3 people like this.

17 comment(s). Last comment by nokenzo 2015-06-04 19:25

chonghai

472 posts

Posted by chonghai > 2015-06-03 18:41 | Report Abuse

Kcchongnz, I own VS share.I believe I never attack or insult your analysis, partly because I am still trying to comprehend your analysis. I bought VS for the recently surge in revenue due to keurig. No matter what is your analysis, I will be holding on my VS for 6 more months, because I believe the jump in revenue could be different from before. However, I still really appreciate your analysis because that allow me to have a good understanding of VS. Thank you very much.

Icon8888

19,022 posts

Posted by Icon8888 > 2015-06-03 19:49 | Report Abuse

"3. PE do not differentiate a company with net cash of 300mil or net debt of 300mil. Therefore using 'PE' and '11' the number to derive your fair value price will end up very wrong.”"

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Why do people say that PE does not reflect borrowings ? If the company has a lot of borrowings and incur high interest expenses, it's net profit will decline and valuation based on PE will be reduced accordingly.

As such, PE does differentiate a company with borrowing from one with cash.

Feedback welcomed

kcchongnz

6,681 posts

Posted by kcchongnz > 2015-06-03 20:04 | Report Abuse

Two companies, A and B in exactly the same industry have the same number of shares with the same share price, and hence the same market capitalization of 100m.

A has a total debt of 50 million and an excess cash of 10m, whereas B has a total debt of 10m but an excess cash of 20m.

Both companies make a net income of 10m. Hence both A and B is selling at a price-earnings ratio of 10 (100m/10m). But are they having the same value? If not, which company would you prefer to invest in?

Please view their simplified income statement in the link below:

http://klse.i3investor.com/blogs/kcchongnz/49016.jsp

Probability

13,801 posts

Posted by Probability > 2015-06-03 20:13 | Report Abuse

'what a contribution to i3'...
I am also truly amazed by your writing skills KC!
How nice if we can have a few more like you in i3.

Icon8888

19,022 posts

Posted by Icon8888 > 2015-06-03 20:26 | Report Abuse

Ah hah, thank you....

chinesetea

1,389 posts

Posted by chinesetea > 2015-06-03 21:06 | Report Abuse

Keep up the good work. Sometimes analysis work sometimes don't. There are too many factors that can affect the price ie intangible assets, brand name that no calculation can be used.

Keep writing and that will make people think more. I am sure the recent articles comparing GTRONICS and VS has created publicity that affect of the share price. Publicity is a great factor and that's why advertising business is so huge. Whether you're right or wrong, one thing for sure is now more people know about these two shares.

Have you not realised that stock that's issued with UMA may sometimes continue to rise after clarifications? Rumours is also a factor that cannot be priced :-)

kcchongnz

6,681 posts

Posted by kcchongnz > 2015-06-03 21:06 | Report Abuse

This is the first time someone owning a stock which I didn't write good about it, thank me. Umm.


Posted by chonghai > Jun 3, 2015 06:41 PM | Report Abuse

Kcchongnz, I own VS share.I believe I never attack or insult your analysis, partly because I am still trying to comprehend your analysis. I bought VS for the recently surge in revenue due to keurig. No matter what is your analysis, I will be holding on my VS for 6 more months, because I believe the jump in revenue could be different from before. However, I still really appreciate your analysis because that allow me to have a good understanding of VS. Thank you very much.

kl foong

427 posts

Posted by kl foong > 2015-06-03 22:17 | Report Abuse

Guys, keep it up.

vinext

117 posts

Posted by vinext > 2015-06-04 06:02 | Report Abuse

i believe i met kiasutrader once when he visited koon yew yin in ipoh. both Ks and KC r legends in their own right

Chan KS

57 posts

Posted by Chan KS > 2015-06-04 08:35 | Report Abuse

well, i dont own VS but i learn great lots from kiasu comment.

JT Yeo

1,639 posts

Posted by JT Yeo > 2015-06-04 09:30 | Report Abuse

An investment can be attractive at certain price but absurd at another price. Means even low ROE can be attractive investment if price is cheap enough. And this is for the investors.

As for management, the only tools that measures how well they run their company, create value for shareholders, create profitability in the long term is ROE/ROIC, nothing else. Too many managements engage in mindlessly following their competitors, acquisition at any price in the name of 'synergy cost-savings' purpose when the trend comes. And few years later, engage in spin-off in the name of 'unlocking' value.

Ask CEOs in airlines and auto carmakers, how many are willing to admit they never really create value for shareholders for the past decade because ROE is constantly below cost of capital. Not many would admit except recently Fiat/Chrysler CEO.

Business processes is absolutely important to figure out the competitive advantage of a company (i.e economies of scale) but the essence is still in ROE. Unless you are convinced the company has done something different that can increase the ROE.

Posted by kiasutrader1 > 2015-06-04 10:09 | Report Abuse

By the way, there is another kiasutrader on this forum. I am not the one, so I use kiasutrader1. Just to clarify.

tkt66

20 posts

Posted by tkt66 > 2015-06-04 17:32 | Report Abuse

Mr. Chong, thank you very much! I ready learned a lot about quality stocks selection after reading your articles. best regards

thteh

105 posts

Posted by thteh > 2015-06-04 18:59 | Report Abuse

I think you are doing a good job by your sharing of your FA knowledge. It's up to people to decide from reading both side of story of what Is the risk and return of VS share.

nokenzo

592 posts

Posted by nokenzo > 2015-06-04 19:25 | Report Abuse

KC's FA of VS is excellent, he has the qualification and knowledge for financial analysis, I have no doubt about his analysis.Those who want to learn about FA, I strongly recommend him to follow KC's course, you will have no regret. This is my personal experience.

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