How high the profit margin of steel manufacturing is important, provided it can maintain there for long time.

Take lesson learned from glove and plantation companies, the market gave a single digit PE only because the prediction is the high profit margin could not last for long.

In 4th quarter of Last year when the price ratio of SWKPLNT / TAANN was around 75%, I bought SWKPLNT.

August this year, when the price ratio has gone up to around 85%, I sold all my SWKPLNT and switched to TAANN.

This week the price ratio dropped to around 80%, I sold some of my TAANN and bought back some SWKPLNT.

In 4th quarter of Last year when the price ratio of SWKPLNT / TAANN was around 75%, I bought SWKPLNT.

August this year, when the price ratio has gone up to around 85%, I sold all my SWKPLNT and switched to TAANN.

This week the price ratio dropped to around 80%, I sold some of my TAANN and bought back some SWKPLNT.

Make reference to BRIGHT (9938) announcement to Bursa on dated 19th August 2021.

The Board of Directors (“Board”) of Bright wishes to announce that the Company had on 19 August 2021 entered into a Joint Venture Agreement (“JVA”) with Datai Plantations Sdn. Bhd. (“DPSB”) (hereinafter referred to collectively as “Parties”) to form an unincorporated joint venture for the purpose of developing an oil palm plantation together with facilities and the provision of services ancillary to such plantation on parcels of land located in Sarikei, Sarawak (“Project”).

Read the item 4.3 of document:

The Investment Sum shall be utilised by the Project to plant up to an additional 150 hectares of oil palm as calculated based on an estimated development cost of Ringgit Malaysia Thirty Three Thousand only (RM33,000.00) per hectare as at the date of the JVA.

You see,
The development cost alone is already RM33K / ha, not yet adding purchase price of the land.
The Enterprise Value / ha for TAANN estate is very much below that.

When I bought SWKPLNT last year, the price ratio of SWKPLNT / TAANN was around 75%.

When the ratio went up to more than 85% recently, and with the news that the timber segment of TAANN is going to be good, I sold all my SWKPLNT and bought TAANN.

When I bought SWKPLNT last year, the price ratio of SWKPLNT / TAANN was around 75%.

When the ratio went up to more than 85% recently, and with the news that the timber segment of TAANN is going to be good, I sold all my SWKPLNT and bought TAANN.

What? I listen to your advice? Who do you think you are?

Or may be you were the one who sold C85 to me at 5 sen?

I wrote that I bought for second round but at smaller quantity, so there was no question of "The volume don't check out".

It is quite safe to buy during the settlement days.
The chance of losing money is small.

When I bought on the 3rd settlement day, I already knew the VWAP for the 1st and 2nd Day. And when I bought again on the 4th settlement day, I already knew the VWAP for the 1st, 2nd and 3rd day.

Cash out and keep RM in bank? He will regret.
He can actually better buy foreign stocks or keep SGD in bank.

*last trading day on 28th June

1) That guy should have waited until the next day to sell at 6 sen instead of 5 sen. He sold to me at 5 sen and I sold it the next day at 6 sen, making 20% gross profit, wasn't it bad for him and good for me?

2) How many times do I need to tell you that "equal chance for the mother share to go both direction"? Go and click the above youtube link and watch. To be exact, we assume the mother share price will in average grow at a rate of equal to interest rate minus dividend yield, then assume it will spread like normal distribution.

3) After making 20% gross profit in the first round, I bought again until the last trading day on 29th June but at smaller quantity, My average purchase price for the second round was at 3.6 sen, and the settlement value is 3.76 sen.

https://www.youtube.com/watch?v=lzMQ3hZqtp0&t=1025s

Understand how to evaluate / calculate the fair value of call warrants.

I said equal chance for the mother share to go both direction,
However, to be exact, for most cases, it is a bit more to upside, depending on interest rate and dividend yield.

As I said, call warrants are for those people who believe that the mother share could go up and down both directions, with equal chance.

Last Friday, when it was around 10.02, I bought C85 with about 10% discount from intrinsic value.

After that, when came to end of Friday trading hours, it shot up to 10.44, of course I was very happy. I show the calculation, for that price of mother share, the intrinsic value of C85 is 0.12, and then question why the last 2 trades of C85 were still at 0.05.

From Friday's 10.44, from there I believe again the mother share could go both direction, further up or reverse down.

Unfortunately, today it reverse direction and go down.

When it came down to around 10.08, the discount is around 10% if I sell at 0.06, I decided to take profit.

Bought at 10% discount and sold at 10% discount with 20% profit, isn't very good?

Now it is at 10.04/10.06, I Q to buy again at 0.05.
If mother share go further down, then I will revise down my Q.

If I did not sell it at 0.06 this morning, I would feel reluctant Q to buy 0.05 now, because my exposure / risk is much higher holding 500K or 600K units.

What is the point to bet at what price TENAGA will end up end of June?
I told you I do not know, I can only say I believe it has equal chance to go both directions.

jeffchan1901
Thanks.

milosh,

I bought at 10% discount and sold at 10% discount, OK lah for profit taking.
Some more now the Dow future drop so much.

I revised the sell Q and sold 100K at 0.06.
No more holding.

I will buy again, but will not disclose here,
Because it may look irritating.

I revised the sell Q and sold 100K at 0.06.
No more holding.

RJ87,

If that is what you think,
I can only say you better don't trade call warrant.

There are 400K buy Q now at 0.055,
200K of it is mine, I guess the other 200K should be from the issuer CIMB.

TENAGA at 10.10, C85 intrinsic value = 0.069

Sold 200K units at 0.06 for profit taking.

And the sell Q 100K now at 0.065 is mine.

And the sell Q 100K now at 0.065 is mine.
Any taker?

TENAGA at 10.10, C85 intrinsic value = 0.069

Sold 200K units at 0.06 for profit taking.

RJ87

Read again what I wrote in this post, I mentioned that the time value is negligible as C85 is about to expire.

Therefore I calculate its intrinsic value, intrinsic value is actually the lowest fair value when we assume both volatility and interest rate are zero.

Any volatility and interest rate will create added value to the call warrants.

Call warrants are for those people who believe that there are equal chance for the mother share to go North and South.

If you believe TENAGA will certainly go South, then do not buy mother share or its call warrants.

If you believe TENAGA will certainly go North, also do not buy its call warrants, it is better to borrow money (margin account etc) and all in.

Do not have a mindset to sailang for any single stock or its call warrants.

Many years ago, before I could first trade call warrant, I need to sign a form to disclose my years of experience in stock trading, I believe the rule is still there.

RJ87,

The more it can gap up/down, the higher the value of C85.

Say now TENAGA is only 9.96,
Intrinsic value of C85 is = (9.96 - 9.6337) / 6.7436 = 0.048,

If it is highly volatile that:

1) 50% chance go up 1.00 and 50% chance go down 1.00
Then the value of C85 = 50%*(10.96 - 9.6337) / 6.7436 = 0.098

2) 50% chance go up 2.00 and 50% chance go down 2.00
Then the value of C85 = 50%*(11.96 - 9.6337) / 6.7436 = 0.172

milosh,

As of today, I think I was lucky to have bought C85 at 0.05,
My break even = 9.6337 + 6.7436 * 0.05 = 9.971
Meaning if TENAGA's VWAP > 9.971,
I will make gross profit.

Of course if the VWAP is <9.6337, then all my C85 will be total loss.

Can download and read the official document.

https://www.bursamalaysia.com/market_information/announcements/company_announcement/announcement_details?ann_id=3103072

getingreal,

No burn, and no need to come out with the conversion money, it is automatically cash settled.

For example,
If the VWAP of TENAGA for the 5 trading days is 10.14,
Then, (10.14 - 9.6337) / 6.7436 = RM0.075,
The issuer, in this case CIMB Investment Bank will pay yus RM0.075 per unit.

I used to receive cheque from the issuers, but I heard that now they just bank-in to our account just like our dividend.

Many years ago, there were some call warrants that were physical settlement, that one we need to send them the money and they will give you the mother shares.

But in recent years, I never came across any call warrant that is for physical settlement.

However, it is still safer to read the official document which you can download from bursamalaysia.com

For this particular C85, I have read the document, it is automatically cash settlement, we just have to wait for the money if the mother share is higher than the conversion price / strike.

birkincollector

When I find that C85 is relatively very cheap compare with the mother share, I bought it and write / highlight / teach people how to do the calculation.

I must say that I do not how to predict the direction of TENAGA, whether it will go North of South in short / long term.

Of course I hope people after reading it, will do their calculation and if they think worth to take the risk, then buy C85 and help to bring C85 price closer to its intrinsic value.

I will sell when C85 at the right price.

I am not Santa Claus.

If this is not allowable, same logic, what about those people who say good or bad thing about any company, be it blue chip or junk companies?

getingreal

No need for us to come up with any conversion money.
I copy and paste the following from the official document which we can download and read.


Settlement: Cash settlement only

The Call Warrants give the Holder the right to receive from us within
7 Market Days from the Expiry Date

In the event that the Cash Settlement Amount is equal to or less than
zero on the Expiry Date, the Call Warrants shall terminate on the
Expiry Date and cease to be valid and our obligations in respect of
the Call Warrants shall terminate absolutely.

Closing Price: The VWAP of TENAGA Shares (subject to any adjustment as may
be necessary to reflect any capitalisation, rights issue, distribution or
others) for the 5 Market Days prior to and including the Market Day
immediately before the Expiry Date (subject to the market disruption
event provision below).

jeffchan1901

As I said, I bought 300K units C85 on Friday at 0.05,

Let say tomorrow the mother share give back 30 cents (75% of 40 cents last minute jump on Friday) and trade at 10.14,

The intrinsic value of C85 = (10.14 - 9.6337) / 6.7436 = RM0.075,
Still a good 50% margin from 0.05.

The other thing is on the issue of settlement calculation.
The issuer announced that as at 31.05.2021,
There were only 14,444,900 unit outstanding C85 in the market,
As the conversion ratio of 6.7436, meaning 14,444,900 / 6.7436 = 2,142,106 mother share.

Now, the settlement calculation is based on 5 trading days data,
In this case, it will be from 23rd, 24th, 25th, 28th and 29th of June.
Further more, it is not from the closing price, but it is VWAP (Volume Weighted Average Price)

Correction ==>> *The value of TENAGA-C85 jump up 100%*

https://klse.i3investor.com/blogs/gambler/2021-06-19-story-h1566936185-TENAGA_and_TENAGA_C85.jsp

Next Monday, will TENAGA-C85 catch up?

Hohoho.........

Today I bought 300000 units of TENAGA-C85 at RM0.05,

Now its intrinsic value = (10.44 - 9.6337) / 6.7436 = RM0.1196.

Q to buy at 4.98.

With the current SERBADK and SERBADK-WA of 0.625 and 0.09,

The IRR is only 3.16%.

Raider,

I just show how to calculate SERBADK performance up to Last Friday closing price.

I have no idea on SERBADK accounts.

08.02.2017, KLCI=1688.50
04.06.2021, KLCI=1578.45
Loss of 1578.45 / 1688.50 - 1 = 6.52%

Assume KLCI's Dividend Yield = 4.00%

SERBADK so far out perform KLCI by 7.26% + 6.52 % - 4.00% = 9.78%.

https://klse.i3investor.com/blogs/gambler/2021-06-06-story-h1566076216-SERBADK_Internal_Rate_of_Return_IRR_since_Day_One_of_Listing.jsp

So far the return since day one is 7.26% per year.
What about next week?
I do not know.

I tot uncle is an engineer.

How could he get sen from sen divided by sen?

How could he graduate from university?

EPS divided by Share price is actually Earning Yield.

pjseow, we actually look at the same document.

You look at the chart that separate the nitrile and latex, which you get 23.1 / 18.0 for year 2019, and 27.2 / 18.5 for year 2025.

I look at the combination ASP, which is 19.2 and 21.5 for year 2019 and 2025.

The way I estimate TOPGLOV profit is simple,
1) Revenue = Sell volume * ASP,
2) Net Profit Rate = 9.73% * Revenue, 9.73% is from pre-pandemic year 2015-2019.

I believe if the raw material / labour cost increase, the ASP will go up as well because all manufacturers face the same problem, the net profit rate for TOPGLOV will be more or less the same.

The profit growth for TOPGLOV is mainly due to capacity growth.

The exceptional high ASP during Covid pandemic is just a big bonus from the sky.

pjseow, I think MARGMA prediction on the post pandemic ASP 40-60% higher than the pre-pandemic is rubbish. They have own interest in it, of course try to say something positive, hopefully can help to push up the ASP.

A safer prediction is from Frost & Sullivan Report, they say the ASP will be 65.4 / 39.5 / 25.9 / 23.0 / 21.5 for years 2021/2/3/4/5.

Look at this ratio = Net Profit / Revenue for the past 5 years before pandemic.
1) FY2015 = 11.2%
2) FY2016 = 12.5%
3) FY2017 = 9.8%
4) FY2018 = 10.3%
5) FY2019 = 7.7%

To play safe, discard the highest i.e. 12.5%
Take average of the rest = (11.2% + 9.8% + 10.3% + 7.7%) / 4 = 9.73%

TOPGLOV said their capacity will be 205b pcs by Year 2025,
Assume their production running at 85%,
Annual production = 205b * 85% = 174.25b pcs

Frost & Sullivan Report said that the ASP will be USD21.50 by Year 2025,

Revenue = 174.25b * 21.50 * 4.1 = RM15.36b,

Net Profit = 9.73% * 15.36 = RM1.49b,

EPS = 1.49b / 8.02b = RM0.186

The fair PE was around 30 times before pandemic,
Therefore the fair price for TOPGLOV in Year 2025 = 30 * 0.186 = RM5.58,

We buy TOPGLOV at or below RM5.58, enjoy the high dividend yield for the next few years and very likely we can sell it at the same price RM5.58 in Year 2025.

How nice?

KMLOONG is more like a Palm Oil Mill than a Oil Palm plantation company, expensive FFB come in and expensive Palm Oil out, the profit margin will not increase too much.

You should also look at BKAWAN, a better choice than KLK.

Look at the numbers tell you the story, i.e. the YoY of FFB production:

JTIASA:
2018: +2.0%
2019: +4.6%
2020: -18.2%

SOP:
2018: -2.5%
2019: +0.1%
2020: +1.2%

TAANN:
2018: -1.5%
2019: +2.7%
2020: -5.1%

SWKPLNT:
2018: +3.4%
2019: +14.4%
2020: +21.3%

The above 4 companies have estates only in Sarawak, so good for comparison, because they face the same weather, workers and etc.

Now, look at big company KLK which have estates in Peninsular, Sabah and Indonesia but none in Sarawak.

KLK:
2018: +4.0%
2019: -0.8%
2020: -1.3%

Good Info.

https://klse.i3investor.com/blogs/gambler/2021-02-06-story-h1540987203-SWKPLNT_Growth_and_Dividend_Play.jsp

Growth and Dividend Play.

Aiya.

Except for leap year, all February have 4 S/M/T/W/T/F/S days.

What a joke!

The profit margin will sure eventually drop back to a reasonable level.

Therefore,
We should not use the current EPS and say the PE ratio is cheap,
we should not also use the future EPS and say the PE ratio is too high because we should consider the extra profit earned during the very good timenow.

So in my opinion, we should use discounted model which capture both.

I think all the 4 glove kings are overpriced. Take HARTA for example, market cap per annual production is around RM1.00 per piece of glove produced. Recently KLK said they are venturing into medical glove (currently produce non-medical gloves). By investing 200 million, they can produce 4.5 billion PCs annually, meaning RM0.05 per piece of glove produced. RM1.00 compare to RM0.05, that is 20 times difference. We may say HARTA is better in term of efficiency and profit margin, but a 20 times difference is too much. Some more KLK has rubber estate, and its mother BKAWAN now already acquired CCM, and have all the chemicals for glove manufacturing.

No doubt the demand for gloves will keep growing.
However, there will be more new companies venturing into glove manufacturing.

For example, KLK has been producing gloves, and now expanding to medical gloves.
By just investing 200 million, they will produce 4.5 billion pcs a year.

Look at SUPERMX latest quarter result, PBT/Revenue=1049/1353=77.5%.
No business can maintain that kind of profit margin for many quarters.
Very soon the margin will drop to a more reasonable level.