Posted by chrisyap > 2015-11-24 20:54 | Report Abuse

I believe incantation, the magic formula hehe

Posted by WinnieFoong > 2015-11-24 21:54 | Report Abuse

Thank you Mr Chong for all the articles, I enjoy reading all the good articles in the i3investor which contribute by different experts. I found that different guru are using different techniques for their investment. Some people are able to make more money and some less. However all the guru have the same intention, there is to help everyone to make more money.
As a reader, I will make use of the techniques which i feel more comfortable and can make more money.
However I feel that it is too bad to put down other people for the sick of self promotion. In order to get more "students".

Posted by Ezra_Investor > 2015-11-24 22:39 | Report Abuse

This article = Fundamental Investing in a nut shell.

Posted by RonnieKimLondon > 2015-11-25 00:12 | Report Abuse

Mr. Chong. This posting is insightful and witty. VS Ind? LOLX

Posted by kcfoe > 2015-11-25 00:17 | Report Abuse

RonnieKimLondon VS keep going up despite KC condemned it. Ronnie how about your Pantech?

Posted by kcfoe > 2015-11-25 00:19 | Report Abuse

Agree with WinnieFoong. KC like to put down other people. KYY is one example and many others(Cold Eye, etc).

Posted by sunztzhe > 2015-11-25 02:58 | Report Abuse

Before I begin, please find my comment below which you may have accidentally omitted as it brings some balance to the overall issue at hand

Posted by sunztzhe > Nov 24, 2015 12:48 AM | Report Abuse X

Of course for a highly leverage company one must also use Return on Total assets as another benchmark on performance besides EPS and PE multiple

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First and foremost ...Thank you for highlighting a narrow portion of what I had written yesterday which by the way was my response to one of the forumers then but I do feel honoured that you had taken the opportunity , the liberty and decision to advertise what I had espoused on the narrow portion on EPS, PE multiple, forward EPS n forward PE multiple based on current price.

I think there were other wider issues on DCF method of determining the Intrinsic Value which I did raised yesterday which you had chosen not to discuss and had omitted in the above article. I believe that in life, one must have a balanced view and keep things as simple as possibly can.

First and foremost as an investor I look at the company's biz model, the management and how the management of any company manages its total assets to generate returns for the company and to its shareholders. I place high importance on the qualitative statements from the chairman/MD in the annual report, the biz strategy going forward and whether the chairman or MD really knows the biz. I will visit its website to have a fuller understanding of its biz, the industry it competes in. This is very important to me as an investor.

Next ..I would focus on ROE(return on Equity) and ROA (return on total assets) as performance metrics concurrently as you too is also aware that for highly leverage companies, ROE will overstate the performance due to the gearing factor. To bring it to some form of balance, I will use ROA for highly leverage companies. Notwithstanding the above I would always look at net cash backing per share as well.

Your topic yesterday was on the usage of Discounted Cash Flow Model(DCF) to determine the Intrinsic value(IV) of a company such as VS. The DCF model is a good financial tool to determine the Intrinsic Value of any company. However it has its drawbacks.

First in todays world, companies may not be privileged to live for a long time due to management/competition /technological obsolescence etc

Second, The DCF financial model requires a fair forecast of future cash flows which has to be discounted back to Net Present Value by the weighted average cost of capital(WACC). Herein lies two challenges on
- a fair but subjective estimate of future cash flows with its attendant assumptions
- a fair but subjective estimate of the weighted average cost of capital which in most cases is comprised of Cost of Equity(Re) + Cost of Debt(Rd)

The estimation of a fair value of Re being the Cost of Equity Capital is very subjective and thus vary even among different financial experts.

The objective of DCF Model company is to determine the Intrinsic Value of a listed company and to enable the investor to ascertain whether the market price is at a premium or discount to its Intrinsic value(IV) which may then assist the Value Investor to decide. Since the estimation of a fair value of Re in particular may vary, the IV number thus computed will also vary. A high Re will result in a lower IV whereas a lower Re value will result in a higher IV. In essence there will be a range of fair estimate of IV numbers based on different subjective estimate of the Re factor given the same subjective estimate of future cash flows.

I hope the above brings balance back to the subject matter that was discussed yesterday.

Posted by kcchongnz > 2015-11-25 04:07 | Report Abuse

Posted by WinnieFoong > Nov 24, 2015 09:54 PM | Report Abuse
Thank you Mr Chong for all the articles, I enjoy reading all the good articles in the i3investor which contribute by different experts. I found that different guru are using different techniques for their investment. Some people are able to make more money and some less. However all the guru have the same intention, there is to help everyone to make more money.
As a reader, I will make use of the techniques which i feel more comfortable and can make more money.
However I feel that it is too bad to put down other people for the sick of self promotion. In order to get more "students".


Kind of agree with you that "self promotion" is kind of "sick". Hence I always try to discuss on subject matter, things, not on person. In this article, I discuss about how true super investors invest using very logical, sound, and intuitive fundamental methods, in my personal opinion.

Of course nothing works all the time and I am also often criticized on my methodologies, which I gladly accept and appreciate. You may read I often defend myself on some of the criticisms which I think is normal for everyone, as long as I don't go about personal attack like saying that the other person is bullshitting, misleading, or stupid.

"In order to get more students"? Of course, my message is very clear, to get more students. Is that bad?

First thing I get some income for sure if people subscribe to my courses. But that is from quite some hard work of my part.

More so it is a passion of mine now to disseminate some of the knowledge that I acquire from the fundamental value investing. It is quite a waste if I don't. That is what I personally think.

Quite a number in i3investor also said they learn from me without being a student of mine. This is one.


Blog: Do you have any No-Brainer Investment? kcchongnz

May 17, 2015 02:47 PM | Report Abuse
honestly speaking , I do not join Mr KCChong online course, I DO NOT pay Mr KCChong a sen, not a single sen, but these 2 years , I made a few lorries of cash using his recommended valuation techniques.


Don't you think the investing community needs some fundamental knowledge in investing in order to get reasonable and safe return from investing in the stock market?

Many thank me for what do for the small fee of a few hundred Ringgit I charge. This is one of them:

Posted by coolio > Oct 22, 2015 11:58 AM | Report Abuse
KC, please keep doing the good things you are doing now. I know you will just ignore those annoying sound out there, you know your quality.
I just want to take this opportunity to say thank you again because recently I have achieved 7 figure in my investing journey...hehehe.. Thanks for your investing methods, no 8 wonders in the world is really amazing!

Posted by JT Yeo > 2015-11-25 06:55 | Report Abuse

Sunztzhe, it is the same as guessing someone's age, if someone is old enough to vote etc, you dont have to be precise. IF you feel cost of equity is too subjective, just use your require rate of return, that's another way how most ppl interpret discount rates. How much return are you happy with? 10%, 15%?

If you ask me, i would just throw 10% on everything. Use a very conservative estimation on cash flow growth, 10% discount rate, and a 50% margin of safety, you already have a lot of protection on your side.

Posted by 3iii > 2015-11-25 08:30 | Report Abuse

JT Yeo Yes, valuation is not a precise art. It is better to be approximately right than precisely wrong. Your recommendation is a very practical one.

Posted by sunztzhe > 2015-11-25 12:25 | Report Abuse

JT Yeo,
You had missed the gist of my message.
The main objective of DCF is to determine a reliable estimate of the Intrinsic Value of a company. There r two subjective elements here in determining the Intrinsic Value (IV) using DCF :
- reliable estimate of future cash flows
- the appropriate discount rate

Being conservative in the estimation of future cash flows and applying the appropriate discount rate does not necessarily imply that the IV that u had derived is a reliable estimate of the intrinsic Value of a company. By being conservative in projecting future cash flows and applying a conservative discount rate may turn out to be totally unreliable and you may err in your decision making and miss out on the potential profit opportunity as an investor. If one is not confident of the input figures in the DCF model , why bother with it in the first place???

The onus is therefore on the person performing the DCF to determine the fair estimate of the IV of the company in order that decisions can subsequently be made.

So lets start the discussion going on in just determining a reliable estimate of the discount rate based on Malaysian situation.

- How would you determine the principles that u will use in determining the Weighted average cost of capital(WACC)of a company
- Having determined the WACC for the company, what are the principles that you will apply in determining the risk premium that you will want as an investor before you decide to consider investing in the company?

Posted by JT Yeo > 2015-11-25 13:34 | Report Abuse

The whole basis of DCF is build on the assumption that you know the business well enough. If you dont know the business, you can do a 50% discount rates, you will eventually get into trouble.

Conservative is different from 'not confident'. Conservative is knowing you might be wrong but nonetheless being careful from overconfidence. Like you say when you are not confident on something, you wont need to go through DCF anymore, it is a no go.

It is like 2 drivers, one is a race car driver. He wears helmet and seatbelt. Another is an uncle, who wants to be a race driver. He says to compensate for his lack of experience he will install 10 airbags, helmets, steal bar around car seats to reduce his 'risk'. It wont work.

Posted by sunztzhe > 2015-11-25 14:00 | Report Abuse

The whole basis of DCF is build on the assumption that you know the business well enough.
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Well said...100% agree with your statement. Now the pertinent job to do is to build on the assumptions as confidently and as realistically as possible in computing a confident but fair IV number based on assumptions of future cash flows and the discount factor

So how would u go about building the assumptions based on the principles at your disposal??

Posted by 3iii > 2015-11-25 15:27 | Report Abuse

Stay within your circle of competence. Only value those businesses that are within your circle; never stray beyond that. Stay with simple businesses, they are definitely easier to value.

Posted by JT Yeo > 2015-11-25 17:41 | Report Abuse

Already told you, 10%. The only thing that will change is cash flow estimation and growth. Discount rate and margin safety unchanged.

http://25iq.com/2015/11/21/why-and-how-do-munger-and-buffett-discount-the-future-cash-flows-at-the-30-year-u-s-treasury-rate/

If you want to read more

Posted by JT Yeo > 2015-11-25 17:48 | Report Abuse

Another thing why you want to use the same discount rate is that you can compare across your investment to determine which is the best idea. If you use different rates for each stock, u cant compare which one has the best upside.

Posted by JT Yeo > 2015-11-25 17:53 | Report Abuse

Read this whole thing

http://25iq.com/2014/05/26/a-dozen-things-ive-learned-about-great-ceos-from-the-outsiders-written-by-william-thorndike/

Posted by WinnieFoong > 2015-11-26 00:36 | Report Abuse

Mr.Chong,Self promotion in a healthy method is not a bad thing, in fact it is a good way to market ourselves. However i personally feel that respect each other is important to the successful of our life.
i am a beginner on investment, i read most of the articles from all the guru. Thank you for sharing a lot of information.

Posted by Probability > 2015-11-26 01:35 | Report Abuse

JT Yeo...excellent sharing :)
very useful link.
Big Thank You to you..

Posted by pisanggoreng > 2015-11-26 13:24 | Report Abuse

winnieFong,

lu cakap macam ini tak patut

When did you see him putting down somebody

he only said VS is not a good buy and he did not demand you must agree.

you are new ID but definitely not a newbie in share market

please be fair to Mr Chong, he is promoting his theory ,not promoting any particular shares he is owning a substantial amount, like the good man KYY. he got the similar right not to agree with others,as you are not to agree with him that VS is not a good buy.

I do not see anything wrong with him generously sharing his knowledge of investing that I believe had already help many to had made ton of money, of course, including me also

he did not and never force you to join his course, if you are hard working and willing to learn you will benefit from his sharing

let me share with you a very brave declaration here,

If I have learnt from him, I would not dare to put almost all my money in gadang when it was selling at 1.20. I have already locked in my profit, enough for me to get a new E250 cash money

I also made some money in VS, not much 5 figures only because I know KYY and his gang are powerful men, they can determine the price. but one must 'know enough'because the 80 years old man and his gang not going to hold on the VS shares forever, I do not want to cry no tear one day. dare you say this won't happen some day?

to me no investment is 'SURE WIN' there is some element of luck.
if you know how to calculate or evaluate your risk, then you win happily and lose willing .

RIGHT?




Posted by WinnieFoong > Nov 24, 2015 09:54 PM | Report Abuse


However I feel that it is too bad to put down other people for the sick of self promotion. In order to get more "students".

Posted by digiuser016 > 2015-11-26 13:42 | Report Abuse

Hi Kcchong
May I know how you evaluate gadang?
Which valuation model did you use. Income(dcf,ddm), comparables(ev/ebit,p/e,p/cf, etc?) or liquidation (graham net net,nav)
2: What do you think about its quality of earnings ? ROE, ROIC and etc?

Posted by pisanggoreng > 2015-11-26 13:53 | Report Abuse

kcfoe & WinnieFoong

I suggest you join the the online course of KC

If you have the knowledge , you need not have to rely on KYY and his gang to make money

other VS, there are many counter like gadang ,flb, matrix concept,favco,.. so many times better than VS
now I want to 'sailang' on RGB, if you buy below 0.16, MOS not less than 40%, before CNY join me walking smiling quietly to the bank

Posted by kcchongnz > 2015-11-26 18:53 | Report Abuse

Posted by digiuser016 > Nov 26, 2015 01:42 PM | Report Abuse
Hi Kcchong
May I know how you evaluate gadang?
Which valuation model did you use. Income(dcf,ddm), comparables(ev/ebit,p/e,p/cf, etc?) or liquidation (graham net net,nav)
2: What do you think about its quality of earnings ? ROE, ROIC and etc?


How I wish I know everything. But I don't. I know very little.

But one of my course participants knows much more about Gadang than me. He did a very good analysis, first judging that it is a good company with ROE and ROIC at mid teens and a high growth potential too. He used all the comparables as mentioned by you to value it half a year ago when it was trading at RM1.50.

His valuation then shows that at RM1.50, PE was at 6.6, Ebit/EV at 6.0. It was cheap. He used a discount FCF to value it too with an intrinsic value of RM1.93 then. Intrinsic value is likely have improved since then.

I relied on his analysis, after going through it, and bought quite a bit for myself and some for those whom i managed their fund. After buying it actually dropped quite a bit before rebounding back to RM1.84 now. Not bad in total return in such a short period.

I believe many of my course participants have invested in it too as his article was published in our training blogs.

I will follow this principle here before i sell:

http://klse.i3investor.com/blogs/kcchongnz/86447.jsp

In answering your questions, i would use sum of parts valuation for Gadang, if I have time and information, for its various business sections; property development, construction and its water treatment concession. Various valuation techniques such as discount cash flow which is good for its concession business, enterprise values, simple PE ratio can be used.

Posted by pisanggoreng > 2015-11-27 10:59 | Report Abuse

It is not that you can't learn, it is that you are lazy to learn
If you are learnt , then the whole wide world is your battlefield
You may not win all the battles, you will win most of the battles
KC likes to teach, why we don't like to learn
What benefit do you get to mislead the crowd what he is preaching is wrong? just because of something that can be manipulated. FA is one thing, price movement is another thing
OTB also dare not guarantee you will sure win if you subscribe to his program. He is just doing all the hard work of analysis for you because you are lazy. You are the type expecting and waiting for people to give you fish, and you demand a big fish in the shortest period. That's why you find KC on-line course is uninteresting. Believed market is a weighting machine. The ultimate winner is still the one follow the safe route. Believe me SAFE is not always slow , can be FAST and BIG also.
Reap what you have cultivated . Work for your good KARMA.

Posted by tealeaf > 2016-11-27 20:36 | Report Abuse

good sharing master kc