Dear friends of i3 forum,

Just as we expected. After Disel price up 52% Businesses in Peninsular Malaysia will be impacted by higher costs

Let us see some examples

Please Refer to Bursa on 99 Speed Mart &  DIY 

1) 99 SPEED MART (Refer to Bursa latest announcement

99 SPEEDMART

Revenue is Up (Which means it sold more goods)

But profit is down

Why?

Let us take a look at its balance sheet (refer Bursa) 

Revenue 2,550,210

Cost of sales (2,330,474

Now see this

Administrative and other operating expenses * (Rm322,391,000 now) (Was Rm280,882,000)

So there is an increase of Rm41.5 Millions total operating cost

Part of that cost is due to 52% diesel price rise

Since 99 Speedmart operates from rented shophouses there is little storage space for "extra inventories"

These must be transported by lorries to replenish Goods sold

As such the cost of diesel has impacted its bottom lines

Now more will come

Minimum wage to go up Rm200 from Rm1,500 to Rm1,700

Workers both local & foreign must pay EPF (added admin costs)

Yet to come R95 petrol price will also rise

Unless it raise its selling prices the bottom line will get worst

2) DIY

Same as 99 Speed Mart

Revenue Up

Profit down

Now see Balance sheet (Refer Bursa)

Revenue Now Rm1,135,074,000  (Was Rm1,066,532,000

Revenue up by Rm68.5 Millions

Profit declined by Rm23 Millions

Why oh why?

See

Other operating expenses (Now Rm283,744,000) (Was Rm257,375,000)

Rm26.3 Millions

So its Operation cost is more than its profit

With more expense to come DIY must either Cut cost, raise price of goods sold or suffer margin compression further

Since we are living in an inflationary environment keeping cash in Bank for 3% interest rate is a no no.

Now we also see even more Inflationary pressure emanating from Trump 2 (that is Trump's 2nd 4 year Term)

Trump will do this

1) INCREASE EXTRA SPENDING BY USD7.5 TRILLIONS

Trump’s Plan Boosts Budget Deficits by $7.5 Trillion, Double Harris’s Proposal

Former president’s tax, spending ideas add up to more red ink than those of vice president, new analysis shows

WASHINGTON—Donald Trump’s flurry of recent tax-cut promises pushed his fiscal plan deep into red ink, and he would increase budget deficits by more than twice as much as Democratic rival Kamala Harris would, according to a new study that is among the most comprehensive estimates to date of the candidates’ proposals.

Trump’s combination of tax cuts, tariff increases, military expansion and mass deportations would widen budget deficits by an estimated $7.5 trillion 

US DEBT ALMOST USD36 TRILLIONS

IT WILL SOON CROSS USD40 TRILLIONS

FED Expected to Cut Interest Rates

Plus Trump's 60% tax on China imports to USA will see a corresponding rise of 60% for American Consumers

All these will cause Higher Inflation & erosion of all paper currencies against real hard assets which Cannot be printed 

That is why in Time of Deflation Cash is King. And on the contrary in time of High Inflation Cash is trash (or holding cash is unwise unless for opportunity to deploy into better investments that will protect it from value erosion

And what are the Stocks to buy?

For that please do your own deduction & homework

With Kind Regards

Calvin Tan

Please buy or sell after doing your own due diligence or consult your Remisier/Fund Manager