Posted by VenFx > 2017-01-30 00:54 | Report Abuse

Favco a very good proxy in heavy equipment design and manufacturer .

Posted by Tiger_shark > 2017-01-30 05:52 | Report Abuse

fantastic write up thank you

Posted by soojinhou > 2017-01-30 06:46 | Report Abuse

The beauty of Favco is that it allows one to enjoy the recovery in the O&G sector, without being fully exposed to the risk because a significant portion of their order book is from the construction company.

Posted by Ntpboon > 2017-01-30 09:05 | Report Abuse

除了渐渐复苏的油气行业，
FAVCO 也将会从区域基础设施的蓬勃发展中受益。
值得期待！

Posted by supersaiyan3 > 2017-01-30 09:17 | Report Abuse

朋友，低處未見低。

Posted by supersaiyan3 > 2017-01-30 09:29 | Report Abuse

營業額插水，你買埋我固（口旁）份。

Revenue is shrinking every month, what did they do? That's the real question.

Posted by CharlesT > 2017-01-30 09:40 | Report Abuse

Everything seems good except sales are coming down....

Posted by wkitwing > 2017-01-30 09:55 | Report Abuse

what concerns me is its revenue keep on decreasing,kcchongnz sifu would you please clarify on this shrinking sales every month?

Posted by Flintstones > 2017-01-30 10:02 | Report Abuse

Kcchongz knows only the numbers. He who extrapolates the past knows nothing about the future undertakings of the business. In the business world, it is easy to con people like kcchongz. You just show him a few years of financial reports with good numbers and tadaa! Hes conned!

Posted by kcchongnz > 2017-01-30 10:57 | Report Abuse

Posted by wkitwing > Jan 30, 2017 09:55 AM | Report Abuse
what concerns me is its revenue keep on decreasing,kcchongnz sifu would you please clarify on this shrinking sales every month?


Everybody knows the revenue of FAVCO has been decreasing for the last few quarters. But that is the first level thinking.

In investing, you need the second level thinking. It is, yes, its revenue has been dropping, profit has also been dropping. Its share price has also dropped substantially, and many people are selling. At this price now, considering it has secured some jobs, and construction industry has been doing well, and oil price seems rebounding, is this price reasonable? What is its estimated intrinsic value? What is the margin of safety? Has the share price dropped substantially below its intrinsic value.

That is the second level thinking.

The second level thinking is not how good one predicts the future, as few can predict the future well consistently. That is the pitch of the snake oil salesman like the one below.

"Posted by Flintstones > Jan 30, 2017 10:02 AM | Report Abuse
Kcchongz knows only the numbers. He who extrapolates the past knows nothing about the future undertakings of the business. In the business world, it is easy to con people like kcchongz. You just show him a few years of financial reports with good numbers and tadaa! Hes conned!"

Posted by ckkhen > 2017-01-30 11:21 | Report Abuse

Excellent write-up and very good clarification to wktwing and Flinstones. Nice to learn about second level thinking in investment.

Posted by Flintstones > 2017-01-30 11:25 | Report Abuse

Well, i will leave it to other members imagination on who is the snake oil salesman here. It seems that i am not the one selling lessons, subscriptions or managed accounts. And please dont crap here with the howard marks theory. I have read the book as well and sincerely, i dont think your "extrapolate the past" analysis fulfills any of his second level thinking.

Let me show you whats second level thinking by posing a few questions to you. How much do you know about favelle favco business? What is their competitive advantage? Who are the major competitors of favelle favco? What is the "current" landscape of the crane industry and where does favelle stand? What is favelle favco management doing to embrace the slowing orderbook ahead? What is the current available crane capacity in Asia right now? Is crane rental rate increasing or decreasing lately?

That my friend, is second level thinking. I am sorry to embarass you because we all know what you will claim when you dont know. And here comes kcchongz infamous - "I cant predict the future". Lmao. On a side note, if you are interested to learn about favelle favco business. I can arrange you a coffee session with the executive director of favelle favco, free of charge.

Posted by probability > 2017-01-30 11:33 | Report Abuse

Flintstone...seems like u really have an advantage...i think your are already at 'third' level thinking already - access to the top most level information. Do share with all if u think FF has any -/+ info we are all not aware.

Posted by soojinhou > 2017-01-30 11:40 | Report Abuse

Yes Flintstones, why don't you write something more substantial? Ricky did a good piece about the industry: http://klse.i3investor.com/blogs/JTYeo/90401.jsp, how about you writing an even better piece?

Posted by gongkia > 2017-01-30 12:01 | Report Abuse

when tips are out, it's over.

Posted by kcchongnz > 2017-01-30 12:15 | Report Abuse

Posted by Flintstones > Jan 30, 2017 11:25 AM | Report Abuse

Well, i will leave it to other members imagination on who is the snake oil salesman here. It seems that i am not the one selling lessons, subscriptions or managed accounts. And please dont crap here with the howard marks theory. I have read the book as well and sincerely, i dont think your "extrapolate the past" analysis fulfills any of his second level thinking.

A SNAKE OIL SALESMAN IS ONE WHO CLAIMS THAT HE CAN SEE THE FUTURE LIKE THE ONE I HAVE JUST MENTIONED. BUT DOES HE? I HAVEN'T SEEN ANY EVIDENCE FROM HIM YET.

WHEN SOMEONE EARNS AN HONEST LIVING, TEACHING SOMETHING USEFUL FOR LIFE, AND MOST BENEFIT FROM IT, AT A LOW AND AFFORDABLE COST, IS THERE ANYTHING WRONG WITH IT? WHAT IS WRONG WITH IT?

REALLY, YOU HAVE READ THE BOOK BY HOWARD MARKS AND UNDERSTAND IT?

Let me show you whats second level thinking by posing a few questions to you. How much do you know about favelle favco business? What is their competitive advantage? Who are the major competitors of favelle favco? What is the "current" landscape of the crane industry and where does favelle stand? What is favelle favco management doing to embrace the slowing orderbook ahead? What is the current available crane capacity in Asia right now? Is crane rental rate increasing or decreasing lately?

I DO NOT DISPUTE IT IS GOOD TO KNOW ALL THE ABOVE. BUT DOES HOWARD MARKS TELLS YOU THAT YOU MUST KNOW ALL THE ABOVE IN HIS SECOND LEVEL THINKING? WHICH CHAPTER AND WHICH PASSAGE IS THAT?

THIS IS WHAT HOWARD MARKS SAYS ABOUT SECOND LEVEL THINKING WHICH IS THE MOST IMPORTANT AS FAR AS I HAVE READ,

First level thinking says, “It’s good company; let’s buy the stock.”
Second level thinking says, “It’s a good company, but everyone thinks it’s a great company, and it’s not. So the stock’s overrated and overpriced; let’s sell.”
First level thinking is simplistic and superficial, and just about everyone can do it. All the first-level thinker needs is an opinion about the future.
Second level thinker is deep, complex and convoluted.
Second Level Thinking
1. What is the range of likely future outcome?
2. Which outcome do I think will occur?
3. What is the probability that I’m right?
4. What does the consensus think?
5. How does my expectation differ from the consensus?
6. How does the current price for the asset comport with the consensus view of the future, and with mine?
7. Is the consensus psychology that’s incorporated in the price too bullish or bearish?
8. What will happen to the asset’s price if the consensus turns out to be right, and what if I’m right?
You can’t do the same things others do and expect to outperform.: to achieve superior investment results, you have to hold non-consensus views regarding value, and they have to be accurate. That’s not easy.



That my friend, is second level thinking. I am sorry to embarass you because we all know what you will claim when you dont know. And here comes kcchongz infamous - "I cant predict the future". Lmao. On a side note, if you are interested to learn about favelle favco business. I can arrange you a coffee session with the executive director of favelle favco, free of charge.

YOU EMBARRASS ME? I DON'T THINK YOU REACH THAT STANDARD YET.

SHOWING THAT YOU KNOW THE ED OF FAVCO? WHAT IS THE POINT?

Posted by SureBankrupt > 2017-01-30 13:04 | Report Abuse

Can ask employees to cut pay?

Posted by supersaiyan3 > Jan 30, 2017 09:29 AM | Report Abuse

營業額插水，你買埋我固（口旁）份。
Revenue is shrinking every month, what did they do? That's the real question.

Posted by Equityengineer > 2017-01-30 13:42 | Report Abuse

The only catalyst for increase in Favco price is OnG sector. The reduction in oil output, how can it be a catalyst for OnG construction company. New orders will be deplete since less oil should be pumped out.
"The decrease in profit before tax for the Group was mainly due to decrease in sales which is in line with industry climate and order book".

The stock price may be undervalue and the metrics can prove it, but the upside is still in increase of sales

They have some contracts for this year for tower crane amounting about 130 mil..
Personally, its really tough to say to buy even the price have rose a bit since i first looking at the stock at 2.40.

Posted by supersaiyan3 > 2017-01-30 13:44 | Report Abuse

《誰偷走了我的乳酪？》

I read a little bit on what its competitors are doing. They are rather busy. And rather horrible!

Pass!

Posted by wkitwing > 2017-01-31 05:16 | Report Abuse

Equityengineer The only catalyst for increase in Favco price is OnG sector. The reduction in oil output, how can it be a catalyst for OnG construction company. New orders will be deplete since less oil should be pumped out.
"The decrease in profit before tax for the Group was mainly due to decrease in sales which is in line with industry climate and order book".

The stock price may be undervalue and the metrics can prove it, but the upside is still in increase of sales

They have some contracts for this year for tower crane amounting about 130 mil..
Personally, its really tough to say to buy even the price have rose a bit since i first looking at the stock at 2.40.
30/01/2017 13:42

kcchongnz sifu,would you mind comment on the above by our fellow equityengineer?

Posted by kcchongnz > 2017-01-31 07:50 | Report Abuse

Posted by wkitwing > Jan 31, 2017 05:16 AM | Report Abuse
Equityengineer The only catalyst for increase in Favco price is OnG sector. The reduction in oil output, how can it be a catalyst for OnG construction company. New orders will be deplete since less oil should be pumped out.
"The decrease in profit before tax for the Group was mainly due to decrease in sales which is in line with industry climate and order book".
The stock price may be undervalue and the metrics can prove it, but the upside is still in increase of sales
They have some contracts for this year for tower crane amounting about 130 mil..
Personally, its really tough to say to buy even the price have rose a bit since i first looking at the stock at 2.40.
30/01/2017 13:42
kcchongnz sifu,would you mind comment on the above by our fellow equityengineer?


Equityenginer certainly has his valid concern about that to invest in FAVCO, it must have increasing sales in order for the price to shoot up.

For me, my investing thesis of investing in FAVCO, if you read carefully, is based on its present. It is undervalued based on its present financial performance and financial position. Hence as long as the business of FAVCO does not deteriorate further and badly from this point, I should be getting satisfactory return in the long-term.

I am not looking for fast return, but it also doesn't mean that won't come.

Posted by Caseyi3 > 2017-01-31 10:13 | Report Abuse

KC thanks for the great analysis. The assumptions used in EPV have been particularly useful to me. Though I've known about the great financials of Favco for a while, the huge excess capacity in O&G sector has been discouraging me from taking a position. I feel a greater sense of comfort after reading your detailed analysis. Nobody knows the future, but management track record, strong financials and wide margin of safety tilt the probaility more to the positive side.

Posted by Jay > 2017-01-31 19:07 | Report Abuse

good analysis, just a few points to consider

1. declining orderbook
this is where a lot of investors are concerned about, an analysis of historical order book to revenue to gauge the impact of the smaller orderbook on future revenue would be good. estimated PE would be more relevant than historical PE

2. use of cash
all EV measures looks low when a company has a lot of cash. good thing about FF is they are paying good dividend but they did mention for a long time that they plan to acquire other companies. that's why they set aside the cashpile. so if they do announce a sizeable acquisition, would the investment thesis change? and idle cash not used efficiently does not create much value either

Posted by Ntpboon > 2017-01-31 20:20 | Report Abuse

见仁见智！
“师父领进门，修行在个人。”

Posted by paperplane2016 > 2017-02-01 01:55 | Report Abuse

Jay got good points

Posted by kcchongnz > 2017-02-01 07:56 | Report Abuse

Posted by Jay > Jan 31, 2017 07:07 PM | Report Abuse
good analysis, just a few points to consider
1. declining orderbook
this is where a lot of investors are concerned about, an analysis of historical order book to revenue to gauge the impact of the smaller orderbook on future revenue would be good. estimated PE would be more relevant than historical PE
2. use of cash
all EV measures looks low when a company has a lot of cash. good thing about FF is they are paying good dividend but they did mention for a long time that they plan to acquire other companies. that's why they set aside the cashpile. so if they do announce a sizeable acquisition, would the investment thesis change? and idle cash not used efficiently does not create much value either


Good comments. Thank you.

I have read some of your analysis and report. Your analysis and report are very thorough, and very good indeed.

This are my opinions:

1) Detailed analysis is definitely good as one should look at every angle possible when investing. However, how detail one can go into depends on many factors; how familiar he is in that particular sector, how much information he has, which profession he is in (investment bankers and analysts are professionals in this as they can get all information easily and they are full time, often just in analysis of one industry), and most of all, how much time he has, and willing to devote to it.

But sometimes the law of diminishing return comes in too and one has to make a choice.

2)Cash in balance sheet is a safety buffer when investing, best of all you don't have to pay for it. Two exactly similar companies, one with excess cash and the other none, definitely the one with excess cash is a better company to invest in, no matter how the management uses the cash.

For example, if you are a dividend yield investor, that definitely gives you great peace of mine that dividend is likely to be sustainable. How is this cash utilize, unfortunately it is the prerogative of the management. Management can also takes on new investments when good ones come along, hopefully they don't simply make acquisitions just to build a bigger empire, and destroying shareholder values.

Posted by stockmanmy > 2017-02-01 10:52 | Report Abuse

An excellent effort.

I will say this belongs to the top 10 percentile proposition.

But I still prefer KYY golden rule.....don't touch any thing unless you are absolutely sure this year makes more money than last year., better still buy game changers that will disrupt and change the whole industry.

You see, every investment I make is an opportunity cost with it. I cannot buy every thing that is good and cheap.

Posted by stockmanmy > 2017-02-01 10:56 | Report Abuse

Dynamic investing as opposed to value investing means I need to look for some thing I dare to sailang with it.

I have to ask.....is this some thing I can sailang?

Posted by VenFx > 2017-02-01 11:05 | Report Abuse

Stockmanmy, buy ViS and hoot kaw kaw.
Make this Rooster 2017 your ever profit year.
Like I try to ask u to buy in Jhm in 2016.

Whish u a frenz and healthy year ahead.
Perrish the opportunity, simple yet this is a free advise.

I has been try to lead u to Mfcb, while u write an article in Jaks.
Check Mfcb warrant , it has surge higher than Jaks.

HAAPY NEW YEAR 2017

Posted by stockmanmy > 2017-02-01 11:12 | Report Abuse

Honestly I have no idea what is VIS, and have not bothered to find out.

I think we operate in different universe.

I prefer KYY universe where things I buy are based on public information.....I cannot be comfortable with non public information or rumors or pure speculations.

Posted by VenFx > 2017-02-01 11:16 | Report Abuse

Hahaha, as predicted.
It's your choice, I must respect that.
Whish u doing good in Rooster Reban anyway.

Posted by VenFx > 2017-02-01 11:20 | Report Abuse

I wont simply sale a call.
The fact sharing has been in my earlier comments in ViS thread.
ViS is my major counter in 2017.

Posted by stockmanmy > 2017-02-01 11:33 | Report Abuse

ven

I promised myself never to criticise your choices again after your Proton contractor makes you multiple baggers...or to bet against you ...its just too weird for me. ..and your VIS up so much in a few weeks.

But, we do operate from different universe.

Posted by VenFx > 2017-02-01 12:06 | Report Abuse

Appreciate that, I believe Rooster is a better year ahead.
恭喜发财

Posted by stockmanmy > 2017-02-01 12:18 | Report Abuse

two roosters ago, it was 1993............!

its abalone and a life of exuberance for some...and suicide for others.

people of my age remembers 1993 well.

history repeats?

Posted by VenFx > 2017-02-01 12:42 | Report Abuse

Don't worry wor,
market still sound and healthy as long there are no overly ecstasy.
Furthermore, free counters no worry la.

Posted by stockmanmy > 2017-02-01 14:46 | Report Abuse

the dichotomy

cheap stuffs are never good stuffs
good stuffs are never cheap

reminds me of the house in Bangsar I did not buy years ago.

still want to be value investors? or dynamic investors?

Posted by stockmanmy > 2017-02-01 15:15 | Report Abuse

the more variables, the more murky the valuations.

stock picking like wife picking

you want a cheap wife or a wife you love?

Posted by stockmanmy > 2017-02-02 07:34 | Report Abuse

the more variables, the more murky the valuations.

Let's look at gold or oil, a commodity.

There is easy reference and only one variable.

But a share or a wife, there are many variables

What is cheap what is expensive is not so clear cut.