Im impressed you can 'know' FM has multiple times turnover by looking at the line. How many times? I'm not interested whether FM is killing 711, can do somersault, or beat MyFM. All I'm interest is tell me the justification of $2 bil market cap.

Worth more than 7/11 you say, so that's valuing standalone Family Mart at $2 bil market cap with $6 mil profit. That's cute.

You're right that talk is cheap. But that words coming from my mouth seems more appropriate

@musang, you don't need me to teach you which counter to buy. You need to learn which counter NOT to buy

A year in history: To improve, it is good to look at what others think of KESM just one year ago (Nov-Dec 2017 - market price at RM19-20). Selected below:

why sell? i dont understand. this counter and inari are monsters... just hold and close ur eyes..

Semicon stock PE 20 is norm. You can check the FCF and Capex.
This stock is in automobile semicon sector. Pls do your own reaserch.
you can also read the thread for the past 2 years, then you will have more understanding of this counter.

20 no problem seems. Next is my hy to touch 21. hoho

Those who have kesm will be pleased with it..those with sunright also is pleased.
everybody should be pleased with the performance of both companies who is uniquely position to capture the growth in automotive tech industry and driverless car tech....
domp should be pleased with sunright (if he still holding).

hehe, KESM got longterm future, because more CARS using electronic, they need testing 100%, very strict, human life. Also when automation of cars become norms, more testing required.

Everyone who wants to be rich in a few years buys KESM!

All invest,met bankers sleeping. I said tp 20 years ago. Now they only wanna follow me....
Next is hengyuan. Is said 21. Later next yr they will say rm30, lets see. (Paperplane)

If you are a novice, it's the best to buy the stock at the current price as much as possible and hold it for three years. Your saving is likely to surge in three years.

the biggest uncertainty is the probability factor in the equation...you can use the most advanced maths for the rest with sensible logics...but if your probability factor is incorrect...everything is useless..

***

I think you got the entire logic of using probability incorrect. Probability is useful precisely because the nature of uncertainty. When a person who knows how to apply probability say he is 83% confident, he isn't fooled by the precision of the figure, all that means is he has 27% chance of being wrong, therefore, he is interested to find out if that 27% happens, what's the plan B and what's the margin of safety.

Sslee, maybe you have other objective doing all these, but my laymen view point is the effort far outstrip the benefit. How much time did you spend doing the resolution for Hengyuan? And luckily Insas is being upfront that they are not going to support the resolution, otherwise you'll be wasting your time gathering 50 signatures.

If you want a company that pays dividend, then find one that pays good dividend. But you seems to be attracted to complex situations that require a hands on activist approach. Maybe it turns you on I don't know, but just looks crazy to me. Crazy that even if the resolution go through and special dividend gets paid, you're far from guaranteeing a satisfactory return. Your ROT (return on time) and ROS (return on stress) will be so low.

@10154899906070843 You are on point that understanding a business should go beyond PE, FCF, or at least, those numbers need to tie back to the business itself. And you mention moat being a good point too, a company that has a huge moat, or at least a growing moat, deserve a higher PE compare to a business that has declining or no moat because it can earn alot more economic profit down the line.

So going back to QL, you have to identify if there is a source of competitive advantage, and if there is, what is it? and is it growing, stable or declining?

From 2006 to 2018, QL invested just over $2 bil into the business, while net income grow from $48 mil to $206 mil during this time, that imply a return on business of 7.4%. Decent but not spectacular. And of course, keep in mind the investment over the past 1-3 years might not have bear fruit yet due to lagging effect. Such as investment in family mart for example.

If we assume QL has a moat, where will that come from? First one I can think of will be scale economies. Their growing gross margin since 2006 can be an evidence that the efficient in production through scale allow them to lower their cost (Spreading fixed cost over more units). But operating margin and ROIC has declined at the same time because asset turnover has dropped significantly. The biggest assets is of course investment in PPE - growing 6.8x in 12 years. In comparison, net income only grow by 4.6x, that's why the decline in ROIC. Operating margin is up, compare to 12 years ago, but not as big of a magnitude as gross margin because SG&A are growing fast too, grown 5x.

So it seems that the investment in assets to allow QL to achieve scale economies which translate into a higher gross margin is being offset by higher administrative cost (meaning admin cost doesn't get the benefit of scale economies). The incremental investment of those assets is producing lesser and lesser return as well. But this is just hypothesis. More of a half truth. Asset turnover has been on the decline since 2006, while at the same time, some assets investments are partly due to Familymart, especially for capex since 2016 ($100 mil in all).

So when you look at from the current valuation point of view of $12 bil enterprise value, there needs to have some form of moat and runway to justify that valuation given a net income of $200 mil. The traditional business (marine & livestock) are doing well, but is there a long runway? Malaysia market is fairly saturated (based on layman assumption). Perhaps neighbour countries have higher growth opportunity but grow fish and chicken are not the same as installing an app, it is highly anchored to country economy and population wealth etc.

So there's a high probability the justification of $12 bil EV comes from family mart investment. Let's assume Affin's estimate of $6k daily turnover per store as ballpark, upon all opening of 90 stores, running full 365 days/year, will get you $197 mil revenue. How much will the net income be? 7-Eleven's profit margin is around 2.5%. Family Mart in Japan profit margin is 2.8%. Let's say we use 3% margin, net income will be $5.91 mil, make it $6 mil. 90 Family Mart stores, $6 mil annual profit. Of course the positive thing with familymart is there is a long runway compare to the traditional fish and livestock business. There is a potential to grow few hundred FM stores all over Malaysia and not to mention perhaps scale economies again. But you are looking at a ROC of roughly 6% here. (ROE = Profit margin 3% x Asset turnover of 2). Family Mart Japan has ROE of 4.5-6%. That should perhaps grow over time because of scale.

So you have to ask is is this investment enough to justify me buying the business for $12 bil?

@Kimchi your rational is the furthest from logical thinking and no, there's no big shark, only your own psychological nonsense

But how can you select good company to watch when your understanding of value investing is flawed?

@Rajachulan, your reason of changing your style reveal your misunderstanding of value investing at its core.

Let's look at Genting past 12 years (2005-2017) track record:

Over the 12 years, Genting invested $14bil into the business.
At the same time frame, Genting grows their net income by $200 mil ($968 mil -> $1160 mil)

So, the return over this 12 years period is 1.43% ($200 mil / $14000 mil).

Of course, keep in mind income growth is always lagging. Investments into the business over the past few years will only generate income growth in future years i.e GITP which require massive investment.

So, if you only look at 8 years record (2005-2013) prior to the GITP plan, then the return would be 8.1%. Decent, but not stellar. Of course, the question for long-term investors is that given the $10.38 bil investment (2013-2023) under GITP plan, how much can these 'assets' generate for future year income growth?

Still have no idea how P2P can mean buying a house at the same price goes from unaffordable to affordable.

Agree with P2P. Can be understood from the law of conservation of energy - energy cannot be created or destroyed, just transformed from one form to another. Property developers still wants to earn their fair return, the bank that created the loan wants their own fair return from lending, so does the first home buyer who wants to own an affordable home, if the interest of them have not changed, so does the risk. P2P is a repackaging of 'risk' to look as if the risk has disappeared.

MY god, argument about value investing again. About to become the longest war in history

@godhand, I think that is another topic of discussion on the integrity of management. But on fundamental level, dividend can only exist if business is profitable, so the return of the business is paramount. But of course, there are investors that prefer high payout stocks than a growth stock that don't pay any div.

@godhand, dividend is not the most important element. Return is.

Future dividend is part of future cash flow.

Fair value is the estimated future cash flow discounted back to the present value. : )

Nothing wrong with looking up Book value, future earnings and prospects, but saying that the fair value of a stock is its book value is clearly inaccurate. And you do seems more emotional than me.

How am I pessimistic? Disagreeing that book value is fair value has nothing to do with being pessimism or optimism.

What kind of logic is this, book value = fair value?

If you vote for PH, then let them do their focking job. You vote for them to make hard decisions, not do things that make sense to you.

As always, easy to sit in front of the computer and criticize others, just as how most would criticize "how bad IB analysts are, I can do better than him." As if you are better, why don't you go and join politics.

A typical victim mindset, something not doing well, blame government. Used to be blaming BN, now LGE.

The length of how long you have been in the market has no substance to what your theory is. It certainly doesn't make your words more 'believable' (because they cannot be disproved). Just as there are ppl that still believe the Earth is flat today even thought they have lived longer than most populations.

And can come up with version 2 to explain how LGE can hide all his Gamuda profit given that PH have to declare all their assets. Looking forward.

Yes, continue with your conspiracy theory just like how no one ever landed on moon or 911 terrorist is designed by US gov.

@Speakup Even if LGE did announce the project to continue at lower cost, that doesn't prove your theory is real. Well it goes back to you, if you're 100% sure this is real, good for you, time to go margin lending, buy every Gamuda you can. Shouldn't you be excited?

Let's not politicise the stock market, if you want to find a victim for your loss, you will always find one

When market panic, people start coming up with crap shit stories like conspiracy theory i.e LGE buying Gamuda on cheap, seriously? I come here for laugh, and never failed to find one.

@VincentTang You are disappointed because PH is not looking after your interest?

Justin, if you really exist, gov job is not 'save' everyone's job, but to improve the living standard of citizen by growing economy. Growing the economy doesn't guarantee everyone is going to be happy or no one will lose job, it just means collectively, everything will improve, but individually, it might not be.

You vote for gov so they can grow the economy as a whole, i.e savings from current issue is funnelled to other areas i.e school, hospital that ripple through the economy. If you are voting for a gov for your sole benefit then you've to re-examine your own mindset. A gov that determine to satisfy everyone is a dysfunctional ones.

And the rest is anecdotal evidence coming from your engineering background. Start thinking in 2nd level. Where is the savings flowing to? If it doesn't get cancelled, where are the losers? I am not saying everything PH has done is absolutely right, the future is never certain. But at least think in a deeper level.

Property side has slower growth but high margin, translate into good ROC
Manufacturing side has lower margin but high growth (turnover), which result in decent ROC as well

I do get your general idea, but sometimes it is about doing the right thing at the right stage, and "eliminating activities that don't match the value of your time" assume the value of things are always the same. And it also assume we have perfect information about the future.

As an example, in most VC or startup, there is the saying 'do things that don't scale", means you have to do the hard things that cannot scale in the early stage i.e talking to customers, do own budgeting, cold calling etc. In the early days of Airbnb, the founders have to personally go knock on the door in the neigbourhood to persuade people to list their property on their website. How would they know what is the future value of their time? They don't. If Airbnb become a huge success, which they do, then of course those time are well spent, that prove to give a future value of 10000x. But if Airbnb fails, at hindsight, they might think those efforts are wasted, probably better to get a job.

But I get your general idea that there are things that below a certain threshold that you shouldn't even think about saving money on like your examples. If a person is a long-term investor, why waste time checking the price every minute, asking others opinions, or getting excited the price is going up 5 minutes ago.

Chill DC

@Flintones - Value investors don't necessarily have to buy property/construction counters just because they are undervalued for many reasons.

1. Outside circle of competence - You don't buy if you're not familiar with the industry even though there is indication that there is undervaluation
2. Opportunity cost - There are better opportunities out there than owning property/construction counters.

The points being written are gladly ignored in most of the comments here. To point out a few:

1. Prediction of highly unknowable forex, interest rate.
2. Calling ROC insensitive or insignificant
3. Projecting EPS for next 2 quarters (trend in 6 months)

My layman understanding is this entire thesis rest on the growth of LH's frozen food segment, which according to part 3, the underlying factor is margin expansion, which lies in the heart of pricing power in the name of brand. The end of the capex cycle assume the brand has been established, groundwork has been laid and there is no more outlay required to build to brand. So the future value comes from the moat of brand to protect Nutriplus from being outcompete by competitors.That is a big assumption. The assumption that brand has been build; the assumption that there is pricing power; the assumption that there is a product differentiation/brand loyalty needs to be investigated further.

Kinda confusing that you want to be a trader and at the same time searching for enduring companies.

As a thought experiment, think in collective level, not individualistic. So multiply yourself by a factor of 1000. You have so many people trying to predict the next qtr result of steel companies, with more or less similar intelligence, where the odds of guessing right no better than 60%, not to mention guessing it right doesn't guarantee profit since your prediction has to be non-consensus, and throw in all the influences, macro, psychological, biases, daily share price etc. Basically everyone trying to outsmart everyone in an unknowable environment i.e the unpredictability of qtr result from large element of luck and nonlinear complexity.

You can probably make money, probably, but I just don't see how average investors can make money in this kind of situation. If you think you can, you're either really good or overconfidence to the tilt.

If a stock is high reward, it can't be high risk.

One always have to remember a stock at a certain price is great, mediocre at a higher price, and bad at another even higher price. While it is glad to know everyone is sitting in the same boat (which to me it's bad because it magnify bias), one should know the risk you bear can be totally different from the person you talking to.

@Daniel Yong. In investing, it is recommend you make decision based on process not outcome. The outcome might be positive i.e Pmetal, but a bad process i.e getting tips from someone is something you should pay more attention to.

1. As you mentioned, your portfolio is too small. Probably need at least 30-40 stocks. Deep value relies on a small amount of stocks in the portfolio to cover the losses for most of the stocks. It rely on magnitude of gain over frequency of losses.

2. The reason why it works is because it doesn't work all the time. Similar to Joel Greenblatt's strategy.

JH, no it's all good. : )

Why is it pouring cold water? If I write 99 pages of thesis that doesn't lead to what I predicted, then someone should point to me that my writeup is BS. I'm not saying what is being written here is nonsense, I'm just asking does the difference in manufacturing process will lead to higher profit in coming quarter? which if it does, would it surprise the market? which if yes then push up the price substantially and therefore allow one to gain superior return?

I haven't, same as I never understand the superiority difference between HY and Petron, that's why it is a serious question to ask.

Does understanding the technicalities difference between Lionind and other steel industry allow one to achieve superior return?

Valuation of course doesn't matter, silly. Depends on what you're set out to do

To a gambler, valuation doesn't matter because they're in for the entertaiment
To a speculator, valuation doesn't matter as long someone is willing to offer a higher price
To a trader, valuation doesn't matter because they're making the difference in bid/ask price
To an investor, valuation does matter because he is owning the business.

Valuation doesn't matter, coming from someone that touts business sense is ironic.

PE is a tool to gauge the value of an asset. If the tool is misused due to the user's lack of understanding, you don't say 'valuation don't matter', you say 'the person has a false perception on how the tool works'.