The author has given his reasons for including this stock in his portfolio. He even provided an intrinsic value of the stock using the earnings power valuation method. So if you have any different view, he is very happy to hear your side of the story. Please shoot.

do you need a "catalyst"?

Posted by gloomberg > Aug 23, 2013 12:11 AM | Report Abuse
I've just read through the annual report, and honestly speaking despite the slightly above par performance matrices, I don't see any catalyst for this company, on top of the HUGE customer concentration risk of BAT, come on, it's around 60 to 65% of their revenue. The discount rate ought to be adjusted higher to account for that.


The Perversion of the Investment Catalyst

Most stock articles you read always include some sort of upcoming catalyst that is going to propel the stock higher. But to only invest in stocks with clear catalysts defeats the purpose of value investing.

Catalysts are not important, nor is it required for an investment.

Take it from the man who defined value investing, Ben Graham. He just wanted one thing and spent his days searching for it.
Cheap stocks.

Warren Buffett also wants to buy one thing.
Awesome companies.

Neither mentioned anything in any of their writings about seeking a catalyst to make a successful investment. In fact, they told you the opposite.
Sit and wait they said.

The problem is that sitting and waiting is torture today. There has to be action. There has to be fast moves up and if something doesn’t play out within a few months, it’s a dud and not worth keeping any longer. “Next!”

Investors today lack assiduity. That’s Charlie Munger’s technical term for sitting on your ass and doing nothing.

If you must seek a catalyst, remember that being cheap itself is a catalyst. That’s the number one catalyst which always gets ignored because it’s so simple and boring.

Let Mr Market do his thing and waltz around with Miss Price in his arms. You don’t have to join his dance or gaze longingly at Miss Stock Price. They are a pure vanity couple. Great looking and fun to be with but horrible to live with.

Having a catalyst is good, but is it necessary?

No.

You make money by waiting.
Monish Pabrai

This post was first published at old school value.

ok ok, we mark to market. KNM's fair marked to market value should be RM 1.20. Its marked-to-market earnings this year should be 500m.

Posted by eSdM > Aug 23, 2013 02:47 PM | Report Abuse

MTM or fair value accounting... also applies to mfg cos...

fair value can b arrived at from future benefit tat d asset can generate... not neccesaary to hv a market...

so if d asset giving rise to d goodwill for example cannot make future profit anymore.. d fair value of d goodwill is 0... n to b written off

look at d respective accounting policies la.......


So are you talking about "fair value accounting" or "marked-to-market" accounting? And what "future benefit" the asset can generate? From which assets, how much future value?

Be specific lah!

Posted by eSdM > Aug 23, 2013 02:23 PM | Report Abuse
kcc... i suggest u look thru knm audited financial statement to find out hw it applies MTM on its assets n liabilities....

KCC... SEEMS EVERYONE CAN TELL FROM D FINANCIAL STATEMENTS BORSIG IS MAKING PROFITS N IMPORTANT TO KNM...... EXCEPT U... WAT... DONT KNOW HOW TO READ FINANCIAL STATEMENTS KA??? ; )

You see i don't know how to read financial statement mah. So can you enlighten me how "it applies MTM on its assets n liabilities...." and tell me the secrete of the magic how KNM marked-to-market its assets and liabilities (is KNM an investment company, a bank, an insurance company etc) and makes it earn a lot of money?

May be I can learn new things from you because what I know about marked to market may be out-dated already oh.

This is what I know about marked to market. a company's assets can be marked to market. Especially for banks and investment companies which their assets are like loans, public securities etc which have market values and hence can be sold at those market values.

Earnings marked to market? Never heard of!

KNM's assets marked to market? Can KNM sell its intangible assets, receivables, plant and equipment to the market at market price? What market price, is there?

Definition of 'Mark To Market - MTM'
1. A measure of the fair value of accounts that can change over time, such as assets and liabilities. Mark to market aims to provide a realistic appraisal of an institution's or company's current financial situation.

2. The accounting act of recording the price or value of a security, portfolio or account to reflect its current market value rather than its book value.

3. When the net asset value (NAV) of a mutual fund is valued based on the most current market valuation.

The trailing twelve month results just announced shows revenue and earnings has increased by 11% and 15% respectively. Just two quarters, CFFO is already 14.5m, fantastic. Plenty of FCF. Should expect higher dividend payment this year.

Operating numbers improved further with ROE and ROIC at 24% and 53% respectively. Fantastic.

But with these good numbers and cash flows and growth, how much Willow is selling? At 53 sen now, PE is only 7.4. Better still, enterprise value is just 4.3 times ebit. Damn cheap.

Posted by eSdM > Aug 23, 2013 01:02 PM | Report Abuse
kcc... I say.. nowaday d in thing is.. forward guidance...

YOU COULD GET HUGE AMOUNT OF FORWARD GUIDANCE FROM GENERAL LEE, JUST LIKE ALL THESE YEARS. NOT FROM ME. BTW, GENERAL LEE HAS BEEN GIVING GUIDANCE EVERY YEAR TO ANALYST AND THE MEDIA. YOU SHOULD KNOW WHAT THAT AMOUNT TO AFTER ALL THESE YEARS.

n things r moving so fast nowaday... everythings is mark-to-market.... ie mark-to-NOW.....

MARKED TO MARKET? WHAT MARKED TO MARKET? KNM'S EARNINGS MARKED TO MARKET? NO UNDERSTAND.

huge >100 years US banks insurance cos... whc hv perfect records for d past 100 years jz closed shops jz like tat o....

NO UNDERSTAND THE ABOVE STATEMENT.

BUT LOOKING AT THE SHARE PRICE PERFORMANCE OF KNM RECENTLY, I DON'T THINK THE RESULT FOR THE NEXT QUARTER IS PRETTY. INSIDERS ALREADY KNOW WHAT THE RESULT WILL BE.

Posted by eSdM > Aug 23, 2013 12:33 PM | Report Abuse
kcc... d past is d past.... u hv d habit of looking at d past.. looking at d pass few years accounts....
jz for once... b forward looking... tell u wat u think knm qtr 2 result wil b like... YS1 says 30m... wat do u think???? TQVM

WOW, YOU ARE GREAT. YOU CAN SEE THE FUTURE. YOU SURE HAVE A GREAT FUTURE!

FOR ME THE PAST OF KNM TELLS ME A GREAT STORY ABOUT KNM. ITS PAST NOT ONLY RHMYES. IT KEEPS ON REPEATING.

Posted by eSdM > Aug 23, 2013 12:16 PM | Report Abuse

so it is settled thn.. tat i m not speculating abt borsig... n d financial statement is actually not tat NO TRANSPARENCY as u said... jz nid to know whr to look.....

YOU ARE RIGHT HERE. I WAS WRONG BECAUSE I WAS LOOKING AT THE UNAUDITED ACCOUNT AND THE INTERIM RESULTS. ACTUALLY THEY SHOULD BE TRANSPARENT ALSO IN ALL REPORTS.

another mistake.... d financial statement also stated borsig is 100% subsidiary ok knm.. so hw can i b shareholder of borsig?/!!

YOU MUST BE ABLE TO READ BETWEEN THE LINES. I ASKED IF YOU THE SHAREHOLDER OF KNM OR BORSIG IS TO TRY TO TELL YOU IT IS THE FINANCIAL STATEMENT OF KNM WHICH IS OF IMPORTANCE TO YOU. BORSIG MAY BE MAKING MONEY BUT IT IS ONLY A SUBSIDIARY OF KNM. IT IS THE CONSOLIDATED FINANCIAL STATEMENT OF KNM WHICH YOU SHOULD BE MORE CONCERN WITH.

Posted by eSdM > Aug 23, 2013 11:48 AM | Report Abuse

kcc.. so hv u taken a look at note 30 of knm 2012 financial statements to find d answer to ur question below???


HOW DO YOU KNOW HOW MUCH INCOME BORSIG IS GENERATING? I COULDN'T GET THE DETAIL FROM THE FINANCIAL STATEMENTS, CAN YOU? OR ARE YOU JUST SPECULATING?



ok ok think u wld doubt d analyst n management.... so thn take a look at note 30 of 2012 audited account u wil c d profit from europe segment...whc is d biggest..... n if wat u r saying... tat.. tat profit was not from borsig.. is correct.. thn wonderful.. cos tat wld means knm has other big units in europe... n borsig is actually not important....


KCC... SEEMS EVERYONE CAN TELL FROM D FINANCIAL STATEMENTS BORSIG IS MAKING PROFITS N IMPORTANT TO KNM...... EXCEPT U... WAT... DONT KNOW HOW TO READ FINANCIAL STATEMENTS KA??? ; )


Yeah lah, i don't know how to read financial statement. But want to open another thread to discuss about financial statement with me? I hope I can learn from you.

Let us start from this first. Are you a shareholder of KNM or a shareholder of Borsig? If you are a shareholder of Borsig, then nothing to talk as I have nothing about Borsig. But if you are a shareholder of KNM, I hope to get your comments of my last posting as appended here.

IT DID HAVE SOME CFFO LAST YEAR IN THE AUDITED REPORT, 54M. BEAR IN MIND CFFO IS FOR THE FIRM. FOR EQUITY HOLDER YOU HAVE TO LESS OFF THE INTEREST PAYMENT WHICH IS HUGE EVERY YEAR, 55M LAST YEAR. BUSINESS PROFITABLE? LAST YEAR MADE 80M OF WHICH 59M IS WRITE BACK OF TAX CREDIT. ALTHOUGH TAX CREDIT MAY BE CONSIDERED AS EARNINGS IN ACCOUNTING TERM, BUT IS IT "REAL' IN THE EYES OF AN INVESTOR? ANOTHER THING, I HAVEN'T TALKED ABOUT ITS LOSS IN FOREIGN EXCHANGE AND HEDGING LOSS AMOUNTING TO NOT-SO-SMALL AMOUNT OF 51M YET. SO IS KNM'S BUSINESS THAT PROFITABLE?

Posted by yongyos > Aug 23, 2013 10:09 AM | Report Abuse
We are all here is to make money and not to win in a fight to be right or wrong ...

ARE WE HAVING A FIGHT? NOT FOR ME. JUST TO DISCUSS THE FINANCIAL STATEMENT OF KNM. I DON'T INTEND TO WIN IN A FIGHT HERE (BTY AS I HAVE SAID, I AM NOT FIGHTING WITH ANYBODY. BUT KE PO A BIT MAY BE FOR MY GOOD FRIEND YUNGSHEN1 AND SOME OTHERS SAKE, HOPING THAT HE DOESN'T DIVE IN FURTHER INTO THE HELL HOLE. AN ALTERNATIVE VIEW OF KNM MAY BE GOOD FOR THEM YOU KNOW.

Right doesn't means can make money, wrong also doesn't means will lose money ...

WE ARE DISCUSSION ABOUT THE FINANCIAL STATEMENT OF KNM, WEREN'T WE? WHY MAKE MONEY LOSE MONEY? BTW, HOW MUCH MONEY HAVE YOU MADE FROM KNM?

Sometimes u know nothing maybe even better can be a better trader to make money ...

I LIKE THE ABOVE STATEMENT VERY MUCH. BINGO!

using technical analysis to trade rather than fundamental ... a different trading strategy

OH YOU ARE A TECHNICAL EXPERT? HOW IS THE TECHNICAL READING OF KNM?

Posted by TeckChuan Lee > Aug 23, 2013 02:22 AM | Report Abuse

FORMOSA PROSONIC INDUSTRIES BERHAD
FPI, 9172, RM0.68

DEC2012 REPORT, RM0.71
1. ROIC 30
2. ROA 7
3. ROE 11
4. FREE CASH FLOW, CFFO/NI 189%
5. DIVIDEND YIELD 0.06
6. NTA RM0.97, P/NTA 0.74
7. EV/EBIT 3.45
8. EARNING YIELD 29%
9. PRICE/BOOK VALUE 0.74

ANY SECOND THOUGHTS?


Not bad a company. but you have to look at average for the last few years, which I believe is still good.

Posted by charan das > Aug 23, 2013 07:52 AM | Report Abuse
kcchongnz --- your recommendations are all scattered arround on the above discussion,, can you summarize on your strong picks please?

did i recommend anything here? i thought i was just giving my views on the companies' business when asked?

aiyoh, i got so much time meh to summarise?

Frank, yeah, it is coming, oh coming.

Another property and construction company?

Posted by jcck79 > Aug 22, 2013 03:05 PM | Report Abuse
kcchongz can you analyze for me the stock for Lien Hoe? this stock make a turn around last year after poor performance last few year's is it a good buy at current situation?

Are you sure Lien Hoe turnaround last year, or it was sale of an asset. A company cannot have a profit of 95m with a sale of 34m (4th quarter last year).

I won't bother on a company making losses every year.

Posted by yongyos > Aug 22, 2013 10:58 PM | Report Abuse

To clear some points here:

1) KNM audited reports signed by KPMG, one of the biggest audit firm in the world, so we should not doubt on its audited reports unless u have doubt on KPMG's professionalism

DID I SAY I DOUBTED THE AUDITOR'S PROFESSIONALISM? DID I SAY I DOUBTED THE AUDITED REPORTS? I MERELY STATE THE FACTS, FACTS APPEARED IN THE FINANCIAL STATEMENTS; THAT THE EARNINGS QUALITY IS VERY POOR WITH LITTLE (AUDITED REPORT) AND NO (THE UNAUDITED REPORT)CASH FLOWS FROM OPERATIONS; AND ITS CONSISTENCY FOR WITHOUT ANY FREE CASH FLOW. ITS ASSET QUALITY IS VERY POOR WITH HUGE AMOUNT OF INTANGIBLES AND RECEIVABLES. BY THE WAY, THERE ARE MANY LEEWAY FOR ACCOUNTANT TO PRESENT HIS FINANCIAL STATEMENT. SO DON'T TAKE THAT AS ABSOLUTELY PRESENTING THE TRUE PICTURE, ESPECIALLY FOR COMPANY LIKE KNM.

2) Based on KNM audited reports, it generated positive operating cashflow ie. its business is profitable and Borsig from Europe contributing most of the company's profit.

IT DID HAVE SOME CFFO LAT YEAR IN THE AUDITED REPORT, 54M. BEAR IN MIND CFFO IS FOR THE FIRM. FOR EQUITY HOLDER YOU HAVE TO LESS OFF THE INTEREST PAYMENT WHICH IS HUGE EVERY YEAR, 55M LAST YEAR. BUSINESS PROFITABLE? LAST YEAR MADE 80M OF WHICH 59M IS WRITE BACK OF TAX CREDIT. ALTHOUGH TAX CREDIT MAY BE CONSIDERED AS EARNINGS IN ACCOUNTING TERM, BUT IS IT "REAL' IN THE EYES OF AN INVESTOR? ANOTHER THING, I HAVEN'T TALKED ABOUT ITS LOST IN FOREIGN EXCHANGE AND HEDGING LOSS AMOUNTING TO NOT-SO-SMALL AMOUNT OF 51M YET. SO IS KNM'S BUSINESS THAT PROFITABLE?

3) Based on KNM audited reports, Goodwill made up a big portion of its assets which arrived from the purchase of Borsig, ie. its share worth less than its net assets of RM1.21, but based on AMMB report on 31 May, it still worth 0.75 after excluding the Goodwill and after appying 35% discount factor, its fair value will 0.49 - Here what i m trying to say is that the successful listing of Borsig is very important and it will boost up KNM share price OVERNIGHT !!!

AGAIN I AM DISCUSSING ABOUT THE BUSINESS, NOT THE SHARE PRICE. I AM VERY SURE KNM SHARES WILL BE GORENG AGAIN AND AGAIN. JUST THAT IT IS HARD TO BELIEVE THAT THE INSIDERS AND MANIPULATORS WILL GORENG FOR ME TO MAKE MONEY FROM KNM SHARES. DON'T KNOW WHO WILL BE THE PATSY.

YEAH LISTING OF BORSIG HAS BEEN TALKING FOR AGES. WHEN IS IT AH?

Good luck folks.

Posted by gloomberg > Aug 23, 2013 12:11 AM | Report Abuse
I've just read through the annual report, and honestly speaking despite the slightly above par performance matrices, I don't see any catalyst for this company, on top of the HUGE customer concentration risk of BAT, come on, it's around 60 to 65% of their revenue. The discount rate ought to be adjusted higher to account for that.

Good observations and good comments. Kind of agree with you. But on the other hand having a solid mountain to lean on could be an advantage for some people.

But seriously, Tien Wah is good in its printing business and i believe they have a niche and can work well with any client.

How bad?

Posted by Penang Ran > Aug 22, 2013 10:05 PM | Report Abuse
GCB report has out. The result is so bad. No idea how the company to ride thru the huge offshore loan? Thanks to kcchongnz pointed out the cash flow problem they faced.
Oh.. put under watch list until positive sign appear.

Let us annualized GCB's earnings for the whole year of 2013 basing on its latest second quarter results just out.

GCB is expected to earn an operating profit after tax (NOPAT) of 58m for the year. It needs 590m in net working capital to do this; out of this 508m in inventories and 176m in receivables. This huge inventories is consistent every year. Is it some kind of hedging required? commodity future? Is it a good business to have such high exposure in working capital but earning just a pittance in comparison?

What kind of return GCB get from using its capital to do this business? Its invested capital is closed to a billion, but just earns 58m in NOPAT, or a miserable return of invested capital of just 6%. Is 6% good?

Looking at its cash flow, again there is no free cash flow from the operations, just like the years before. That is why you can see its borrowing becomes bigger, bigger and bigger each year without fail. Its short-term loan is 536m! This is because a company needs money for capital expenses, even maintenance works need capital expenses, capital for doing other investments which GCB is very fond of doing it everywhere in the world while it can't even keep its local house in order, some more pay dividends when there is no money to do so.

I can place my money in ASM and get 6% return each year, almost risk free. Would one want to put money in a highly risky business for that return? If not, how much would you want that return to be? For me looking at GCB operations and cash flow, my minimum required return is 15%.

IAYAH DON'T KNOW WHY I AM SO "KE PO" HERE. I CAN'T SHORT SELL KNM ALSO. OK, DON'T WANT TO STOP YOU GUYS FROM MAKING MONEY FROM GORENGING KNM LAH.

Posted by eSdM > Aug 22, 2013 06:08 PM | Report Abuse
u r doubting d nta is abt 1.21 as u doubt d bals r real..... analyst n management hv said borsig is contributing 80% of knm profit... of cos if u also doubt thm thn....

I AM NOT DOUBTING IF THE NTA IS 1.21. I WAS SAYING THE POOR QUALITY OF THE ASSETS WHICH MADE UP THE NAB (NET ASSET BACKING, NOT NTA OR NET TANGIBLE ASSET BACKING PER SHARE).

"analyst n management hv said borsig is contributing 80% of knm profit... of cos if u also doubt thm thn.... "

AFTER EXPERIENCING NUMEROUS TIMES THE CREDIBILITY OR RATHER THE LACK OF IT, YOU STILL TRUST WHAT THE MANAGEMENT SAY? AND WHERE DID ANALYSTS GOT THE INFORMATION FROM? FROM AN INDEPENDENT SOURCE? I BET THEY JUST TOOK THE WORDS OF THE MANAGEMENT FOR GRANTED.

I SAY THIS IS BECAUSE THERE IS NO TRANSPARENCY IN THE FINANCIAL STATEMENTS WHICH YOU CAN SEE THIS. WHY IS THERE NO TRANSPARENCY?

Posted by eSdM > Aug 22, 2013 05:48 PM | Report Abuse

Tat was why i said u hv a rather healthy level of skepticism...... wat u r doing is not reading n interpreting d account... u r doubting d bals.... u r doubting d auditors......

I AM NOT READING AND INTERPRETING THE ACCOUNT? I GAVE ALL THE VALUES OF VARIOUS ASSETS AS SHOWN AND THEY ARE AS AT 31/3/2013, THE LATEST AVAILABLE ACCOUNT NOW. WHAT DOUBTING YOU ARE TALKING ABOUT?

Anyway.... ths r my observations....

d big loan was used to finance d purchase of borsig... borsig is generating income.... tis income is paying d interest...

HOW DO YOU KNOW HOW MUCH INCOME BORSIG IS GENERATING? I COULDN'T GET THE DETAIL FROM THE FINANCIAL STATEMENTS, CAN YOU? OR ARE YOU JUST SPECULATING?

crisis coming to tail end.. n knm stil standing.....

in 2012 abt 29,000,000 goodwill was written off bcos it was no longer acceptable to d auditors to b termed asset..... hv d auditors written off d intangible d deferred tax d receivables n d plant n machinery.... n auditors in overseas r more stringent...

THAT IS 2012 AS MENTIONED BY YOU. BUT THERE ARE STILL ALL THOSE SHITS THERE AS SHOWN IN MY COMMENTS WHICH WAS BASED ON THE LATEST ACCOUNT.

21/08/2013 16:13

did you read this? Any comments eSdM?

Posted by kcchongnz > Aug 21, 2013 04:01 PM | Report Abuse X

Interesting subject. Can a public listed company go bankrupt?

Posted by eSdM > Aug 21, 2013 02:35 PM | Report Abuse
ask urself... wil knm ever b closed.. wound up??? if d answer is no..... n u hv bought it at its bottom... then d only way is up... up by a lot!

Why not? If you have no cash flow from operations each year. You have to fund your operations, capital expenses etc from whatever cash left in your balance sheet. The cash will disappear very fast without CFFO every year. You have no more tangible assets to sell to get cash.

Furthermore, you owe huge amount of money to banks (close to one billion. So interest payment alone is 60-70m a year. What if the banks refuse to rollover this huge amount of debts? What if suddenly there is a financial crisis and banks require KNM to pay back the loan in a short notice?

Don't worry, KNM has 1.8 b in net assets, or equals to RM1.21 per share. Really no worry? What if I tell you out of this 1.8b, 1.3 billion is intangible asset? Intangible! 369m as deferred tax assets, 900m as receivables, yeah what KNM claims others owe them but not paid yet, 850m in Plant and equipment, don't know how much they are fetched in a fire sale?

Oh, this is just for discussion purpose. No lah, no company can go bankrupt one.

Posted by eSdM > Aug 22, 2013 05:23 PM | Report Abuse
basically wat i hv bin saying again n again is... knm has cleared its past sins shits n craps.... n has bottomed out......

Really? But my comments on KNM was based on its latest quarterly report ending 31/3/2013 woh. Were my comments right or wrong? If wrong, what is wrong?

Posted by Fat Cat Tim Buddy > Aug 22, 2013 02:20 PM | Report Abuse

chong, u too obsessed with all the fcf thingy la, every since inari listed, every year, every quarter they also got pay dividend. fact*

IT IS ONLY WITH FCF A COMPANY GOT MONEY TO DISTRIBUTE DIVIDEND WITHOUT RESORT TO ISSUE MORE SHARES AND HENCE DILUTING EARNINGS, BORROW MORE MONEY AND HENCE INCREASE DEBT. YES, INARI PAY DIVIDENDS BUT HAVE YOU LOOKED AT WHERE THIS DIVIDEND MONEY COME FROM? NUMBER OF SHARES OUTSTANDING HAS INCREASED FROM 248.6M TO 336.6M NOW. BORROWING INCREASED FROM 6.6M TO 18.8M NOW. THAT IS WHERE THE MONEY COME FROM. NOT FROM THE CASH FROM THE OPERATIONS.

and their dividend is getting generous each year, if you buy inari at 40 cents ( before the right issue) combine with the dividends received ah... your total return easily get 200-300%.

I NEVER QUESTIONED THAT YOU HAVE MADE HUGE MONEY FROM INARI, HAVE I? BY THE WAY, CAN YOU SHOW ME EXACTLY HOW MANY PERCENT PROFIT YOU HAVE MADE IN TERM OF TOTAL RETURN?

see the kfima u so heavily recommended... having a mountain of fcf , but they rather put it on bank and get 3.88% interests than paying it out to enrich their shareholders.

I NEVER RECOMMEND ANYBODY TO BUY ANY SHARE. CAN YOU FIND ANYTHING I HAVE WRITTEN ASKING PEOPLE TO BUY THIS OR THAT SHARE? I POSTED ALL MY POSTINGS FOR SHARING OF KNOWLEDGE PURPOSE.

BTW, I AM ONE WHO DO NOT CARE MUCH ABOUT HOW MUCH DIVIDEND A COMPANY DISTRIBUTES BECAUSE TO ME IT IS THE TOTAL RETURN WHICH IS MY CONCERN, NOT JUST RETURN FROM DIVIDEND. I PREFER THE MONEY TO BE REINVESTED INTO THE BUSINESS FOR GROWTH AND EARN MORE RETURN IN THE FUTURE. THINK ABOUT IT, WHY DO YOU INVEST IN A COMPANY IN THE FIRST PLACE? ISN'T IT BECAUSE IT CAN EARN YOU RETURN MORE THAN OTHER INVESTMENT? SO WHY WANT TO TAKE OUT MONEY AS DIVIDEND RATHER THAN REINVEST IN THE BUSINESS?

what make it worse is their ESOS priced at 1.48 and still have 60somethings% havent issue out, they keep cash on the investor yet dont want pay better dividend.

ESOS IS A WAY TO ALIGN THE INTEREST OF BOTH SHAREHOLDERS AND MANAGEMENT. IT COULD BE A GOOD THING BECAUSE WHEN EMPLOYEES HAVE A STAKE IN THE COMPANY, THEY NORMALLY WORK HARD FOR THE COMPANY AND HENCE BENEFITS THE SHAREHOLDERS.

if let u choose now, u still choose kfima over inari?

YOU KNOW MY ANSWER, WHY KEEP ON ASKING?

Posted by ten one ten > Aug 22, 2013 11:10 AM | Report Abuse

kcchong,
What is CFFO? Usually analysts would depend on FCF on tracking the company's use on credit / cash to determine the health of the company operations.Which is a better guide?

CFFO IS CASH FLOW FROM OPERATIONS, THE FIRST STATEMENT FROM THE CASH FLOW STATEMENT. IF YOU DON'T KNOW WHAT IS CFFO, I DOUBT YOU KNOW WHAT IS FCF. YES, YOU DON'T KNOW WHAT IS FCF. YOU NEED TO READ UP ABOUT IT.
BOTH ARE IMPORTANT. A COMPANY AT LEAST MUST HAVE GOOD CFFO, AVERAGING ABOUT 100% OF THE NET INCOME. A FAST GROWING COMPANY MAY NOT HAVE FCF NOW BUT EVENTUALLY IT SHOULD HAVE. IF NOT WHERE TO FIND CASH TO PAY DIVIDEND ETC?

In the case of Inari Berhad was wondering where you got the balance sheet as I doubt any brokers cover it.

BALANCE SHEET AND OTHER FINANCIAL STATEMENT ALL I BURSA WEBSITE.

Inari shows good growth in revenue and profits as per your analyst as it intends to hit the RM3 billion mark in revenue as it acquires an offshore asset.

TALK IS EASY. WHAT MAKES THEM THINK THAT GOOD ASSETS ARE WAITING FOR THEM TO ACQUIRE? OR WILL THEY BE ACQUIRING ASSET AT EXPENSIVE PRICE AND DESTROYING SHAREHOLDER VALUE?

The problem is the nature of the industry which one has to acquire equipment continuously to keep pace with the demands of the technological changes in the consumer electronic market.

IT IS ALRIGHT IN DOING SO, INARI HAS NO FCF. BUT AT LEAST INARI SHOULD HAVE CFFO AT LEAST THE SAME AMOUNT AS NET INCOME. THERE IS WHERE THEY CAN HAVE MONEY TO GROW THEIR BUSINESS AS THEY CLAIMED TO DO. BUT EVENTUALLY THEY MUST HAVE FCF.

You are right on corporate governance as I do not know where the stakeholders came from and they have to be one of the existing players in the industry.

I THINK INSAS CONTROLS INARI. AS I HAVE SAID, THE MAJOR SHAREHOLDERS/MANAGEMENT OF INSAS IS NOT PROVEN TO TAKE CARE OF MINORITY SHAREHOLDER'S INTEREST.

The only drawback I notice with global Malaysian players , most of the profits are parked offshore and the dividends are paltry.Most of these stocks are capital growth stories with no form of insurance like good dividend payout eg. like banks like Maybank and Public Bank.

INARI HAS NO FCF. IN FACT IF I AM NOT WRONG, THEIR FCF IS IN THE NEGATIVE TERRITORY OF MORE THAN 15M. SO WHERE GOT MONEY TO PAY DIVIDEND? KEEP ON DIGGING INTO ITS COFFER? BORROW MORE MONEY? RIGHT ISSUE?

Your views? Thanks.

Posted by eSdM > Aug 22, 2013 12:32 PM | Report Abuse
kcc... must say u hv a rather healty level of skepticism..... first u doubted knm audited account... now u r questiong d analyst.......

eSdM, let me tell you this. I have looked into KNM financial statement for the last few years. To say doubtful about the account is an understatement. There are manipulations and financial shenanigans.

Questioning analysts? Don't you think that analyst is so stupid to change the target price of KNM by more than 30% in just one week? What kind of analyst is that? How did he go about doing valuation? Looking at the share price of KNM and make a valuation?

"RHB gave reports on 29 May TP 0.63, 31 May TP0.59 and the last one on 5 June TP0.42"

Wah this is really amazing! Target price of a stock given by an investment bank amended three times within a span of one week for a difference of more than 30%!!!! This is really Guiness World Record of a company's fastest change in its business fundamentals, as suggested by an investment bank!!!

I would like to meet this analyst of RHB.

Posted by Steve Jub > Aug 22, 2013 10:06 AM | Report Abuse
kcchong, any tot on LIIHEN? i have its fundamental looks ok.

Please read this, courtesy of Tan KW

http://klse.i3investor.com/blogs/5_rules_cold_eye_kcchongnz/34608.jsp

I have a few postings about gab after looking into its pat years financials. One serious thing I found about it is its very poor cash flow for many years. For me cash flow is more important than accounting earnings. So to me this is a lemon. But I could be wrong. You don't have to follow me.

Even if you are very bullish about this company, just doesn't put all your eggs, not even the major part of your eggs there.

I very rarely tell others like this. Again I could be wrong and you don't have to follow me.

Penang Ran,
I remember you said you liked my postings. Since you are interested in this apa ini GCB, why not read some of my thoughts on this company GCB in order to have a balance view?

Interesting subject. Can a public listed company go bankrupt?

Posted by eSdM > Aug 21, 2013 02:35 PM | Report Abuse
ask urself... wil knm ever b closed.. wound up??? if d answer is no..... n u hv bought it at its bottom... then d only way is up... up by a lot!

Why not? If you have no cash flow from operations each year. You have to fund your operations, capital expenses etc from whatever cash left in your balance sheet. The cash will disappear very fast without CFFO every year. You have no more tangible assets to sell to get cash.

Furthermore, you owe huge amount of money to banks (close to one billion. So interest payment alone is 60-70m a year. What if the banks refuse to rollover this huge amount of debts? What if suddenly there is a financial crisis and banks require KNM to pay back the loan in a short notice?

Don't worry, KNM has 1.8 b in net assets, or equals to RM1.21 per share. Really no worry? What if I tell you out of this 1.8b, 1.3 billion is intangible asset? Intangible! 369m as deferred tax assets, 900m as receivables, yeah what KNM claims others owe them but not paid yet, 850m in Plant and equipment, don't know how much they are fetched in a fire sale?

Oh, this is just for discussion purpose. No lah, no company can go bankrupt one.

Fat Cat, I have posted my opinion on Inari before as below. My view has not changed.

Inari Berhad is involved in the electronics manufacturing services (EMS) industry. The Company is an EMS company principally involved in back-end semiconductor packaging, which comprises back- end wafer processing, package assembly and Radio Frequency (RF) final testing for the electronics/semiconductor industry. Inari serves wireless RF and microwave telecommunication semiconductor market.

I heard of this company before but don’t know much of it. A spinoff from Isas? Oh, a technology company, something like Unisem?
Looking at the twelve month trailing financial results, Inari, undeniably appears to be a great company with high growth in revenue and profit of 19% and 74% respectively. Operating numbers are excellent with ROE and ROIC of 31%. The quality of earnings also appears to be good with CFFO above net profit.

The only problem (may not be a problem because of it being new and the nature of the business) is it requires a lot of money for capital investment. Hence whatever cash it receives each year, it is not enough for it for capital expenses. Do you notice that it has to borrow more money each year from the banks? If this heavy capital expenses yield future quality growth and earnings, it is ok.

Pricewise, it is trading at a PE ratio and earnings yield (Ebit/EV) of 8.4 and 12% respectively which is undemanding.
The other thing is who control Inari? Is it those Insas people? They are not known for taking care of the interest of minority shareholders.

Posted by Steve Jub > Aug 20, 2013 08:15 PM | Report Abuse
kcchong, for malton, i saw the net asset per share pretty high (1.37) and PE ratio pretty low (5.84). what do you think of these 2 area?

steve, you are talking about the financial results ended 30/6/2012 which is more than a year ago. Malton's 2013 results will be announced soon. So the PE ratio you are referring to is history. But even for the 2012 results, you notice that revenue and profit has declined. Malton reported that they made 64.4m, or 15.4 sen per share in 2012. But show me the cash. Why is that that year they have to pay out a net cash of 52.6m? What is this 118.2m as "short-term fund" appearing in the "Cash Flow From Operating Activities" statement? Strange.

Now let us come back to its 2013 ending 30/6/2013 which will be announced soon. I won't think it will be pretty. The three quarters results showed that it only make 19.2m or just 4.6 sen per share. What do you think the EPS will be for this last quarter? How much higher can it be when compared to its third quarter of just 0.36 sen? So what is its latest PE ratio then? Don't forget that it has loan stock and warrant holders who are also will be sharing any profit made in the future.

Earnings is one thing which I never trust it standing alone. Look at its cash flow. Just three quarters, its CFFO is a negative of 192m! this is a result of increase in inventories and receivables of 83m and 215m respectively. As I have mentioned, the total inventories and receivables amount to 437m as at 32/3/2013. They are already more than its NTA of RM1.43 in its balance sheet. These assets are what I consider as "bad" assets" My feeling is that Malton will soon try to borrow more money from the bank. I don't know the bank will lent them any more and if not, a right issue or private placement is on the card.

Damn scary.

Posted by hng33 > Aug 20, 2013 05:47 PM | Report Abuse
How about next hidden gem: MNRB

Not sure if you are asking me. I think you know more about this company than me. But anyway, I just give a shot.

MNRB certainly meets your high dividend yield criterion.

Insurance companies very hard to value, especially those contingent liabilities; how much it has to pay out due to future claims etc.

Other assets are more straight forward, especially the financial assets which are marked to market. So normally I value the stock using ROE. Average ROE of MNRB last two years was 9.1%. So fair value =ROE/required return*NTA=9.1%/12%*5.32=RM4.06

Using PE ratio say 10, fair value =10*.4725=RM4.72

47.25 sen is the average EPS for last two years

Posted by haikeyila > Aug 16, 2013 09:25 AM | Report Abuse
how would you factor in liquidity in the assessment of a company? companies like FL are financially good, but lacks shareholding liquidity.

If you value a company with comparative industry or sector, you may want to add a liquidity premium, say 15% to the PE ratio, P/Sales, P/Cash flow. EV/Ebitda, Ev/Ebit or whatever.

In finding the intrinsic value of the company, perhaps you may want to use a higher required return, say 15% instead of 12% to find the present value of its future cash flow. Or perhaps you may want to use a higher margin of safety.

This is all art.

Hey, this is Ooi Teik Bee's stock. You should ask the right person.

Posted by BBB79 > Aug 20, 2013 01:33 PM | Report Abuse
kcchongnz, i treat LBS as a hidden gem, you can consider and study on it...

I remember reading an article courtesy of OTB in i3 about LBS's sale of Properties in china which enable LBS to rake huge amount of profit of cash. That would be an excellent point for LBS, provided the management is willing to share with all shareholders.

Just wonder why the special dividend just announced is so little at 8 sen only.

Malton? so many good property companies, why Malton?

Posted by Steve Jub > Aug 20, 2013 01:22 PM | Report Abuse
kcchong, any thought on Malton? Going up much lately.

Looking at its third quarter 2013, didn't make much and big drop from last year, just 4.3 sen for three quarters. Balance sheet not good. Huge amount of receivables, 325m in all. Inventories also scary at 112m. What about cash flow? Not even positive in cash flow from operations, no need to talk about free cash flow. Not only for this three quarters. Last year same.

Malton is a darling of the stock market. Everybody cheering and hohohoing about it. It is for this same reason that I won't want to get near to it. It is just me. You don't have to follow me.

Posted by iafx > Aug 20, 2013 07:57 AM | Report Abuse

latest two UK prjs (269m+560m)alone already carried gdv of £829mil, excluded m'sia prjs, not to mention infra, power and rental income!

don't buy this counter for intraday, u will shoot yr own foot... Hahahaa...


WAH SO MANY PROJECTS AH? MULTI-BILLION HO. SO HOW MUCH AMPRO GOING TO MAKE FROM THESE PROJECTS? HOW MUCH IS IT AS TRANSLATED TO EPS, CASH FLOW PER SHARE?

Let us learn from this "Guru" here'

Posted by iafx > Aug 20, 2013 12:35 PM | Report Abuse

"如果股市极端疯狂，给出高的离谱的价格，你还坚守长期投资不出售， 冷眼认为你就不是做股票投资的料子."

离谱的价格. COULD YOU TEACH US WHAT IS 离谱的价格? WHAT KIND OF METRICS DO YOU USE TO JUDGE THAT? WHAT VALUATION METHODS DO YOU USE TO DETERMINE THAT THE PRICE IS 离谱的价格. WHAT COMPARATIVE VALUATIONS DO YOU SUE, WHICH COMPANIES YOU USER TO COMPARE AND WHAT METRICS?

if u would have acted correctly after the first comment above; rather than psycho by long "beautiful" cerita, excited by "massage" numbers, CONGRATULATE to u!! now u can sit back relax and slowly buy back at low price if u will, or use the good $$$ to sapu even better counters :D :D :D

YOUR FIRST COMMENTS 6 MONTHS AGO WAS PINTARAS TOO EXPENSIVE AT RM2.70 AND YOU ADVISE EVERYONE TO SELL. WHY YOU "PHYCHO" AH> SOLD TOO EARLY AT RM2.70? "MASSAGE NUMBERS", WHO MASAGE? WHICH NUMBER? SAPU WHICH COUNTERS? PLEASE ALSO TELL US WHICH AND WHY SAPU? I MEAN HOW TO YOU JUDGE WHICH TO SAPU.

HahhahaHahaahahhahaaaaa.... argued with ghost story? HAhahahHAHAHAhaa..

WHY SO HAPPY AH? HAVE YOU SWORN THAT YOU WERE NOT THE GHOST WHICH CHANGED THE WORD "REVENUE" TO "PROFIT" IN THE KFIMA THREAD? IF NOT, PLEASE SWEAR HERE.

Posted by iafx > Aug 20, 2013 12:35 PM | Report Abuse

"如果股市极端疯狂，给出高的离谱的价格，你还坚守长期投资不出售， 冷眼认为你就不是做股票投资的料子."

if u would have acted correctly after the first comment above; rather than psycho by long "beautiful" cerita, excited by "massage" numbers, CONGRATULATE to u!! now u can sit back relax and slowly buy back at low price if u will, or use the good $$$ to sapu even better counters :D :D :D

HahhahaHahaahahhahaaaaa.... argued with ghost story? HAhahahHAHAHAhaa..


Your first comment is to sell Pintaras at 2.70 6 months ago lah. See my return for Pintaras long term, 1, 2 3, 4 and 5 years as below when it was just RM5.01. Now it is already RM6.02. How much more I have made man! Can calculate for me or not in term of CAGR? Give you $$$ if you can do for me!



Posted by kcchongnz > Jul 31, 2013 09:41 AM | Report Abuse X
stagnnant crap? 4-years of waiting?

Before this announcement of bonus issue, the 4-year total return is 318%, or a compound annual rate of return of 38% compared to 10% of KLSE! i challenge you to find another one as good as Pintaras in Bursa and shows us.

Pintaras 5.01 12/06/2013
Period 2-week 6-month 1 year 2-year 3 year 4 year 5 year
Price 3.68 3.14 2.80 2.35 1.60 1.20 1.40
Return of stock 36.1% 59.6% 78.9% 113.2% 213.1% 317.5% 257.9%
CAR 304505% 154.6% 78.9% 46.0% 46.3% 42.9% 29.0%
Dividend 2.7% 4.0% 6.8% 6.4% 6.3% 10.0% 7.1%
Stock price appreciation 304503% 150.6% 72.1% 39.6% 40.0% 32.9% 21.9%

Posted by iafx > Aug 20, 2013 12:35 PM | Report Abuse

"如果股市极端疯狂，给出高的离谱的价格，你还坚守长期投资不出售， 冷眼认为你就不是做股票投资的料子."

if u would have acted correctly after the first comment above; rather than psycho by long "beautiful" cerita, excited by "massage" numbers, CONGRATULATE to u!! now u can sit back relax and slowly buy back at low price if u will, or use the good $$$ to sapu even better counters :D :D :D

HahhahaHahaahahhahaaaaa.... argued with ghost story? HAhahahHAHAHAhaa..


Wah laugh so happily ah when Pintaras dropped to RM6.02 now. Can you tell us what do you mean by 离谱的价格? PE, Ev/Ebit, P/B, P/cash flow, P/sales????? What valuation method do you use? Please enlighten.

However I thought you advise people to sell Pintaras when it was RM2.70? See your below statement. You made GCruey sold his share at RM2.70 about 6 months ago.

Also 你就不是做股票投资的料? Show us a bit what you know about investing.



[ptaras a pick only bcos it is small & relately safe given its cash (also means $ not utilize); maybe could exercise bonus (hopefully not yet another private placement). given its outlook, it is actually too expensive already. given that price, there r a number of other counters worth better than this one. those who grabbed it during the 1.4-1.5 days a bless of god (no need say anything :). those who buy above 2.7 should continue to assess the viability of holding this counter. GCruey could have done a right thing by disposing it now & wait for next opportunity.

TOO EXPENSIVE ALREADY WHEN PINTARAS AT RM2.70. MANY OTHER COUNTERS MUCH BETTER. BUT DON'T KNOW WHICH HE REFERRED TO. WAH SOME MORE MADE GCRUEY DISPOSED HIS SHARES AT RM2.70 6 MONTHS AGO. ]

Bsngpg,
Go ahead with your safe investment strategy. As I have said, your strategy is the right strategy for most people, safe and steady.

Don't worry about me picking small cap and unknown stocks. Yeah, financial shenanigans is very common for pubic listed company. As a matter of fact, I have seen that after working in the corporate world myself. I have read books on how financial shenanigans were done, and read about and learnt how to read behind the numbers. As a matter of fact, I have seen many of these financial shenanigans in many stocks I have analysed, and high lighted many of them in i3.

Yeah, despite of that, I could still be deceived sometimes. But the chance is low, I believe. You absolutely no need to follow me. And I appreciate your good intention.

Posted by bsngpg > Aug 19, 2013 06:02 PM | Report Abuse
In fact I can proudly say that those who follow my advice such as few close friends and my wife are making VERY decent return.

I HAVE NO DOUBT ABOUT THE ABOVE STATEMENT.

So I always want to preach safe investment strategy with sincere hope that those believe me do not repeat my stupid mistake.

YOUR SAFE INVESTMENT STRATEGY IS DEFINITELY THE WAY TO GO FOR MOST PEOPLE.

(you are right that my kind of stocks are fully valued at the moment. But I preach to buy only at Christmas Sale/Big Bear, not now)

CAN YOU TELL US WHEN WILL BE THE NEXT CHRISTMAS SALE? THE POINT I WANT TO EMPHASIZE IS FEW, VERY VERY FEW PEOPLE CAN TIME THE MARKET. SEE HOW THE ORACLE OF BURSA OF ICAP HAS BEEN UNDER-PERFORMING THE MARKET FOR THE LAST 5 YEARS TRYING TO TIME THE MARKET.

NOW REGARDING YOUR "SAFE INVESTMENT STRATEGY AGAINST VALUE INVESTING STRATEGY, LET SAY YOU ARE ABLE TO FORESEE THE MARKET IS ALMOST AT ITS BOTTOM ALREADY 5 YEARS AGO. TELL ME WHICH 10 STOCKS YOU WOULD HAVE BOUGHT THEN. I WILL SHOW YOU SOMETHING ONCE YOU TELL ME THE 10 STOCKS IN A PORTFOLIO.

Posted by bsngpg > Aug 19, 2013 02:33 PM | Report Abuse
KC : Do you consider to take profit now ? Or you still have faith on it? Just want to learn your thinking process.

I am an investor, not a trader. I buy stock of a company based on the intrinsic value of the company. If there is an adequate margin of safety of the intrinsic value against the stock price, I buy. I sell only when the stock price has risen to a value which shows that there is not much of margin of safety owning the stock.

Yes, my investment philosophy differs from yours. You prefer to own those 5-stars stocks with durable business and established records and favorites of most people. For that, I believe you will earn decent return of investment long term and would never go to Holland. Good on you. However, these kind of stocks are owned by most people; unit trust funds and institution investors. As a result, I believe they are fully valued.

I also prefer to invest in 5-stars company, but the definition of my 5-stars companies differ from you. My five stars companies are companies also having durable business. They have high operating efficiencies as evidenced from their recent past. They must have clean balance sheets and great cash flows. And they are selling at a good price in term of enterprise value against ebitda or ebit, P?E, P/B etc. However, these companies can be small capitalized companies.

SCGM?
Posted by Robert123 > Aug 18, 2013 08:38 AM | Report Abuse
KCCHONGNZ,been following ur postings for few months, amaze at ur stock picks, will ask ur FA comments on SCGM and Kheesan.... No hurry, just to learn ....

Someone wrote to me before asking about SCGM. So I just do this one here.

KC,
Nothing spectacular about SCGM's business. This is another one of those companies making plastic products and packaging. But I m looking at it more in terms of value stock. Based on their latest numbers, it does seem like they are turning around their business with some good numbers in 2013 especially growth in cashflows. They are almost debt free with a strong balance sheet.

Growth rate
Revenue 18%
Operating income 32%
Net profit 28%
Equity 9%
Cash flows 178%

ROIC 12.2%
EV/Ebit, 7.5
EV/Ebitda 5.4
FCF/Sales 9%
　
I know you dont use TA much, but I see some sign of strength from technical standpoint as director was accumulating when stock dipped to around RM 0.955, so this would be a good support level.
Rgds


And the following was my reply:

Looking at your numbers, SCGM appears to be great in term of its last growth in revenue and earnings. Its operating efficiencies in terms of ROE, ROIC are ok lah for last year, but there were very poor before that. Cash flows was excellent but that was only for last year. So it has not shown the consistency yet. Valuation wise is also ok lah but not screaming buy, buy, buy. Those are the past. May be you know more about its near future.

Of course having the information that insiders are buying, and technical buy signals do help. May be you should also compare with its peers such as Daibochi, Tommypack, Cenbond etc to see which plastic packaging company is most efficient and which offer the best value for money in terms of PE ratio, earnings yield etc.

bsngpg,
Your advice is most appropriate and suited here. I would say the majority of the people here should listen to your experience i order to avoid future regret. However, I doubt many people here would want to listen to your "jong yuen" (honest words) here because they are "neh er" (painful to the ears).

Punters always think of and how they can make 50%, or 100% return within a short period (looking up). However they should end up better if they look down (invest with a margin of safety to avoid heavy losses). Sigh, we are all human, like what this fellow said.

Posted by Lim Jy Lim > Aug 18, 2013 02:48 PM | Report Abuse
知易行难。

Posted by xyxy8 > Aug 18, 2013 05:35 PM | Report Abuse
Hi kcchong. Is it good that drbhicom is selling uni asia life ass. to reduce its debts? If it good, then I will jump in tomorrow. Thanks.

I don't know much about this. but since you asked, I give it a try.

Selling off a non core business to me is good so that management can concentrate to do well in its core business. The best thing is to spin it off as another listed company (is Uni Asia life insurance a public listed company itself?). It is even better for the spin off company, ie Uni Asia.

But does that justify you "jumping in"? I have no idea.

TanKW, Your CAGR of nestle of 20% is certainly very good. It is twice the return of KLSE. But you should get a portfolio of those high dividend yield stocks, say 10 stocks to find the average which is more representative.

KLSE 5-year CAR
18/08/2008 1085
16/08/2013 1788
CAGR 10.5%

My portfolio returned about CAR of 25%. Those stocks in that portfolio also happened to be mostly high dividend yield stocks.

Posted by Tan KW > Aug 18, 2013 10:44 AM | Report Abuse

i think the author argue on high div yield with 拥有良好业务....

it should be 莺莺美黛子 + high dividend yield

TanKW, may be this is an interesting mini research you can do if you are interested. Select the best 10 dividend stocks 5 years ago. You can select those 莺莺美黛子, whatever it may mean. compute their 1,2,3,4 and 5 year CAR total return. Compare with that of KLSE. And also compare with an arbitrary portfolio.

If you wish, I have the CAR return of my portfolio started 7-8 months ago which was put up by you which you can compare with.

My instinct tells me that the total CAR return of that high dividend yield stocks which you are going to compute would not be much different from the CAR of the broad market. And it would be very far behind my portfolio put up by you previously.