Posted by paperplane2016 > 2016-09-21 12:01 | Report Abuse

Estimating Free Cash Flow of KESM

We start with the estimation of future free cash flow for firm from its top line revenue using the year 2016 as the base year, and at the most recent operating margin of 12.4%.



We will estimate the reinvestment rate and then the FCF based on the sustainable growth rate internally which we assumed is the 10% for the next 5 years and subsequently at 3%.



Sustainable growth rate, g = Reinvestment rate * ROC



Return on capital, ROIC of KESM in 2016 was computed to be 14.3%.



Hence RR = g/ROIC =10%/14.3% = 70%



After five years, it is assumed that its FCF will grow at 3% forever, something close to the growth of GDP, and its long-term ROIC reduced to 12%, which is about its long-term cost of capital. These are quite normal assumptions.



Terminal reinvestment rate = Growth rate/ ROC = 3% / 12% = 25%

Posted by ctquay600305 > 2016-09-21 12:01 | Report Abuse

wait 7.00 today

Posted by wleon > 2016-09-21 12:02 | Report Abuse

Greed.....

Posted by paperplane2016 > 2016-09-21 12:02 | Report Abuse

The present value of free cash flow for the firm was obtained by summing up those of first 5 years of supernormal growth value of RM43.6m, and the terminal value of RM324.2m, totalling RM367.8m. After adding the excess cash of RM116.9m, and deduction all debts of total RM36.0m, it gives the intrinsic value of KESM attributed to common shareholders at RM448.7, or RM10.40 per share.

Posted by wleon > 2016-09-21 12:02 | Report Abuse

GREED is edge swords depend how will u can use its.

Posted by paperplane2016 > 2016-09-21 12:02 | Report Abuse

This shows KESM still has an upside of 30% at a market price now of RM8.00 apiece at the close on 20th September 2016. The margin of safety (MOS) is reasonable at 23%. For buying, one may require a higher MOS say 30%, but it may be still too early to sell as there is still substantial upside potential.

Posted by wleon > 2016-09-21 12:03 | Report Abuse

Greed is also the one who help to push UP the price :)

Posted by paperplane2016 > 2016-09-21 12:03 | Report Abuse

At RM8.00 and with only 43m shares, the market capitalization is only RM344m, a small cap company and with a free float of 22%, hence expect high volatility in its share price.

Posted by wleon > 2016-09-21 12:04 | Report Abuse

use wrongly will create BIG hole in your pocket

Posted by muscular > 2016-09-21 12:04 | Report Abuse

wahahahahah, drop 45sen... if next quarter miss again, rm6 coming

Posted by paperplane2016 > 2016-09-21 12:04 | Report Abuse

KESM is a reasonably good company earning above its cost of capitals. It is still selling at reasonable market valuations at RM8.00 at the close on 20th September 2016. Its balance sheet has improved vastly with a net cash of RM1.88 per share. It has excellent CFFO for all these years and started to have good FCF now. However, it is hopeful that with the improved efficiency and potential more jobs in the future, they can provide good profit growth and cash flows, and higher dividend payment in the near future.

Posted by paperplane2016 > 2016-09-21 12:05 | Report Abuse

Using the DCFA from the basic principle with internally generated growth and some reasonable assumptions based on its latest performance, KESM’s intrinsic value is worked out to be RM10.40. It appears that KESM is still not overly expensive at the present price of RM8.00 apiece.

Posted by paperplane2016 > 2016-09-21 12:06 | Report Abuse

Yes! GREED helps

Posted by Kad Al > 2016-09-21 12:10 | Report Abuse

paperplane2016....tq. u made a good elaboration n comments on the Qr. but many outside there
still worried short term

Posted by steel88 > 2016-09-21 12:11 | Report Abuse

July is KESM typical best qtr. If profit already drop how to expect other poorer qtr to do well?

Posted by dompeilee > 2016-09-21 12:14 | Report Abuse

Sunright - 40,000 shares just got BOUGHT up @ 31c... Unaffected by KESM's drop :D :D :D

Posted by paperplane2016 > 2016-09-21 12:16 | Report Abuse

like kc said, low circulation, sure got weakholders sell in panic one. Later the big hand will buy back. not first time we seen this. LAst time drop to 5++, only less than 1 month it rebounce to 7.

This time I think let it drop to 7, later rebound 9, 10.

Posted by musangfoxking > 2016-09-21 12:16 | Report Abuse

hshshs!!! slowly but surely going north!

Posted by Kad Al > 2016-09-21 12:16 | Report Abuse

dompeilee.. right move.. but buy in sing dollars, if u hve xtra cash. spore $ getting stronger

Posted by paperplane2016 > 2016-09-21 12:17 | Report Abuse

you read management comments also know coming yr one result damn good!
if you take out depreciation, which I believe is crazy. 50mil a year, like that next few yrs all FIXED ASSETS and Machine carry at book=0 value which is churning cash! so ROE, ROIC will be damn crazy.

Posted by ooihk899 > 2016-09-21 12:19 | Report Abuse

I think not need to talk too much, If wan buy, sell or hold up to each individual.
If we think kcchongnz analysis is correct, we should diam diam, let it drop more and more collect later.

Posted by ooihk899 > 2016-09-21 12:29 | Report Abuse

Paperplane2016, any reason y TGuan is not in yr top 10?
Possible to sharee the info?

Posted by paperplane2016 > 2016-09-21 12:33 | Report Abuse

I used to like TGUAN. My sifu loves it, TGUAN, TGHER. both he likes.
But it has run up a lot which I find margin not much left.....
I prefer an xxxx stock he has also but now lying quietly there. I can sapu slowly till next yr 100% minimum return I believe.

Also, GKENT got stable income, KESM got grow story in global china mkt especially.

TGUAN go to do food, which they believe is sustainable longterm biz, but I find it wasting money. I rather they focus main core and become DAIGOR. like SCIENTEX.

Posted by paperplane2016 > 2016-09-21 12:34 | Report Abuse

bought some just now 7.54. aiyo, so fast rebound. damn it

Posted by dompeilee > 2016-09-21 12:46 | Report Abuse

Sunright - Another 20,000 shares demanded @ 31c...now 31 (14,100) / 31.5c (40,000) :D :D :D

Posted by dompeilee > 2016-09-21 13:03 | Report Abuse

Practically IGNORED KESM's drop today...even though it owns 20,825,000 KESM shares :D

Posted by ooihk899 > 2016-09-21 13:08 | Report Abuse

Thanks for sharing paperplane2016. Yr xxxx stock is it construcion stock? Can give some hint bo?
Aiyo, you guys buy so early, y not wait n see if can drop until 7 only buy?

Posted by fattycat > 2016-09-21 13:11 | Report Abuse

agree wif pp2016 ,lets read kesm report by Mr.Sam 1st ..

http://www.bursamalaysia.com/market/listed-companies/company-announcements/5209053

Posted by Tai KT > 2016-09-21 13:13 | Report Abuse

pls do not fight, all you decision is at your own. the new investor now is very glad to buy below 8. welcome to the boat and congrats them.

Posted by Tai KT > 2016-09-21 13:14 | Report Abuse

people who already take profits, I also congrats them for next boat.

Posted by ongmari > 2016-09-21 13:23 | Report Abuse

hope to see 7.8 break back

Posted by ongmari > 2016-09-21 13:25 | Report Abuse

last 4 days volumn less than 500,000, if volumn build up to 800 k with uptrend back...likely to retest 8

Posted by paperplane2016 > 2016-09-21 13:29 | Report Abuse

KESM is superbly positioned in our target market and we are confidently looking
at 2017 with greater optimism

Posted by paperplane2016 > 2016-09-21 13:30 | Report Abuse

more I read, more SONG I feel, sibeh hor seh the feeling you know? like kena jackpot.

Posted by paperplane2016 > 2016-09-21 13:31 | Report Abuse

He added, “We are just at the starting point of an exciting road ahead focusing on
our strategic plans. Our customers are rolling out new devices and solutions to meet
the growing demands by the car makers. We see great potentials as increasing new
automotive devices are required for added features in the evolution of cars and our
opportunities will remain as the demand grows.”

Posted by paperplane2016 > 2016-09-21 13:31 | Report Abuse

this is already an INSIDER sharing! what else can you ask? Superb Management=Superb profit=Superb PRICE soon!

Posted by Tai KT > 2016-09-21 14:35 | Report Abuse

I read from news paper, they are very misleading. I study the report , the result is excellent.

Posted by paperplane2016 > 2016-09-21 14:37 | Report Abuse

let them mislead. I wanna buy below 7.50, so hard

Posted by dompeilee > 2016-09-21 14:50 | Report Abuse

KESM is a bit too volatile for me to average up...but my Sunright...safe as an FD in OCBC :D

Posted by steel88 > 2016-09-21 14:51 | Report Abuse

Pity those chased above RM 7.70. Drop again. PP2016 bought at RM 4+ the higher the price the rest of you buy the closer you will jump from KLCC.

Posted by paperplane2016 > 2016-09-21 15:06 | Report Abuse

my avg now 6, as I keep buying up. hehe

Posted by kt888 88 > 2016-09-21 15:12 | Report Abuse

My avg price is Rm4++, will consider to buy when reach Rm6xx or lower :)

Posted by Gowingo > 2016-09-21 15:23 | Report Abuse

Still dreaming?
Down 4.5% is a wake up call.
Panic sell

Posted by paperplane2016 > 2016-09-21 15:24 | Report Abuse

yes. 7.50 fast lah, 7 me waiting leh

Posted by leekh5555 > 2016-09-21 15:37 | Report Abuse

if you dare just buy and keep and wait 2-3 years to reap, simple..dun waste time.

Posted by muscular > 2016-09-21 15:42 |

Post removed.Why?

Posted by leekh5555 > 2016-09-21 15:47 | Report Abuse

please be polite..

Posted by Kad Al > 2016-09-21 16:31 | Report Abuse

let the share price settle dwn first guys

Posted by WB2F > 2016-09-21 16:36 | Report Abuse

pp2016 now 7.54 can buy some more aaaah

Posted by WB2F > 2016-09-21 16:37 | Report Abuse

I try to catch fallen fish at 7.5