4 people like this.

16 comment(s). Last comment by popo92 2016-09-05 00:59

Posted by shareinvestor88 > 2016-06-19 04:03 | Report Abuse

Another gem to be discovered is IQ group

ckwan11d

567 posts

Posted by ckwan11d > 2016-06-19 07:38 | Report Abuse

Both are good.

OPMS

1,183 posts

Posted by OPMS > 2016-06-19 07:48 | Report Abuse

Added to watchlist. Thanks dude!

Ricky Yeo

1,637 posts

Posted by Ricky Yeo > 2016-06-19 09:00 | Report Abuse

1. May I ask how did you get the NOPAT figure? Based on my calculation for 4 recent quarters using same tax rate, NOPAT is $14,255 or ROIC of 21%. You might have included the income earned from excess cash into the EBIT

2. ROIC is derived from turnover and NOPAT margin. Turnover remain pretty much the same. So it is the NOPAT margin expansion that fuel the ROIC growth. When you dig deeper, it is the gross margin expansion not NOPAT. The question is can they maintain a margin of 24-25%? Because based their report and historical margin, this margin is fuel by favourable exchange rate. (Hence gross margin expansion)

3. Historical margin ranged from -2% to 17% or average of 8-10%. What you are seeing now is a margin expansion that double triple the history. Let's say if they cannot hold this margin and revert close to average, say 15%, ROIC will fall back to 12.5%.

4. Although Oceancash doesn't do insulation in HVAC but they're involve in auto insulation. It is a stretch but their margin is a good reference, averaging 7.85%

4. If your upside of 35% is correct, a ROIC fall to 13% gives you a downside of 28.2%.

Ricky Yeo

1,637 posts

Posted by Ricky Yeo > 2016-06-19 12:02 | Report Abuse

Higher sales volume has to come from either 1) Increasing pricing and/or 2) Lower cost. And you might have a point of economic of scale, but consider it is not a business heavy in fix assets, long term assets to current assets is 50:50 ratio, how would a company derive economic of scale when the fixed assets aka fixed cost is not even that huge on the balance sheet.

And if you ask me economic of scale that can double triple bottom line margin, I find it hard to believe.

Ricky Yeo

1,637 posts

Posted by Ricky Yeo > 2016-06-19 13:05 | Report Abuse

ok typo there, I mean higher sales, shouldnt be higher sales volume.

You mention not fuel by foreign exchange, should I take your word or from quarterly report? I believe it is a mixture of both, but unless you have a good argument what state-of-the-art machineries that they bought can double NOPAT margin, the argument that they can maintain those margin is weak.

Every household will need their insulation materials - I am not quite sure what you are trying to say with that statement. Just like someone once wrote global warming should favour Superlon.

Up_down

4,304 posts

Posted by Up_down > 2016-06-19 13:18 | Report Abuse

Guessing time. Mixed feelings in coming QR by looking at its Revenue. Will it grow another 10% in revenue?


Revenue - forex USD

30 Apr 16 - ??? (3.9236 or Down 6.5%)
31 Jan 16 - RM 22.3m (4.1526 or Down 4.2%)
31 Oct 15 - RM 22.4m (4.292 or Up 11.3% )
31 Jul 15 - RM 22.1m (3.8215 or Up 6% )
30 Apr 15 - RM 20.9m ( 3.57 or Down 2.7%)
31 Jan 15 - RM 19.3m

Ricky Yeo

1,637 posts

Posted by Ricky Yeo > 2016-06-19 15:43 | Report Abuse

Nice wordplay by the way.

So you are saying you are not assuming because you are following an analyst report, which is 2nd hand, while im assuming because im reading a primary report release by mgt? Well fair enough, provided MIDF visit Superlon and interview them, which I doubt.

Let's say MIDF is 'accurate'. EBIT of 15%, where would ROIC be at that margin? 12.5%. Improvement to 18.6%, ROIC will reach 15.4%. Where does that leave you on your ROIC assumption of 24%?

Let's extrapolate it, Superlon hits a margin of 20%, competitors takes notice, bought the same machineries, improves their efficiency, undercut Superlon on price. What's the chance this will happen? Superlon's clients are mainly commercial, industrial and residential. They buy insulation in bulk. Superlon's clients aint fragmented buyers that doesn't have pricing power. It is good they can improve cost savings by investing in capex. But you need to figure can those savings be retained in the business itself or eventually it will flow towards the customers.

Palm oil industry is a classic example. Buying palm oil mills from CBIP to improve their operations efficiency. But so what, theyre a price taker, palm oil is a commodity. Eventually it is the end users that benefits not them.

Ricky Yeo

1,637 posts

Posted by Ricky Yeo > 2016-06-19 17:17 | Report Abuse

I never say it is solely, im saying it is partially to mainly. Signature Kitchen use to claim that they have economic of scale in their report. I would have believe if they are Burlington North.

Yes the formula is correct, it is the numbers that goes in. It is because their clients have bargaining power, that's why they want to get it from small supplier. Where's your ability to negotiate when your supplier are bigger and your purchase only make up a small % of their sales?

I've stated enough opposing view for you. Down to you to weight the probability to each outcome. The probability to maintain current margin or revert back to the mean.

sostupid

447 posts

Posted by sostupid > 2016-06-20 08:34 | Report Abuse

Waste time does not waste money but anything that waste money waste time. The law of nature. If you want to puke puke yourself or else other people will puke on you. Show you some mathematics and show you a picture of money to ask you for money, you ask the guy yourself whether his head got problem or not? Waste time does not waste money but anything that waste money waste time.

Blacksails

762 posts

Posted by Blacksails > 2016-06-20 21:21 | Report Abuse

Its too late!!!

007

1,902 posts

Posted by 007 > 2016-06-20 21:27 | Report Abuse

is not too late, let's see what q. result will be annouced then invest. safer

Blacksails

762 posts

Posted by Blacksails > 2016-06-20 21:58 | Report Abuse

Buy now before its too late?

PlsGiveBonus

3,749 posts

Posted by PlsGiveBonus > 2016-06-20 21:59 | Report Abuse

Margin of safety is less than 30%
What do you think it will fit?

Posted by shareinvestor88 > 2016-06-20 23:48 | Report Abuse

Another gem is IQ bhd

popo92

578 posts

Posted by popo92 > 2016-09-05 00:59 | Report Abuse

Good try. I am curious that your given figures for ebit, nopat, and invested capital were not same from my derivation in the first place. But i think thats a small matter. Superlon is a good company in my opinion but it does well recent years with favourable forex, even the management has declared themselves repeatedly over and over again. I agreed with you that superlon results were not benefiting much from swinging of forex gain. But in fact, favourable currency price in well to its sales pricing. I don't know how long superlon is able to benefit from these pricing due to competitions. I personally will not pay 180-200million yet for superlon...maybe in future, but not now yet

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