tq moneysifu for your kind explanation. The way i look at D&A, is like required maintenance or cost for you to buy new machines to replace the obsolete ones in order to maintain your current business. I understand that not all machines which have been depreciated to zero book value are obsolete. So, my question is actually "are they spending too much capex to cover D&A to maintain current business instead of expansion?" Is it the nature of broiling industry?
@ probability - consumption per capita growth is far from being certain if it will catch up to Malaysia. Coca-cola entered Indonesia market ages ago and see the growth potential due to huge population, extremely low Coke consumption vs US (1.4% of US consumption in 1988), massive muslim population that rules out alcohol, but today it remains below world average level. So something worth while to investigate why Indonesia consumption is 25% of M'sia. Might have to do with income per capita I don't know.
@ Iamgoogle - I am always interested to hear and learn what I don't know. You are right. There are many factors that influence business decision and what strategy the company decides to take. And there are many things that can't be readily captured by figures i.e the culture of PBB and LPI that make them a standout in their own industry. But at the same time, it is also true that strategy shapes decisions, decisions drive result, which eventually reflects in financial statement, although there will be a time lag.
Today CAB strategy is to grow, thus their decision is to take over Farm Best and move into Indo. Thus our role as investors is to ask "Given these strategies, how much would they need to put into the business (capex), how much cash flow, and when will they be generated?" Discounting those 3-5 years cash flow back to present gives you a valuation. I will be BS-ing you if this is easy to do, it's not. But 3 simple things, how much they going to put in, how much will they take out, and when.
Let me guess - you checked what I wrote and compare the price, and make a conclusion. How convenient. It is always easy to shout around than sit down and write, cause it is hard work, and no one would bother doing that.
That's what we want, Rikcy Yeo, write so much of things but never bring good direction to investors, it is useless, I rather buy Peter Lynch's book, it is more useful. Because he had fantastic track records.
We have money, we need to buy good stock, simple as that.
I am a layman type investor, I can't read too technical things, I don't really understand what are you talking, sorry to say that, if you can make it simple in your comments, guess everyone will appreciate that.
there are people who are so scare of me they will take all the trouble to give me 10 report abuse to stop me making them feel stupid very soon all my post will be remove quietly by their 10 ID not the i3 admin .
For the investing part of depreciation, it all depends on the type of company. If you are looking at a rapid tech company where assets lose most of the value within the first year, needs to be replaced regularly, and costs a lot to maintain, the accelerated method is the right choice. If you come across a company where the depreciable life of the assets is extended or the useful life is much too long, watch out.
From the point above we know that it depends on many factors that effects D&A, level of maintenance needed , availability of parts , availability of vendor to support and productivity. Most of the the time the depreciation is calculated at the first phase when investing on the machinery/equipment and never been revised after that .
I think the vision of company and getting the whole corporation to work towards that objective can overtake all those financial ratios. That is business, how to translate those visions to numbers , yes you can but how many can believe that those numbers is achievable or not. It's creating a perception it's achievable and get them achieve that.
1. Peter Lynch definitely can teach you a lot, but if you look at things at skin deep, the problem is on you, not others. I could have asked you to buy Scientex in 2012 at $2.50 pre-split (now $15), SKPRes at $0.30 in 2013, and you wouldn't have hold it until today because of the prevalent idea of profit taking. And now I wrote about APM and Favco, but you won't have the temperament to buy them. Even if you did, you will only hold them for few months, same goes for CAB.
2. If you don't understand, I would appreciate you ask. If you don't understand something that doesn't mean the universe will make things easier to suit your taste. I have explained things as simple as I can.
I don't think Ricky is being lanci. Yes I agree Ricky often can be quite skeptical, but he's definite not arrogant, otherwise he wouldn't offer to teach.
He is just pointing out the facts. I'd say he is closer to Charlie Munger, someone who point out things in a very blunt and critical manner. Contradictory information is important. It good so that people can activate second level thinking. If you can't take a little criticism, then you are very blinded by cognitive biases, specifically, confirmation bias.
This ricky yeo is more suited to become an educator like Hairy Teo. If you guys notice all his postings are very academic based. In terms of market acumen, I afraid ricky yeo has ZERO track record here on i3! Without track record, dont talk so big la
Is the comment below talking bad on Ricky Yeo? Just read how Ricky Yeo commented above:
Stock Kingdom I am a layman type investor, I can't read too technical things, I don't really understand what are you talking, sorry to say that, if you can make it simple in your comments, guess everyone will appreciate that. 23/03/2017 09:23
Previously I had requested Ricky Yeo to explain on certain matters on one of his articles, he was very obliging. So be fair on ur comments. He is sharing his best judgment basing on financial data available to him. That's is nothing wrong. What is wrong with Rick challenging u? It is ok to be disagreed. Let other evaluate for themselves which informed data sets shud they adopt to formulate their decision.
Some folks may not agree to what he wrote doesn't mean others hv the same opinion. If u disagreed use ur own data or facts to challenge Rick's thesis. Pls don't use sarcastic general statement. We all here wanted to see facts and data to guide us on decision making shud we invest on the counter or not.
Ricky, these are not easy because we are outsiders & we do not have the details. Just like Ekovest selling Kesturi, no one know the details until they announced. Meanwhile, we can only guess.
Ricky Yeo Today CAB strategy is to grow, thus their decision is to take over Farm Best and move into Indo. Thus our role as investors is to ask "Given these strategies, how much would they need to put into the business (capex), how much cash flow, and when will they be generated?" Discounting those 3-5 years cash flow back to present gives you a valuation. I will be BS-ing you if this is easy to do, it's not. But 3 simple things, how much they going to put in, how much will they take out, and when. 23/03/2017 04:45
Due to my personal preferences, I don't like to use discounted cashflow due to the variable factors used in the formula are very subjective, but I respect anyone that using it. It is still very useful & powerful.
I like this statement you made :"If the profit can cover the cost of finance & give good return of more than 10% on investment, it will be good deal" mind to provide your calculation for CAB acquiring best farm? it is very useful for us to make a quick decision whether CAB is a good buy at the current price . thanks
(i did not any bad about anybody , please do not flag me , if not i got use aseng to post my next comment
I do not find ricky yeo argument hard to understand, in fact , he is just following a basic principle " buy good stock cheap" now , what he see in the available figures , things are not cheap , so he is putting across his view , hoping some kind souls to help him see that it is indeed cheap, since the article started with the tile " CAB is currently under value with a fair value more than 3.00 ". I am also hoping you can convince me , it indeed worth this value so that I too can put some of my hard earned money into to share the excellent discovery of wealthwizard
you see....management only guided RM 1.6 billion revenue in FY18. assuming margins remain like the most recent quarter, we are only looking at around RM40 million net profits. At a PE of 10-12x, CAB is only worth maximum RM2.01 in FY18. This RM3.04 target price is unrealistic.
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
Posted by culbertlim > 2017-03-22 23:56 | Report Abuse
xue wen come gadang