Posted by inwest88 > 2013-07-28 20:15 | Report Abuse

KW, may I know where to have a look at your portfolio. Also I agree with your proposal to invite the three "sifus" to set up a new portfolio effective 1st Aug till 31st Dec. It's not so much of a competition as to who is better but just as a comparison of which method is better as each of them has their own criteria in stock selection. At the end of the day there are so many other factors in determining the direction of the market. The selection would also benefit the other is users Of course they have to near in mind that the stock picks are not a recommmendation to buy.

Posted by pathew > 2013-07-28 21:44 | Report Abuse

Yeah i agree, they have different styles and it would be good to have a look at their current selection based on current market conditions. Although whether or not they age would be a totally different matter. But to all 3 sifus, market at all time high, would it correct in a near future? Or shoot up higher?

Posted by pathew > 2013-07-28 21:45 | Report Abuse

Age = agree

Posted by inwest88 > 2013-07-28 22:17 | Report Abuse

FTCB, no harm sharing with us, right. If kcloh joins, it will be better. More men more ideas !

Posted by CityTrader > 2013-07-28 22:36 | Report Abuse

Agreed with this suggestion. Pl get more ppl to support this idea. All investors wll benefit from their generous n wiilingness unselfish contributions. We name u three the best of the best investors in this forum. Can invite other sifu like imf etc to participate too.

Posted by kcchongnz > 2013-07-29 10:56 | Report Abuse

I have to reiterate that the 6-9 months of the good performance posted is too short a record to boast about. It could very well be due to luck. Really the measurement of successful investing does not just based on a short-term of seven months performance. Investing to me is a long term endeavor. So we have to look at the more important long-term return. So how to measure the long term performance of your portfolio?

Table 1 below shows the performance measurement of my portfolio for one to five years. Again this is just for discussion purpose. I hope others do not construe this as a self bragging exercise. Some of the stocks only have prices of 2-3 years as they are either only listed 2-3 years ago, or data is not available from the Yahoo website.

Table 1: Stock prices 1-5 years
Stock Name Code Price now 1 2 3 4 5
Kfima 6491 2.11 2.26 1.78 1.04 0.650 0.490
Pintaras 9598 4.90 2.65 2.35 1.70 1.37 1.30
ECS 5162 1.22 1.05 0.955 0.735
Plenitude 5075 2.31 1.88 2.060 1.93 1.30 1.04
Jobstreest *0058 4.10 2.12 2.890
Pantech 5125 1.09 0.6 0.595 0.720 0.68 0.690
SKPRes 7155 0.320 0.32 0.180 0.130 0.085 0.080
NTPM 5066 0.565 0.475 0.535
Kimlun 5171 2.23 1.42 1.690 1.040
Prestariang 5204 2.14 1.26
KLCI KLSE 1808 1632 1549 1361 1175 1159

Table 2 below shows the compounded annual return (CAR) of each stock for 1-5 years of holding period.

Table 2: CAR of stocks and KLSE (28/7/13)
Stock Name Code Price now 1 2 3 4 5
Kfima 6491 2.11 -6.6% 8.9% 26.6% 34.2% 33.9%
Pintaras 9598 4.90 84.9% 44.4% 42.3% 37.5% 30.4%
ECS 5162 1.22 16.2% 13.0% 18.4%
Plenitude 5075 2.31 22.9% 5.9% 6.2% 15.5% 17.3%
Jobstreest *0058 4.10 93.4% 19.1%
Pantech 5125 1.09 81.7% 35.3% 14.8% 12.7% 9.6%
SKPRes 7155 0.320 0.0% 33.3% 35.0% 39.3% 32.0%
NTPM 5066 0.565 18.9% 2.8%
Kimlun 5171 2.23 57.0% 14.9% 29.0%
Prestariang 5204 2.14 69.8%

And Table 3 below shows the computation of CAR of the portfolio as compared to that of KLSE.

Table 3: CAR comparison of portfolio with KLSE
Year 1 2 3 4 5
Average Portfolio CAR 43.8% 19.7% 24.6% 27.8% 24.6%
KLSE CAR 10.8% 8.0% 9.9% 11.4% 9.3%
Excess return 33.0% 11.7% 14.7% 16.5% 15.3%

It can be that on average, the CAR of the portfolio out-performed the broad market by a wide margin. For example for a five year holding period, the portfolio returns a CAR of 24.6% as compared to KLSE’s 9.3%, a whopping 15.3% of excess return each year. For a shorter holding period of three years, the excess return a year is 14.7%.

Posted by Ooi Teik Bee > 2013-07-29 11:03 | Report Abuse

I am willing to accept this challenge to give my watchlist. Please allow me until end of August to screen for good stocks. I will only select 10 stocks.

Thank you.
Ooi

Posted by yfchong > 2013-07-29 11:05 | Report Abuse

Learning cycle begins,........

Posted by kcchongnz > 2013-07-29 13:34 | Report Abuse

I like to cite this saying below:

•In Bursa, there ain’t no tooth fairy

As I have posted that the total six-month return of my portfolio was 38% as compared to 10% of the KLSE, or an excess return of 28%. The 5-year compounded annual return of that portfolio just posted above was 24.6% as compared to 9.3% of the KLSE, or an excess return of 15.3%. This 5-year CAR is more representative because we have gone through a boom and bust from July 2008 to now. Sorry ah for boasting about them again.

Can I get another 38% of a new portfolio in another 6 months time? Highly unlikely. Can I post the same stellar return of the 5-year return. Dream on.

First of all, the great performance as I have said could have a big portion of the element of luck. Secondly, I believe this mean reverting principle in the equity market; any market for that matter, such as the property market.

But I also believe the economy of the country and the world at large will continue to grow and stock prices of good companies will continue to rise, albeit at a slower pace. So stocks selected basing on fundamentals such as their growth prospects, durability and quality of the business, management efficiencies and asset allocations, and most of all the concept of margin of safety, will continue to provide a higher return than the market.

I can share stocks which I think meet my requirements above and give my analysis and reasons for the choices. No point for me just to tell you which companies are good as investment without giving reasons why. However I think many here will find the stuff boring. Not sure if it is a good idea.

For those who are interested, it may provide you with some fundamental knowledge in investing which may be useful whether you make big money or not. This I personally believe so. I very much welcome constructive criticisms, not just baseless accusations and allegations, names calling etc without any substantiations.

I reiterate here again that I seriously don't think they will give you quick short-term return. Forget it. I am here just to share my thoughts.

Posted by pathew > 2013-07-29 13:47 | Report Abuse

KC agreed that luck is part of the computation. Even analysts revise their TP when new information emerges. Therefore, considering that at an all time high, one may select defensive counters as opposed to high growth ones.

This would give some of us who are interested in the boring stuff an idea of what and how you all derive and base your analysis on.

I'm glad that OTB is up for the challenge to give us a new list post KLCI All-time High :)

Posted by Jonathan Keung > 2013-07-29 13:53 | Report Abuse

interesting views on stocks but i do believed that selection criteria may differ but the bottom line is we all of us, here is to make profit out of the market.

the number of stock selected is important. one may have a short list (eg. 5-6 stocks on the watch list)if we can hit the target on all the 5-6 stocks ( that means we are 100% accurate)

the bottom line is the holding period of the stocks. At 1,800 index most funds are targeting between 1830-1840 year end. that does not leave much room.

if we can identify growth stocks for 2014 that would be really of interest to people reading this blog.

Posted by houseofordos > 2013-07-29 14:15 | Report Abuse

KC, it will be great if you can share a summarized compilation of shares on your watchlist by ranking them according to your FA metrics such as ROE, ROIC, FCF, EV/EBIT etc...

Posted by Steve Jub > 2013-07-30 09:52 | Report Abuse

kcchong, how to do calculate mr ooi performance is 55% for 6-8 months ago? because he is more towards technical analysis, which means his trade should be short term (1-3 months), right?

Posted by hw0706 > 2013-07-30 09:58 | Report Abuse

for me i still hold my share for dksh and bonia

Posted by Steve Jub > 2013-07-30 10:17 | Report Abuse

i see, no la, i am just wondering only...thanks for the info..

Posted by kcchongnz > 2013-07-30 10:23 | Report Abuse

hey steve, you asked a very relevant question. You were right. Traders relying on technical analysis base entry and exit mostly from price volume and other technical indicators. They generally don't hold those stocks longer than a few months, some not even days, because the price changes all the time. They would have exit long ago and may re-enter, exit and reenter again and again.

Posted by choolooi > 2013-07-31 12:53 | Report Abuse

A big THX to the sifus for sharing with us all in this thread,
Buy or not , is our choice. So no blame thrown ....keep this in mind .
Remember it is thru their graciousness that they share.

Posted by Ooi Teik Bee > 2013-07-31 13:47 |

Post removed.Why?

Posted by inwest88 > 2013-07-31 14:33 | Report Abuse

Thaks to Ooi who starts the the ball rolling. Perhaps kcchongnx, fat chat and kcloh can also provide their input.

Posted by Ooi Teik Bee > 2013-07-31 18:27 |

Post removed.Why?

Posted by kcchongnz > 2013-07-31 18:58 | Report Abuse

Posted by kcchongnz > Jul 31, 2013 05:00 PM | Report Abuse X

Kumpulan Fima

“Value portfolio managers buy and sell judiciously, choosing today’s ugly duckling that shows the promise of becoming tomorrow’s beautiful swan.”

Kumpulan Fima has been in my original portfolio for about 4 years now. At 2.06 now, it provides me with a total return of 220%, or a compounded annual rate of return of 34%, three times above the return of KLSE a year of 10% for the last 4 years. However, for the past one year, return has been unsatisfactory with a negative return of about 8%. Should I discard this stock now? No way!

The business
Kumpulan Fima Berhad is engaged in manufacturing and trading of security and confidential documents; bulk handling and storage of liquid products and cargoes, warehousing and transportation and customs forwarding services; Oil palm Plantation and manufacturing and packaging of food products.

It has a well diversified group of businesses. I won’t say these businesses are very great but each has reasonable growth in revenue and earnings for the last 10 years. All these businesses are durable and are expected to be around for many years to come.

Quality of the business
Kfima’s revenue and net profit has been growing at 8.2% and 23% to 487m and 104m respectively for the last 10 years. In recent years, Kumpulan Fima has been buying up plantation land for its next phase of growth. The growth in revenue is unabated but just last year, earnings has slipped by 10%, due to the low price of palm oil which makes up 30% of its revenue. All divisions remain profitable.

The good quality business of Kfima is evidenced from its high gross margin of average of 43% for the last 5 years (Table 1). Net profit margin is also high at an average of 21%. This results in good 5-year average ROE of 15% and high ROIC of 22%. Retained earnings have been growing at a CAGR of 15% a year.

Kfima’s quality of earnings is excellent as shown in Table 2 below. Its CFFOs are generally about the same as net income. There is good average free cash flow, 16% and 19% (both> >5%) of revenue and invested capital respectively for the last 5 years. It is noted that last year cash flow has deteriorated. It may be still too early to tell if they will further deteriorate.

Capital allocations
Kfima has spent quite a substantial amount of money buying plantation land, new plants and equipment for its business. 143m in total was spent for the last 5 years. The capital expenses were well spent as they yield higher earnings and better cash flows the following years. Due to the better earnings and cash flows, the company has been increasing its dividend payment from 3 sen per share five years ago to 8 sen for 2013. This gives a reasonable good dividend yield of 4%, higher than the bank fixed deposit rate.

Market Valuation
With such good business and operation performance, one would expect it would not be cheap to invest in this stock. But is it so?

AT RM 2.06, Kfima is trading at 7.2 times its earnings per share of 28.6 sen for the financial year ended 31 march 2013. Note that Kfima has an excess 272m cash or cash equivalent sitting in its balance sheet, or an excess cash of RM1.00 per share. Besides it has about 100m in investment properties and interest in associates.

Its enterprise value is less than 4 times its earnings before interest and tax, far below the industry average of more than 10 times. This translate to an earnings yield of 26%, much higher than my 10% requirement.
Hence at RM2.07 a piece, kfima will remain as a second stock in my new portfolio.

Table1: Quality of Kfima’s business
Year 2013 2012 2011 2010 2009 Average
Gross margin 44% 46% 47% 40% 39% 43%
Net margin 21% 25% 25% 14% 13% 20%
ROE 12.5% 15.5% 16.6% 16.0% 15.6% 15%
ROIC 19.2% 25.3% 25.4% 21.1% 18.6% 22%

Table 2: Cash flows of Kfima
Year 2013 2012 2011 2010 2009 Average
CFFO 52589 131052 137909 114196 56521 98453
Capex -49513 -26434 -24022 -19500 -23826 -28659
FCF 3076 104618 113887 94696 32695 69794
FCF/Revenue 0.6% 22.2% 26.4% 23.0% 8.9% 16%
FCF/IC 0.6% 25.8% 29.1% 27.7% 9.4% 19%

Posted by tonylim > 2013-07-31 19:29 | Report Abuse

Kcchong,

1. ".... element of luck. Secondly, I believe this mean reverting principle in the equity market; any market for that matter, such as the property market"
^ I have not heard of reverting principle. Is it a market phenomenon?

2. Your 5 years bursa indices, is it 31st dec figures or 12 months comparison adjusted to July 28th?

Posted by kcchongnz > 2013-08-01 07:32 | Report Abuse

Posted by tonylim > Jul 31, 2013 07:29 PM | Report Abuse
Kcchong,
1. ".... element of luck. Secondly, I believe this mean reverting principle in the equity market; any market for that matter, such as the property market"
^ I have not heard of reverting principle. Is it a market phenomenon?

2. Your 5 years bursa indices, is it 31st dec figures or 12 months comparison adjusted to July 28th?

Definition of 'Mean Reversion'
"A theory suggesting that prices and returns eventually move back towards the mean or average. This mean or average can be the historical average of the price or return or another relevant average such as the growth in the economy or the average return of an industry."

The bursa data or stock price are meant to be 5 years from now, ie 28th July. It needs some time to get those prices and compute the total returns and CAR. So sometimes I curi ayam a little bit using data I computed say a week or two ago. But when you talk about 5 years total return or CAR, I don't think there is much difference.

Posted by Ooi Teik Bee > 2013-08-01 07:41 |

Post removed.Why?

Posted by Ooi Teik Bee > 2013-08-01 11:26 | Report Abuse

Dear Tan KW,

Please invite another sifu here because he is 100% accurate one. Let us learn from him to make more money. I want to be a billionaire by following his stock pick. Please help me !! Please !!

Thank you.
Ooi

Posted by Ooi Teik Bee > 2013-08-01 11:32 | Report Abuse

Yes. See you when we have class. I will email you.

Thank you.

Posted by iafx > 2013-08-01 11:49 | Report Abuse

siapa makan cili siapa rasa pedas ;)

Posted by Ooi Teik Bee > 2013-08-01 11:55 |

Post removed.Why?

Posted by Ooi Teik Bee > 2013-08-01 13:02 | Report Abuse

My return for 2013 now is > 60%, I am very sure I will win big in 2013. Please ask all my students whether I take them to wonderful land or not.

Please recommend stock lah !! No ball ?

Posted by Ooi Teik Bee > 2013-08-01 13:25 | Report Abuse

Posted by Fat Cat Tim Buddy > Aug 1, 2013 11:44 AM | Report Abuse

i never admit that im sifu ;im sohai mah..

Posted by annie24 > 2013-08-01 13:33 | Report Abuse

Tan KW - am a little confused with all these comments...
Where shall i look at to find the stocks picked by these sifus ... whoever they are :)

Posted by banditos > 2013-08-01 14:08 | Report Abuse

is this the same fat cat who talks so big about nextnation and the BIG BOYS theory? LOL!!!! ;P

Posted by mummy2u > 2013-08-01 14:09 | Report Abuse

fat cat just an animal,u urgue with it? funny

Posted by mummy2u > 2013-08-01 14:10 | Report Abuse

by the way otb=ocb?

Posted by inwest88 > 2013-08-01 14:29 | Report Abuse

I reckon FTCB may not want to take up the stock pick challenge

Posted by kcchongnz > 2013-08-01 15:00 | Report Abuse

Mega First Corporation Berhad (1/8/13)

擁有一隻股票，期待它下個早晨就上漲是十分愚蠢的 Warren Buffet

Mega First Corporation Berhad (MFCB) is principally engaged in Power, Property, Limestone, Engineering and Investment Holding. The Power segment builds, owns and operates power plants.

The main earner is the power division which owns two power plants, one in China and the other in Sabah. The plants provide steady income for MFCB of 76% of the total revenue and profit of the company. It’s resource division operates one of the largest limestone hill reserves of more than 100 acres in Perak. It is also one of the country’s largest producers of lime products. This division contributes 13% and 15% of the total revenue and profit respectively. The management intends to increase capital expenses in this division in anticipation of greater demand for the limestone products in the country. Going forward, the Resource division will be contributing more to the revenue and profit of the company. The other core division in property development contributes about 5% of the total revenue and profit. These businesses of MFCB will continue to provide steady income and stable cash flows for many more years.

Quality of MFCB’s business
Years ago, MFCB has been depending on its power generation business to provide a steady and stable revenue and profit for the company. However there is not much growth in this business. Revenue and operating profit have been hovering less than 500m and 100m respectively (See Table 1). It is only about two years ago revenue and operating profit spike up to 635m and 120m respectively from the three core businesses last year. The compounded annual growth rate for the last two years is very good at 10% and 27% respectively for its revenue and operating profit.

The margins of the business of MFCB are reasonably good for its kind of industry. Last year, gross and operating margins have recovered steadily back to 26% and 19% respectively (See Table 2). Net margin deteriorated to 15% due to its losses in its investment activities and as a result affecting its return of equity. ROE of MFCB was 10% last year which is nothing to shout about but meets the minimum quality requirement. ROIC is however, much better at 18.6%, much higher the costs of its capitals.

MFCB’s quality of earnings is excellent as shown in Table 3 below. Its CFFOs are generally about the same as net income. About 30% of its cash flows from operations is spend on capital expenses. There is good average free cash flow after that, 13% and 16% (both> >5%) of revenue and invested capital respectively for the last 7 years. Last year cash flows are particularly good at 15% and 20% of revenue and invested capital respectively.

Market Valuation
There may not be high growth in MFCB’s business, but it has stable earnings and good cash flows, beside having a squeaky clean balance sheet. Hence it should be accorded with a reasonable good market valuation. But is it so?

At RM1.70, MFCB is trading at 7.1 times its earnings per share of 24 sen last year. Note that MFCB has an excess 126m cash or cash equivalent sitting in its balance sheet. Besides it has about 117m in quoted and unquoted investments and interest in associates. Despite of these quality assets, its price-to-book value is at only 0.7.

The cheapness of MFCB is more glaring from the perspective of its market enterprise value. At RM1.70, Its market enterprise value is 1.6 times its earnings before interest, tax, depreciation and amortization, far below the industry average. Earnings yield (Ebit/EV) is great at 50%, much higher than my 10% requirement.

Hence at RM1.70 a piece, I have added MFCB as a third stock in my portfolio.

Table 1: Revenue and profit of MFCB from 2006-2012
Year 2012 2011 2010 2009 2008 2007 2006
Revenue 635304 610508 523323 463103 500889 471813 478387
Gross profit 165798 145553 118934 135952 93215 111351 123305
Operating profit 119885 105838 73765 93392 46089 70915 87461
Net profit 93662 112568 99221 96188 66073 82487 77708

Table 2: Margins
Year 2012 2011 2010 2009 2008 2007 2006
Gross margin 26% 24% 23% 29% 19% 24% 26%
Operating margin 19% 17% 14% 20% 9% 15% 18%
Net margin 15% 18% 19% 21% 13% 17% 16%

Table 3; Cash flow of MFCB
Year 2012 2011 2010 2009 2008 2007 2006
CFFO 115207 102393 97420 111842 54207 92293 71955
Capex -22791 -24829 -49267 -35078 -7727 -19401 -18716
FCF 92416 77564 48153 76764 46480 72892 53239
FCF/Revenue 15% 13% 9% 17% 9% 15% 11%
FCF/IC 20% 17% 11% 19% 12% 19% 12%
CFFO/NI 123% 91% 98% 116% 82% 112% 93%

Posted by kcchongnz > 2013-08-01 15:05 | Report Abuse

Hi all,just would like to inform that I have just made some money from GOB, the stock selected by OTB two days ago.

Posted by inwest88 > 2013-08-01 15:22 | Report Abuse

FCTB, that was the earlier picks made last year. Now KW has initiated for a new Stock Pick Challenge.

Posted by ipomember > 2013-08-01 15:28 | Report Abuse

oh ya i remember one of the Fat Cat most recommended stock, KNM, with extremely high TP of >100? opps i cant recall haha.

Posted by kcchongnz > 2013-08-01 16:07 | Report Abuse

Posted by Fat Cat Tim Buddy > Aug 1, 2013 03:14 PM | Report Abuse
kcchongnz so fast take profit?

Sorry, i may have made a mistake saying "I have just made some money". Not right. I bought this morning but only paper gain, not sold yet.

Posted by ipomember > 2013-08-01 16:08 | Report Abuse

things just got serious now? hehe

Posted by inwest88 > 2013-08-01 16:09 | Report Abuse

KW< how did you arrive at the ref price of 0.875 for Inari because at the time of posting the last transaction price is 0.90 or .0905

Posted by kcchongnz > 2013-08-01 16:09 | Report Abuse

Posted by Tan KW > Aug 1, 2013 03:13 PM | Report Abuse
@kcchongnz.... congratualtion... but still far away to reach TP 1.67

Valuation is an art. Don't take that as written in Gospel.

Posted by inwest88 > 2013-08-01 16:14 | Report Abuse

Ok, Thanks.

Posted by charlt09 > 2013-08-01 16:19 | Report Abuse

Peace. Be good sport to benefit readers. Stop shooting like bitchy women. tq.

Posted by CityTrader > 2013-08-01 16:20 | Report Abuse

3 same trading giants, kcchongnz, otb, fat cat n they are applying 3 different trading methods to reach the same goal. What colors the cats are, so long they are able to catch mouses, are good cats. I hope all counters as per their recommendations will move upside but to what level?

Otb has set tp but kcchongnz n fat cat have not done yet.

Tq

Posted by Ooi Teik Bee > 2013-08-01 16:38 |

Post removed.Why?

Posted by newbiestock > 2013-08-01 16:41 | Report Abuse

agree with OTB. u are wise in ur sayings.

Posted by newbiestock > 2013-08-01 16:48 | Report Abuse

fat cat but KCCHONGNZ and KCLOH also the same ler. why u neva bang them?

Posted by charlt09 > 2013-08-01 16:49 | Report Abuse

just ignore the bad sports who attacking others if thing went wrong. they only got themselves to blame and no others.