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Export stocks time to think properly if you want to be rich
stockmanmy
Publish date: Thu, 01 Dec 2016, 04:13 PM
stockmanmy
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Trade at your own risk. I am here only to vomit out my feelings
Export stocks time to think properly if you want to be rich
Since Trump win, ringgit down almost 10% against US$, but no action on export stocks. How so? Why? and recommended action?
Export stocks generally sleeping , not up, not down.
Sellers not selling because no reason to sell
Buyers not buying because no action....low volumes every day.
Low risk
But I am buying, I want to be the first to move, early bird advantage. Buy when risk is low because it has not yet been disturbed.
September interim results, there are quite a few trading at single digit PE , value is there
The surge in Dec quarter results is going to be phenomenal just from the forex perspective.
Typical case calculation
Lihen.....and this is a very typical case
Turnover per quarter $ 150 million.
Change in exhange rates 10%
Adds $ 15 million to the sales proceeds....equvalent to 8 sen per share.,,,that is only for 1 quarter.
Annualised, that is 32 sen per year, on a factor (PE) of 10......that adds $ 3.20 to its existing share price of $ 3.25 or 100%, thus doubling share share.
This assumes the ringglit decline at 10% decline stays for 12 months. In reality, it can be more, it can be less and the ringgit can even weaken to a crisis level which is bad for everyone but good for exporters.
The effect per quarter in cash terms in this example is $ 15 million per quarter or $ 60 million per year.
Some of the $ 15 million additional cash will be booked as sales, meaning core profits to analysts and some of the $ 15 million will be booked in as forex gains which analysts try to be smart and eliminated when they calculate core profits. The amountt shown as forex gains ( which ranges from $0 to $ 15 million) is really a function of the timing of book keeping , not reality. The thing that is real is the cash received which is $ 15 million more.
Here...you have it. A typical case of an export share that can double in price if the ringgit remains like this next the next 12 months, pari passu, all things being equal. Exporters may choose to give discounts to encourage sales and for goodwill and this may lead to even more sales and profits.
There you have it...a good case to buy export shares......if for nothing else, at least it is the best insurance policy you can buy in case of turmoil in currency market.
I have spoken to friends and some of the them, the doubters , the non entreprenuers and the scared scared type have the following comments.
Cons and my response
TPP no more......This is an invalid reason because these companies are operating in current condition. I am only assuming status quo.
Trump's protectionist America......I tell you what. If the world goes into a trade war like in the 1930s...everybody dies, including America. Buy any share also no use. So, we must not live our lives always thinking of doom scenario. Have a bit of optimism to make money.
Further, there is a big difference between campaign nonsense and reality when in power.
So what you think? Your feedback.
Your actions, past and future.
Your favourites.
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2 people like this. Showing 37 of 37 comments
Correct only if status quo like last time.
For now Trump is in power and the equation has changed.
Why?
Answer::
Because US Debt has ballooned to USD 20 Trillion!
And Trump might tax all stocks imported to the US by at least 15%. For China Trump might tax up to 45%.
Malaysia also got high debt. Go Govt implemented 6% Gst tax for all.
So US might follow Malaysia by imposing tax.
2016-12-01 16:24
Bank Negara already said RM movement is due to speculative activities, not Malaysia's fundamental issues.
On mid-Aug: USD to MYR is 4.0. Now is 4.47.
Topglove is 4.4. Today ref. price is 5.28.
Today: USD vs MYR up 0.1%
Topglove down 3.4%
I bet someone in Topglove knows the MYR gonna strengthen back.
As for Liihen, it is already past its prime in May and now profits in declining mode.
2016-12-01 16:56
Trump will have 4 years time..what can be done in 4 years?
1) increase infra expenses to push economy- YES
2) pass a new law to impose minor tax so fund seated oversea can be repatriate back to US and invest into whatever government fiscal spending bond (with expectation of good return since fed going to raise rate soon) - YES
3) move back oversea job to usa? Apple and the rest will think think think...then 4 years past liao..- NO
RINGGIT strengthen? Maybe after election and if there is a major win.
RM 5 to USD 1 looks possible.
2016-12-01 17:13
Calculations wrong. 10% increase exchange will result in extra 15 mil sales, that's only gross sales.
Besides, it is correct sales is in a declining mode. That's the reason for no buyers
At best, it could maintaining last years figure with fired gain.
Ended Sep Q should have a huge jump for Christmas orders but it declined instead
2016-12-01 18:21
Yes I also believe it would reverse with RM appreciation soon. Potential danger of US imposing tax
2016-12-01 18:25
The export play, in my opinion, has limited upside and plenty of downside. The consensus view now is that RM would weaken with trump presidency. But lets face it. The consensus view is almost always wrong. Assuming RM do indeed go down to RM 5, that is only about a 10% movement. It is a far smaller movement compared to, say, RM 3 to RM 4.4. And also, many traders do not understand that most export companies are manufacturers who do not command high PE. Export companies are no Dutch Lady or Nestle. Even when you put 10x PE, I feel a but too rich as well.
2016-12-01 18:54
liihen management and big shareholder very shady, buy hevea homeriz better for a peace of mind
2016-12-01 19:02
Agreed with Flintstones. Export theme is a good play but don't put too much high hope on it. Many were enjoying the last great party before entering suffer stage. Think the old memory still haunted them.
2016-12-01 19:06
Support Stockman for Liihen. Its management is very good in tackle challenges ahead. Let's wait and see for more quarters after so many Q of excellent works. But Hevea and Homeritz already can't keep their momentum already, qr deteriorated is a fact.
2016-12-01 19:20
Liihen is the highest potential counter in furniture industry now. Most companies in the industry are facing lackluster earnings at least until the next quarter.
2016-12-01 19:36
nevermind, we analyse only
nothing convinces people like seeing shares move!
2016-12-01 19:45
Posted by Lukesharewalker > Dec 1, 2016 06:21 PM | Report Abuse
Calculations wrong. 10% increase exchange will result in extra 15 mil sales, that's only gross sales.
Ans: Ringgit today revisits its 14-month low at 4.46 against the US Dollar. Ringgit retreats 8% since 1st October, 2016. The tumbling of Ringgit is a great boon to Liihen as its sales are 100% exported.
As per 3Q2016 report, its revenues & profits were respectively Rm 145mil & Rm 16mil. Assuming all other variables affecting its bottom line remain unchanged, the stronger US Dollar means its revenue is set to increase by the same percentage of 8% (RM11.6mil) to RM157mil.
Profit is however set to jump significantly 72% (RM11.6mil) from RM16mil to RM27.6mil. The above profit increase calculation does not take into account the potential unrealised forex gains from their receivables stipulated in the balance sheet.
2016-12-01 19:48
A friend gave back RM20 mil in Jan/Feb.
============
ronnie...a friend gave back because he join the last rally late after the share 100% , 200%.
Now, you have opportunity to enter as if nothing has happened.
Not disturbed ( yet)
No risk.
At least no extra risk.
2016-12-01 19:49
Wonder why most furniture companies did not report good earnings in last quarters while raw materials (plywood and chipboard) prices crashed recently as witness with poor earnings in timber companies. Any input?
2016-12-01 19:54
Posted by lazycat > Dec 1, 2016 07:02 PM | Report Abuse
liihen management and big shareholder very shady, buy hevea homeriz better for a peace of mind
Ans: Liihen has chalked up EPS growth (Y-to-Y)for the past 12 quarters consecutively. http://www.malaysiastock.biz/Corporate-Infomation.aspx?type=A&value=L&source=M&securityCode=7089
This is a remarkable feat by an export stock. Can you find any like Liihen?
2016-12-01 19:55
The USD appreciation gain for exporters is the low hanging fruit. Now, what if demand for their goods drop?
I think that is the reason why some export-orientated stocks rise and then drop again. That said, it is good for 'hit n run' strategy.
2016-12-01 19:56
Pohuat arh icon ? Glove counter facing latex and rubber price increase so not because insider knew something unicorn
2016-12-01 20:11
Stockmanmy/Icon888,how about latitude?
Latitude latest earning higher than liihen but market cap still lower than liihen. Cash level also higher for latitude. Thanks.
2016-12-01 20:25
Stockmanmy, found your article getting cute.
Come, my challenge still valid.
Pick your pet.
2016-12-01 20:58
Ven
Professionals measure performance by returns per beta.
Not by gambling with Tek Seng and Comcorp
2016-12-01 21:02
I always invest in recent good profit companies. Very safe way to earn money. Not intelligent enough to care much about outside factors like commodities prices.
2016-12-01 21:39
no way ringgit goin appreciate back as long as US hike-rates is ongoing.
2016-12-02 10:31
The easier way is to play currency loh...... no need to worry about management of company
2016-12-02 15:36
need to be more selective this round for export, avoid those that are too reliant on US market to be safe.
2016-12-02 15:47
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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....
ronnietan
You're right, today.
As for the "doubters, non-entrepreneurs and scared types," they could be right tomorrow.
In Jan this year, as soon as RM strengthened, export stocks plunged, yes, plunged, even when record Q4 was going to be announced. Market was very efficient. A friend gave back RM20 mil in Jan/Feb.
Thanks for sharing your position, no need to call names on those who disagree.
2016-12-01 16:22