr.Ooi, a famous remisier who running the business for advising, consultation, recommendation, fund management etc for living as well as to fulfill his daily interest in life. I BET you love investment more than money at this age.
Dear Bintang21 brother, although we have very limited communication in this forum. Nevertheless, I respect you as a senior at least for me(young investor in stock market). I wish I can write to you in private email but unfortunately we never exchange our email address. In order not to give my opinion with any BIAS, I took long time to follow your comments and read all your comments through your personal profile to learn more from you. I am doing this to give you my most sincere friendly review. As a reader please allow me to raise and suggest my kindergarten view on this particular "Blog: V.S again? kcchongnz" blog.
Again, please don't take it as personal because we can harmonize it in a business way but not PERSONAL perspective.
Firstly, I could feel the same pressure by Mr OTB when you "advised" him to disclose BUY and SELL call since you know Mr Ooi doing it for day living(income source). I WANT TO MAKE YOU AS MY FRIEND SO I RAISE MY FEELING, NOTHING PERSONAL MY SENIOR.
Secondly, must try not to ENLARGe KCCONGZ's point to validate/verify/certify which methods/rationales are more appropriate for INVESTORS. Indirectly, it will caused both KCCHONGZ and OTB in a trouble situation since both of them give us more variety set of analysis eventually. When there is discussion or positive debate going on, don't you think we already gain something COMPLIMENTLY, at least it happen to beginner like me. AGAIN, I WANT TO MAKE YOU AS MY FRIEND SO I RASIE MY PERSONAL FEELING, NOTHING PERSONAL MY SENIOR..
Thirdly, if you don't mind you may try (I guess you know this more than me)to approach them with any CLOSED QUESTION rather than to keep discussing on above mentioned issues. When you ask both gentleman in CLOSED QUESTION such as OTB, do you think VS can achieve higher than previous quarter PBIT or to KCCHONGZ, what do you think is the best FAIR Value of VS in this financial year. I believe you will get positive feedbacks from them simply because they will address you should they aware of it and it will make everyone more comfortable in terms of SOCIAL ACCOUNTABILITY and RESPONSIBITY. I do not want to speculate but strongly believe they wont take BET on their reputable name to SIMPLE ANSWER US WHHEN THEY ARE NOT SURE WITH OUR QUESTION. My above points are They would happy to address if the question more towards share trading analysis rather than METHOD VERIFICATION as well as WHO IS BETTER IN THE FIELD.
Lastly, bintang21 brother. I MIGHT BE TOTALLY WRONG ON ALL MY RUBBISH KINDERGARTEN THOUGHTS. As a reader cum beginner in stock market, I just want to learn from all of you but not really put much time to "learn" who is the greatest or most generous in this community.
Dear bintang21 bro, respected OTB and KCCHONGZ..... wishing you all have a wonderful trading days ahead.
Please forgive should I made you uneasy!
warmest regards,
duit
2015-05-27 12:08
bintang u must be new to i3 ? That explained why u don't know the background how optimouse attacked OTB. It was like world war 3, lasted for three days three nights
Ha ha
2015-05-27 12:13
Icon88888888888
LU si pek JIALAT lo...
don't simply say la... U make me in trouble....
2015-05-27 12:18
my dear brother DUIT,
You said:
"Firstly, I could feel the same pressure by Mr OTB when you "advised" him to disclose BUY and SELL call since you know Mr Ooi doing it for day living(income source). I WANT TO MAKE YOU "
how many time do I have to clarify myself I did not demand OTB to reveal his buy and sell calls
when did I do that?
why you all keep on saying I want free lunch from OTB?
is it fair to me?
is that what you said you have understood me?
what I actually want to say is OTB is very influential
what is said most of the people will follow including me
but this time ,it is about value investing in VS
why it is so difficult to understand my point of view, brother?
2015-05-27 12:27
duit
you said:
"We should not follow or influenced by Mr. Ooi..... Because we shall responsible to ourselves."
you are wrong again.
we can follow OTB and KC if what they said is true and worthwhile to follow
we must have the wisdom and knowledge, that is what I hope they continue to share
2015-05-27 12:43
DUIT,
I just playing naughty with you, do not take it seriously
nothing wrong with you
so far, I notice, you are doing very well
2015-05-27 12:59
OTB,
Thanks very much for your kind words. You are a well respected forumer here with proven records. yes, you record can be seen in i3investor this few years. Nobody can dispute it.
I hope with your post here, everyone should view the importance of having some knowledge and skills when foraying into this jungle out there in Bursa; be it FA or TA. And you have rightly said, TA + FA would be the best combination.
With your good recommendations here, hopefully it would attract keen learners to learn from me through my online investment course which I have been organizing for more than a year already.
With this may be I can do some noble work by teaching fundamentals of investing to whoever interested in order to improve their investing experience.
No lah, I can also earn some money also. You know everybody needs to eat and survive what. Not that I am a multimillionaire. Btw the fee is peanut compared to the stakes you have in the market.
And I also hope that those who are interested in TA can also learn from OTB, And you know he is good, and he has proven to be good.
But remember what OTB said, TA alone won't work. You must combine TA and FA, then only it works, beautifully.
Posted by Ooi Teik Bee > May 26, 2015 07:36 PM | Report Abuse
I had spent a lot of money to learn FA, at the end I learn the most is still from KC Chong. I had repeated this sentence many times in I3. I did not say KC Chong is not good, I copy the best from KC Chong to use them in my FA report. Certain parts I disagree, I just avoid them.
I am a remisier, I have many stocks to take care, I cannot be so details on one stock. Hence I have to balance my act to get the best out of them. I had tried many methods to make money from stock market. I regret to say that I wasted many good years. If I know KC Chong earlier, I should have done very well in my investment. I did very well in last 7 years after I learn TA. TA alone will not work, you need to combine TA and FA. To me, TA comes first, FA comes second. I had tested this combination many years, I want to say it is still the best method for me.
I had shown this combination skill in my stock pick in 2013, 2014 and 2015. All of you should know the results.
I have a pool of subscribers, they pay me the money or subscription. I have to take care of them first, this is a business I run. Many of them will be very unhappy if I post my buy recommendation in I3. If I want to sell the stocks, I have to inform them first so that they can cut loss fast at a better price. Please understand this, I have a business to run. Do not blame me if I did not tell you to cut loss. I cannot do that because I am answerable to my subscribers first.
I stop here, I am not challenging KC Chong that I am better than him. I just express my opinion on my strategy. If you think KC Chong's method is better, go ahead to follow him. Please do not be so personal in writing here.
Thank you.
2015-05-27 21:01
Just to highlight a few points why cash flow is more reflective on the quality of earning, in FY 13 VS has acquired additional 17.19% shares in VSIG for RM32.77 million satisfied in cash, increasing its ownership from 38.06*% to 55.25% resulting in VSIG being consolidated. As a result of this, it has recorded a negative goodwill of RM 28.45 mil on its profit and loss statement. Mainly due to the fair value of the identifiable net assets is more than the total considerations that VS has paid to acquired the 55.25% interest.
This one-off accounting treatment gave an impression that VS is very profitable. The true fact is VSIG business operation is not profitable at all. On consolidation, for the one month up to 31 July 2014, VSIG contributed revenue of RM44.71 million and net loss of RM5.88 million to the Group. (refer to note 22 of FY 14 annual report)
This probably explained why there is a disparity on the profit after tax of RM 40 mil and operating cash flow of RM 20 mil.
Another questionable treatment on costs, if you look at the inventories costs charged out to p/l, it is exactly the equal to the inventory costs recognized as cost of sale (refer to note 10). However, if you look at note 18 on operating profit disclosure, depreciation, wages, salaries and others amounted to RM 316 mil, these periodic costs are much higher than those shown in the p/l. I suspect some of these costs are residing in the inventories. The argument here is whether the inventory is overvalued most auditors will use the test case that the unit cost should not exceed the market price. I hope KPMG has done a good job here. An overvalue inventories can jack up the profit.
2015-05-28 09:24
Alphabeta,
Very detail analysis.
So that RM28.45m of "Effect of acquisition of a subsidiary" is how it comes about. Something like "releasing the negative goodwill", "expense" it in the income statement, oop, "profit" it in the income statement? Wow, that is very interesting accounting practice. But that RM28.45m "profit" is a huge amount equivalent to 70% of the net income.
Yeah you are right. The above none cash item is taken out from the cash flow from operating activities.
V.S consolidated financial statement seems complicated. But never mind, for retail investor like us, just follow the cash.
Is there any cash the business owner can extract out from the ordinary operations, last year, the last few years?
CFFO?
Capex?
FCF?
That is the important question.
KC
2015-05-28 12:05
KC, actually the description for this negative goodwill is "Gain in Fair Value for re-measurement".
2015-05-29 08:49
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This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
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