Forum : Stock: [EVERGRN]: EVERGREEN FIBREBOARD BHD

1,637 posts

Posted by JT Yeo > 2015-11-23 16:21 | Report Abuse

The company proposed to raise more money is a bad sign. Price is all time high, management is smart to raise money now, add in bonus warrant to entice everyone to buy the shares. Red flag to me.

If you look at the ROIC track record, you know it is mediocre at best. None of the past 5 years are over 10%, only this year closely edging 9%. The profit has gone up like most people says, because of many tailwinds, how long it will last? That's anyone guess.

Think it from business point of view. A business doing fibreboard, is there a moat? is there edge? Nope. If no, why do you want to pay more than NTA? Because economic of scale? I doubt it. And yet they want to expand, buy more plants etc. This is like a fat guy raising money to eat more fries and burgers, to increase weight (revenue) but not value (ROIC).

528 posts

Posted by Kevin Tam > 2015-11-23 16:39 | Report Abuse

The company with the NTA of 1.60 and better n improving EPS, the risk for buying it at RM2 or holding it should be not that high. Although the revenue remained to be about 250-260million. Among all the export oriented counters, there r not many choices in Bursa. Evergreen with the latest 4 quarters EPS, with PE of about 12, not that expensive as well......

kquah3

68 posts

Posted by kquah3 > 2015-11-23 17:23 | Report Abuse

ai ya.. as long as US$ strong.. export oriental companies will remain profit ... go with the trend... until the trend start to change...

1,637 posts

Posted by JT Yeo > 2015-11-23 17:48 | Report Abuse

Kevin, the PE doesnt sounds high. But if you look at the ROIC for past 5 years, theyre unable to cover cost of capital, which u can put it at 8-10%. So the justifiable PE is 1/cost of equity. if COE is 8, then 1/8, PE = 12.5. If COE is 10, then 1/10, PE = 10. that means the correct PE they should be trading at is 10-12.5 PE. Looking at current price, there isnt margin of safety to go in.

My logic is this, if a company can earn good ROE/ROIC, make sense if they raise money, im willing to give. With track record like Evergreen, and in commodity business, they want to raise money, I better think 10x.

kquah3

68 posts

Posted by kquah3 > 2015-11-23 20:40 | Report Abuse

JT, can give example which counter fulfill what you say.. would like to take a look..for my learning...if u willing to share..

134 posts

Posted by hyteo1992 > 2015-11-23 20:58 | Report Abuse

JT Yeo, how u get the 8-10% figure??

nbtrend

134 posts

Posted by nbtrend > 2015-11-23 22:09 | Report Abuse

Just the beginning. Hold on to it.

muk912

77 posts

Posted by muk912 > 2015-11-23 22:23 | Report Abuse

From my view of point, as long as their profit is better than previous years and money raised used in appropriate investment activities, the shares will raise in long term. I am a great supporter of Evergreen since early this year. What I worry about is 30% of their main customers are from middle east. Middle east is facing a deep shit financial reduction very soon as crude remain stagnant on low price. It might affect their sales in these countries next year.

528 posts

Posted by Kevin Tam > 2015-11-23 22:52 | Report Abuse

This stock was recommended by few experienced fund managers during April this year, the fund manager got said about how come the company facing bad performance during 2013. Something about bought those forest concession with high price then they wrote off to get few quarter of loss in 2013 n early 2014. It is medium size to medium to large size wooden product manufacturer in Malaysia. JT Yeo , ROIC stands for? I just know ROE, return on equity ....
.

1,637 posts

Posted by JT Yeo > 2015-11-24 09:30 | Report Abuse

cost of capital consists of risk free rate, risk premium & cost of debt/equity. Risk free rate if you use 10 years government bond is around 3-4%. Risk premium is how much you have to pay someone to take the risk to invest in your stock. Great company like public bank has lower risk premium for example, but generally it is around 5-6%.

Remember Evergreen has debts also, how much is the interest for those debts? Easily 6-8% for commercial loan from banks, this is cost of debts. So add it all up, their ROE need to be at least above 10% to cover these costs. Evergreen ROE from 2010 to 2014 is 14.74, 8.15, 3.94, -5.31, 0.02. Judging for the past ROE they are not covering their cost except 2010

Kevin ROE and ROIC (return on invested capital) is similar concept, just slight different calculation.

134 posts

Posted by hyteo1992 > 2015-11-24 09:46 | Report Abuse

JT Yeo thanks. But frankly if u count like tis, 90% stock wont pass ur standard. N the 10% is blue chips.

joni

1,251 posts

Posted by joni > 2015-11-24 12:25 | Report Abuse

going to north anytime .. .. should close high today.

1,637 posts

Posted by JT Yeo > 2015-11-24 13:35 | Report Abuse

of course im talking from the point of a long term investor. Past is a record, just like looking at a person's past behavior, they can always change of course. The key is you dont want to get caught in 'fairy tales'. That's when people bought IFC at RM1.80, bought DKSH at RM8 etc. Not saying the price now is expensive, but you need to consider if you have protection if something goes bad.

You are correct, more than 50% bursa companies lose money, many doesnt pass the 10% test. But you still can make money on them - if they are so cheap

kquah3

68 posts

Posted by kquah3 > 2015-11-24 13:56 | Report Abuse

I like Evergreen as long as the business env (etc.. strong dollar) still apply... in Dec the dollar will get stronger and it still good for export oriental..btw Hotrod is correct, this is turn around companies.. we cant measure the past record... forecast future is more reliable..btw.. u not yet share which counter fullfil u calculate method ;-)

papaya

3,086 posts

Posted by papaya > 2015-11-24 14:56 | Report Abuse

hahaha....are you sure joni.....it seems going south....

joni

1,251 posts

Posted by joni > 2015-11-24 15:20 | Report Abuse

just bought some to average.

kennethcheah

505 posts

Posted by kennethcheah > 2015-11-24 16:31 | Report Abuse

给EVERGRN时间bullish。

1,637 posts

Posted by JT Yeo > 2015-11-24 17:19 | Report Abuse

hm a bit hard to explain in few sentences, there are many ways to make money, im talking about investing not trading.

I bought Flbhd early this Feb at $1.40 not because of forex gain, but because they have 50% in cash and management decide to do 10% buyback. The business itself is nothing wow, just selling plywood mostly to US market, commodity business, but just too damn cheap. Forget about forex gain, they make $15mil profit. And you can own the whole company for only $70mil for $15mil. To me that is too cheap. In their IPO prospectus their record for past 3 years before listing is very stable and growing slowly as well, therefore I dare to buy.

I bought Mercury shortly after. Cash rich company, almost 50%, but can be useless if management just let it sit in the bank forever. But they use the cash to buy a construction company that has orderbook of $120mil, they guarantee Mercury $4.62 mil every year for next 3 years. Means their profit will jump at least 50%. So I see something interesting here. All the money in the bank, you earn FD rate, 3-4%, throw into construction, 8-9% return at least. So im still waiting. I can be wrong, but risk is quite low in my opinion. These 2 companies are not 'supergood' company, just purely cheap.

If you ask is there any company that i look at the future then yes, but that also means their past record must be very very good. Flbhd and Mercury i dont look at their future, i buy purely because theyre cheap that's all. I will sell once they reach fair value. I bought Aeon Credit last year, still losing money but im not a bit worry at all. I bought it at a fair price, not cheap, because it is a real quality company. Ask how many companies can do loan besides the banks? Can count with fingers, not many. They have a strong edge here as in they do many loans (car, personal etc) that banks doesnt want, either too small, or bad credit history, therefore they charge higher interest. ROE/ROIC above 20% over past 10 years. No banks can match that except PBB. Management, I reckon it is AAA. I pay 2 billion (market cap) for a great company that makes $200 mil a year. I think it is a good buy and good to keep for 10-20 years.

I bought a bit of favco, still researching. Favco makes cranes for oil&gas sector and tower cranes for skyscrapers. Beaten down so bad because alot of their clients are in O&G (70%). Drop in oil price, o&g companies cutting down in capex, people fear Favco will go down also. Favco market cap is about $500+ mil, with $200mil in cash, the company worth only $300mil. Their ROE above 20% since listed. They make 80-90mil a year, i believe profits will drop for sure, temporary. I keep thinking Favco is such a tiny company, less than USD100mil market cap, yet builders all over the world used their cranes to build Freedom Tower (World Trade Centre previously), Taipei 101, Burj Dubai, Petronas Twin Towers, Shanghai Financial Centre etc all these tallest towers in the world, there must be something there. These builders pay for quality, they dont want to pay cheap cranes and end up falling from 100 storeys above. That says alot about the reputation of Favco. Even if profit cut by half to $40 mil, you still can buy it for 7x at $300mil.

The rest are Scientex, MFCB bought them long ago so nothing special to talk about.

pputeh

698 posts

Posted by pputeh > 2015-11-24 21:56 | Report Abuse

JT Yeo, Much obliged for yr valued comments and insight. I am new and just learning the ropes. Thanks for giving me food for thought. Indeed yr reasoning esp about Aeon Cr and Favco are eye openers.
I believe with my limited knowledge staying invested in a growing company and having the patience to ride out bad times is the key

leecuteguy

475 posts

Posted by leecuteguy > 2015-11-24 22:03 | Report Abuse

@JT YEO to you what is the fair value for evergrn in 3 months time

kahfai211

822 posts

Posted by kahfai211 > 2015-11-24 22:50 | Report Abuse

evergreen got announce for dividen?

1,637 posts

Posted by JT Yeo > 2015-11-25 03:51 | Report Abuse

There's no way to predict fair value in 3 months. If I can, ill be a trader already lol. I can only tell you have a fair value in yourself, and pay a lot less than that.

Classic example - signature int. bhd. Early this year, they report 2 quarters of profit jumping from 2 mil to 12 & 13 mil, that is a 600% jump. People on here start talking fairy tales how more property developments push more sales for them etc. Can be true but you have to be careful with all these stories. So the price go from $1.80 to $3.20, until they report in June 30 profit drop back to normal 3 mil, the price took a month from $3.20 down to $1.90, and climbing to $2.60 again, yesterday report Sept quarter 4 mil profit, price fall 15.5% right away.

What is the lesson here? If you look at the record of SIGN, their profit has been around 3-4 mil per quarter since 2007, you have to ask, is this 12 mil quarter for real? How long can it last? Everyone can say this time is different, you know, so many turnaround story out there. But you dont want to get caught at buying high price.

My advice is: it is very dangerous buying stock that has SUDDEN jump in profit, because there will be SUDDEN drop too. If a company grow their profit slowly every year, i prefer that kind of company.

134 posts

Posted by hyteo1992 > 2015-11-25 09:52 | Report Abuse

Jt yeo, can u share how u determine whether the company is considered cheap? Besides P/E ratio. How u decide?

134 posts

Posted by hyteo1992 > 2015-11-25 09:55 | Report Abuse

The sign example u gave, doesn't conclude all. I can give u another example. Inari in 2014.

1,637 posts

Posted by JT Yeo > 2015-11-25 10:29 | Report Abuse

Generally if you want to find out, the only way is to do DCF calculation like Kcchongnz always does. The figure you get from DCF, apply 50% margin of safety, if the share price still below that normally it is considered cheap. You can use this one http://www.moneychimp.com/articles/valuation/dcf.htm

If you want to use shorthand, PE is a shorthand. You can use EV/EBIT, similar to PE but i think more accurate. For me, anything below EV/EBIT of 8x is consider cheap, you still need to consider a lot other factors of course. FLBHD EV/EBIT is 3-4x when i buy. Aeoncr I pay 10x because the quality is there.

Inari I wont have a clue because I didnt study it, also something im not familiar with, but doesnt look cheap. Require a lot judgement, example Amazon negative cash flow and lose money every year, but stock keeps going up, because ppl believe cash will flow in in the future. Then you have to be certain about it.

Example Ecoworld, if you use the link above, key in EPS, 10% discount rate, adjust the growth rate to reach current price $1.42, you will get 37%. Means the market think Ecoworld can grow 37% for 10 years. Is that realistic to you? some say yes some say no.

skylifttoptoptop

4,002 posts

Posted by skylifttoptoptop > 2015-11-25 10:34 | Report Abuse

the most dangerous trade is using your calculators.
collected little more today
keep buying please :P

1,637 posts

Posted by JT Yeo > 2015-11-25 10:42 | Report Abuse

oh hyteo, when nobody wants something, afraid of it etc, that's when it is cheap, when everyone wants something, analysts want to cover it, give buy call, that's when it's not cheap anymore. Be a contrarian. what companies nobody wants now? Thats where opportunity lies.

528 posts

Posted by Kevin Tam > 2015-11-25 12:30 | Report Abuse

JT Yeo is fundamental investor, so do I. Among all the export oriented counters in Bursa, many of them already gone up more than 100% since 1/1/15. Evergreen is slowly picking up in term of profit before tax, EPS n so on n because the counter is losing money in 2013 and first 2 quarters of 2014, they r not able to declare dividend in 2015 yet. Evergreen with the latest 3 quarters above average result, one of the largest wooden product counters in Asean nations, it should worth above Rm1.90-2.10, if talking about margin of safety, the risk is not high if retail investor buying them at RM 1.90-2.00. (this comment doesnt mean strong buy....hehe) In ur eyes, any blue chip in KLCI index considered worth to buy, JT Yeo??

528 posts

Posted by Kevin Tam > 2015-11-25 12:33 | Report Abuse

Among all the top 30 counters of KLCI, in my eyes, most of them r overvalued. Those 3 telco r having low growth rate for profit n revenue and they need to spend more money in infrastructure in near future as well. Among all the large banks, maybe Maybank n HL bank still ok, PBB bank is quite expensive.