Audited accounts is only a record of the company’s past performance but it does not indicate nor tell you the future performance of the company.

To some investor, the stock market can appear as a rather daunting experience. But in reality, understanding the company growth prospect in share provides the opportunity to achieve greater return with some practice of discipline and patience.

I noticed that many novice investors openly tell other investor to sell off counters that had company reported losses from last year. As an investor, before giving out any 2 cents opinion or advise to others, we must first examine our own track record to see why we are not making money in the first place.

Secondly, to be a successful investor, we must at least have some practical sense on how a business works. We must first look at the future development of the company and their profit growth prospects. 

As a references of counters that has churned profit without mirroring its previous QR results;

JAKS

JAKS lost money last year due to its interest or holding charges of its mega mall. But it has tremendous profit growth from its 1,200 MW coal fired power plant in Vietnam as an Independent Power Producer.    

About six years ago, JAKS Resources Bhd was awarded the contract to construct two units of 600 megawatts (MW) coal-fired power plant to sell electricity to the Vietnamese Government for a 25-year period in August 2011.

Since the total cost of US$1.87 bil (RM7.76 bil) (based on US$1=RM4.15) is so huge that JAKS could not find any bank to finance the project, the construction of the power plant was postponed several times until JAKS found China Power Engineering Consulting Group Co Ltd (CPECC) to be its joint venture partner in March 2016.

After careful study of the viability of the concession, a consortium of three banks, namely Industrial and Commercial Bank of China, China Construction Bank Corporation and Export-Import Bank of China have expressed preparedness to finance US$1.4 bil (RM5.81 bil) for the entire scheme.

Those who wish to know the details of this Joint Venture should read the company’s annual report and its announcement in Bursa.

Eversendai

Eversendai also reported losses last year. I notice many novice investors telling people to sell as soon as possible when the Quarter report is out. Even my close friend advise me to dispose this stock. You will be very impressed on how a Malaysian company can undertake such colossal projects such as  Burj al-Arab, Burj Khalifa, Petronas Twin Tower, Changi T3, and etc. Eversendai have built a strong reputation in engineering field and they continue to register increasing order book. The following is from the company’s press release quote:

Eversendai Corporation Berhad’s Executive Chairman and Group Managing Director, Tan Sri A K Nathan said “This is the first year the company is recording a loss owing to both internal and external factors. The Group has since identified all shortfalls, re-strategised and aligned towards moving out of the losses incurred during the financial year of 2016 with progressive profits projected from the 1st quarter of 2017 onwards. With over 45 ongoing projects in UAE, Saudi Arabia, Qatar, Kuwait, Thailand, India, Singapore and Malaysia, along with an impressive number of newly secured projects coupled by an experienced and committed team and skilled workforce, we are sure to step out of this phase in early 2017”.

To-date the Group has secured projects worth RM801.4 million for the year 2017, of which RM117.4 million is from the Oil and Gas sector, bringing Eversendai’s Order Book to approximately RM3 billion. As of 31st December 2016, projects from the Middle East make up 37.7% of this secured projects list while the South East Asian region and India make up 24.7% and 22.3% respectively. The Oil and Gas sector makes up the remaining 15.3%. Some notable projects secured are a university project in Kuwait, ICD Brookfield Place in Dubai, gallery works for the Statue of Unity in India as well as the supply and installation of piping works for the Jimah East 2x1,000MW Super-Critical Coal Fired Power Plant and a motorcar assembly plant in Malaysia.

Tan Sri A K Nathan said, “The current order book is the highest the company has recorded since its inception. We are very confident of achieving higher wins and profitable returns hereafter. We will focus on further strengthening our operations in the current markets where we operate and streamline our cost control to improve profit.”

There are some Sifu who will never recommend his followers to buy JAKS and Eversendai because he relies too much on audited accounts and does not look at the company’s business and growth prospect. That is why they misses the opportunity to buy stocks which have been shooting up like rockets.