kcchongnz blog

Is Insas Share a Value Trap? kcchongnz

kcchongnz
Publish date: Tue, 16 Jan 2024, 12:10 PM
kcchongnz
0 408
This a kcchongnz blog

Is Insas Share a Value Trap?

I have posted an analysis of Insas yesterday in the link below,

https://klse.i3investor.com/web/blog/detail/kcchongnz/2024-01-15-story-h-210469040-Isn_t_this_the_most_undervalued_stock_in_Bursa_Insas_Berhad

I just like to deal with a couple of comments below. By the way, thanks for the comments.

paperplane

insas FOREVER UNDERVALUED, IN FACT undervalue more than 10 years.....lol. what does it tell you then/

1 hour ago

MrFox

very obvious, value trapped?


Insas has been perceived as a value trap by many people. They seem to have good reasons for that as they don’t see the share price of Insas flying high most of the time, except in the last few days. But investing results should not be viewed from a short-term perspective, but a long term.

So, let us look at the share price performance of Insas over a long period of time. Figure 1 below shows the share price movement of Insas over the last 15 years.

Figure 1: Share price movement of Insas

Isn’t there a clear uptrend of the share price of Insas over the last 15 years?

At a price of RM1.27 today on 16 January 2024, Insas is at its peak price now. Hence anyone who has invested in Insas any time since it was listed is making money now. It is at least better than many lemon shares which I had shared in i3investor since 10 years ago.

Of course, just making money is not good enough. It must be better than the return of alternative investments, or a benchmark, say the return of FBM KLCI over the same period.

We can see from Figure 1 above that there has been a general uptrend for Insas’s share price over the last 15 years, increasing from 28 sen in January 2009 to RM1.27 now.  The total return over the 15 years period is 354%, or a compounded annual growth rate, CAGR of 10.6%.

RM10,000 invested in January 2009 will become RM43,400 now.

That is not bad at all and certainly beats the return of the broad market CAGR of 3.6% over the same period by a wide margin.

Why not, as the company continues to make profit and have positive free cash flows over the years, and equity growing at a good rate too?

Figure 2 below shows the equity attributed to common shareholders, and hence its book value per share, has tripled over the last 15 years, or a CAGR of 7.6%.

Figure 2: Increase in equity of Insas

The net cash of Insas has also increased from RM218 m 15 years ago to RM702m now without issuing any new shares. That increase in cash in its balance sheet must be from the free cash flows of its core operations and investments, right?

But of course, if one were to buy the stock at its peak of RM1.20+ (which was certainly worth much more than that then) at end of year 2014, he would be unlucky. But on the other hand, if he bought the shares in January 2009 at less than 30 sen a share, and sold at the peak at the end of 2014, his CAGR would be fantastic.

Nobody can time the market like that!

So, how many stocks in Bursa you had invested in provided you with a CAGR of 10.6% when the CAGR of the broad market was only 3.6%?

I am not going to argue with you about stocks which can provide you a gain of 50% or 100% in the last few months. There were surely some of them.

So, is Insas share a value trap?

For more articles and analysis from kcchongnz, please go to my Facebook page and follow.

https://www.facebook.com/kcchongnz/

KC

Related Stocks
Market Buzz
Discussions
3 people like this. Showing 50 of 55 comments

stockraider

Yes & No loh!

10 yrs ago insas Nta is roughly Rm 1.90 & its EPS is around 13.9 sen with share price 80 sen.
Today Nta is Rm 3.56 & eps is 18 sen with share price Rm 1.20.

Surely a dumb fellow using warren buffet formula will had notice insas wealth has grown by rm 1.66 per share or about 16 sen pa over the 10 yrs loh!

And added back div about roughly 1.5 sen div pa avg your total cash generation from insas is about 17.5 sen pa mah!

If your IRR is 10% pa.....surely base earnings Insas should easily worth Rm 1.75 per share loh!

Remember in 2015, Inari only worth less than Rm 1 billion loh but today it is worth more than Rm 12B mah!
Also we have not factor in the hidden reserve of Inari mark to mkt gain for insas holding of about rm 1.6b which is additional gain of rm 2.42 per share for insas loh!

Thus Insas shareholder funds plus Inari hidden reserve mark to mkt gain will contribute potential wealth of Rm 6.00 per share to insas loh!

Surely insas will worth much more than Rm 1.20 loh!

Posted by paperplane > 54 minutes ago | Report Abuse

insas FOREVER UNDERVALUED, IN FACT undervalue more than 10 years.....lol. what does it tell you then/

2024-01-17 20:21

speakup

Mestron will limit down tomorrow

2024-01-17 21:27

arv18

come on now. you've answered your own question.

and not "perceived". it is one.

cherry picking a month (Jan) and year (2009) to suit your story is wee bit sad tbh.

2024-01-18 10:46

kcchongnz

Posted by arv18 > 38 minutes ago | Report Abuse
come on now. you've answered your own question.
and not "perceived". it is one.
cherry picking a month (Jan) and year (2009) to suit your story is wee bit sad tbh.

Thanks for your comment. You are definitely not the only few who think Insas is a value trap. Many seemingly good investors also think so, and I think you are not wrong.
However, I am not responsible for your "sadness" in my "story". I have no control over it.
The date January 2009 was chosen as I was trying to look at look term return, rather on the noises in the short term, and 15 years was the longest I could get as you can see from the chart in the article.
Well, you could do some homework to choose other dates to substantiate your theory of value trap of Insas. I am sure you can do that. So which return you want to chose, 10-year, 5 year, or one year, or 9.8 years? And was Insas a value trap basing on your choice of reference? Would like to see your analysis.

2024-01-18 11:31

ahbah

The whole mkt is now a fire burning trap ? Not just Insas ?

2024-01-18 12:11

CharlesT

Posted by arv18 > 1 hour ago | Report Abuse

come on now. you've answered your own question.

and not "perceived". it is one.

cherry picking a month (Jan) and year (2009) to suit your story is wee bit sad tbh.

100% agreed

2024-01-18 12:15

CharlesT

Personally I think it's better for KCChong to leave I3 forever io coming back to do this promotion on Insas

2024-01-18 12:16

qqq47660

insas jump from 1 to 1.20...............kc has done his job. or was it after the jump?

2024-01-18 12:24

CharlesT

KC is just a normal human being like us.

He needs to cari makan also

2024-01-18 12:28

kcchongnz

Posted by CharlesT > 26 minutes ago | Report Abuse
Personally I think it's better for KCChong to leave I3 forever io coming back to do this promotion on Insas.

Thanks for your advice. May be you are right. However, I have benefited immensely from i3investors. Good to contribute back, I think.
But why do you think I need to "promote" Insas? Have I really promoted any shares in i3investor since years ago, or was I just sharing my points of views on various stocks?

2024-01-18 12:47

CharlesT

The timing...

At least SSLee has been holding n promoting Insas for years...when it was rm0.80+ i think

U only come now to promote after price shot up

2024-01-18 12:50

CharlesT

But still better than OTB lah

OTB gave buy call on Insas-WC when it broke new high of rm0.40+...lol

2024-01-18 12:55

xiaoeh

i sincerely hope Kcchongnz's analysis can always come out before price moved.

2024-01-18 13:24

OTB

Post removed.Why?

2024-01-18 13:30

kcchongnz

Posted by CharlesT > 3 hours ago | Report Abuse
Personally I think it's better for KCChong to leave I3 forever io coming back to do this promotion on Insas

I do agree with you although there is no intention of promoting Insas. It is no use to be in a forum when the only thing the participants talk about is the share price.

Oscar Wilde once said that "A fool is someone who knows the price of everything and the value of nothing".

2024-01-18 16:05

Permutation

@OTB
"Yes, it is my mistake.
I did recommend to buy 30% at 0.40, buy another 30% on correction and add 40% if the share price can cross 0.40 after correction.
I agreed this recommendation report only come out at night.
It is in a hurry, everyone is asking me to buy Insas.
I will be more careful in future, will not recommend if I do not have my strategy plan.
I am sorry."

So it is no longer a buy on WC now ??

2024-01-18 17:55

OTB

I believe it is still a buy.
Buy on weakness.
Thank you.

2024-01-18 21:10

OTB

Please stop to attack kcchongnz.
I wish kcchongnz will continue to post his good article in I3 to benefit all readers.
I3 is short of good analyst like kcchongnz.
I believe kcchongnz is capable and a good FA analyst.
I learn all my FA lessons from him, kcchongnz is my best FA teacher.
dragon328 is a very good FA analyst, I believe kcchongnz is also another good FA analyst.
kcchongnz, welcome back to I3, we miss you a lot.
Thank you.

2024-01-18 21:19

TIticamara

So now its buy or no buy or cut loss?

2024-01-18 21:26

qqq47660

buy low sell high is buy low volume sell high volume

2024-01-18 22:01

TheContrarian

Tlticamara, why you need to cut loss? Thought everyone was making tons of money on Insas.

2024-01-21 07:58

TheContrarian

Insas isn't a value trap until you have experienced been trapped. Those who don't learn from that will be trapped until his last breath.

2024-01-21 08:03

stockraider

Very good investment principle loh!

When u talk about share always look beyond the share price, and reflect on its business, terms of business potential, its cashflow, its assets valuation n its liquidity & cash holding loh!

Insas perform highly above those matrix mah!

Posted by kcchongnz > 2 days ago | Report Abuse

Posted by CharlesT > 3 hours ago | Report Abuse
Personally I think it's better for KCChong to leave I3 forever io coming back to do this promotion on Insas

I do agree with you although there is no intention of promoting Insas. It is no use to be in a forum when the only thing the participants talk about is the share price.

Oscar Wilde once said that "A fool is someone who knows the price of everything and the value of nothing".

2024-01-21 12:56

stockraider

Remember this loh!

Upside of Insas is not value trap mah!

But it is investors price discovery of the good enormous value insas which rerate its share upward mah!

In fact as more people discover the value of insas, which be much higher, it will go up higher & higher loh!

Tong Kooi Ong a tycoon had value insas at Rm 4.33 per share mah!

2024-01-22 20:34

stockraider

Alot of Insas value investors sifu after holding so long have dispose a sizeable of their holdings, R they right in disposing so soon leh ?

Ans; As a value investor selling so soon is wrong loh! As our master sifu Tong Kooi Ong had indicated a conservative fair value of Rm 4.33, thus selling at Rm 1.30 & below is a wrong decision loh! Surely u can safely hold on insas longer & sell it at 50% fair value that is roughly Rm 2.15 per share mah!

The only justifications of selling insas prematurely at Rm 1.30 & below is just to buy insurance loh! In which alot of sellers did that loh!
But after selling enough to buy adequate insurance, it is time u hang on to your remaining insas for higher target above Rm 2.15 loh!

Forget of all the naysayers shouting value traps lah! This lah! That lah!

Just have convictions & believe in the proven facts that insas worth alot of monies above Rm 4.33 loh!

Thats how value investors become damn rich loh!

2024-01-23 08:01

OTB

Post removed.Why?

2024-01-23 11:06

TheContrarian

After 6 weeks, the question resurfaces again : IS INSAS A VALUE TRAP ?

2 months ago

TheContrarian

When this article was written Insas was at 1.27. Today Insas closed at 1.09. So, is Insas a value trap?

2 months ago

kcchongnz

TheContrarian
When this article was written Insas was at 1.27. Today Insas closed at 1.09. So, is Insas a value trap?

If you make a decision based on your statement above to decide and demand me to say I have been wrong whether Insas a value trap or not, that is your prerogative, and I respect your opinion. My point of view is just different from you as I looked at a whole lot of different things, all in the article itself.
Do you expect everyone thinks the same?

2 months ago

TheContrarian

I sincerely think most people think Insas is a value trap. Had I not thought so I wouldn't have completely exited thrice near the peak in the past ten years or so, making a 4 fold gain from my initial investment by buying back near bottom after having sold near peak.

2 months ago

arv18

nicely trapped the waterfish...

2 months ago

kcchongnz

TheContrarian
I sincerely think most people think Insas is a value trap. Had I not thought so I wouldn't have completely exited thrice near the peak in the past ten years or so, making a 4 fold gain from my initial investment by buying back near bottom after having sold near peak.

Congrats, in market timing, you are the best.

But I am confused here. Did you profit from a value stock or a value trap.

For value stock, investor buys it when it is selling cheap, have to buy first. When the price goes up, then you sell it and you profit from it. And repeat, just like what you have been doing for Insas.

But for a value trap, the share appears to be cheap and you buy it. Because it is a value trap, it is never cheap in the first place, and the price continues to go down. No dividends too. So how come you were so good profiting in 4 folds in trading in a value trap? It is never suppose to go up for you to profit, isn't it.

2 months ago

TheContrarian

At 1.28 Insas is a value trap, at 60 sen it is a value stock. No price stays down forever (unless it gets delisted) and no price stays up forever.

2 months ago

arv18

if you have the money, buy Broadcom (AVGO) shares/options. Or Inari directly. Don't waste time with Insas.

2 months ago

TheContrarian

If you buy 10,000 shares at 60 sen, sells all at RM1.10 your original RM6,000 becomes RM11,000 and with that amount you can later buy back say, 15,000 shares at around 70 sen. Then sell the 15,000 shares at RM1.20 to get RM18,000. Later when price drops back to say, 80 sen, you can buy 22,500 shares. And after selling off 22,500 shares at say, average price of RM1.30 you realised a total of RM29,250 , that's a gain of RM23,250 from your initial cost of investment of RM6,000 , almost 4 fold gain.

2 months ago

arv18

cool story bro...

2 months ago

Sslee

Bravo.
This is how you play with value trap/value stock.
Do not be like leno trapped for 15 years and only want to sell at RM 60.

Ah Thong trap/lock a lot of value inside insas, waiting to be unlocked someday.

2 months ago

TheContrarian

You don't learn this by reading stock investment books or attending investment talks, you earn the gains by actually timing when to buy and when to exit, all decision by yourself.

2 months ago

Hush77

well i wouldnt invest in a value trap, unless the management has plan to unlock the value..
also if the value is in shares, the actual value could be much lesser....since if the shares is dump to the market , it probably wont be worth much...unless there is a buyer...

2 months ago

Sslee

Go and read Insas financial report and tell us how much in current assets especially cash and FD.

2 months ago

xiaoeh

Posted by Sslee > 2 hours ago | Report Abuse
Go and read Insas financial report and tell us how much in current assets especially cash and FD

a) Current Asset: 2,069,816,000
b) Cash & Bank Bal: 154,699,000
c) Deposit: 940,928,000
b+c= 1,095,627,000

Correct Sslee sifu?
and what does this mean?

2 months ago

Sslee

This mean Ah Thong accumulate/lock in to much value/current assets/cash/FD inside insas. Hence Insas ia a value trap waiting to be unlocked some fine day.

In conclusion buy below 90 sen and sell above RM 1.20 and repeat few times as what TheContrarian did for 4X gain.

2 months ago

xiaoeh

noted thanks sifu Sslee
wah....
now i can really feel that this is a value trapped....
will patiently wait at my dock no. 0.860 and quick quick on board then...
appreciate Sslee sifu
learnt something new

2 months ago

godhand

If you make a decision based on your statement above to decide and demand me to say I have been wrong whether Insas a value trap or not, that is your prerogative, and I respect your opinion. My point of view is just different from you as I looked at a whole lot of different things, all in the article itself.
Do you expect everyone thinks the same?

what is your definition of value from the perspective of a minority shareholder.

2 months ago

xiaoeh

Dear Godhand
would u mind pick up some points from the article that go align with your value trap definition?
just a brief one will do as a point form

2 months ago

godhand

Dear Godhand
would u mind pick up some points from the article that go align with your value trap definition?
just a brief one will do as a point form

Lets put it this way. as a minority shareholder what is your certainty? I'm not going to say that Insas is a trap but it simply lack the certainty. It also could be the nature of their business that they have to hoard the cash and re-invest. What guarantee the minority that they can have the piece of cake? I think whatever the author say here is irrelevant. what is more important is the direction and promise that the this company made and deliver in stages to the shareholders

2 months ago

xiaoeh

Posted by godhand > 1 minute ago | Report Abuse
Lets put it this way. as a minority shareholder what is your certainty? I'm not going to say that Insas is a trap but it simply lack the certainty. It also could be the nature of their business that they have to hoard the cash and re-invest. What guarantee the minority that they can have the piece of cake? I think whatever the author say here is irrelevant. what is more important is the direction and promise that the this company made and deliver in stages to the shareholders

Dear Sslee sifu
since Sslee sifu has been closely participating AGM and whatsoever meetings with the board members
any directions and promises that they have made to assure to the minority's shareholders that they will deliver besides the large amount of cash pile and deposit?

2 months ago

xiaoeh

Posted by TheContrarian > 7 minutes ago | Report Abuse

What Is a Value Trap?
A value trap is a stock or other investment that appears attractively priced because it has been trading at low valuation metrics, such as price to earnings (P/E), price to cash flow (P/CF), or price to book value (P/B) for an extended period.

Posted by TheContrarian > 6 minutes ago | Report Abuse

A value trap persuades investors because the trade appears inexpensive relative to historical valuation multiples of the stock, industry peers, or the prevailing market multiple. A value trap can drop further after an investor buys into the company.

KEY TAKEAWAYS
Value traps are misleading investments trading at low levels that present buying opportunities for investors.
For a value trap investment, the low price is often accompanied by extended periods of low multiples.

2 months ago

xiaoeh

both of you are talking the same topic but in different forum
TheContrarian & Godhand

2 months ago

godhand

i didnt say its a trap. i simply think the BOD do not have the conviction or integrity to set a long term promises to the shareholders. Please understand that the minorities just want to get paid. Setting a simple dividend policy shouldnt be that hard .how many %? if cant set now then when? why? whats the setback? Stock price doesnt just derived from the figure factor. The management integrity is placed above everything else.

2 months ago

Post a Comment