4 people like this.

23 comment(s). Last comment by Learning machine (BRK investor since 08) 2020-04-05 21:26


480 posts

Posted by teoct > 2020-03-02 10:16 | Report Abuse

Thank you for sharing.

Posted by Philip ( Icarus) > 2020-03-02 11:45 | Report Abuse

You are very welcome. But please note that the market currently is very choppy, and if you need a dividend yield it unable to withstand long periods of market down, you would be best served to wait it out.

I am able to keep holding on and to purchase more during this bloodbath because I have access to margin and additional dividend and cash resources to average down.

I can't tell you how to predict when a market downturn is coming, but I can sure navigate one. Bursa now is under the strain of fear from covid+ trade war+ political uncertainty, a very very rare combination.

Today you can buy public bank at pe12, PCHEM at ipo prices etc.

If you ever need a signal to buy wonderful companies at drop dead prices, this is it.

Ignore the noise and understand the business.


480 posts

Posted by teoct > 2020-03-02 13:56 | Report Abuse

Thanks again. Yes looks like a perfect storm for Malaysia in particular and the world in general.

Any lead to new company(s) that you maybe assessing now? Appreciate it very much.

I am looking at DBS (PE10) and comparing to PBB appears to have much better potential going forward.

Happy investing.

Posted by Philip ( Icarus) > 2020-03-02 15:58 | Report Abuse

For me in terms of banks I prefer safety of investment in terms of loans.

DBS has a lower PE than PBB true. However why is that so?

PBB has a much lower gross impairments loan ratio of 0.49% versus DBS 1.5%. This is because PBB borrows for hire purchase loans (which pretty much does not exist in Singapore haha). Comparatively, it is almost a guaranteed loan, as the loan principal is paid off early, and profits are paid of in the back end of the car/house loan. Which if any impairment occurs PBB can auction of the car or resell it cheap as the principal has already been paid, and any further loans is just gravy on top.

DBS has such a high gross loan impairment because it borrows a lot to SMES, developers and manufacturing companies, which is going to be looking at huge losses and payment misses in the months to come. The disposal of assets of which will be hard to factor in due to bankruptcy.

PBB on the other hand is mostly borrowing to households and car owners that already have a committed monthly loan payment schedule. So i believe the payment schemes are there.

In terms of free loans (individual deposits and fixed deposits), the lifeblood that banks use to generate income and cover loans, you can measure yourself the deposit/loan percentage of DBS versus PBB. You will quickly find out how much the chinese communities save money and squirrel away in malaysia versus singapore.

One sad fact is singapore seems to be a very wealthy country, but in truth its individuals do not have much money to save and spend almost all of it away.

Malaysia on the other hand has a very healthy savings community (the chinese community at least), and this is shown with how much cheap loans are being kept as fixed deposits and regular savings accounts in Public bank.

Either that or Singaporeans are far brighter in chasing after alpha, keeping most of their wealth in bonds, stocks and mutual funds, versus in plain old boring fixed deposits.


3,053 posts

Posted by qqq33333333 > 2020-03-02 18:30 | Report Abuse

You would do far better if you spent time trying to understand how to predict that instead of just turning the blinders on and buying based on dividend yield, PE, cash flow, debt, ROE and alone.

I like that...that is the professional approach...........

don't lah be like subscription services talk warren Bufett.........than go and recommend all kinds of cyclical rubbish stocks, small caps , companies with unpredictable long term future.......


31,556 posts

Posted by stockraider > 2020-03-02 18:39 |

Post removed.Why?


55 posts

Posted by untong > 2020-03-02 19:41 | Report Abuse

Thanks for sharing.
Is the size of each positions relative to your relative confidence on their business competitive advantage or expected return%.?

For PCHEM,what do you think of their growth trajectory after RAPID project? Da Vinci management guided will contribute about only 5% to the earnings when fully consolidated.
Latest analyst Q&A they mentioned about why they need to conserve so many cash instead of increase the dividend payout after Pengerang project, it is for some plant upgrade in Pengerang,may need as much as 2-3bil USD in 2-3 years,related to specialty chemicals, e.g intermediaries for gloves manufacturing etc. I am curious what is the prospect like for them to spend so much


5,459 posts

Posted by Sslee > 2020-03-02 20:32 | Report Abuse

Dear Philip,
Refer SERBA financial end 2019 report: On SERBA major contributor O&M business segment:
O&M-Operation and maintenance which include maintenance, repair and overhaul of rotating equipment (“MRO”), inspection, repair and maintenance of static equipment and structure (“IRM”), maintenance of process control and instrumentation and other related services.
Revenue: RM 3,895,228,000
Operating Profit: RM 710,923,000

Cash flow from investing activities:
Acquisition of property, plant and equipment: RM 868,207,000 (2019): RM 551,917,000 (2018)

Capital commitments of the Group in respect of property, plant and equipment as 31st December 2019 are as follows: -
Land and Building
Approved and contracted for RM 436,440,000

“My qualitative view on adding Serba dinamik, their main business model is operations and maintenance, all items that require very little in purchasing big ticket items or storing warehouses of equipment. Mostly needed is just simple manpower and high level of expertise in servicing and maintaining equipment”

Q1: If O&M is as what you said then why the need of huge CAPEX for Acquisition of property, plant and equipment?
Q2: Do you know CAPEX RM 868,207,000 (2019) is for what?
Q3: Most of original equipment supplier (Especially expensive rotating equipment) will come with warranty with condition services by the original supplier or their qualified maintenance service provider. (Surely you do not want your BMW car to be serviced by any workshop)
Q4: Do you know how many original suppliers qualified Serba as their qualified maintenance service provider.
Q5: Who is Serba nearly competitor?
Thank you

Posted by Philip ( Icarus) > 2020-03-02 22:30 | Report Abuse

Q1: operation & maintenance still needs warehouses, testing and rewinding facility, specialized machinery to break apart turbine for servicing which cannot be done in client area. Indeed this capex is a normal expenses which is assistant if you look at previously Schlumberger and baker Hughes financial reports.

You will receive more detail in the latest annual report coming up, but for your kind attention in last year annual report.

Long-term Short-term Assets leasehold leasehold under land land Furniture, ______construction______ (Unexpired (Unexpired Plant fittings Tools Land Freehold lease term lease term and Motor and office and Office use Other land > 50 years) < 50 years) Buildings machinery vehicles equipment equipment renovation rights asset Total RM’000
==================================================================================================================== ======== At 31 December 2018 5,896 2,984 20,831 67,640 315,326 7,337 4,080 528,927 3,236 196,544 120,289 1,273,090 ====================================================================================================================

The main expenses here are for Plant and machinery at 315 million and Tools and equipment at 528 million.

Now this amount looks big until you realize that Serbadk is doing international business with an exposure in the following countries:

Segmental Revenue by countries
Individual quarter Cumulative quarter
31/12/19 31/12/18 31/12/19 31/12/18
RM’000 RM’000 RM’000 RM’000
Malaysia 395,454 278,660 1,305,559 920,250
Indonesia 12,480 20,780 155,443 70,399
Laos 1,358 - 12,326 -
South East Asia 409,292 299,440 1,473,328 990,649
Turkmenistan 95,767 98,416 175,325 239,514
Kazakhstan - 1,789 - 1,789
India 16 - 16,555 -
Uzbekistan 7,888 - 24,320 -
Central & South Asia 103,671 100,205 216,200 241,303
Bahrain 122,045 101,790 382,011 327,204
UAE 232,270 161,699 889,945 674,919
Qatar 427,063 235,320 1,243,263 681,244
Oman - 552 - 46,764
Kingdom of Saudi
Arabia 25,027 55,669 188,287 274,998
Kuwait 51 152 26,879 12,848
Middle East 806,456 555,182 2,730,385 2,017,977
Tanzania 38,508 22,539 104,015 29,821
United Kingdom 2,622 632 4,693 3,424
Total 1,360,549 977,998 4,528,621 3,283,174

868 million looks big until you realize it is merely 200 million USD, chump change in opening an o&m facility in each country.

Johor pangerang Serba dinamik maintenance facility alone is costing them 270 million.

So first answer is the capex is not huge, it is actually very small. secondly is a one off setup and non recurring. Now is expansion phase however as many of the foreign American and European specialists have left the market, leaving a huge void filled by Serba.

So ask yourself if 200 million USD in capex is huge or small to cover so many countries at once.

Thank you

Posted by Philip ( Icarus) > 2020-03-02 22:54 | Report Abuse

Q3: very interesting question here as in Sabah we do not have a mercedes service facility. So what am I to do? My only choice is to use either hap SENG star or use my 30 year old friend whose workshop tokai engineering is a specialist in servicing Mercedes with the same equipment and trained mechanics sent to China facility. I choose the cheaper option of course: and hap seng does not service or warranty any car not bought by them.

Sometimes we just do not have a choice.

In this case, in Malaysia there is bumiputera requirement which gives Serbadk a huge advantage especially if they can perform well.

And in Qatar, the political embargo has forced suppliers to choose between supporting Saudi or Qatar. Most have been pressured away. Serbadk is filling that need from Qatar.

FYI Serbadk is a qualified service provider. They have been doing as an agent for many brands for the last 20 years. They are the cheaper option with all the needed certification. I checked. It is one of my qualitative requirements and easy to find out what certificates Serba has.


In fact, not only are they qualified to do. They are also qualified to teach, as they have multiple accreditation to train new specialists from city & guild.


They have the capacity to train new specialist and give them jobs as well, feeding a new business model where you don't need to go to UK to learn how to be a plant engineer.

Posted by Philip ( Icarus) > 2020-03-02 23:06 | Report Abuse

Q4: judging from these wins: I would prefer to assume they have all the capability needed to complete o&m jobs.

Its unit, Serba Dinamik International Ltd secured three operations and maintenance (O&M) contracts from Energeniq FZE for work in United Arab Emirates, Pavillion Multi Holding LLC in Uzbekistan, and Process Dynamics Company in Qatar.

Another unit, Serba Dinamik Sdn Bhd, secured three O&M contracts from Pengerang Refining Company Sdn Bhd, Pengerang Petrochemical Company Sdn Bhd, and Petronas Dagangan Bhd.

It also secured one engineering, procurement, construction and commissioning (EPCC) contract from Malaysia LNG Sdn Bhd, and two O&M and EPCC contracts from Petronas Carigali Sdn Bhd.

Posted by Philip ( Icarus) > 2020-03-02 23:08 | Report Abuse

Q5: maybe you can tell me? Share and share alike. I have a list, local and international which I monitor. But I still like Serbadk so far along those lines.


5,459 posts

Posted by Sslee > 2020-03-03 09:13 | Report Abuse

Dear Philip,
Capex is good provided it can generate earning above it cost of fund.
I just feel for the last 4 years their Capex is above their earning. Will Serba becoming another KNM? Very happy to be proven wrong though

Cash flow from investing activities:
Acquisition of property, plant and equipment:
RM 868,207,000 (2019): Acquisition of associates RM 58,257,000: Advance to an associate RM 26,264,000: Increase in other investments RM 32,009,000
RM 551,917,000 (2018); Acquisition of associates RM 267,306,000: Increase in other investments RM 74,888,000
RM 237,942,000 (2017) Purchase of share in associates RM 34,000,000
RM 109,527,000 (2016)
Depreciation of property, plant and equipment
RM 141,636,000 (2019)
RM 89,781,000 (2018)
RM 68,198,000 (2017)
RM 32,952,000 (2016)

Consolidated Profit or loss and Comprehensive Income
Finance costs: RM 204,295,000 (2019)
Finance costs; RM 62,122,000 (2018)
Share of results of equity accounted associates
RM 35,306,000 (2019)
RM 13,880,000 (2018)

Thank you

Posted by Philip ( 2.3% fatality rate) > 2020-03-03 10:27 | Report Abuse

I believe knm and serbadk is a totally different animal.

One has been growing revenues and earnings at a fantastic rate, the other had not been growing revenues at all, and has losing quarters.

You have a point though, and every capex for each company is different.

The capex for serba consists of training centers and maintenance centers and support warehouses and specialized equipments.

One thing I monitor more is not to compare capex against earnings, but to compare capex against free cash flow. As there operating cash flow is still positive and growing (86 million last year after finances and taxes).

I will definitely monitor continuously if this will be a case similar to London biscuit ( which I find unlikely having checked with my friends on the o&m contract by pchem, dagangan and carigali to serba), but so far I am ok with it.

Spending 400 million USD in capex to collect 1 billion USD in revenue and 100 million USD in earnings every year for the next 10 years ( with the first 2 years showing promised) sounds like a deal I am ok with.

Don't forget, KNM never grew it's revenue and earnings, so did London biscuit. So what was the capex for?


Capex is good provided it can generate earning above it cost of fund.
I just feel for the last 4 years their Capex is above their earning. Will Serba becoming another KNM? Very happy to be proven wrong though

Posted by Integrity. Intelligent. Industrious. 3iii (iiinvestsmart)$€£¥ > 2020-03-03 10:38 | Report Abuse


In essence, Koon yew yin was half right. A company that has increasing revenues and earnings will always go up in share price.

That is true in almost every case. But the other half is also true, a company with decreasing revenues and earnings will always go down in share price.

The trick is to predict not 2 quarters or 3 quarters, but to predict multiple years of earnings and revenue growth.

You would do far better if you spent time trying to understand how to predict that instead of just turning the blinders on and buying based on dividend yield, PE, cash flow, debt, ROE and alone.

Warren had a 54 year secret.



Thanks for sharing.

Yes, buy WONDERFUL COMPANIES at fair price. Can also pay a little bit more too to own them. Long term focus. Let these WONDERFUL COMPANIES grow their intrinsic values over time, rewarding you the returns through compounding.


31,556 posts

Posted by stockraider > 2020-03-03 10:48 |

Post removed.Why?

Posted by Philip ( 2.3% fatality rate) > 2020-03-03 11:38 | Report Abuse

Which one is worse, I remember another sohai recommending tp rm3 for his sape, and put 30% o oh his money in the stock competition. So how? Who is worse? Dlady already start moving up from 38 to 42 and gaining 10% return and dividend. The sohai I mention his sape drop from 33 to 17, and still not giving any dividend.

And now he don't dare to take bet to prove his recommendation of sape TP3 in 3 years.

You should change your name to lousyraider lo.


stockraider Yes but sohai 3iii recommend dlady at Rm 66 & padini Rm 6 the share price crash loh...bcos overpay mah....!!

Posted by Philip ( 2.3% fatality rate) > 2020-03-03 11:39 | Report Abuse

A few more months left your Insas 0.755 versus ql 8.25 the gap going bigger and bigger lo.

Posted by Philip ( 2.3% fatality rate, 80% recovery rate age 10-40) > 2020-03-04 06:14 | Report Abuse

Q4 results is out for stoneco, and it has gone up to usd45 per share on EXTREMELY good results. If anything, this is my most profitable investment ( and first one outside of Malaysia) of all time, beating my 1 year record with QL and TOPGLOVE

Mar. 2, 2020 4:16 PMStoneCo Ltd. (STNE)By: Liz Kiesche, SA News Editor
StoneCo (NASDAQ:STNE) Q4 adjusted net income of R$275.0M (US$61.5M), up 76% Y/Y and adjusted net margin of 35.1%jumped 570 basis points Y/Y.

Q4 net addition of active clients was 66.2K; total active clients were 495.1K, up 84% Y/Y.

Q4 total revenue and income of R$782.9M, up 48% Y/Y.

Q4 total payment volume of R$40.2B rose 51% Y/Y.

Q4 adjusted free cash flow of R$185.9M increased from R$144.7M a year earlier.


8,448 posts

Posted by RainT > 2020-03-04 13:04 | Report Abuse

Thanks for this good article information sharing

Posted by Learning machine > 2020-04-02 14:17 | Report Abuse

Hi Philip, really admire your track record for QL and Topglov. I noticed that you have a huge position in StoneCo. They have 3G imprint all over. I am a bit worry that it will end up like two 3G investment like KHC and BUD because they push their business variables too far. May I know how you have a huge conviction on Stone Co? Any qualitative factor that you see? Thanks

Posted by Learning machine (BRK investor since 08) > 2020-04-04 00:17 | Report Abuse

Just curious, are you still adding Stone Co at lower price now? Stone Co is the most interesting ideas that I come across on i3 as I am a new member.

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