Posted by miketyu > 2014-02-19 00:00 | Report Abuse

Dear Mr Kcchongz,

How would you evaluate companies like Kossan, Hupseng Topgloves etc as their present EV/Ebit value is more than 7. Which method or (EV/Ebit value of 15 or 20) would you use to determine their fair value at the moment?

Posted by Henry HO > 2014-02-19 10:02 | Report Abuse

Mr. Chong, Thank you for the write-up on Pintaras..
Can you please explain what is MI??? How does MI affect the EV value or etc??? is MI so important???

Posted by kcchongnz > 2014-02-19 10:15 | Report Abuse

Posted by miketyu > Feb 19, 2014 12:00 AM | Report Abuse

Dear Mr Kcchongz,

How would you evaluate companies like Kossan, Hupseng Topgloves etc as their present EV/Ebit value is more than 7. Which method or (EV/Ebit value of 15 or 20) would you use to determine their fair value at the moment?

If you want to value a company in absolute EV/EBIT term, you should think about flipping the metric over to EBIT/EV, which we call the earnings yield (EY). So what do you think you personally require? 10%, 12% 15% or 20% of EY? Please note that EBIT/EV is before tax, unlike P/E which is after tax.

The above article mentioned that,

"Buffett has said that he will generally pay 7x EV/EBIT, or an earnings yield of about 14%, for a good business that is growing 8-10% per year."

EV/EBIT is more useful to compare companies within the same industry; for example glove companies of Topglove, Kossan, Supermax, Harta etc, better than using PE ratio. However, it is not infallible as it still have not taken into consideration of the growth prospect, efficiencies etc of different companies.

Posted by kcchongnz > 2014-02-19 10:29 | Report Abuse

Minority interest

http://www.ibankingfaq.com/interviewing-technical-questions/enterprise-value-and-equity-value/what-is-minority-interest-and-why-is-it-in-the-enterprise-value-formula/

Posted by miketyu > 2014-02-19 11:56 | Report Abuse

Thanks Mr Kcchongz. Fully understood.

Posted by francis5269 > 2014-03-11 22:58 | Report Abuse

Hi mr.chong, your excess cash is from the formula "excess cash=total cash - max(0,current liabilities- current asset)". may i know how you classify the "total cash" from? i add up "Short-term deposits","Cash and bank balances", but cant get your amount Excess cash 155459.then i add up other asset also has variance of it... may i know what category should classified in "total cash"?

Posted by kcchongnz > 2014-03-12 04:56 | Report Abuse

francis5269, yes i use the formula mentioned by you. More specifically, it is:

Excess cash = Total cash or cash equivalent- max[0,current liabilities- (current asset-cash or cash equivalent)]

Don't forget that cash also include the 46.6m "available for sales investments" in the non-current asset which is quoted shares.

Posted by francis5269 > 2014-03-12 11:05 | Report Abuse

Hi mrchong, i think i know why has variance...bcs i see u posting the date is in 18feb14. so i thought u using 31dec13 financial statemenet. but actual, u r using 30jun13. u r right...

and EV/EBIT should be 4.79 because EBIT i check is 67152.

Posted by francis5269 > 2014-03-12 21:36 | Report Abuse

hi mr.chong, i think i know y 5.9... bcs EBIT minus the dividend n disposal income... bcs this ady add in into excess cash so they should not included EBIT...otherwise they will duplicate...am i right?

Posted by kcchongnz > 2014-03-13 00:57 | Report Abuse

Francis, exactly

Posted by francis5269 > 2014-03-14 01:42 | Report Abuse

thx, mr.chong...ur patient explanation...

Posted by Ezra_Investor > 2015-10-02 21:39 | Report Abuse

Mr Kcchongnz, there's something I would like ask regarding EV.

In the US, EV is calculate by:

EV = market value of common stock + market value of preferred equity + market value of debt + minority interest - cash and investments.

When translated to MY, it means:

EV = Market Value of Equity + Minority Interest + Debt – Excess Cash

Here's the question, when we speak of Excess Cash, do we refer to Cash and Bank Balances? Or do we refer to Cash and Cash Equivalents in Bursa?

Thank you for your time and explanation in advance.

Posted by kcchongnz > 2015-10-03 05:47 | Report Abuse

Excess cash is cash not required for the ordinary operations of the company. It can be just taken out without affecting the core business, and EV is about the core business.

So for me, excess cash is not only cash in the balance sheet, but investment in equity, investment in property for a non-property firm, investments in associates, JV etc.


Posted by Ezra_Investor > Oct 2, 2015 09:39 PM | Report Abuse

Mr Kcchongnz, there's something I would like ask regarding EV.

In the US, EV is calculate by:

EV = market value of common stock + market value of preferred equity + market value of debt + minority interest - cash and investments.

When translated to MY, it means:

EV = Market Value of Equity + Minority Interest + Debt – Excess Cash

Here's the question, when we speak of Excess Cash, do we refer to Cash and Bank Balances? Or do we refer to Cash and Cash Equivalents in Bursa?

Thank you for your time and explanation in advance.

Posted by Ezra_Investor > 2015-10-03 16:11 | Report Abuse

Posted by kcchongnz > Oct 3, 2015 05:47 AM | Report Abuse

Excess cash is cash not required for the ordinary operations of the company. It can be just taken out without affecting the core business, and EV is about the core business.

So for me, excess cash is not only cash in the balance sheet, but investment in equity, investment in property for a non-property firm, investments in associates, JV etc.

----------------------------------------------------------------------

Thank you KC. Just to confirm, if I get what you're saying right, in my case it should be "Cash and Cash Equivalents" instead of "Cash and Bank Balances", right? Because it's not only cash in the balance sheet.

Posted by kcchongnz > 2015-10-03 16:54 | Report Abuse

Posted by Ezra_Investor > Oct 3, 2015 04:11 PM | Report Abuse

Thank you KC. Just to confirm, if I get what you're saying right, in my case it should be "Cash and Cash Equivalents" instead of "Cash and Bank Balances", right? Because it's not only cash in the balance sheet.


You are right.

Posted by paperplane2 > 2015-10-03 19:16 | Report Abuse

Why suddenly all kc posts appear?