Posted by choolooi > 2013-07-31 21:00 | Report Abuse

You sure have ur facts to present and argue ur case of this stock which has caused quite a furor recently.
Thanks

Posted by looloo99 > 2013-07-31 21:16 | Report Abuse

thanks alot

Posted by zaprija > 2013-08-01 07:15 | Report Abuse

Thanks Kcchoongnz for the analysis and info. Appreciate so much and always follow your info.

Posted by inwest88 > 2013-08-01 07:28 | Report Abuse

A very detailed and comprehensive analysis. Worth considering to invest.

Posted by yfchong > 2013-08-01 08:30 | Report Abuse

Bro KC, need to seek advice for FY 2013, the capex is almost double comparing to year before, any idea on KFima expansion plan.

Posted by fookchng > 2013-08-01 08:36 | Report Abuse

Bravo KC. Very decent analysis. It's really need time to discover the undercovered and talented swan who hide themselves as ugly duckling. No doubt that the discovering process will invite dispute even attack from those naive peoples haphazardly. I salute your courage to fight for your stand. There are people out there who really cherish your sharing because only wise people knows how to judge. Indeed you had most of the wise people captivated with your shared knowledge and information. Again well done and I appreciate your hard work.

Posted by fatinvest > 2013-08-01 14:19 | Report Abuse

Bravo Uncle Chong. A good analysis!
Cheers.

Posted by kcchongnz > 2013-08-02 07:35 | Report Abuse

What is the intrinsic value of Kumpulan Fima?

Financial theory postulated by John Burr Williams in his “The theory of investment value” says that the value of a stock is worth all of the future cash flows expected to be generated by the firm, discounted by an appropriate risk-adjusted rate. This theory has since been extensively used in contemporary finance.

There are two major assumptions used in the computation for the intrinsic value, or the present value, of the expected future cash flows of a company; earnings growth rate and the discount rate. Slight deviations of the assumptions can yield a vast difference in the intrinsic value.

The discount rate is related to what is the required return by the equity and debt holders respectively; i.e. how much risk premium above the risk-free rate would be required. For most practical purpose, in contrast with the academic approach in capital asset pricing model, a risk premium applied is related to how stable the earnings and cash flow of the company and its financial health. The 10-year MGS rate at the moment is about 4%. Kumpulan Fima earnings and cash flows have been steady for the last 10 years. It has a squeaky clean balance sheet. So it would be conservative to apply a risk premium of 6% above the MGS rate, or a required return of 10% (4%+6%). Using a before-tax borrowing rate of 6% for Kfima, it weighted average cost of capital is about 9.8%. This WACC will be used as the discount rate for the valuation of the firm.

The more difficult part is the assumption of future cash flows of the company which is related to its expected growth rate. A difference in assumption of growth of 10% will yield a completely different intrinsic value of the company. For example if one assumes Kfima’s earnings will grow by 5% for the next 5 years, and 3% subsequently, its intrinsic value is RM4.10. If his assumption is 10% growth for the next 5 years, the IV is RM4.95. So which growth rate is the right one?

When I carry out the computation of IV to decide whether to invest in a company, I would prefer to use conservative assumptions in its growth rate. In Kfima’s case, how about the assumption that its business will be stagnant, and there is no further growth, not even grow with the rate o finflation? In this case I would use the Earnings Power Valuation popularized by Columbia University Professor Bruce Greenwald. For those who are interested, please refer to the following link:

http://www.scribd.com/doc/15987706/Greenwald-Earnings-Power-Value-EPV-lecture-slides

The intrinsic value of Kfima using the EPV is RM3.36 per share as shown below.

Figures in thousands
Revenue 486524
Ebit, 126763
less income tax, -37766
EBIT after tax 88997
Add average D&A 21253
Less average capex -25917
Normalized Ebit 84334
Cost of capital, R 9.8%
Capitalized earnings=Nor Ebit/R 857956
Add cash 272236
Other investments 110462
Less debts -18472
EPV 1222182
Less minority interest -315821
EPV to common shareholders 906361
Number of shares 269987
EPV/share, RM 3.36

So at the close of Kfima’s share price at RM2.06 on 1/8/13, it is trading at a margin of safety of 39%.

Posted by houseofordos > 2013-08-02 07:52 | Report Abuse

KC, in your KFIMA spreadsheet for EPV, I notice you use this method to calculate the cost of capital

WACC = [(Market cap) / (Market cap +Debt) * 10% ] + [Total debt/(market cap + Debt) * 0%]

When this method is used, if debt is increased, you end up with lower cost of capital and a higher EPV value. Does this make sense ? A company with high debt to market cap ratio have a higher EPV ?

Posted by kcchongnz > 2013-08-02 08:18 | Report Abuse

house, cost of debt is not 0%. I used 6% before tax.

Yes, higher debts EPV higher. Perfectly make sense because cost of debt (6%) is cheaper than cost of equity (10%). Equity investor requires higher return because of higher risk. When a company goes bankrupt, debt holders has the first claim to what is left.

But there is a limit how high the debt can go, the higher the debts, the higher the chance the company can go bankrupt when the economy turns bad. So the higher the debt a company has, the higher is its increment borrowing cost.

Posted by newbiestock > 2013-08-02 09:42 |

Post removed.Why?

Posted by KC Loh > 2013-08-02 09:49 | Report Abuse

kcchong, sometime just bad luck you get this fly to stick to you even though all hygiene matters are covered. He is still in vendetta mode to lick his wounds from 2012 losses. the losses not enough to cover his 276% profit! hahahahahahahahaha

Posted by kcchongnz > 2013-08-02 10:10 | Report Abuse

Posted by newbiestock > Aug 2, 2013 09:42 AM | Report Abuse
liar and cheat KCCHONGNZ aifx is right about u

Since the two buddies above kept on saying I lie, cheat, tipu, pusing, macham macham, let me take the opportunity here again to brag a bit here about the achievement of my portfolio put up by Tan KW


Posted by kcchongnz > Jul 29, 2013 08:20 PM | Report Abuse X

How is kcchongnz portfolio compared to the unit trust funds invested in Bursa stocks for the 1-year, 3-year and 5-year holding period? For unit trust funds return, please refer to the following link:

http://klse.i3investor.com/servlets/forum/900334365.jsp?fp=2

Year 1 3 5
Average Portfolio CAR 43.8% 24.6% 24.6%
KLSE CAR 10.8% 9.9% 9.3%
Unit trust, ave CAR 15.20% 12.10% 11.70%
Unit trust Max CAR 28.50% 22.00% 20.80%

It does appear that I did pretty well. Not only my portfolio beat the averages of the unit trusts for all the holding periods, the portfolio even out-performed the best of the 68 funds investing in Bursa! Hard to believe!

Posted by newbiestock > 2013-08-02 10:15 | Report Abuse

KCCHONGNZ tipu macam biasa ler sohai

Posted by kcchongnz > 2013-08-02 10:20 | Report Abuse

These two jokers are exactly the same style. Shouting tipu, cheat, lie but how did i cheat? Show substantiations and proofs. Go and compute the CAGR of my portfolio, the KLSE's and the unit trusts in Fundsupermart. I have done that and all posted in i3. Go and do it yourself and check.

Posted by newbiestock > 2013-08-02 10:21 | Report Abuse

KCCHONGNZ sells his stocks. good salesman. but alot of tipu and crap

Posted by kcchongnz > 2013-08-30 19:29 | Report Abuse

Kumpulan Fima first quarter 2014 results

Revenue and profit before tax dropped by 3.2% and 18.7% to 112.8m and 30.1m respectively. The drop was mainly due to the poorer performance of the manufacturing and especially the food division. The palm oil division surprisingly did well with an increase in revenue and PBT. Bulking division also did slightly better.

My concern about its cash flow proved to be unnecessary as this quarter saw its receivables reduced by 33m. This improves its CFFO to 52.6m, 175% of its net profit. Free ash flow for this quarter is very good at 40m after continue spending 12.4m in PPE and biological assets.

The good cash flow is reflected in its balance sheet with cash increased by 18% to 321m from 272m last year.

Posted by kcchongnz > 2013-09-08 19:16 | Report Abuse

Here I attempt to find the intrinsic value of Kumpulan Fima based on what was posted by Tan Kian Wei as appended in the following link:

http://klse.i3investor.com/blogs/kianweiaritcles/36514.jsp

First I need to explain what are the few important data and assumptions I would use for the discount cash flow analysis.

Table 1 below shows the free cash flow for the last 5 years. For the starting free cash flow (FCF), I would use the five year average of 69.8m.

Table 1: FCF for the last 5 years
Year 2013 2012 2011 2010 2009 Average
FCF, m 3.1 104.6 113.9 94.7 32.7 69.8

One may query that if we consider to use the immediate past year FCF of just 3.1m which I sometimes do, then my computation will be totally out. However, if you look at the FCF of Kfima for the past 4 years before last year, there is a trend that FCF is trending upwards to more than 100m a year. Hence it would not be right to use just last year FCF which was exceptionally low. In fact Kfima has just announced its first quarter 2014 result which shows that there is about 40m FCF, just for a single quarter. Hence this confirm that using the last 5 year FCF as the starting FCF is reasonable if not conservative.

Next I need to have a reasonable assumption of what the growth rate of this FCF is for the next 5 years and thereafter. Kfima’s FCF has been growing at a CAGR of 43% before the fall of last year. If you consider the FCF for the first quarter 2014, the rate doesn’t seem to slow down. However using that rate of 43% would be grossly unjustifiable as it would be hugely liberal and would result in an exceptional high intrinsic value. What about an assumption of 5% growth for the next 5 years, and then 3% thereafter?

For the next assumption of a discount rate, I will stick to 10% as explained in my previous valuation exercise. Here the risk premium is just 6% above the long term MGS rate. This is because the company has steady earnings and cash flows and a very healthy balance sheet.
The following shows the intrinsic value of Kfima based on the discount cash flow analysis:

PV of FCF 1118m
Add cash 272.2m
Less debt 18.5m
PV of FCFE 1371.8m
Less minority interest 354.5m
PV FCF 1017.3m
Number of shares 270m
FCF per share RM3.77
MOS 48%

The above discount cash flow analysis shows that the intrinsic value of Kumpulan Fima is RM3.77. This represent 48% margin of safety investing in Kfima at RM1.96 now. Of course the market doesn't have to agree with me. Obviously it doesn't.

Posted by bsngpg > 2013-09-09 12:51 | Report Abuse

Hiddengem : If you really want gem and plantation related gem, pls have a look on KFima. Furthermore sifu KC Chong has done very outstanding homework for us, best still, he follows up closely and update us periodically. Where to find this kind of “好慷”. KC Chong : Big big Kam Siah to you.

Yield : Some of the reasons I bought KFima are cash, div yield but most importantly the bright future of the palm oil.

People: I do not put in significant money into KFima as I am not comfortable with all “Ali” in BOD.

Biz : I do not feel great on other biz sections i.e. bulking, food etc. Besides liking palm oil, I am OK with the printing of security documents.

Timing: I feel it is not expensive now. I do not think you can get fast and significant return from KFima and investing in KFima is a bore game except when CPO raises significantly, that is also the time I am waiting for. I let my KFima goes for long term holiday. I never plan to sell within a year or two unless CPO goes very high.

Fundamental : I believe in KC Chong a lot on KFima.

Posted by kcchongnz > 2013-11-06 18:28 | Report Abuse

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.

Posted by bsngpg > 2013-11-06 22:22 | Report Abuse

“You make money by WAITING” after buying into a GOOD and RELIABLE company.

I have neither any fundamental nor technical skills in investment. Honestly I even do not know how to read financial report, let alone financial analysis. But I am blessed to have reasonable return from Bursa. There is no special secret or skill, but just do ONE thing:-“Buy good and reliable company then just Sit and Wait”

Example1: Bought Zhulian @ RM0.68 in Nov08, with PAT 75 mil. Sit and Wait till PAT 117mil(Nov12) with current close at RM4.40.

Example 2: Bought LPI @RM9 in May 09 (exclude bonus and RI as lazy to do adjustment) with PAT 104mil (Dec08). Sit and Wait till PAT 167mil (Dec12) with current close at RM16.50

Example 3: Bought Genting @RM6.4 in Mar 07 with PAT 1.5bil (Dec06). Sit and Wait till PAT 3.98bil (Dec12) with current close at RM10.50.
How can I wait for so long? It is because I perceptually bought into the business but NOT the shares.

So do you believe now that Sit and Wait can make you money ?

Posted by nightshade > 2013-11-25 11:29 | Report Abuse

Maybank-C2, gearing > 40, expiry next year June, ratio 5:1

strike at RM 10.50....it is possible in my view....

Posted by heavyth > 2013-12-17 16:38 | Report Abuse

Is it still a good stock to buy & keep ???

Posted by bsngpg > 2013-12-22 16:24 | Report Abuse

Hi KC Chong : I am referring to your post on Sep 8, 2013 07:16 PM on “Blog: Stock Pick Challenge - [KFIMA] by kcchongnz” .

Can you please tell me where did you get “minority interest 354.5m” ?
Thank you

Posted by kcchongnz > 2013-12-22 17:10 | Report Abuse

Posted by bsngpg > Dec 22, 2013 04:24 PM | Report Abuse

Hi KC Chong : I am referring to your post on Sep 8, 2013 07:16 PM on “Blog: Stock Pick Challenge - [KFIMA] by kcchongnz” .

Can you please tell me where did you get “minority interest 354.5m” ?
Thank you

If you refer to the income statement of fy 2013, total net income is 104.3m of which 26.9m, or 25.8% belong to minority interest. So when I got the FCFE of 1371.8m for the equity shareholder, I proportionate that percentage, or 354.5m for the minority interest. the remaining FCF then belongs to the common shareholders of Kfima.

Frankly speaking, I have never seen any analysis doing like that and hence I am not 100% sure if it is the right way of doing so although I feel it is correct way. Most analysis only have the analysis of the ordinary business and there is no items like "minority interest", "excess cash", "investments", "associate companies" etc which is not consolidated into the ordinary business. What do you think then?

Posted by bsngpg > 2013-12-22 22:03 | Report Abuse

Hi KC Chong : thank you very much for your prompt and generous response.

Posted by nokenzo > 2013-12-23 06:49 | Report Abuse

Hi KC, what does PV stand for?

Posted by kcchongnz > 2013-12-23 11:01 | Report Abuse

Posted by nokenzo > Dec 23, 2013 06:49 AM | Report Abuse

Hi KC, what does PV stand for?

It stands for present value, what is the worth of the stock now. Or the intrinsic value of a stock.

http://www.investopedia.com/terms/p/presentvalue.asp

Posted by nokenzo > 2013-12-23 13:15 | Report Abuse

Thanks Mr KC, while cash and debt can easily obtained from the 2013 financial statement, how do get PV of FCF of 1118m?

Posted by kcchongnz > 2013-12-23 14:26 | Report Abuse

nokenzo,

PV of FCF is the discounted amount of all future FCF to the present value using a discount rate. Future FCFs are estimated. I found one link for this which is more comprehensive for you to read and understand.

http://klse.i3investor.com/blogs/edu_morg_star/31605.jsp

Posted by nokenzo > 2013-12-23 15:01 | Report Abuse

Thank you very much, Mr KC.

Posted by nokenzo > 2013-12-23 22:23 | Report Abuse

Hi KC, tried out CF at year N/(1+R)^N, still can't get your PV FCF of 1118m. Wonder how you did it?

Posted by bsngpg > 2013-12-23 23:22 | Report Abuse

Hi nokenzo : the below are the numbers I got. Do you have the same numbers ?

Base/Yr 1/2/3/4/5/Terminal

FCF: 69,794/73,284/76,948/80,795/84,835/89,077/1,310,701

PVFCF:-----/66,622/63,593/60,703/57,943/55,310/813,842

PV of FCFF of core operations=1,118,013

Posted by nokenzo > 2013-12-24 01:46 | Report Abuse

Hi Mr BSNg, FCF I got for 2013/2012/2011/2009/2008 are 3,239/104,617/113,956/95,784/32,695, average is 70,058. I don't know how to get the terminal like yours. Hence, PVFCF is also out. I was a biology student, quite dumb.

Posted by nokenzo > 2013-12-24 02:24 | Report Abuse

Hi Mr BSNg, just got the formula of Terminal FCF, $=CFn(1+g)/(R-g).

Posted by bsngpg > 2013-12-24 05:57 | Report Abuse

Hi nokenzo : pls try to use 69,794 as your base FCF to check if you can get Terminal FCF 1,310,701.

I got 69,794 from Table 2.

Table 2: Cash flows of Kfima 
Year 2013 2012 2011 2010 2009 Average

CFFO 52,589 131,052 137,909 114,196 56,521 98,453

Capex -49,513 -26,434 -24,022 -19,500 -23,826 -28,659

FCF 3,076 104,618 113,887 94,696 32,695 69,794

FCF/Revenue 0.60% 22.20% 26.40% 23.00% 8.90% 16%

FCF/IC 0.60% 25.80% 29.10% 27.70% 9.40% 19%

Posted by bsngpg > 2013-12-24 06:03 | Report Abuse

Hi nokenzo : if use your number 70,058 as base FCF, I got terminal FCF =1,315,659. PV FCF= 1,122,242.


add cash =272200
less current debt=-18500
Total PV FCF =1,375,942
less minority inetrest=-354,993
Total PV FCFE =1,020,949
FCF/share=IV = 3.78
MOS @1.96 = 48%

Do you get the same numbers ?

03:45am, do you live outside Malaysia ?

Posted by bsngpg > 2013-12-24 06:05 | Report Abuse

You can get Table 2 by double clicking the Title "Blog: Stock Pick Challenge - [KFIMA] by kcchongnz"

Posted by bsngpg > 2013-12-24 06:18 | Report Abuse

Hi kokenzo : I were a chemistry student, very dumb too. I spent many days in performing reverse engineering on the numbers by KC Chong to understand DCFA. I were shy to simply ask question, thus I spent lot of hours in reading at Investopedia.com and annual reports to map his numbers. Now I have little(not much and not validated) understanding on his numbers. Please feel free to ask whatever questions, let us learn together.

Happy learning.

Posted by nokenzo > 2013-12-24 09:18 | Report Abuse

Thank you very much, Mr BS Ng. Shall try to sort out later after office. I live in Kedah, usually wake up early to read mail and quite computer illiterate. Worst, now trying to understand finance! Me, too, because of KC, I learned to read AR. You are much better than me, hope to learn from you too.
Ecstasy, when I got certain figure right as stated by KC. This reminded me of my student time, I was really on top of the world when I can solve a maths equation.
Yes, happy learning together.

Posted by nokenzo > 2013-12-25 11:37 | Report Abuse

Hi Mr BS Ng, Merry Christmas, while most of us are enjoying the holiday, I am still struggling with the 'equation'. Starting from CFFO, I found certain discrepancy, could you advise when you are free?
2013 2012 2011 2010 2009 2008
nokenzo CFFO 52,898 131,051 137,909 114,196 56,521 62,207
Capex -49,659 -26,434 -24,022 -18,412 -23,826 -30,433
FCF 3,239 104,617 113,887 95,784 32,695 31,774


KC ChongCFFO 52,589 131,052 137,909 114,196 56,521 98,453
Capex -49,513 -26,434 -24,022 -19,500 -23,826 -28,659
FCF 3,076 104,618 113,887 94,696 32,695 69,794

BS Ng FCF 73,284 76,948 80,795 84,835 89,077

Posted by nokenzo > 2013-12-25 11:39 | Report Abuse

Hi Mr BS Ng, are you from Penang island? If so, do you go jogging in Botanical garden?

Posted by bsngpg > 2013-12-25 14:28 | Report Abuse

Hi Nokenzo : I did not calculate FCFO of the last 5 years and the average. I just used the numbers provided by KC Chong as Table #2.

My numbers of FCF {base FCF * (1+growth%)} =73,284, 76,948 80,795 84,835 89,077

Yr1=69794*(1+5%)=73,284,
Yr2=73,284*(1+5%)=76,948,
Yr3=76,948*(1+5%)=80,795
Yr4=80,795*(1+5%)=84,835
Yr5=84,835*(1+5%)=89,077
Terminal FCF= CFn(1+g%)/(R%-g%)=89,077*(1+3%)/(10%-3%)= 1,399,778

FV FCF= FCFF1 / (1 + WACC)^1 + FCFF2 / (1 + WACC)^2 + ... + FCFFn / (1 + WACC)^n

Yr1=73,284/(1+10%)^1+Yr2=76,948/(1+10%)^2+yr3+yr4+yr5+Yr Terminal= 1,399,778/(1+10%)^5=1,118,013.

Good Luck.

Posted by kcchongnz > 2013-12-25 14:39 | Report Abuse

The base FCF I used for the estimation of future FCF is the average of the FCF of last 5 years, ie 69794.

You notice last year's FCF is very usually low at about 3m only. The FCF before that are much higher. For example 2012 FCF is 105m, 2011 114m etc. Last year there was a build up of inventories and receivables which were unusual. Anyway I have checked the first quarter 2014 cash flow and most receivables have collected and inventories reduced. So it appears to be ok.

So I think the average 5-year FCF used as the base is conservative enough.

Posted by anbz > 2013-12-26 01:22 | Report Abuse

don't buy kfima...it's too expensive...look...another stock recommended

by kcchong...is pmcorp...only 21.5 cents...ask him why he recommends

lousy counters such as pmcorp..hahaha

Posted by anbz > 2013-12-26 01:28 | Report Abuse

ask him to make future FCF which must be the average of the FCF of last 5 years for pmcorps...u'll be surprised....ripley's believe or not..he will make u believe...lol

Posted by fatinvest > 2013-12-26 01:30 | Report Abuse

Go go go! Go to the company recommended by anbz, the beautiful one of it's kind Nova MSC, that superstar that should reach RM1.20 from RM0.06 before the UMNO general assembly in 2013 ( November 2013???)
Or did you mean 2023?
2033?
2043?
2053?

Posted by anbz > 2013-12-26 01:34 | Report Abuse

bsnpg, tan kw and many more are all his member of gang...jcool call them jcw gang...or is it jwc gang? can't remember

he also recommends fibon before...and they goreng it well..now look at fibon...what has happened???!!!

he and some of his gang also goreng pmcorp..and now what has happened?!!!

well his team are very powerful and have significant influences on their days...

but he likes to mix craps and truth

Posted by anbz > 2013-12-26 01:40 | Report Abuse

woe another member of the gang here..i wish i have loyal supporters like u

at least my recommended shares are not in ruin compared to fibon and pmcorp

---
one thing they doesn't move is because i don't have ability to influence people like kcchong

if not..some of mine would also shoot up...and fatin...i also recommended glomac when it was 77 cents...and pw-con when it was 68 cents

they are moving up u know...but if i have the ability to influence or con people like kc...i may made my case...lol

Posted by fatinvest > 2013-12-26 02:08 | Report Abuse

But did KC Chong inform his kakis that he had sold out PMCorp and Fibon after these shares have risen???
Did he???????
But did you tell people that all your Nove story was bullshit, and that people should not take your recommendation seriously???
Did you???