Koon Yew Yin's Blog
How to use margin finance to make more profit? Koon Yew Yin
Koon Yew Yin
Publish date: Wed, 10 Nov 2021, 10:07 AM
Koon Yew Yin
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An official blog in i3investor to publish sharing by Mr. Koon Yew Yin.
All materials published here are prepared by Mr. Koon Yew Yin
All materials published here are prepared by Mr. Koon Yew Yin
One of the early lessons in accountancy and finance study courses is how to borrow more money to make more profit. If you only use your own money to do business, you will earn less profit.
When I first started doing business about 60 years ago, I have been borrowing money from the banks to do more business. Even now IJM Corporation Bhd, which I co-founded still has bank borrowings even after selling all its IJM Plantation shares to KLK for about Rm 1.6 billion.
If you are confidant to earn more than the interest rate of 6% per year, you should not be afraid to borrow money to do more business.
After my long experience in doing business, I found out that it is easier to make money from the stock market. In business there are many obstacles and challenges. There will be always business competitors, competing to sell at lower prices and also competing to achieve better quality to increase sales.
Stock market
In the stock market, I only buy stocks of companies that have already overcome all their inherent difficulties and reporting increasing profit.
Let me show you the advantage of using margin finance to buy more AYS to make more profit. You can see AYS price chart above as reference.
Suppose my initial capital was Rm 1 million cash and I could borrow another Rm 1 million from margin finance. I would have Rm 2 to buy AYS at 40 sen to own 5 million AYS shares.
Suppose AYS went up 10 sen to 50 sen, my 5 million AYS share value has increased by Rm 500,000 with which I can buy another 1 million AYS shares. I will have 6 million AYS shares.
Suppose AYS went up another 10 sen to 60 sen, my 6 million AYS shares value has increased by Rm 600,000 with which I can buy another 1 million AYS shares. I will have 7 million shares.
Suppose AYS went up another 10 sen to 70 sen, my 7 million AYS share value has increased by Rm 700,000 with which I can buy another 1 million AYS shares. I will have 8 million AYS shares.
Budget 2022 proposal
As you all know the Budget 2021 proposal has affected almost all the listed stocks, especially the large cap stocks due to the prosperity tax increase from 24% to 33%. In view of this additional tax, all the big cap companies will report reduced profit next year. As a result, institutional and foreign investors have been dumping their shares. This rapid dropping of large cap stocks is also pulling down small cap stocks, including AYS.
The last traded price for AYS is 68 sen and my last purchase price was 70 sen using margin finance. I will have margin call if it does not rebound today. In any case whether AYS rebound or not to day, I am not discouraged to use margin finance.
Why didn’t I sell AYS?
On 2nd November AYS placed out 38 million shares at 76 sen to big investors who are familiar with the company operation and its profit growth potential. No investor would buy 38 million AYS shares unless he knows the company’s business and its profit growth prospect. AYS Venture received Rm 28.9 million cash.
On the first day of the Budget 2022 announcement Rm 33 billion was wiped from the market capitalisation. Almost all the listed shares plunged. AYS plunged to 68 sen per share. As a result, there are many forced selling to meet margin calls.
AYS is a steel trader:
Steel price does not affect AYS because AYS is a steel trader. It will only buy steel from the cheapest steel manufacturer to sell the get better profit.
AYS latest quarter EPS 8.5 sen and its previous quarter EPS was 4.45 sen, an increase of about 100%. Even during the Covid 19 MCO lockdown, AYS could make so much of profit. Currently there is no more MCO lockdown, AYS should be able to make more profit in the next quarter ending Sept. which should be announced before the end of this month.
Assuming its profit remains unchanged, its annual profit should be 4 X 8.5 sen = 34 sen. Currently it is selling at 68 sen. The PE is 68 sen divided by 34 sen = 2. Ridiculously cheap.
Conclusion:
Currently there is still some forced selling to meet margin calls. I am very sure that AYS price will soon recover to at least its share placement price of 76 sen. As I mentioned above that with my initial capital of Rm 1 million and margin finance, I bought a total of 8 million AYS shares. Based on 76 sen, 8 million AYS shares is worth Rm 6.08 million and 50% or Rm 3.04 million is my borrowing. My net value is Rm 3.04 million minus Rm 1 million capital, my net profit is Rm 2.04 million.
In fact, my capital is more than Rm 1 million.
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Discussions
Be the first to like this. Showing 50 of 92 comments
Now 0.615. Those who buy 68 cents already lost 10%. When the bank do margin call? Those who gamble will lose many nights sleep.
2021-11-10 14:08
secondly how can u mark your investments of AYS at RM0.76 when the market price is at RM0.615?? I might as well say my investment in company A is at RM5.00 because the NTA says so but market pricde could be RM3.50
2021-11-10 14:11
Posted by stockraider > Nov 10, 2021 12:32 PM | Report Abuse
qqq333 is a very good example of former qualified accountant turn layman like any Ordinary aunties n Uncles when come to investment loh!
=======
is the story of glove boss suicide , trading losses plausible? possible? Of course it is.
does not matter boss or not, trading style is personal, character, personality. and boss got more info so more brave.............
2021-11-10 15:49
just like how serba boss so brave to do the things he did ........................its temptation.
behavior is a personal thing.
2021-11-10 15:52
success = execution X rate of return
S = QR
one physics equation to explain every thing.
2021-11-10 15:54
not so long ago, KYY used to trade by the hundreds of millions....
now AYS, he only 1 million shares, margin account already.........pity.
2021-11-10 15:57
from gloves jump to steel.....
gloves PE 2 keep going down,
but don't learn...........still buy steel cyclicals.
2021-11-10 16:04
instead of KYY advise, better is qqq advise.............u cannot dictate to the market
u can only watch and adjust to the market.
2021-11-10 16:06
“The last traded price for AYS is 68 sen and my last purchase price was 70 sen using margin finance. I will have margin call if it does not rebound today. In any case whether AYS rebound or not to day, I am not discouraged to use margin finance. “ -KYY
2021-11-10 16:26
Geezer is just a mediocre trader. He do not do comprehensive analysis of the margins and types of products AYS sells. Just a guesstimate of what the earnings will be. In short, savvy newbies with accounting knowledge is way ahead of him in terms of re-searching a company's financial. In short, just ignore this old lying fox.
2021-11-11 07:45
There is hidden trick in this blog while he is "buying" at margin as mentioned in the blog. but in contrary he is running and sell down in bulk with today price down 9.3% with volume increase 170% of 22 millions.
This blog is to paint a picture that AYS is cheap and can be bought with margin while he is selling and take profit. Beware of falling knife throw by the old man. Very shrud old cap.
2021-11-11 08:02
Unce Koon, you forgot the saga fo Jtiasa few years ago......... someone committed suicide after incurring heavy losses ...... Bro Calvin might still remember.
2021-11-11 08:14
Could be the reason why Geezer totally avoid JTIASA. The KARMA will haunt the guilty party and I'm sure you can't escape.
2021-11-11 08:31
@ calvintaneng. In fact, it will be good sharing of information if Calvin can do a write up on the JTIASA story that led to the suicide. It will be a good learning experience for newbies and those greedy traders who punt on write up stories from those who are unqualified to predict the direction of the company's potential profit and the future. The reality is these story tellers are just doing a guesstimate of the future profitability of the stock they are promoting, nothing more. They talk like they owned the business and is able to deliver the promised profits. They are nothing more than a Story Teller like this Geezer.
2021-11-11 09:31
@calvintaneng @kelvin61
Senpais can you please make a write up bout the JTIASA suicide? uwuwwuwuw
Me wanna know more about how one can suicide over a counter.. UWUWUWU
2021-11-11 10:13
Integrity. Intelligent. Industrious. 3iii (iiinvestsmart)$€£¥
Buffett employed margins in arbitrage situations in his early investing years, when he was certain he was absolutely right, and not when he was approximately right.
OTOH KYY had been caught badly with his margin trading in Jaks; and if I read his posts correctly, he had to sell assets to cover for his losses during that period. Also, got a lot of brick-bats from his followers too.
Leverage is better avoided, unless you know what you are doing and also not to be employed unthinkably.
2021-11-11 13:06
margin can make more monies, it also can make you loss more
buy more earn more loss more
dont mislead by this old man that loss so much from dayang and jaks due to margin
2021-11-11 17:26
What is the difference between a great man and a terrible man?
A great man always busy hiding his greatness and a loser always busy hiding his negative. They both busy hiding somethings.
Can not challenge the truth. Can not bring down the truth to our level so that we ourselves feel good. Is better to confess our weaknesses and got much more to learn.
God said "someone who covered his crime will never succeed".
Better to confess "I am not a holy man, i am loser but i will elevate my level as i begin to learn..."
What if you have bought at RM0.92 not long ago...
2021-11-11 19:27
99% comments r negative...it seems now even donkey also know Koon's monkey tricks
2021-11-11 19:37
Like watching hong kong movie series .
it is a little bit near the crashing point.
It should be near the final episode.
Very "Geng Cheong" now!
2021-11-11 20:59
Bro Koon, Im agree with you about margin. My two cents, investment is about control risk. If you are pro, why not!?
2021-11-12 01:48
Leverage works in a bull mkt only la…bear market u will die. Learn from the past please
2021-11-12 12:25
Last round kyy used margin 99 to goreng Jaks till burnt (at the end kena goreng)
Anyway he got lands to sell to meet the margin calls n losses
Do u hv lands?
2021-11-12 12:30
use margin finance to make more profit is like
borrow Along to gamble in casino
2021-11-12 16:19
Never buy using margin finance.. One mistake which definitely will happen one day may cause ur entire fortune… Come on kyy don’t mislead young investors n novice… If u wish to do it, just keep quiet n do it urself… u r not that kind to assist others.. U just want others to push up the price for ur stock holding..
2021-11-20 21:43
I just read the star biz page 5 n I immediately know must be kyy… don’t do harm on others..financial harm is the worse u can inflict on others.. Time to repent..
2021-11-20 21:45
Why Investing using margin is really misunderstood including the many experts loh ?
The may reasons are as follows:
1. Like Kyy advocates people use margin to gamble & speculate instead of using it to invest steadily for sound steady long term gain loh!
2. The people who use margin had not master the required the art & skill of investing loh!
3. The margin users had not master the skill of cash management loh!
4. They have concentration of risk in 1 to 2 stocks loh!
5. They are hit by the element of bad luck & poor mkt conditions.
6. They had not master the skill of risk management, margin of safety and cut loss loh!
Mastering the use of margin is just like mastering any business skills that require an element of financing or borrowing loh!
Borrowing is a double edge sword, if u master the art of investment it can do wonders but if u fail....it will compound your losses loh!
U need to consider your investment skill level 1st, b4 embarking on margin financing.
Those who has mastered margin financing, are expected to do well considering the cost of financing is still low todate as it is around 4% pa to 4.5% pa mah!
2021-11-21 11:05
I even lose my hard earn moni when I onli try to get some coffee n nasi lemak moni
from the mkt!
I will be in ICU if I use margin finance !!!
2021-11-21 11:16
Just buy insas PA , if u just want to earn nasi lemak or better mah!
Posted by ahbah > Nov 21, 2021 11:16 AM | Report Abuse
I even lose my hard earn moni when I onli try to get some coffee n nasi lemak moni
from the mkt!
I will be in ICU if I use margin finance !!!
2021-11-21 11:18
I believe what stockraider said .
I have been successfully using margin sparingly.
2021-11-21 11:51
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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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let's get this straight. If you claim that you never own a downtrending stock means you sell once the stock's chart breaks down. NO EXCUSES AND NO JUSTIFICATION. I dunno how KYY articles keep getting to the top8 with such bad advice
2021-11-10 14:08