It is not the calculation, it is IV rarely changes from quarter to quarter. At best, every year. Anyway

Geary i like your intrinsic value, can change from quarter to quarter, that's market price not IV

You are overestimating your ability to affect price. How many people in i3? How many saw your post?

Word of caution: 2015 YTD profit, more than 50% came from non-operating item. But free cash flow is a more worrying sign, 3 years positive out of the last 10, that's why debts are ballooning. Last issue is buybacks, but i guess this happens to many companies. It is great to do buyback when it is RM1-2, but at current share price, it doesnt make sense to buyback, would be more appropriate to pay off their debt which is incurring 6-8% interest expense.

Rule no1: Do not associate emotions with your stock.

The company buyback 4 million shares from 2006-2009. Share price at 2006 is 35 cents, by 2010 it is 25 cents.

Please do not pin all your hope on buybacks. Do your own research.

Read this whole thing

http://25iq.com/2014/05/26/a-dozen-things-ive-learned-about-great-ceos-from-the-outsiders-written-by-william-thorndike/

Another thing why you want to use the same discount rate is that you can compare across your investment to determine which is the best idea. If you use different rates for each stock, u cant compare which one has the best upside.

Already told you, 10%. The only thing that will change is cash flow estimation and growth. Discount rate and margin safety unchanged.

http://25iq.com/2015/11/21/why-and-how-do-munger-and-buffett-discount-the-future-cash-flows-at-the-30-year-u-s-treasury-rate/

If you want to read more

The whole basis of DCF is build on the assumption that you know the business well enough. If you dont know the business, you can do a 50% discount rates, you will eventually get into trouble.

Conservative is different from 'not confident'. Conservative is knowing you might be wrong but nonetheless being careful from overconfidence. Like you say when you are not confident on something, you wont need to go through DCF anymore, it is a no go.

It is like 2 drivers, one is a race car driver. He wears helmet and seatbelt. Another is an uncle, who wants to be a race driver. He says to compensate for his lack of experience he will install 10 airbags, helmets, steal bar around car seats to reduce his 'risk'. It wont work.

hm is it funny? I never said investment is all about financials, but you can learn a lot from financials. Many people see Nihsin, Johotin, SIGN as gem too.

A word about the management, we all get it from news, annual report, your judgement on management is as good as everyone. So im not sure if you should rely on what the management says or more on what they do, which appears on financials.

hm the largest by market cap ive now is Aeoncr, which i think is still very cheap. Never had blue chip before. Researching Favco and Coastal

oh hyteo, when nobody wants something, afraid of it etc, that's when it is cheap, when everyone wants something, analysts want to cover it, give buy call, that's when it's not cheap anymore. Be a contrarian. what companies nobody wants now? Thats where opportunity lies.

he likes to delete comment, very sad

Generally if you want to find out, the only way is to do DCF calculation like Kcchongnz always does. The figure you get from DCF, apply 50% margin of safety, if the share price still below that normally it is considered cheap. You can use this one http://www.moneychimp.com/articles/valuation/dcf.htm

If you want to use shorthand, PE is a shorthand. You can use EV/EBIT, similar to PE but i think more accurate. For me, anything below EV/EBIT of 8x is consider cheap, you still need to consider a lot other factors of course. FLBHD EV/EBIT is 3-4x when i buy. Aeoncr I pay 10x because the quality is there.

Inari I wont have a clue because I didnt study it, also something im not familiar with, but doesnt look cheap. Require a lot judgement, example Amazon negative cash flow and lose money every year, but stock keeps going up, because ppl believe cash will flow in in the future. Then you have to be certain about it.

Example Ecoworld, if you use the link above, key in EPS, 10% discount rate, adjust the growth rate to reach current price $1.42, you will get 37%. Means the market think Ecoworld can grow 37% for 10 years. Is that realistic to you? some say yes some say no.

If Larson Juhl has great economic, thats says a lot for classic scenic. You are on the other side of the deal with Buffett.

Sunztzhe, it is the same as guessing someone's age, if someone is old enough to vote etc, you dont have to be precise. IF you feel cost of equity is too subjective, just use your require rate of return, that's another way how most ppl interpret discount rates. How much return are you happy with? 10%, 15%?

If you ask me, i would just throw 10% on everything. Use a very conservative estimation on cash flow growth, 10% discount rate, and a 50% margin of safety, you already have a lot of protection on your side.

There's no way to predict fair value in 3 months. If I can, ill be a trader already lol. I can only tell you have a fair value in yourself, and pay a lot less than that.

Classic example - signature int. bhd. Early this year, they report 2 quarters of profit jumping from 2 mil to 12 & 13 mil, that is a 600% jump. People on here start talking fairy tales how more property developments push more sales for them etc. Can be true but you have to be careful with all these stories. So the price go from $1.80 to $3.20, until they report in June 30 profit drop back to normal 3 mil, the price took a month from $3.20 down to $1.90, and climbing to $2.60 again, yesterday report Sept quarter 4 mil profit, price fall 15.5% right away.

What is the lesson here? If you look at the record of SIGN, their profit has been around 3-4 mil per quarter since 2007, you have to ask, is this 12 mil quarter for real? How long can it last? Everyone can say this time is different, you know, so many turnaround story out there. But you dont want to get caught at buying high price.

My advice is: it is very dangerous buying stock that has SUDDEN jump in profit, because there will be SUDDEN drop too. If a company grow their profit slowly every year, i prefer that kind of company.

hm a bit hard to explain in few sentences, there are many ways to make money, im talking about investing not trading.

I bought Flbhd early this Feb at $1.40 not because of forex gain, but because they have 50% in cash and management decide to do 10% buyback. The business itself is nothing wow, just selling plywood mostly to US market, commodity business, but just too damn cheap. Forget about forex gain, they make $15mil profit. And you can own the whole company for only $70mil for $15mil. To me that is too cheap. In their IPO prospectus their record for past 3 years before listing is very stable and growing slowly as well, therefore I dare to buy.

I bought Mercury shortly after. Cash rich company, almost 50%, but can be useless if management just let it sit in the bank forever. But they use the cash to buy a construction company that has orderbook of $120mil, they guarantee Mercury $4.62 mil every year for next 3 years. Means their profit will jump at least 50%. So I see something interesting here. All the money in the bank, you earn FD rate, 3-4%, throw into construction, 8-9% return at least. So im still waiting. I can be wrong, but risk is quite low in my opinion. These 2 companies are not 'supergood' company, just purely cheap.

If you ask is there any company that i look at the future then yes, but that also means their past record must be very very good. Flbhd and Mercury i dont look at their future, i buy purely because theyre cheap that's all. I will sell once they reach fair value. I bought Aeon Credit last year, still losing money but im not a bit worry at all. I bought it at a fair price, not cheap, because it is a real quality company. Ask how many companies can do loan besides the banks? Can count with fingers, not many. They have a strong edge here as in they do many loans (car, personal etc) that banks doesnt want, either too small, or bad credit history, therefore they charge higher interest. ROE/ROIC above 20% over past 10 years. No banks can match that except PBB. Management, I reckon it is AAA. I pay 2 billion (market cap) for a great company that makes $200 mil a year. I think it is a good buy and good to keep for 10-20 years.

I bought a bit of favco, still researching. Favco makes cranes for oil&gas sector and tower cranes for skyscrapers. Beaten down so bad because alot of their clients are in O&G (70%). Drop in oil price, o&g companies cutting down in capex, people fear Favco will go down also. Favco market cap is about $500+ mil, with $200mil in cash, the company worth only $300mil. Their ROE above 20% since listed. They make 80-90mil a year, i believe profits will drop for sure, temporary. I keep thinking Favco is such a tiny company, less than USD100mil market cap, yet builders all over the world used their cranes to build Freedom Tower (World Trade Centre previously), Taipei 101, Burj Dubai, Petronas Twin Towers, Shanghai Financial Centre etc all these tallest towers in the world, there must be something there. These builders pay for quality, they dont want to pay cheap cranes and end up falling from 100 storeys above. That says alot about the reputation of Favco. Even if profit cut by half to $40 mil, you still can buy it for 7x at $300mil.

The rest are Scientex, MFCB bought them long ago so nothing special to talk about.

of course im talking from the point of a long term investor. Past is a record, just like looking at a person's past behavior, they can always change of course. The key is you dont want to get caught in 'fairy tales'. That's when people bought IFC at RM1.80, bought DKSH at RM8 etc. Not saying the price now is expensive, but you need to consider if you have protection if something goes bad.

You are correct, more than 50% bursa companies lose money, many doesnt pass the 10% test. But you still can make money on them - if they are so cheap

cost of capital consists of risk free rate, risk premium & cost of debt/equity. Risk free rate if you use 10 years government bond is around 3-4%. Risk premium is how much you have to pay someone to take the risk to invest in your stock. Great company like public bank has lower risk premium for example, but generally it is around 5-6%.

Remember Evergreen has debts also, how much is the interest for those debts? Easily 6-8% for commercial loan from banks, this is cost of debts. So add it all up, their ROE need to be at least above 10% to cover these costs. Evergreen ROE from 2010 to 2014 is 14.74, 8.15, 3.94, -5.31, 0.02. Judging for the past ROE they are not covering their cost except 2010

Kevin ROE and ROIC (return on invested capital) is similar concept, just slight different calculation.

I think i can go around all the companies in bursa, all give them PE 10-12, 80% will be undervalued

WTF never know flowers has anything to do with the company performance, u should check the toilet too.

Kevin, the PE doesnt sounds high. But if you look at the ROIC for past 5 years, theyre unable to cover cost of capital, which u can put it at 8-10%. So the justifiable PE is 1/cost of equity. if COE is 8, then 1/8, PE = 12.5. If COE is 10, then 1/10, PE = 10. that means the correct PE they should be trading at is 10-12.5 PE. Looking at current price, there isnt margin of safety to go in.

My logic is this, if a company can earn good ROE/ROIC, make sense if they raise money, im willing to give. With track record like Evergreen, and in commodity business, they want to raise money, I better think 10x.

ok good good, accumulate more. Nth worth writing.

The company proposed to raise more money is a bad sign. Price is all time high, management is smart to raise money now, add in bonus warrant to entice everyone to buy the shares. Red flag to me.

If you look at the ROIC track record, you know it is mediocre at best. None of the past 5 years are over 10%, only this year closely edging 9%. The profit has gone up like most people says, because of many tailwinds, how long it will last? That's anyone guess.

Think it from business point of view. A business doing fibreboard, is there a moat? is there edge? Nope. If no, why do you want to pay more than NTA? Because economic of scale? I doubt it. And yet they want to expand, buy more plants etc. This is like a fat guy raising money to eat more fries and burgers, to increase weight (revenue) but not value (ROIC).

Please, you have my permission to accumulate. Elit96 wants to grab popcorn and says bullshit to me today. Maybe you can say that tomorrow, you never know, it will fly

If you ask me, I will give a TP of RM1

Evergreen ROIC over the past 4 years have been way below cost of capital, if they continue forward, their PE is actually going down not up.

Same for Mieco

I find your lack of faith disturbing

I am impressed I can move the market.

The director that sells the 70% in PBSB is the same director running Mercury now. Yea this isnt a buy and hold forever play, more like a 'special situation' or arbitrage play. The profit will only increase slightly if you taking into account the interest they have to pay for the borrowing, but im expecting an upward move on ROE, which may or may not push the price up. But compare to having a large sum of cash sitting in the bank earning 2-3%, definitely better to have it use it on assets (construction) generating future cash flow.

I cant say much about the director since my guess is same as anyone. He has quite a large stake in Mercury as well. Unless he offload all his stake in Mercury when the price has gone up, he will still need to manage both the main biz and construction biz well. I only know he is famous for turning around biz. He is the director for Eco first and having turned their property development biz around few years back.

Thats your rules, not mine. I don't mind missing train. There are trains everyday.

You are correct, the business itself isnt a strong growth biz, mainly because they dont intend to expand, and as Icon8888 say, it is a very commodity business as well. Without the forex gain, the revenue/profit would have gone up a bit only. In my opinion fair value is at 2.50-3.00, so current price upside is very limited. Unless they decide to return a large portion of cash to investors.

If you are interested you can look into Mercury. They used to have a lot of cash too, now they went and acquire 70% of a construction company for $37mil. Most from cash and borrow some. The construction company guarantee them $6.6 million profit for next 3 years, or $20mil, (70% = 14mil) because of outstanding order book of $120mil. Mercury main biz (paint) earns about 5-6mil a year. So the construction biz will almost double the profit. The recent q result release few days ago already show 100% jump on revenue qoq and 50% jump on profit. The only downside risk is main business is not growing due to GST and consumer weak spending.

I didnt discover flbhd until early 2015, the price hasnt runup back then. Kssng is slightly different as in they are involved in palm oil, palm oil is a capital intensive business, to buy lands, years to grow, and sell at commodity price. Same for many cash-rich property stocks, they need the money to buy more lands for development, those cash cannot be return to shareholders through dividend or buyback, they need to be reinvested for the future. Flbhd generate 10-15mil profit a year, only need to use 2-3mil of their cash each year, with cash at 90mil, they do not know what to do with it, thats why their dividend yield is at 10.7% of my buy price.

I invest in Flbhd not because of forex, it is because of the cash in the company and decision to buyback, period. I invest regardless where the forex is.

Debate is based on if you have certain knowledge, come back and debate when you know what is $1 test and ROIC.

Whether tomorrow is big or small, it doesnt concern me, im writing based on long term fact. The economics of the business doesnt change just because a quarter turns out to be good.

Sorry this is very complicated, continue using your PE 10

Not telling the right fact? Tomorrow news isnt fact, it is forecasting. TA come first, I agree to disagree, you have your way, I have my way. And like I say im writing for long term, in the short term, you can TA the shit out of it if you want.

Yea okay, feel free to invest. Metaphor is a way to keep it simple, maybe not for you.

You didnt get my meaning right, 'bankruptcy' is a metaphor.

I have write everything above why it is heading to 'bankruptcy', the company is destroying shareholder value, you're welcome to debate me. 19% return in 10 years, that is permanent loss of capital.

thanks for checking my background too. My analysis is for long term, no doubt people can still make money in the short term when company exceed expectations. I am analysing the economic of the business

thanks for the compliment

You dont need debt to go bankrupt bro. Borrow me money at 10% and i went and make 4% return, that is what Nihsin is doing. And you will ask, Nihsin doesnt have borrowing. Well, the fact investors are investing in Nihsin to get a decent return, that is the '10%', called cost of equity. So here is your fact

Trait 1: Is there more eager buyer now than ever? Easy answer.
Trait 6: After the price has runup 100-200%, not many people can think clearly, they will explain to you why the price gone up and why it will continue, but they can't explain when price exceed value because they can't even tell what is the value of the firm. Only thing most can tell is something like these below:

"PE only xx, below PE 10, my EPS estimate x PE10 = TP xx!!..Cheap!.. Buy!!

ha.ha.ha

Nihsin's past 5 years ROIC highest are at 4%. Fock me, they are growing themselves to bankruptcy.

Here we go, another classic example of whacking a PE 10 and call it undervalued