CAN YOUR STOCK VALUES SIMPLY "DISAPPEAR"?

Yes.  This year alone, about USD3.2 trillion of stock values disappeared. Period.

GARY SHILLING'S UPDATE (17 JAN 2016)

Slow growh (USA) may persist at least another 2 years due to excess financing not significantly worked out.  After the balance sheets is normalised, USA will grow at 3-4% p.a. due to innovation.

THEMATIC INVESTING

Can provide extraordinary return if the TIMING is good.  It is different from VALUE INVESTING.  However, it can be a sub-set of thematic investing.  Look at some of the chart of oil and gas.  

To do well, you must get into the party early, and you must know when to stop drinking.  Else, once you are drunk, you are like anyone else who comes in later.  You blackout.  In a party, the temptation of drinking is very high.   So, make sure you have the "CONTROL".  The tricky part is, no one tells you the party is over.  When you wake up, it is normally too late.

RECOMMENDED APPROACH - GROWTH "VALUE INVESTING"

If you have at least 10-20 years horizon, a lot may start around 20s or 30s, and assume you treat it as a long term, your last transaction may be when you are 70s.  So you have 40-50 years for investing.  BUT that does not mean you hold a stock for that long, not at all.  

TWO WORDS that you can do well in such approach:

1. PLAN    (70:30)
2. PATIENCE (cannot be taught in school)

Once you have these two in mind (all the time), you just need to execute as planned.  It is always easier said than done.  A checklist is helpful, so that you follow your plan.  As for patience, this can only acquire through experience.

STOCK MARKET NEVER DIES

Only the players die.  You can invest up to 80 years old or more.  You could be a winner today, or even for 10 years, the game is not over.  You cannot count your chips until the last day you said, ok, it is over for me.  If you have intention to invest for life, (I have done my for 30 years), hopefully still have another 30 to go.

ARE YOU RUSHING SOMEWHERE?

Unless you have to rush somewhere, take your time, but follow your plan.  I will be under a lot of pressure if someone tells me, I give you RM1.0 million, double it in 4 years or less.   If you are under pressure, it may effect your good judgement.  Of course, if you are the lucky one, you can even do it in 2 years or less.  The question is how many time will you be lucky.  Remember, not everyday is Sunday.  It is one over seventh of the time.  

Value investing is not about striking Sundays, and show your trophies around town.  Enjoy the journey(s), while the end result is important, don't let the "deadlines" to pressure you.  I bet, over time you have "funny" and "great" stories to tell your grandkids.  Winning alone is not the thing.

WHAT I LIKE

The technical analysis for this stock is not great (price below 200-day SMA).  But the growth probability is great. Provided it is implemented smoothly.  You will not see me coming up with a nice story, chart or photos, or a comprehensive report, or a convincing debate on how good it is.  I look at it very simple.

The company is about RM500 million.  Existing Recurring Earnings RM16-20m.

The new project is RM1.0 billion.  Capital raised about RM200-300m. Built-and-leaseback for 12 years.  Payback Period is about 4-5 years.  Period.

23/1/16

Amended:  

After researching for a little while, i notice that the assumption on payback period's basis is not strong.  I have used TA Securities' analyst report during its IPO, wereby, the analyst was using a model of sale and leaseback (using Malaysia as reference) with an ROI of 38%.  This is called "lack of sufficient data" assumption, which we face in our daily live in making decision about investment.

Further research, India's towerco, mentioned it is 6-7 years (with teancy ratio of 2 times).  And in Indonesia, 4 top towercos has an EBITDA of about 80% (India - 43% and USA 61%) and PAT 30-40%.  Some of the key factors that determine the payback period are tenancy ratio, land leasing (ownership), power arrangement (telco or towerco responsibility) as well as location (rural or urban - determine the land price).  The 4 top towercos listed in Indonesia (cannot be compared), were trading at PE of 35x (in 2014) and 25x (in 2016) due to growth potential and good profit margin.

Having consider all that, a more conservative assumption will be 6-7 years.  Telcos' capital cost per unit also range from USD90m to USD200m depending on the location, tenancy ratio, ownership (some lease 50 years + 10 + 10 in Myanmar).  6-7 years is a very conservative assumption from a commercial perspective, taking into account you have to look for the location, type of structure, linkage to power source and funding.

So, if you have a contract on built and leaseback with payback period of 6 years of RM1.0 billion, I suppose, in 12 years time, you will get RM2 billion in cash with RM1.0 billion of investment.

TIMING AGAIN?

Slow economic growth will persist until excess financing is worked out. But at the rate that balance sheets are being normalized it may take longer than two years (from now) to complete the correction. Hence our 2 percent real GDP forecast for 2016 and 2017. 

After the age of Deleveraging is complete, we believe that today’s new technologies will drive rapid GDP growth of 3.5 percent to 4.0 percent.