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Cold Eyed Speech - 20121026 (watch list)
Fong Siling (Cold Eyed)'s Stocks Holding - 冯时能(冷眼)持有的股票
Fong Siling / Cold Eyed (冯时能 / 冷眼) - Wrong Investment
Created by Tan KW | Nov 25, 2024
Created by Tan KW | Nov 25, 2024
I agree with the five yardsticks in investing by ColdEye’s namely ROE, cash flow from operations and free cash flow, PE, Dividend yield and NTA. However I view the credibility of the management as more important than all of the above.
ColdEye also provided lists of recommended stocks for investing here. Looking at the lists, there is no doubt that ColdEye has provided many good stocks for investment. I think it is a great opportunity for me to discuss about his picks and see what are the pros and cons of those stocks recommended. Anybody?
To me I like to follow Warren’s Buffet’s Golden Rule on investing. He said:
"Rule No.1 is never lose money. Rule No.2 is never forget rule number one."
For this I will chose one stock in his lists to discuss if this stock meets the 5 yardsticks mentioned by ColdEye and the Golden Rules of Warren Buffet above. The stock I chose is Ivory. Just to clarify here first ColdEye has my utmost respect in his investment skills and I remain respectful of him.
Yardstick 1: ROE
Ivory reported an earnings from its ordinary business of 32.5m, or EPS 8.8 sen for the year ended 31/12/2012. With its net asset backing per share of 82 sen, ROE is about 11%, not bad, but not good either. The problem is if you dig deeper into their financial statements, it has included a 36.6m “earnings” from “Bargain purchase gain on acquisition of subsidiaries”. What kind of “earnings” is that? Is this not a financial shenanigan? If it is, is the management creditable? If this “earnings” is wrong to be classified as “earnings” what is the ROE of Ivory? Does Ivory meet the ROE criterion?
Yardstick 2: Cash flow and free cash flow
The financial shenanigan in Yardstick 1 above is clearly exposed in Yardstick 2 here. The cash flow from operations (CFFO) is a negative of 38.3m for year ended 2012. The “earnings” above is clearly a manipulation of its book, i.e. taking doggy “Bargain purchase gain on acquisition of subsidiaries” as earnings in its ordinary operations. After spending 14.5m in capital expense, free cash flow is 52.8m in the negative side (-38.3-14.5m). That means Ivory has to at least find another 52.8m just to do its ordinary business. How did they do it? Last year, a right issues was called to get 102m and borrowed another 214m from bank to carry on its business as well as paying back 220m debt. Some 26m worth of land was also sold to help in its cash flow.
Yardstick 3: PER
Yeah a lousy company can still be a good investment if the price is dirt cheap. Does Ivory meet this criterion? EPS last year was 8.8 sen Vs its price now 50.5 sen. A PE of 5.7, damn cheap right? Is that E in that equation “real” as discussed in yardstick 1 above? If it is not, what is its PE now?
Yardstick 4: Dividend yield
Do shareholders received any dividend for the last two years? If not, ever wonder why? Read yardstick 2 above. Do you think Ivory has money to distribute as dividend now, and the near future?
Yardstick 5: NTA
Ivory has a total assets of 840m and total liabilities of 475m. With 446m shares outstanding, the net asset backing per share of Ivory is 82 sen compared to its price of 50.5 sen. This means if Ivory liquidate its assets, shareholders pocket 31.5 sen, or 60% profit. Is it true? Ivory’s major assets are its property under development (223m), receivables (177m), inventories (176m). Together these make up to 576m worth of assets, or RM1.29 per share. Have you wonder if the value of these assets are true? Well it appears to me they aren’t from my doubts of their financial shenanigans.
Well I have nothing against Ivory at all. I am not trying to press down its share price so that holders of Ivory sell to me cheaply. For I will never buy Ivory share, whatever price it is as I follow WB’s rules. I can’t short sell it too as it is not allowed in Bursa. I still got utmost respect for ColdEye, just I don’t understand him for still recommending Ivory. Hope somebody can enlighten me.
2013-03-17 07:23
Posted by Tan KW > Mar 17, 2013 10:12 AM | Report Abuse
@kcchongnz nice analysis....
listen to the cold eyed speech on track03 - he mentioned that a lot of unit @ penang world city have been sold but yet to record in the account yet...
TanKW, please note that I am a novice armchair investor, leaving a 10-hour flight away from home. My comments on Ivory using ColdEye's 5 yardsticks of investment is based on what I see in its financial statements, a history. Its history does look very ugly, especially the credibility of the management which I think is the most important thing. Of course for property company, it is its future which is important; like how much land in choice area do they have, how low they bought the land for, etc. I don't know about its future, like how much shop units they have sold and not recorded yet (I kind of skeptical about this statement as just judging from how they record “Bargain purchase gain on acquisition of subsidiaries” as earnings before), how successful will be their Bayan Mutiara project etc. So I could likely be wrong on Ivory. But whatever it is, all these prospective sales and projects still have to arrive at a value, isn't it? For example, how much their prospective revenue and profit for the next few years. How much is it if converted to the present value. Then only you can evaluate if Ivory is a good buy or not, isn't it? If all these profit amounts to only say 40 sen per share, is it worthwhile to buy at 50.5 sen? What about after this Bayan Mutiara, what is their plan? History doesn't repeat itself, but it rhymes.
2013-03-17 10:42
Tan KW, this was what I said about Tambun some time ago.
Posted by kcchongnz > Feb 13, 2013 03:48 PM | Report Abuse X
jtpc2006, again don't know much about Tambun. However I just had a quick look at its most recent quarterly report. Very good indeed. I would expect its full year 2102 results should make about 15 sen per share. At a price of 74 sen now, PE is just about 5, another undervalued property stock. Balance sheet is very healthy. This year's cash flow abundant. ROE about 13%, not bad. Good choice. If I am not mistaken, they give good dividend too, don't they? I think I am contemplating to buy some too. I don't know about its prospect. That has to look at the land it has, the development plan they have, the demand etc which is beyond what I can do as a small time retail investor.
The latest financial statement ended 31/12/12 announced recently actually shows that Tambun made 15 sen per share, right to the spot, by chance.
2013-03-17 11:02
And Tan KW, this is my opinion about Hua Yang
Posted by kcchongnz > Feb 8, 2013 10:51 PM | Report Abuse X
necro, my opinion on your Hua Yang
Hua Yang is one of the fastest growth property companies in the last three years. Its main project is the One South Sri Kembangan development which has a GDV of RM920m, with other minor projects spread over in Johore, NS and Selangor. Revenue rose by a compounded annual rate of 82% and 62% respectively in the last two years to 306m for year ended 31/3/2012 and profit ballooned by almost 5 times to 53m. Net profit margin has expanded every year to a respectable 17.3% last year and ROE to 20%. A dissection of its ROE below shows that the high ROE is achieved with the high net profit margin, NI (17.3%) and skillful use manageable debts and good financial leverage of 1.7.
ROE=NI*AT*FL=17.3%*0.7*1.7=20%
With more projects expected to come on-stream, it is expected that asset turnover will increase and so is the ROE. Earnings per share increases every year, despite the issuance of bonus share each year to its shareholders. In the year ending 31 March 2012, EPS is 37 sen. For the three quarters ending 31 December 2012, net profit increased further to RM53.5m, or 28 sen per share with a another increase shares outstanding to 198m due to the 1 for 4 bonus issues. EPS is estimated to be about 40 sen for the full year. Its balance sheet is healthy with a debt-to-equity ratio of just 0.36 (<1), and low solvency risks with current ratio high at 3.0. However, there is no free cash flow yet as Hua Yang uses all its CFFO to buy up more land for development and other capital expenses. FCF will come soon. Hua Yang gave a dividend of 15 sen for the last few years, despite the increase in outstanding shares. If this dividend persists, this will translate to a dividend yield of 9.3%, with today’s closing price of RM1.61. Meanwhile the PE ratio is incredibly low at just 4.4. Using the simple valuation with ROE of 20%, a 12% required return,and a net tangible asset per share of RM1.69, Hua Yang should worth RM2.80 (20%/12%*1.69). Don’t you think it is a good investment?
2013-03-17 11:10
kcchongnz...dont make thing so complicated on ivory...as per cold eyed said: simple method. Why ivory? very simple...bayan mutiara is the last piece of pebang island v sea view & prime area, sales for blok A & B fully sold without any advertisement, the project will take about 8 yr for this 100 acrea land (60% land + 40% reclaimate land) with revenue od RM10B, project JV v Dijacor. so, buy & hold for 1 yr I believe could >RM1.
2013-03-17 11:15
I have yua yang and tambun but not ivory, reason : they show proven good record but ivory depands on its beautiful future picture.
2013-03-17 11:26
Nowadays I have learnt not to trust 'proposed' plans. Sure it probably might be true but I can sleep better investing in good growth records.
2013-03-17 11:43
Hi kcchongnz, any comments on L&G? Appreciate your comments, please. Thanks.
2013-03-17 13:38
ccs999, Below are a couple of comments I have made before in i3investor.
Posted by kcchongnz > Dec 7, 2012 04:44 PM | Report Abuse X
Ooi, sorry, I have never looked at L&G before. And you know what, I am just a small time retail investor. I have little information like what those analysts have. But since you asked about it, there must be something in this stocks. I will look at it one day. My hobby is try to search for value stock anyway. But again what i can get is just public informtion only. I doubt it will be much help to you.
Posted by kcchongnz > Dec 9, 2012 05:53 PM | Report Abuse X
Is L&G really such a steal? Of course it is if the story told by Mr Ooi about the 75m profit for the next 8 years for the foresta condo project is correct? That cash flows alone is already worth 400 m or 67sen per share, using a discount rate of 10%. Is that projection correct? How the hell I know?
Let us just forget about the projection, as profit projection 8 years away is a very hazardous things to do, in my opinion. Looking at its financial statements for the last few years, and the last couple of recent quarterly reports, my opinion is that I would have no worries investing in this stock. There have been no loss in the last few years, quite ok in cash flows and balance sheet is healthy. Just worry a bit about its Australian operations, but not too big an issue. Buy the share at 40 sen, much better than many many hot stocks pitched about nowadays. No worry lah. If the story doesn't materialized, it is still ok with that price. If the story comes through, there will be big payoff.
2013-03-17 13:53
Cold-eyed's answers on unbelievably cheap China companies were disappointing. The plain answer is the risk of disappearance of the companies. No matter how cheap it is based on market-price vis-a-vis book values, the shareholders in Malaysia bear the inherent risk of losing everything they have invested.
Almost all do not pay dividend and the very few who do give only miserly amount. Most run the business as though it is that of major shareholders'.
No private equity fund, big investors or syndicates dare to push up the market price because that might be what the main shareholders are waiting for: to move away all cash and assets in China from company to themselves, sell all their shares to you in open market, get the money from share sales. Double happiness to them.
The answer has never been just negative perception. It is real, actual risk. Otherwise, who need to work in this world.
2013-03-17 15:50
The queue to listing on SH and SZ is long and lead time is about 3 to 4 years. HK listing is expensive and SC there is more stringent on main board unless the companies go for GEM. In any case, ICAC is rigorous in fighting corruption.
On the other hand, KLCI is thirsty for overseas companies. The inherent risk however is that sharehodlers and diretors based in overseas are beyond the reach of Malaysian SC. There are many ways to defarud minority shareholders (I can think of 10 methods easily) and any investigation of overseas companies will take years and probably end without conclusive findings.
2013-03-17 16:04
Hi cold eye. Can I have you advisor , is regarding latexx share. As when latexx send me a form offer for disposal of share by 2.30 but I never accept. Now I don't wa to do, is there will send me another offer form again as I know now there going to delist , is it I should sale it in d market now or how. I'm very appreciated if you can give an opinion. Tq
2013-03-19 15:48
Tan KW, can you post the 42 counters picked by cold eyed for sharing purpose. TQ
2013-08-12 19:23
helo mr tan kw,when 2014 cold eye seminar?do inform time,date and cost,tq
2014-04-07 10:02
Wendy Yap
nice. thanks!
2013-03-16 22:08