Posted by Robert Love > Feb 5, 2015 02:10 PM | Report Abuse
In essence, F (E(x)) is not the same as E(f(x))....

Wow, F (E(x)) is not = E(f(x))!

What the f is that?

And Robert oh Robert, when are you going to carry out your Monte Carlo simulation on the distribution of the growth rate to estimate the intrinsic value of Tien Wah?

What the f, I though using Monte Carlo simulation on share price of a stock is already mind boggling to all of us here, not to say apa itu Morte Carlo simulation on the distribution of future growth rate!!!!

OMG!!!


Posted by Robert Love > Feb 5, 2015 02:08 PM | Report Abuse

Instead of assuming a certain deterministic value of growth rate for Tien Wah, one should actually use a distribution of growth rate, and examine the impact of this distribution of growth rate on the final valuation, i.e. via Monte Carlo simulation...

It is all written in the book by Sam Savage..

http://web.stanford.edu/~savage/flaw/

Posted by Tey Tian Foo > Feb 5, 2015 03:36 PM | Report Abuse

KC, Good report. Just one question. The Fix Asset at RM570 Million. Huge !! How many years is the depreciation base on? 5, 7, 8 or 10 years?


I am no accountant. I think PPE life span probably 5-10 years? For London Biscuits, I doubt the life span or the depreciation method matter as they buy and sell huge amount of PPE every year. So there will be huge amount of capex and add back of depreciation to make cash flow from operations pretty, but persistent negative free cash flow, and hence persistent right issues and private placement, and of course continuous borrowing every year. A very interesting management action indeed.

While I welcome constructive criticism very much, but

1) What is the relevancy of the following comment on MRCB warrant?

2) What has your favorite Tien Wah to do with warrant and its valuation?

3) Which part of my valuation of Tien Wah used the assumption of average growth in the future like this:

3%, 4%, -2%, -5%, 4%, 5%, 5%

4)Which valuation of which stock did I used "average" future growth assumption?

5) Thanks for your great recommendation of your "flaw of averages". Looking at the title I thought do I really have to read the book to know what is the flaw of averages which seems like 1 2 3 to me.



Posted by Robert Love > Feb 4, 2015 09:22 PM | Report Abuse

I think you have made a fundamental error in all your analysis because you have made the mistake called "the flaw of averages".

E.g. with reference to your article on "Tien Wah Valuation", you assumed that a company can grow certain average rate of growth annually. But, it will never happen in reality!!!

e.g. 3%, 4%, -2%, -5%, 4%, 5%, 5% ---- Growth Path 1

e.g. 2%, 2%, 2%, 2%, 2%, 2%, 2% --- Growth Path 2

The average of the above 2 series = 2% per annum.

If one were to apply the above 2 different path of growth rates to derive valuation for Tien Wah, one would end up with 2 totally different valuation!!!

Welcome to the world of "Flaw of Averages"...

http://flawofaverages.com/

Hope the writer can go and read up on the book "The Flaw of Averages" :)

Posted by Robert Love > Feb 5, 2015 11:18 AM | Report Abuse

it is not about forecasting growth. It is about using probabilistic management to manage uncertainty in valuation analysis...


Robert, perhaps you could share with us your "using probabilistic management to manage uncertainty in valuation analysis." in any of the stock you are familiar with.

I am dying to see your prowess in the above.

Btw, please explain what you mean first. I am with a head full of dew water now.

Robert oh Robert,

Still harping on Tien Wah? OMG, others have moved far ahead already!

Anyway, I find your posting below which appears in a couple of my threads, classic, absolute classic!經典

I didn't know people can forecast future growth like you did:

[3%, 4%, -2%, -5%, 4%, 5%, 5%]

Classic, absolutely classic! Can't help saving your post below.



Posted by Robert Love > Feb 4, 2015 09:18 PM | Report Abuse

The above article made a serious flaw. It assumed that Tien Wah can grow at a certain average rate of growth annually. It will never happen in reality!!!

e.g. 3%, 4%, -2%, -5%, 4%, 5%, 5% --- Growth Path (1)

e.g. 2%, 2%, 2%, 2%, 2%, 2%, 2% --- Growth Path (2)

The average of the above 2 series = 2% per annum.

If one were to apply the above 2 different paths of growth rates to derive valuation for Tien Wah, one would certainly end up with 2 totally different valuation!!!

Welcome to the world of "Flaw of Averages"...

http://flawofaverages.com/

Hope the writer can go and read up on the book "The Flaw of Averages" :)

Posted by YiStock > Feb 3, 2015 10:46 PM | Report Abuse
Hi mr kcchongnz, u have picked fibon in your 2nd portfolio in 2013. However, i did some analysis and found that the company is deteriorating since 5 years ago till now except for zero debt and have 20 million cash. Do u mind to share the reason u picked this fibon? Thank you

I wrote an analysis and published in i3investor here:

klse.i3investor.com/blogs/stock_pick_challenge_2013_2h/34374.jsp

Basically it fits my Magic Formula investing strategy.

The question is does it still fit the Magic Formula?

Yes, it still does as I described in this recent post:

http://klse.i3investor.com/blogs/kcchongnz/68009.jsp

[Posted by truthseeker1 > Feb 3, 2015 10:32 PM | Report Abuse
So many perform better than him. Why need to follow him? Who is as boastful as him in i3?]

Yeah ah why you follow me everywhere ah? Me boastful? If I am not "boastful" to people like you, who then?

[Posted by truthseeker1 > Dec 21, 2014 05:21 PM | Report Abuse
Got few of KC Chong recommendations now 40% capital loss.
What I know is Prk Corp, BIMB-W, MRCB-W, what else. ]

[Posted by truthseeker1 > Oct 18, 2014 08:53 PM | Report Abuse
Maybank C6. Recommendation time 10.5sen. Now 4.5sen Loss 6sen. If follow KCChong advise to invest 960,000shares at 10.5sen, Maybank C6 value will drop to RM43,200 a loss of RM57,600 in less than 2 months. Stock market is not a place for fun(last paragraph), genting casino or gambling is. KC why so quiet on this blog?]

By the way, you haven't responded to my reply to your post above as below:

[Posted by kcchongnz > Oct 19, 2014 04:39 AM | Report Abuse X
Posted by truthseeker1 > Oct 18, 2014 08:53 PM | Report Abuse
Maybank C6. Recommendation time 10.5sen. Now 4.5sen Loss 6sen. If follow KCChong advise to invest 960,000shares at 10.5sen, Maybank C6 value will drop to RM43,200 a loss of RM57,600 in less than 2 months. Stock market is not a place for fun(last paragraph), genting casino or gambling is. KC why so quiet on this blog?


Truthseeker? Another new name? I think Troll suits you the most as mentioned by someone before. Take this identity.

How to seek truth when you have been lying and throwing wild accusations instead of contributing something useful in i3investor?

How to seek truth when you have anger and hatred in your head?

How to seek truth when you can't even understand simple English as written in the post?

How to seek truth when you can't grasp the right message in the article which anybody who reads English would be able to? Although of course I don't expect you to understand what a derivative is, and how it works.

How to seek truth when you can't differentiate "Recommendation" and "Discussion of issues"?

How to seek truth when you can't differentiate "Recommendations" and sharing and discussions?

By the way where did you find the word "Recommendation" to buy that call warrant?

Where did you find the phrase "KCChong advise to invest 960,000shares at 10.5sen"?


Finally you did cite something from my article as below:

"Stock market is not a place for fun(last paragraph), genting casino or gambling is"

But why didn't you cite the complete paragraph of mine as below?

"Punters are reminded that this is not an even playground for most people, including you and me. However there may be some fun here as long as you take the financial risk management approach as described above."

What are the true messages behind the complete paragraph? Punters, "not an even playground", "fun". "risk management approach".

Why you so stupid, couldn't understand a thing what i wrote and "invest 960,000shares at 10.5sen on Maybank C6" and lost RM43200, and rant here for some stupid actions of yourself?

Hey, is that the best you can do to try to put me down again? I have written 77 posts in i3investor and posted 4030 comments. Still can't find something, instead of showing your stupidity here?]

Posted by ks55 > Feb 3, 2015 03:58 PM | Report Abuse
Out of 12 counters, 6 green, 6 red. 50% chances make profit. 50% chances make losses.

As I can see it is a diversified portfolio of 24 stocks made up of 80% of earnings based stocks of various industries, and 20% of asset-based stocks, and a couple of company warrants too. There are more than enough stocks for diversification purpose for a retail investor. If more than that will be diworsification then.

As at to date, there are 18 greens (not 6) and 6 red. That means that 75% of them are in positive territory, not 50%. The average return is 8.42% after one month. Not too bad when compared with the return of the broad market of just 1.13% during the same period. 10 of them have double digit return, while there is none with double digit losses.

Of course it is far off from the top contenders of the contest going on now.Many of those portfolios fared much better.

Return of a month's period is not what a value investor looking at, not even one year, two years. Value investors talk about 5 years, 10 years and even 20 years. That is why I always talk about investing to build long-term wealth. So let us not focus too much on short-term return.

The portfolio of stocks was actually left over from the last three portfolios I have had and posted in i3investor. All the reasons why they were retained as stocks in this portfolio were deliberated with all the reasoning and arguments. It will be more productive if one can comment constructively about the rationales behind rather than talking about stock price performance, especially in such a short term of one month. In that way, everyone will learn better.

Posted by shrobin > Jan 30, 2015 07:57 AM | Report Abuse

KC, can you comment on Insas up and coming warrants? The rights for RPS is still on trade at the moment. The RPS comes with two free warrants! Thank you.

There are good discussions in Insas thread in i3investor. A few of forumers are well versed in it; mililia. Koay, Gweilo, Oregami etc.

My opinion on Insas is a question; how come the market gives such a low valuation for Insas and its derivatives? Or is there a forced selling on Insas?

Posted by CFTrader > Jan 28, 2015 11:54 AM | Report Abuse
Hi , kcchongz. Do you feel that Black Scholes theory do not quite "suitable" apply in M'sia market ?

There are two basic kinds of theories; theory on physical matter and theory on finance and investment. Physical theory applies everywhere in the world, and finance and investment theories often do not apply anywhere in the world.

To me,Black-Scholes OPM is just a guide. One can't know the value of something without having a feel of something, can he?

Posted by paperplane > Jan 27, 2015 08:00 AM | Report Abuse

Hi kc, what do you consider high gearing ratio range. Isnt higher the better. Is multiply effect better.


Yes, the higher the gearing, the better is the warrant as the higher the potential gain because of the leverage effect. The maximum loss remains the same as your initial outlay

"Green came out from the Blue, and better than the Blue"

What do I think about the Malaysian market. I don't know lah. there are many people here who know better than I.


All I know is if a stock is cheap, I buy. Expensive, I sell.

Posted by truthseeker1 > Jan 20, 2015 03:45 AM | Report Abuse
If takeover of BIMB as some speculated in bank merger will the acquirer pay premium for warrant holders?


The above question appears to be much more sensible than his and his accomplice comments a month ago below.

[Posted by truthseeker1 > Dec 21, 2014 05:21 PM | Report Abuse
Got few of KC Chong recommendations now 40% capital loss.
What I know is Prk Corp, BIMB-W, MRCB-W, what else.

Posted by ravichung > Dec 21, 2014 03:10 PM | Report Abuse
I bought Homeriz as recommended by KC Chong. But i was totally dissapointed to see it stagnant while other furniture stocks not favored by him gone up doubling in value. I will never again believe him

Posted by ravichung > Dec 21, 2014 05:24 PM | Report Abuse
See.. i am not the only one who know
Posted by truthseeker1 > Dec 21, 2014 05:21 PM | Report Abuse
Got few of KC Chong recommendations now 40% capital loss.
What I know is Prk Corp, BIMB-W, MRCB-W, what else.

Posted by truthseeker1 > Dec 21, 2014 05:23 PM | Report Abuse
Maybank C6. Please refer to his blog. ]


So I have decided to answer his sensible question with some questions.

1) So BIMB merging with another bank?
2) which bank taking over BIMB, or who is the acquirer?
3) where is your source?
4) What is the likelihood of this speculation?
5) what is the price offered, from which bank to which bank?
6) What "premium" you are talking about?
7) So what do you thin about your own question?

Posted by paperplane > Jan 18, 2015 09:35 PM | Report Abuse
My point is not using nnwc alone. My first priority is always look at holders, who are controlling behind, their mgt, also the percentage of top 30%.

http://klse.i3investor.com/blogs/kianweiaritcles/68676.jsp

Posted by kancs3118 > Jan 19, 2015 10:38 AM | Report Abuse

Hi KCChongnz,
What is the meaning of
"Gadang is not a Graham net net stock. It appears to be inexpensive earnings wise at the price you mentioned."
Care to elaborate? Also, how do we value the earnings?

Read the article here again and understand what Graham net net is.

There are numerous ways of estimating the intrinsic value of a stock. Some of them are listed here:

http://klse.i3investor.com/blogs/kcchongnz/68009.jsp
This talks about ROIC and EY

http://klse.i3investor.com/blogs/kcchongnz/67260.jsp
This talks about some simple ratios but very useful and back of the hand.

http://klse.i3investor.com/blogs/kcchongnz/56316.jsp
This uses discount cash flow analysis

Posted by paperplane > Jan 18, 2015 09:35 PM | Report Abuse
My point is not using nnwc alone. My first priority is always look at holders, who are controlling behind, their mgt, also the percentage of top 30%.

Sure sure, everyone has his own investing strategy. NNWC is just one of the proven successful investing strategies to utilize in a diversified portfolio of stocks which I have provided evidence.

I also know about other proven investing strategies such as Greenblatt's Magic formula, low PE, low P/B, Low market cap, Jockey Stocks, Follow the leaders, etc but I have never heard of any proven successful strategy by looking at the controlling shareholder, management and the top 30 shareholders.

I only mentioned and provided facts that Kuchai is a dirt cheap negative enterprise value stock. Hope you understand what I mean. And may be it is worthwhile to be patient investing in it. I never said its controlling shareholder/management is good in taking care of minority shareholder.

Posted by kancs3118 > Jan 18, 2015 02:22 PM | Report Abuse
Hi kcchongnz, may i ask some help from you ? recently, i performed a valuation on Gadang using net net assets valuation method (ben graham) to determine the downside risk. It seems Gadang is a good buy as long as it is between RM1.30 to RM1.40. Is it ok if i email you my thinking process ? It will be great if you can access the reasonableness of my thinking...

Gadang is not a Graham net net stock. It appears to be inexpensive earnings wise at the price you mentioned.

Icon8888,

My comments are in general nature and not specific on anybody. Having said that, for those who indulged in margin financing then, I think you were an exception.

Human nature is such that once someone has tasted sweetness, few can get away from it.

Wow, just put up yesterday already made 15%! Ingenious!

I believe those people who used margin finance even up to 20% -30% will be hit very badly by margin calls in 1998, 2001 and end 2008. Many of them wouldn't be able to recover because the forced selling had diminished their chance to recover. Those who did not use margin finance had recovered and prospered.

Even those who used margin finance up to 30% were also hit very badly in a small downturn in Mid December 2014 and margin calls would have also diminished their chance of recovering. Just my hunch.

One can easily set up a spreadsheet and see the scenario analysis as shown in the link here:

http://klse.i3investor.com/blogs/kcchongnz/44344.jsp

Still want to use OPM to make money from the market? Read this latest example of FXCM leveraged losses leading to emergency rescue.

http://www.wsj.com/articles/swiss-franc-move-cripples-currency-brokers-1421371654

Anyone in the world foresaw this problem? May be one of two only.

Anyone foresaw the steep drop in oil price leading to drastic drop in share price of some even very good oil and gas stocks in Bursa by more than 50% in weeks? None!

Anyone foresaw the fast and furious drop of the stock markets in 2008 resulting the demise of this Dominion Fund, the highest Sharpe ratio hedge fund in the world in this article? Very few.

http://klse.i3investor.com/blogs/kcchongnz/44344.jsp

Still not convinced about the peril of using OPM for investing, or rather speculating?

YiStock,

Yeah as shown in your calculation, ROA, ROE and ROIC have been deteriorating. they are just marginal now.

Coupled with the bad FCF, that is why EY is still reasonably high.

Success is nothing that successful after all.

Posted by YiStock > Jan 17, 2015 03:43 PM | Report Abuse

Current FY's 3Q cash flow red flag!

YiStock,

Few people can see what you saw. Everyone talking about profit, growth etc. Who looks at cash flow?

Despite all the beautiful ROA, ROE, ROIC, EY, PE, the negative FCF of Success is too persistent to be ignored.

Red flag? Keep on showing profit figure but no cash and hence debts keeps on increasing every year. Show me the cash!

Oop the comparison chart doesn't come up. But you can use that KLCI chart and then type in 2186.kl for Kuchai in the "Compare" slot, then you see those two price movement curves. Use the "Max" period.

"I've learned that what looks like tomorrow's biggest threat almost never is. Most of what people worried about over the last five years -- inflation, rising interest rates, a double-dip recession, stagnant markets, Greece leaving the euro, a government default -- never occurred. The biggest actual risk for most of us was something few talked about: excessive pessimism." A Fool's Take

It also includes worry about the general election, PKR winning the GE, Barisan wining the election, the expensive house price, rising oil price, lower oil price, lower palm oil price, Sabah secession, kidnaps in east Malaysia, Sulu intrusion, rising Ringgit, falling ringgit etc.

Wondering why a value investor worry so much of macroeconomics and stuff he can't control at all.

Posted by paperplane > Jan 16, 2015 06:54 PM | Report Abuse
With so many shr holding in lee family. You think they will shr with you? Kuchai some ppl hold 10yrs still like this. Like facbind.

You got a valid point. Buy why do you think they are so cheap at huge negative enterprise value? Surely there must be reasons. Don't you think so?

But do you think the long term return of Kuchai is so bad? There is one way we can make an inference if it is so, ie to compare the return of the broad market during the same period. If you look at the comparison of the return of Kuchai and KLCI from the year 2000, or 15 years ago, the longest you can get from Yahoo finance, you will find that Kuchai did quite well despite the stinginess of the major shareholder. Look at the graph in the appended link below:

https://sg.finance.yahoo.com/echarts?s=^KLSE#symbol=^klse;range=5y;compare=;indicator=volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=undefined;

The graph show that since 15 years ago, the return of Kuchai is always above that of KLCI. Yes, all the time. And sometimes it is significantly higher.

Don't trust my words. Look at it yourself.

FACB unfortunately shows a complete different story.

https://sg.finance.yahoo.com/echarts?s=^KLSE#symbol=^klse;range=5y;compare=;indicator=volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=undefined;

That is why any value investing strategy, one must have a diversified portfolio, 10-20 stocks. You made from say 65%, but small loss for 35% of them, then you will do very well. Haven't I shown you the performance of many value investors in US?

The other difference between Kuchai and FACB is I think it is the business. FACB's business didn't do well. Kuchai? Kuchai has not much business except investment in equity and property, and the steady palm oil industry. That is why the value of Kuchai won't deteriorate much. In fact, it rides along with the slowly up trending market.

That is why I think Kuchai is very safe to invest, at this low price Vs value.

"Heads I win, Tails I don't lose much"

Even if Insas is above RM1, say, RM1.20 or even RM1.50, it is not wise to convert your warrant.

Value of warrant = intrinsic value + time value

Intrinsic value = Underlying share price - exercise price.

Time value? This can be huge for a 5-yr expiry date and the volatility or how violent is the movement of the underlying share..

Posted by Hotrod > Jan 16, 2015 04:39 PM | Report Abuse

Just curious. If Dato' Thong doesn't push up the price above RM1 .... whose gonna subscribe ? The underwriters have to bear a big chunk of it.


Can you pass your rights to subscribe to me? I will give you some money.

Posted by kc888 > Jan 14, 2015 11:57 PM | Report Abuse
Wow, 15% for 20 years, who can make it?

You are right. Few people can do it, very very few indeed. I doubt any fund manager in Malaysia can claim it too.

But there is a bunch of people who did it, and did it convincingly:

http://klse.i3investor.com/blogs/kcchongnz/50988.jsp

This group of people made a return ranging from 18.2% to 29.5% a year for a long period of 13 to 28 years, or an average of about 23.5%.

Joel Greenblatt's Magic Formula made it at 23.8% a year for 22 years:

http://klse.i3investor.com/blogs/kcchongnz/51631.jsp

Water Schloss made 20% a year for a period of almost 5 decades.

Who else had done it?

Warren Buffet, Seth Klarmen, Mohnish Pabrai, Peter Lynch and many many others.

What is the characteristics of all these investors?

Fundamental value investing, stress free, margin of safety, value Vs price, risk management, of course.

So I can see the author of this thread can do it with his fundamental knowledge in the long term. Long term is the key word. It is only his psychology mindset which may prevent him from doing so.

Posted by Johnnys > Jan 14, 2015 05:35 PM | Report Abuse
Than How much it will be adjusted for mother share?

Sum of pre = Sum of post

Sum of pre = just mother share
Sum of post = mother share + warrant

The above relates to the "value" of the stock, not the price, in my opinion. This is because "value is what you get, and price is what you pay"

Price depends on market forces. In general value = price, but not necessary all the time.

So post value = mother share + warrant

Warrant price is related to the mother share using the option pricing. With some iterations, you get a post sum of parts of mother + warrant which theoretically equals to mother pre.

Posted by tbm65 > Jan 14, 2015 06:03 PM | Report Abuse
http://www.safalniveshak.com/smart-people-investing-five-habits-of-highly-successful-investors/
dont steal this author hard work.

Can't you differentiate between plagiarizing and using others articles with reference and expand it for sharing purposes?

Can't you see the referencing?

Posted by AzmiMerican > Jan 7, 2015 10:39 PM | Report Abuse

Theoretically there ought to be an adjustment to harga ibu, because...

Sum of pre = Sum of post

Sum of pre = just mother share
Sum of post = mother share + warrant

RPS is just like a bond yielding market rate interest. so we ignore it

why do you want to let it pass? To forgo the free warrants which will affect the value of the mother shares you hold?

posted by murali > Jan 14, 2015 05:16 PM | Report Abuse
Read carefully,the warrant refers to rps.......not the actual insas warrant

Murali,

RPS stands for Redeemable preference share. It is a preference share, redeemable by the company. It is not a warrant.

Preference shares have the right to get interest before the common shareholders get. And it has no voting right. And in this case Insas RPS has no other claim over the company except the dividend, or interest.

Posted by Johnnys > Jan 14, 2015 05:05 PM | Report Abuse
KCchongz, 5 for 1 PRS and free 2 warrant, mean I need buy 1 more PRS from market to convert 2 warrant for 2 mother share?

You are right. Or you no need to buy another RPS. Just use another RM1. The RPS acts like a bond. Itself can't be converted to mother share, but can be used as cash to convert the warrant to mother share. imoogi99 explained it well.

Posted by imoogi99 > Jan 14, 2015 05:08 PM | Report Abuse

Read page 5 to page 9 of the prospectus.

1 warrant + RM1 = 1 Insas share OR
1 warrant + 1 RPS = 1 Insas share.

Posted by Andre Kua > Jan 14, 2015 04:50 PM | Report Abuse

Kcchongz, are you sure no need to up RM1 to convert to mother share? Where you find such info? No need pay then Insas should be RM2 now. LoL...


imoogi99 is right I think. You can use your one RPS to convert one warrant to one mother share, not two warrants to two mother shares. The other warrant you can use another RPS or RM1.00 cash to convert.

I vote for the best posts here today.

Posted by oregami > Jan 14, 2015 01:18 PM | Report Abuse

It is unfair to say tat. Insas does has its value. It is one of the cheapest (fulfilling Graham NNWC) stocks in KLSE. Besides, it has the highest ROE among all the Graham NNWC counters. One might wander why on earth a company tat can utilize its assets efficiently can be traded tat cheap? If you look at all those Graham NNWC stocks, all have non performing assets (low ROE).

Posted by imoogi99 > Jan 14, 2015 04:24 PM | Report Abuse

Hmmm....prospectus is very detail but some people refuse to read and starts calling name.

Actually the RPS is more of borrowing money from the shareholders. You pay RM1 for the RPS, you get 4sen dividend annually. At the end of 5yrs, you get back the RM1. In addition you get 2 free warrant to cover the future value lose of your RM1. If you have the warrant and also the RPS, you can exercise your warrant (convert to mother) without paying the RM1 exercise price.
So you basically nothing to lose unless the Insas share price goes zero....lol!

Posted by Intelligent Investor > Jan 14, 2015 02:47 PM | Report Abuse

Hi Jester,

Mr. Ooi is a well respected TA guru. I think he is far better than me.

And, I think your return is good - http://klse.i3investor.com/servlets/pfs/41632.jsp


This is the kind of "student" I aim to produce, if II is willing to treat me as a teacher.

Posted by lepaklangkawi > Jan 13, 2015 10:28 PM | Report Abuse
Hi KC. TQ for sharing.
Couple of questions

1) BIMB-WA. With the maturity so far out in future, is it ok to 'but-and-hold' these warrants?

You have to know about what make up the value of an option, and how to estimate them:

Value of an option = intrinsic value Plus time value

2) FIBON.
The public shareholding spread is an issue here. How much, if any an impact is this having on liquidity and price discovery?
The company has got into the factoring business. Why is a high-tech polymer manufacturer venturing into such business?

Me: I am an investor, not a trader or speculator. So shareholding spread, liquidity and price discovery (?) are not that important.

I am just a small time investor, not in the management in Fibon, neither am I a professional analyst. You should ask them. For me I find that business is insignificant.

3) Kuchai.
Does it not concern you that such a good company on paper, does not seem concerned about dividend distribution or buybacks?
And does this not affect liquidity/price discovery?

Me: If everything is good about Kuchai, will it be trading at this price?

Posted by stockraider > Jan 12, 2015 10:48 AM | Report Abuse
RAIDER COMMENT
THIS MARGIN......RAIDER HAS BEEN USING FOR A LONG TIME.........IMAGINE....U CAN GET RETURN OF 10% TO 20%.....AND U BORROW FROM THE BANK 5% TO 6% PA.....THIS MEAN U R ENHANCING YOUR BUT IN A BEAR MARKET...WHERE ALMOST ANYTHING SELL OFF....IT QUITE RISKY LOH.....!!

Borrow at 6% and get a return of 20% a year for a net gain of 14% a year. Yes very logical. So where do I sign? Investment bankers somehow are very kind and willing to lend you that money for you to make that extra-ordinary profit instead of them doing it themselves.

For the last 5 years, KLCI has gone up from 1300 to 1730 points now. The compounded annual gain is 5.9% a year, just short of the 6% of interest charges for margin financing, not forgetting the upfront set up cost of 1% and other administrative charges. And what do you think of the market the last 5 years? I would think it has been a good market, and not an average market.

This means that what an ordinary investor get is just enough to pay bank charges. The only extra in a good market is the annual dividend estimated to be around 2%-3% a year. Is 2%-3% return commensurate with the risk a margin financing investor gets? You tell me.

Of course many investor will tell you that they are above average investor, and not an ordinary investors. Every investor seems to think that he is much better than an average investor. Does this sentence make sense?

Don’t get me wrong, I sincerely believe those saying they made more money in this thread here by borrowing money to do it, did make it. But they aren’t average investors.

Posted by Johnnys > Jan 12, 2015 08:10 PM | Report Abuse
Dear KC, regarding the Padini, do you think it a lot affected by GST?

GST will affect sales. Not only GST affecting Padini, the competition in this industry also seems to take its toll on Padini with its share price falling quite substantially the last couple of years.

However, for value investor, this is precisely the time to invest in companies with proven management skill and care for shareholders when the price is severely beaten down. You can refer to its ROIC and EY which I have computed.

Yeah, value investors have different investment mindset and strategies compared to momentum investors as one of the investment thing they believe is mean reversion.

Classic example of the pitfalls in investing in Bursa. Well done M Wind. We missed "Where is Ze Moolah too, don't we?

It reminds me of this post of mine also:

http://klse.i3investor.com/blogs/kcchongnz/45373.jsp

I am very happy that my this old post attracted a number, all of them, very high quality comments and criticisms. There are indeed a lot of very knowledgeable investors in i3investor.

First I thank SapuMalaysia’s appended chart, http://klse.i3investor.com/blogs/ss2020_vaInv/61899.jsp.

This chart is extremely useful and I will “leverage” it later for some of my future articles to share. That is one of the great advantage of leverage, but not leverage with margin financing.

Eleven occasions of serious drops in Bursa in 30 years of an average of 42.3%, or at least once in three years does sound very frequent and scary to me. For those who embark on margin financing, don’t you think so? Can you imagine the consequence if this happens when you are with margin financing at the peak of one of these cycles? I believe most probably margin financing was used at the market euphoria when people got greedy, and not at the low end of the market when it was full of fear. In any of these cases, most likely the equity of the one engaging in margin financing would have gone to zero or even negative. Few recovered.

[Posted by ks55 > Jan 12, 2015 12:34 PM | Report Abuse
Remember how people get bankrupt during 1996 when market was still good? All because of margin trading. Everybody taught market was the place to get easy money with margin.
Those still were with margin in 97/98 all went holland. Hardly see any left today. Mostly bankrupt.]

[Posted by lcwin > Jan 12, 2015 06:31 PM | Report Abuse
Anyway almost all the people I know got totally burned bcos of margin during the 1998 so I talk from experience.]

[Posted by matakuda > Jan 12, 2015 10:08 PM | Report Abuse
If u asked me what is the best sentence to sum up my 2014, I would say this above title]

The problem is research has shown that nobody can predict correctly in a statistical significance when the market turned.

On the other hand, if you were investing for the long term, you can see from the chart that market always recovered and you would have a satisfactory positive return in the long term. The positive return could be amplified with some good fundamental investing strategies.

[Posted by stockraider > Jan 12, 2015 10:48 AM | Report Abuse
RAIDER COMMENT
BUT U SHOULD..NOT too fear!!....DESPITE BEAR!!....Bcos MARKET MAY.....RECOVER & REBOUND...VERY QUICKLY.WITHOUT U.....KNOWING........LEAVING U BEHIND........!!
SO U MUST NOt BE TOTALLY OUT OF STOCK.........ALWAYS have SOME MARGIN OF SAFETY STOCK..........THAT CAN WITHSTAND........!!]

[馬雲：今天很殘酷，明天更殘酷，後天很美好，絕大部分人死在明天晚上]

So what course of action do you think you would take in investing?

Tan KW,

Thanks for putting up the portfolio.

However, I would like to reiterate that it is more for sharing of investment methods and strategies. Notice that I have never asked anyone to buy or sell any share I wrote about but just share the fundamentals of investing.

Appreciate constructive feedback.

There are three group of investors; the not-much-money, the average, and the rich.

the not-so-much-money can't get margin financing. No need to talk.

The average one can get margin financing and they are the ones who wish to make more money using OPM. Unfortunately most of them got caught when the market is in euphoria and due to greed wanting to get rich fast, they obtain margin financing from the "good and friendly" investment bankers when stocks seem to be flying. However, that is the time most of them were caught, and when the market turns badly. Note that market always revert to the mean. I have a couple remisier friends still working very hard after retirement age, just to slowly paying back their debts.

The rich has no problem getting margin financing. The investment bankers will crawl to them to beg them to get margin financing from them as they are extremely happy to help the rich make big money and become even richer. But market can turn any time as usual, and can be very fast and furious too like in 1996 (second board) 1998 (Anwar fiasco), 2001 (Internet bubbles), 2008 (US sublime crisis) and many times before those. So like ks55 said, it can be very stressful.

But I really cannot understand is, if you are so rich that you have no worries of survival even for your next generation, why do you want to subject themselves to this type of stress and risk losing all you have now?

“I don’t like stress and prefer to avoid it" Walter Schloss

that is why I like ks55's comments

Posted by ks55 > Jan 12, 2015 12:34 PM | Report Abuse

Remember how people get bankrupt during 1996 when market was still good? All because of margin trading. Everybody taught market was the place to get easy money with margin.
Those still were with margin in 97/98 all went holland. Hardly see any left today. Mostly bankrupt.
Were you one of the lucky one still survive? Then you will do well in 2015/16.

Posted by ks55 > Jan 12, 2015 12:38 PM | Report Abuse

No OPM please no OPM.
Buy with OPM will land you sleepless night each time DJ down by 200 to 300 pts.

馬雲：今天很殘酷，明天更殘酷，後天很美好，絕大部分人死在明天晚上。

Warren Buffet said:

3. Learn How to Read Financial Statements
4. Focus on Saving, Not Getting Rich Quick
5. When Stock Prices Drop, Buy — Don’t Sell

"Charles, what say you?"

Charles Munger, "I have nothing to add".

But the question now is is 80 sen a true value of Insas.

I believe at this price it is way undervalued. The depressed price could be many reasons:

1) Foreigners are selling at any cost
2) Some panicky punters are selling
3) Some momentum players are selling
4) Some margin players are forced selling
5) Investors do not trust the management
6) etc etc etc

Just wild speculating the reasons.