ANOTHER ANGLE OF LOOKING AT GADANG

KEY MANAGEMENT BOUGHT A QUARTER OF A MILLION WORTH OF SHARES IN GADANG

1.  MD for Mechanical & Electrical Division (Gadang) (one of the Key Senior Management) announced today:

     Bought 100,000 shares of Gadang @ RM2.73, transacted on 17/11/16 (Last Thursday). [Total amount RM273,000]

2.  Who is he? A principal officer

3.  Have he bought the shares before? No, according to the announcement.

4.  Don't waste too much time (or lose hairs) to speculate why he bought Gadang shares worth about a quarter of a million.  This  division head is pretty rich tough.  Hope he will not be under investigation by  income tax department.

5.  Btw, they have 2 Division Heads and 5 MDs (Construction, Property, M&E, Utility, Plantation) in their key senior Management

6.  Looks heavy at the top.  If they can contribute, it's ok.

EMPLOYEES BENEFITS (NOTE 36) PAGE 142 OF ANNUAL REPORT

1.  Increased to RM57m (FYE16) vs RM48m (FYE15).  Salaries included.

2.  About 19% increase in salaries or about RM9m.

3.  From an owner point of view, an increase in salaries normally meant an increased in biz activities (hopefully value added).

CAPITAL CITY THAT NOT MANY AWARE (GDV of about RM1.8b to RM2.0b)

1.  About RM286.3m of PBT not recognised yet by Gadang (Hope my fund manager don't lie to me).

2.  PAT not recognised is about RM190m [ RM286m less land cost RM21m x 75%].

3.  Land are bought many years back at about RM21m.  Sunk cost.

CYBERJAYA LAMAN VIEW (GDV of RM1.0b)

1.  Was informed the project is about RM1.0 billion.

2.  It is on-going, > 100 acres.

3.  It is a JV (Gadang don't need to buy the land).

4.  Can sustain its property division for many years to come.

SEMENYIH LAND & KWASA LAND (ESTIMATED GDV OF MORE THAN RM1.0B)

1.  Contribution can only come in from at least FYE 2018.

2.  Semenyih land was purchased for about RM100m.

3.  Kwasa Land was awarded to Gadang couple of months ago, and Kwasa Land are guaranteed for RM165m.

4.  Details for both yet to know, but, definitely can last many many years to come. 

PROPERTY DIVISION

1.  GDV of RM3.0b is under construction.

2.  Another over RM1.0b is in planning.

3.  So roughly how much this GDV of RM4.0b going to contribute.

4.  Capital City will bring in about RM190m + Cyber RM130m (estimates) + Semenyih + Kwasa Land RM180m (estimates)

5.  Property Division estimates contribution (net) is about RM500m, lets spread it over 10 - 12 years.  Each year is RM42m to RM50m.

WILL GADANG BE A PROPERTY COMPANY?

1.  At the moment, looks like property is quite heavy.  Good and bad at the same time.

2.  Book order of RM600m left @ 31/8/16.

3.  But don't forget, there are some VO.  This may be the one off bonus.

4.  The pressure is now on the MD of Construction Division.  

5.  He only have about 12 - 16 months to secure new contracts, else, he may face Donald Trump.  Let's hope not.

UTILITY & PLANTATION DIVISION - INVESTED AND PLAN TO INVEST UP TO RM200M

1.  Will comes in FYE2018 significantly.  Perhaps 15% of RM100m of PAT.

2.  FYE 2019 will contribute about 20% to the PAT (assuming total profit is RM100-110m)

3.  Normally, research house will value it based on NPV, as the cash flow contribution is stable and predictable.

TOMORROW IS LAST DAY BEFORE EX-DATE OF SPLIT, BONUS &  FREE WARRANTS

1.  Liquidity will be a positive to this Company post 23/11/16

DON'T FORGET

1.  To do your OWN INDEPENDENT RESEARCH.  Figures above is just rough estimates.  

2.  To use the formulat BFM+V to evaluate, Business Model, Financials, Management & Calculate the Intrinsic Value.

3.  Also not forget, used your own EPD, experience, patience and discipline to maximise the profit.

4.  Invest like a businessman.

QTR RESULTS - updated 23 Nov 2016

1. Do you think that Gadang fundamental will improve if they "smoothen out" 4Q16 and 1Q17?

2. Warren Buffett said, "In the long run managements stressing accounting appearance over economic substance usually achieve little of either."

3. Frankly, over emphasising qtr results or yearly results, one may miss out on the real strength (wonderful company) of a company.

WARREN BUFFETT ADVISES updated 24 November 2016

"For some reason, people take their cues from price action rather than from values.  What doesn't work is when you start doing things that you don't understand or because they worked last week for somebody else.  The DUMBEST REASON in the world to buy a stock is because it's going up." 

• Gadang is invested and investing more into the hydro project in Indonesia - add values to the company
• Gadang is also putting more into water concessionaire/plantation (last few years) - value can only be seen much later
• Gadang is getting the development of Kwasa Land - add values to the company (details not shown yet)

INVESTMENT CLUBS - updated on 25 November 2016

1.  I have not joined any stocks investment clubs, but I have attended a few sessions of properties investment clubs (2011/2).

2.  For properties investment clubs, I think is good to acquire basic knowledge about properties & some good fundamental selection criterions.

3.  I did not realise that STOCKS investment clubs became popular lately until I joined i3, and finding out from a relative in Penang.

4.  I realised, some of the investment clubs have the privilege to have meetings exclusively with CEOs or MDs, which ordinary investors do not have.  Some are quite huge, in hundreds of millions.  So, they do have a little bit of influence.

5.  Of course, some are paid, some are not.  Some are very convincing, I suppose.

6.  I think Property Clubs have some similarities with Stocks Clubs.  It follow trends until the their effectiveness reached the diminishing marginal returns like Property Clubs.  Today, we hardly heard any meetings for Property Clubs members.

7.  I believe these classes is effective (more during bull markets) and will gradually phase out when investors realised it is harder than it is proclaimed.  As what we seen in the property clubs.  It is very hard to be sober in a party when alchoholic drinks are free.

8.  On a positive note, I do hope stocks investment clubs do share the benefits of investments for long term (>3-5 years) not chasing the quarterly results or yearly results.  Ask yourself, do you invest in a business for only one year results and abandoned it after one quarter of weak results?  I do not advocates 20-30 years of investments (unlike NYSE, companies with 30-50 years history), but SOME do provide handsome gain, but the selection MUST be above average like IJM, Gamuda, Hap Seng, Genting, just to name a few.

9. Investment is not a game of who gets the trophy, or who reach the finishing line first or his report cards shows the best.  Its about beating our silent killer "inflation", as a benchmark.  I mean real "inflation", not government statistics.  Have a reasonable long term plan, say 10 years with CAGR of 10% and above.  Look at Hap Seng, if you keep it the earlier first 7 of the last 10 years, the return is very low (lower than FD) and it only started to move over the last 3 years, which overall provide a very reasonable gain of >10% CAGR for 10 years.  You look at 10 years & 20 years performance of unit trusts, you can count with your fingers for those who did >15% CAGR.

DISCLAIMER

Not a recommendation.  Just a reference of information for those who is trying to calculate the intrinsic value of Gadang.