Posted by Ryan Leong > 2013-11-23 22:55 | Report Abuse

Dear Kc Chong

Hi KC ..how do you think of AWC with dividen Yield 9% and a lot of cash worth 0.25 cents but share price o.27 only..is it the good stock to buy?

Posted by kcchongnz > 2013-11-25 13:55 | Report Abuse

KESM?
Posted by aaron69 > Nov 21, 2013 09:42 AM | Report Abuse
Hi,kcchongnz,could you please give some comment on KESM?High NTA of 5.473 and net cash of nearly RM1.70/share.Thanks in advance.

Sorry this question has been hanging for a while. You see I don't know a lot of things, including this KESM. But I still would like to have a look at it since aaron asked about it. And he also provided some numbers, yes great numbers worthy to have a look.

You see I use "look" but really in order to know about a company to decide if want to invest or not, it really needs some effort to read its annual reports, do some analysis here and there. It is not easy to get any other information for a illiquid stock like KESM. So please bear with me that some time I take quite long to respond to any of your question. As you know I am just an arm-chair investor (often teased by a fortune teller here, and another). I am no analyst, never work in any investment environment, and also living so far away.

Yes, after spending some time (quite a lot of time actually), I concur with aaron that KESM is undervalued. Benjamin Graham, if he is still alive, he surely will invest in it. Below is my assessment.

KESM Industries Berhad is engaged in the provision of semiconductor burn-in services, testing and assembly.The Company also operates in China.

KESM’s revenue has not changed much since 7 years ago. It hovers around 210m a year. However, its net profit margin has contracted drastically from 15% in 2008 to just 1.8% last year. The good news is it did not have a single year of losses through a complete economic cycle from 2006 to now.

After the US sublime housing crisis, its efficiency has dropped drastically. Return of equity dropped from 16.5% in 2008 to a mere 1.9% in 2013. ROIC is equally bad at 2.6%. Wondering why should it still in business with this kind of efficiency.

At the close of the market on 22nd November, 2013 at RM2.04, PE ratio is 19.2, not cheap at all. However in term of enterprise value, KESM is quite good actually with EV just 5.5 times its ebit, or an earning yield of 18%, far better than my requirement of 12%. This is because KESM has plenty of non operating assets in cash and quoted investments. Yes, we must look at its assets to see if it is a good investment. As I have said, a poor company can be a good investment if it is selling cheap.

Referring to KESM’s latest balance sheet as at 31 July 2013, KESM has a net tangible asset backing of RM5.47, more than twice its market price. But just how good is the quality of its assets? The liquidation value of KESM is computed using the Graham net net is shown in Table 1 below:

Table 1: Graham net-net valuation of KESM

Cash and cash equivalent 147256 100% 147256
Trade Account Receivables 59542 75% 44657
Inventories 16035 50% 8018
PPE 135662 50% 67831
Other assets 7186 0% 0
Total assets 365681 xxx 267761
Total liabilities -99617 100% -99617
Net asset 266064 xxx 168144
Minority interest -30636 100% -30636
Net asset common share 235428 xxx 137508

Number of shares 43015 xxx 43015
Net net per share 5.47 xxx 3.20

The net-net valuation of KESM is shown to be RM3.20, which is also much higher than its price.Isn’t KESM an undervalued stock as shown above? Wait until we perform some basic checks.

3 Basic Checks to Perform for a Net Net
For a net net to be investable, it should have
• a solid balance sheet, preferably more cash than inventories and receivables.
• is not bleeding cash. At least breaking even or positive in net profit.
• positive EBITDA

The first check shows that KESM has most of its net-net assets in high quality assets in cash and cash equivalent amount to RM3.42 per share. Hence we can safely confirm that the quality of the assets is excellent. Just not sure why each year, only 3 sen dividend is distributed.

KESM has been profitable for the last 7 years with average net income of 16.5m. CFFO has been always very high in relation to net profit because of high depreciation. However, the business of KESM requires very high capital expenses too. After incurring capital expenses, there are years of positive FCF and years of negative FCF. On the optimistic side, on average, FCF tends to be on the positive side.
Hence the above checks show that KESM is investible as a Graham net net.

Conclusions
KESM has its business performance deteriorated severely after the US Sublime crisis. Its share price has also dropped quite significantly from RM5.60 at the peak of internet euphoria to just RM2.04 now as a result. However, it has high quality assets which makes it a good investment at the present price of RM2.04. There is sign that there may be a significant improvement of its performance as evidence from the vast increase in net income recently.

Posted by kcchongnz > 2013-11-25 18:56 | Report Abuse

Posted by Ryan Leong > Nov 23, 2013 12:11 AM | Report Abuse
KC ,How do you think of AWC Berhad..Price 0.27 but with cash around 0.25..almost buy its business for free

Posted by Ryan Leong > Nov 23, 2013 10:55 PM | Report Abuse
Dear Kc Chong
Hi KC ..how do you think of AWC with dividen Yield 9% and a lot of cash worth 0.25 cents but share price o.27 only..is it the good stock to buy?

Ryan, from your numbers, don't you think AWC is a great stock to invest in? I certainly would think so.

A small company AWC has a net cash of 60m in its balance sheet. It makes about 5.6 m net profit, and the quality of its earnings is good with very good CFFO. On average, the last two years provide good free cash flow too. ROE is not good at 6% but that is because of its high excess cash. A better metric for measurement of efficiency is ROIC. ROIC of AWC is 11.6%. Not too bad as it is above the cost of capital. So it is quite a good company. But more important is it expensive?

With the closing price today (25/11/13) at 27 sen and its latest earnings of 2 sen per share, PE ratio is 13.5. This is not cheap in view of a small company like that. But again it is because it has relatively too much cash. So a better metric is enterprise value. EV is actually very low at about 2.5, or an earnings yield of 40%, which is much higher than my requirement of 15%. So AWC is actually very cheap at 27 sen.

So with the relatively huge amount of cash in the balance sheet and good amount of FCF, AWC is able to pay generous dividend.
With the above, I would like to invest in AWC too.

Posted by tptan45 > 2013-11-25 19:39 | Report Abuse

On the other hand...
a look at the performance of AWC over the past 5 years did not show any steady increase in revenue or earnings. The only parameter which seemed to increase was the dividends. But what was the payout ratio?
A quick google showed a payout ratio of over 200%. It is nice to return the money to the shareholders but is it sustainable?
So for me I will pass.

Posted by houseofordos > 2013-11-25 20:32 | Report Abuse

KC AWC cash is high but so is the debts.. I asked u b4 bout this stock in the graham net net thread...

Posted by kumar > 2013-11-25 22:41 | Report Abuse

Hi KC Chong,

Today MUIIND 3rd quarter 2013 result out. What is your opinion about this counter. Please post your analysis in this forum.

Thank you,
Kumar.

Posted by kcchongnz > 2013-11-26 05:35 | Report Abuse

Posted by houseofordos > Nov 25, 2013 08:32 PM | Report Abuse

KC AWC cash is high but so is the debts.. I asked u b4 bout this stock in the graham net net thread...

houseofordos,
Yeah you asked me before whether AWC is a Graham net net investment and below was my response.

AWC doesn't qualify as a Graham net-net because the net net value is less than the market price. It is because it has some substantial total liabilities which you need to less off from its asset value, not because of its high debt. AWC has very little debts compared to its cash.

I also asked you to look into investing in AWC from another angle, not as a net net.


Posted by kcchongnz > Nov 13, 2013 06:43 PM | Report Abuse X

house, AWC doesn't qualify as a Graham net net play as although it has high excess cash per share, it has relatively high total liabilities.

However AWC can be a great investment if you look at it from the angle of a good company (good ROIC and good cash flow) selling at a low price (earnings yield). And also from the angle of high dividend yield investing strategy.

Try that and let me know.

Posted by kcchongnz > 2013-11-26 05:51 | Report Abuse

Posted by tptan45 > Nov 25, 2013 07:39 PM | Report Abuse
On the other hand...
a look at the performance of AWC over the past 5 years did not show any steady increase in revenue or earnings. The only parameter which seemed to increase was the dividends. But what was the payout ratio?
A quick google showed a payout ratio of over 200%. It is nice to return the money to the shareholders but is it sustainable?
So for me I will pass.

tptan, thanks for the comments. I know this does not suit you because I know you are a growth investor. I am a value investor. I prefer to pay for free growth potential.

Many companies have just the right capital structure, certain proportion of debt and equity just right for the business. So this type of companies should not pay dividend above its earnings, otherwise future growth is difficult.

Some companies has a lot of excess cash, cash not needed for the ordinary operations. AWC is one of them. Its cash holding can be used continuously for years to pay dividends, without affecting its ordinary business.

Anyway, dividend payout ratio is just one of the ways to look at it. The other way, which I am more concern about is FCF. It is from the FCF that dividend is sustainable. AWC has huge amount of FCF last year. Check it out.

Posted by kcchongnz > 2013-11-27 05:46 | Report Abuse

RGB, a fallen angel out from the dream gate of heaven? A gambling machine?

Posted by Eric Wong > Nov 23, 2013 07:01 PM | Report Abuse
kcchongz, u missed out this --RGB

"Posted by w2sin > Nov 21, 2013 08:46 AM | Report Abuse
Hi kcchongnz, need your advice on RGB, thanks in advance."

RGB International Bhd. (RGB) mainly involves in the sales and marketing of gaming and amusement machines and systems and related products. It is trotting around the regions, a high flier?
Looking at its latest audited account, very messy indeed. Very difficult for me to understand its mode of operations and to estimate its value.

Revenue, depreciation, “others” (what the hell is this?), “other gain/expense” (Yeah, what the ?), “foreign exchange gain/loss” and net profit , all behave like a boy jumping up and down on a trampoline. Very dangerous and can easily fall down, and so I scared. Also high debts.

I don’t understand its business, have no clue of how it makes money, speechless of how it does its accounting etc.
So do you have any compelling reason to invest in RGB? I hope you don’t tell me there is this rumours going on, or you saw a beautiful chart.

Yeah, before I forget, I won’t know about its future share price performance. Don't next time RGB share price go up to RM1.00 and you come back and blame me for giving this comment. Just joking, no joke no fun.

Posted by hongchai > 2013-11-27 18:49 | Report Abuse

Hi Kc,

Can you have a look at AWC again since the quarterly result just announced?
This time without dividend.
Thanks.

Posted by wajatimur_28 > 2013-11-27 19:04 | Report Abuse

thank you very much mr. Kcchongnz..your comment on Careplus stock really give more valueable info for me...

Posted by w2sin > 2013-11-27 20:14 | Report Abuse

thanks you.
still holding want to cut lose already.... :(

Posted by kcchongnz > 2013-11-28 04:16 | Report Abuse

Posted by hongchai > Nov 27, 2013 06:49 PM | Report Abuse
Hi Kc,
Can you have a look at AWC again since the quarterly result just announced?
This time without dividend.
Thanks.

I normally do not too much on quarterly result. Take for example AWC. Its 1st quarter 2014 results appear to be very good, positive compared to loss the corresponding quarter last year. But that is just EPS of 0.16 sen. In fact AWC's quarterly always bouncing around, too much to my comfort of which I just noticed.

Same as its cash flows. The thing which makes me feel uncomfortable this quarterly result is relatively poor cash flow.

Why do the results of AWC vary so much, in earnings, cash flow? I am not too happy with this.

I guess one who is interested in investing in this company must do more due diligence, including examining the actions of the management for the last few years.

Posted by i3raymond > 2013-11-28 06:31 | Report Abuse

Dear KC, in your preamble to this thread, you stated: "Do you have any hidden gem which is tucked in some where undiscovered, unloved and institutional investors have no mandate or interest to buy them for the time being, and selling at bargain price. The chance to earn 50% return a year, a double bagger, five baggers or even ten baggers. An ugly duckling which would turn to a beautiful swan in the near future? Which one and why?"

Do you seriously consider PMCorp and MUI as relentlessly promoted by Calvin Tan, to be gems of gems for 2014 and beyond? I know you endorsed
PM Corp but you exited @35sen?

Posted by kcchongnz > 2013-11-28 07:04 | Report Abuse

For the record, I have never said nor "endorsed" PMCorp as a gem. If you read my analysis well on PMCorp, you would understand why did I buy it at less than 20 sen, and sold it at 34 sen (not 35 sen). I did buy it again when it fell back, and if you read my valuation about PM Corp, you would understand my rationale.

Mui? I glanced through its balance sheet last night. It is much more complicated than PM Corp and I won't be able to value it with the Graham net net accurately. One really needs to know very well what are those balance sheet items which I couldn't. So I have no opinion on it.

Posted by aaron69 > 2013-11-28 08:50 | Report Abuse

Dear Kc,thanks for your input on KESM.Not only did you check the current status,you took the effort to check through the last seven years as well.Thanks again.
Can you take a look at FACBIND as well?Came out with its quarterly results last night and its cash balloned to 148 million,ie around 1
RM1.74 per share after the disposal of land and its loss making steel subsidary.Apart from this,it's also holding 339million shares of KBUNAI.It went through periods of losses due to its recently disposed steel arm.Though there's no guarantee that it will turn for the better in the future,do you think that it's a stock worth keeping tab on due to its massive cash in hand and high NTA of 2.61?Thank you in advance.

Posted by kcchongnz > 2013-11-28 09:09 | Report Abuse

If Benjamin Graham is still alive today, he will definitely invest in FACB. He is the pioneer is valuing company basing on balance sheet.

The quality of assets of FACB is excellent, mostly in cash and cash equivalent. That alone and after net off all liabilities, is still much more than the present share price.

Posted by aaron69 > 2013-11-28 09:54 | Report Abuse

Thanks Kc,for your prompt reply.Will definitely keep tab on FACBIND.

Posted by houseofordos > 2013-11-28 10:05 | Report Abuse

Posted by kcchongnz > Nov 28, 2013 09:09 AM | Report Abuse

If Benjamin Graham is still alive today, he will definitely invest in FACB. He is the pioneer is valuing company basing on balance sheet.

The quality of assets of FACB is excellent, mostly in cash and cash equivalent. That alone and after net off all liabilities, is still much more than the present share price.


Problem is assessing whether management is willing to share that cash with shareholders. FACB industries does not have a good track record in that sense. I invested in FACB before in anticipation of cash payout after they dispose some assets. Even after disposing some of their land and factories earlier this year there was no special dividend or payout announced. I have since sold the stock I am also uncomfortable with the links of FACB with KBUNAI a loss making company with mega projects in Sabah. Just concerned on RPTs involving these 2 companies where FACB cash could be used to finance KBUNAI... just my 2 cents view, no need to take seriously...

Posted by kcchongnz > 2013-11-28 10:32 | Report Abuse

Benjamin Graham would probably gang up with some private equity or hedge funds and gain control of FACB. Then they would strip of and pocket the cash more than they pay, and then still own a call option on the company for free.

The above is just for academic purpose. Yeah how the management handles the cash is important. I do no have the privilege to know that.

Good point, houseofordos

Posted by aaron69 > 2013-11-28 11:12 | Report Abuse

Hi,house and kc,I read somewhere(sometime back) that upon cessation of their steel business that FACBIND could be making profits of around 20 sen per share from their bedding business and a certain dividend policy will be implemented.Could not find the link now,though..Thanks for both your inputs.

Posted by i3raymond > 2013-11-28 20:51 | Report Abuse

Thanks KC and apologies for having misintepreted your postings. I think
I know the picture (about PMCorp)much clearer now.

Posted by sephiroth > 2013-11-29 19:49 | Report Abuse

kcchongnz, need yr help to analyse this cash rich Formosa Prosonic Industries(FPI) if it is a graham net net counter. thanks a lot

Posted by sephiroth > 2013-11-29 20:17 | Report Abuse

FPI seems bleeding cash from "net changes in working capital" but cash level remains high at RM110m (44.7 sen per share) and div for FY10/11/12 is 6/4/6 sen

a chinese article posted months ago
http://klse.i3investor.com/blogs/bang/36488.jsp

Posted by kcchongnz > 2013-11-30 12:08 | Report Abuse

Posted by sephiroth > Nov 29, 2013 07:49 PM | Report Abuse
kcchongnz, need yr help to analyse this cash rich Formosa Prosonic Industries(FPI) if it is a graham net net counter. thanks a lot

From its latest financial report as at 30/9/13, its NAB is 99 sen. Cash per share is only about 45 sen. Its other major assets are in PPE (101m) and inventories (41m). Its total liabilities is 154.5m, or 62.5 sen per share. Hence at the price of 75 sen now, FPI cannot qualify as a Graham net net, far from it.

Posted by sephiroth > Nov 29, 2013 08:17 PM | Report Abuse
FPI seems bleeding cash from "net changes in working capital" but cash level remains high at RM110m (44.7 sen per share) and div for FY10/11/12 is 6/4/6 sen

Working capital increases doesn't mean bleeding cash, just that a lot of earnings is tied up. Yes, the cash flows from operations is bad for the last 9 months due to that. CFFO for the 9 months is negative of 8m, not very good.

However have to see the following quarters if this improves. FPI has have very good CFFO prior to this.

Posted by sephiroth > 2013-11-30 21:41 | Report Abuse

kcchongnz, thanks for yr speedy reply, can you analyse FPI using the gordon growth model since div is not bad for the past 3 yrs

Posted by kcchongnz > 2013-12-01 05:24 | Report Abuse

FPI and The Gordon constant Growth Model

The intrinsic value of a stock can be estimated by discounting a future series of dividends that grow at a constant rate in perpetuity to the present value.

Price P = D / (k-G)

Where:
D = Expected dividend per share one year from now
k = Required rate of return for equity investor
G = Growth rate in dividends (in perpetuity)
For FPI, let us use a required rate of return k=10%
G=4% in accordance to the rate of inflation

Hence P = 0.06 * (1+4%) / (10%-4%) = 1.04

1. Is the required rate of return reasonable?
2. Is the growth rate of 4% for dividend for FPI reasonable?

FPI has a clean balance sheet with an excess cash of 21 sen per share. It has shown to have consistent earnings and cash flow every year. For the last 10 years, the dividend of FPI has grown from 3 sen to 6 sen last year, or a compounded annual growth rate of 7%.

However the dividend payment has not been a consistent growth.

Posted by Ooi Teik Bee > 2013-12-01 12:01 | Report Abuse

Dear Kcchongnz,

Please do me a favour, please copy and paste your write up to compare all 3 furniture manufacturers i.e Homeriz, Lattitude and others.
I remember I read this posting, but I cannot locate it.
Thank you.
Ooi

Posted by sephiroth > 2013-12-01 12:03 | Report Abuse

Mr Ooi, here's the link
http://klse.i3investor.com/blogs/stock_pick_challenge_2013_2h/40360.jsp

Posted by Ooi Teik Bee > 2013-12-01 12:50 | Report Abuse

Dear sephiroth,
Thank you. Hope you are doing well in your investment in KLSE.

Posted by kclow1 > 2013-12-01 15:18 | Report Abuse

Kcchongnz

May I know how to determine k value

Posted by kcchongnz > 2013-12-01 15:30 | Report Abuse

k = Required rate of return for equity investor

This is a subjective matter. But it is very important as a change in K will yield a different value of P.

You can look at it from various angles.

1) The equity market has been providing an average of 10% return historically.

2) What is the risk premium do you require in investing in the stock market? How much the return should it be higher when compared with alternative investment? The bank deposit gives you 4% now say, is a 6% premium adequate for you? Or are you contented with 4% risk premium, or k of 8%, in which case Prestariang stock price should worth much more? Or you are very risk averse and you want a risk premium of 10%, or k of 14%, in which case it is hard for you to find stocks to invest in?

3) what has been the risk premium in the stock market? 6% risk premium is probably at the higher end historically.

4) As interest rate goes up, obviously k will be higher

5) Other risk considerations such as a higher risk premium if the balance sheet and cash flow has been bad, etc

Haven't I said again and again, investing is not a exact science, it is an art?

Posted by kclow1 > 2013-12-01 15:41 | Report Abuse

Thank you

Posted by kcchongnz > 2013-12-03 09:16 | Report Abuse

GroMutual a hidden gem? It does look like one to me.

Posted by jennylee1382 > Dec 2, 2013 10:22 PM | Report Abuse

Hi Kc chong can u look in to Gmutual? is this a good counter to invest.

Using my usual Graham net net valuation, Gromutual is worth 73 sen. This represents 38% margin of safety investing in Gromutual the close of 45.5 sen.

http://klse.i3investor.com/blogs/stock_pick_challenge_2013_2h/36493.jsp

Moreover GMutual's earnings has been very good the last few quarters. It earns 8 sen per share for the last 4 quarters, very good. PE would be 5.7 only. It has been making consistent profit each year supported by good cash flows.

Not only that, dividends 3 sen a year. So dividend yield is 6.6%, very good also.

Posted by AyamTua > 2013-12-03 13:00 | Report Abuse

kcchongnz - what's your thoughts on GrandFlo potentiality, thanks.

0056.KL (GrandFlo)
http://klse.i3investor.com/servlets/stk/0056.jsp

Company Background

GF is a fully integrated provider of comprehensive Enterprise Data Collection and Collation System (EDCCS) Solutions using mainly bar coding (current), and radio frequency (RF) (future) technologies. It services a wide range of sectors, including healthcare, warehousing, retail chains, manufacturing, but the key industries underpinning growth are logistics and the fast moving consumer goods (FMCG) sectors. GF have offices in Malaysia, Singapore, Thailand, Vietnam and China and a presence in Indonesia and the
Philipines via value-added resellers. Group revenue comprises of sale of EDCCS products and software, sale of barcode labels, as well as system maintenance.

Recent Developments

On 9 and 10 April 2013, GF have reduced its stake in Simat Technologies Public Company Limited (Simat) from 30.5% to 20.9% through off-market transactions for a total consideration of RM12.8m.
On 4 June 2013, GF declared a final tax exempt dividend of 1.0 sen per share for FY13, which translates into a dividend payout ratio and yield of 16.4% and 3.5% respectively. On 7 June 2013, GF declared a final tax exempt dividend of 1.0 sen per share for FY12. This translates into a dividend payout ratio and yield of 40.8% and 3.5% respectively.

On 2 July 2013, the group change its company name from Grand-Flo Solutions Berhad to Grand-Flo Berhad effective immediately.

On 1 August 2013, Grand-Flo Capital Sdn Bhd, a wholly owned subsidiary of Grand-Flo Berhad had entered into a conditional share acquisition with Loyang Ekuiti Sdn Bhd to acquire 520,000 shares (or 52%) in Jalur Bina Sdn Bhd (JBSB) for a total cash consideration of RM2.4m. The proposed acquisition is expected to be completed by end of August 2013.

JBSB is principally involved in the business of housing development and currently owned a piece of freehold residential development land measuring 3.3 hectares (8.1 acres) at Seberang Perai, Pulau Pinang. The market value for the Land as appraised by the Valuer is RM15.6m. Going forward, due to the strategic location of the land, GF expect that the land will be developed into a preferred neighbourhood and the group can benefit from the favourable market demand and selling prices.

Earnings Outlook
Near term, we expect profit margin could still be affected by higher operating costs. Demand for EDCCS products and label business in Malaysia also affected by the global economic uncertainties. We are forecasting profit before tax from its core operations of RM8.4m in FY13 and RM9.1m in FY14.

The key to potential upgrade in forecast earnings would depend on performance of its core EDCCS products and label business in Malaysia. Economic outlook remains cautious, with Bank Negara recently having revised overall GDP growth target for Malaysia in 2013 to 4.5%-5.0% from 5%-6%. Nonetheless, Grand Flo is well positioned to recapture sales and higher margin projects in its integrated EDCCS should economic activities pick up. According to the company, the recent proposed acquisition is part of the group effort in continuously seeking investment opportunities to generate positive returns. Albeit we do not expect any contributions from this property development venture in the next two years.

The company remains in a net cash position, and it will continue to seek out other investment opportunities to add another revenue stream to drive future growth.

http://klse.i3investor.com/servlets/ptres/19779.jsp

Some News:

Grand-Flo is currently awaiting final approval from the Penang government for its maiden property project.

Located in Alma, Bukit Mertajam, the proposed exclusive project comes with a gross development value of RM60mil. Comprising 77 units of semi-detached and bungalow houses in a gated-and-guarded compound, the project is expected to be launched by mid-2014.

Tan reveals that all the units are expected to come with a size of at least 3,000 sq ft each, and prices are expected to start from RM800,000 each.

“As this is our maiden project, we have to put in extra effort to make sure that we do it well,” Tan says, adding that Grand-Flo has already spent RM1mil on building the guardhouse alone.

“We don’t think it is a challenge for us to sell all our units; in fact, we are confident that we can sell all the units within a short period of time after launching the project,” Tan shares.

“We are certainly in this (property development business) for the long run,” Tan says, adding that he expects the property segment to account for 25% to 30% of Grand-Flo’s earnings by 2015.

http://www.thestar.com.my/Business/Business-News/2013/10/26/Flowing-into-a-new-venture-GrandFlo-adds-property-development-into-its-core-business.aspx

Posted by houseofordos > 2013-12-03 13:04 | Report Abuse

Gmutual... wow what a superb company trading at a cheap price ! the cashflow for this year is simply superb and its cash position has strengthen greatly compared to last year.... with its property/land bank mostly in Melaka, I m sure the growth will be good as properties in Melaka should be in affordable price range which would appeal more to the masses...

Posted by houseofordos > 2013-12-03 13:10 | Report Abuse

GMUTUAL Graham net net
Cash & equivalent 27993 100% 27993
Land held for property development 161498 100% 161498
Investment properties 83479 100% 83479
Land development expenditure 39246 100% 39246
Receivables 36060 75% 27045
Inventories 2502 50% 1251
PPE 1958 0% 0
Other assets 626 0% 0
Total assets 353362 xxxx 340512
Total liabilities 65810 100% 65810
Net assets 287552 xxxx 274,702

No. of shares 375776 xxxx 375,776
NAB 0.77 xxxx 0.73

Posted by kcchongnz > 2013-12-03 14:39 | Report Abuse

houseofordos,

good analysis.

Posted by jennylee1382 > 2013-12-04 00:18 | Report Abuse

kcchongnz, thanks for yr speedy reply

Posted by kcchongnz > 2013-12-04 06:30 | Report Abuse

Posted by AyamTua > Dec 3, 2013 01:00 PM | Report Abuse

kcchongnz - what's your thoughts on GrandFlo potentiality, thanks.

AyamTua, you know much more than me about GrandFlo. I don't anything about it until I read a little about it from its financial statements after you asked me.

No, I don't have an opinion on it.

Posted by AyamTua > 2013-12-04 06:40 | Report Abuse

Posted by kcchongnz > Dec 4, 2013 06:30 AM | Report Abuse

Posted by AyamTua > Dec 3, 2013 01:00 PM | Report Abuse

kcchongnz - what's your thoughts on GrandFlo potentiality, thanks.

AyamTua, you know much more than me about GrandFlo. I don't anything about it until I read a little about it from its financial statements after you asked me.

No, I don't have an opinion on it.

-- this part attract my attention: the sentences more like incomplete .. " I don't anything about it until I read a little about it from its financial statements after you asked me." ?? If I would fill in the blank - you would say ..

I don't want to know anything about it?
I don't know anything about it?

was hoping some Graham Net Net keyword etc ..

however you have mentioned " No, I don't have an opinion on it. "

I would take that as opinion .. thanks for analysis! cheers.

appreciated.

Posted by miketyu > 2013-12-04 10:58 | Report Abuse

Mr kcchongnz,
What implications does capital repayment to mother share do to warrant? Does it dilute the warrant?

Posted by kcchongnz > 2013-12-04 11:24 | Report Abuse

Generally capital repayment for underlying shares will result in lowering of exercise price, I think. It depends on the details in the warrant issuing document.

Posted by nightshade > 2013-12-05 23:43 | Report Abuse

Pestech Bhd
Elsoft Bhd
Microlink Bhd

can consider for year 2014.....

Posted by sense maker > 2013-12-06 01:10 | Report Abuse

Tsurukame wrote:

Capital expenditure once realized becomes capital expenses and these capital expenses has certain lifespan and will be depreciated over its lifespan on an annual depreciated value basis.

For instance plant machinery to improve future income once purchased in this year with a determined lifespan of say 5 years must be depreciated starting this year at 1/5 of its purchased cost. Buildings has say 20 years lifespan and will be depreciated accordingly. Software, office equipment is also depreciated over say 5 years period.
So the Net Profit figure for any particular year will have already taken off the annual depreciation value of these capital expenditures.

So how does one compute Free cash Flow??

Answer:

Your question is a good one and your rationale as a layperson is correct too in that depreciation actually spawns from capex.

The only superiority of DCF over simple PE multiple method on this point is just that DCF captures the timing of capex cash outflow more correctly and therefore theoretically gives a more accurate fair value.

In terms of timing, capex cash outflow inevitably precedes depreciation. As DCF is expressed in net present value, getting the right timing for each amount of capex cash outflow in all future years is important.

There are different levels of FCF which can be used within DCF format, depending on the purpose of you using it.

1) FCF to the firm is as per kcchongnz. This is useful normally for determining the value of the company to all stakeholders, and for fixed assets valuation. The firm here denotes all stakeholders including bankers.

2) For biz valuation, FCF to the shareholders is more appropriate and it is FCF to the firm minus payments to banks (principal plus interest) and tax payments. Biz that has big borrowings has less FCF as they have to service the loans. Company enjoying tax holiday similarly will have higher FCF as they pay less tax.

3) For bankers assessing debt service coverage ratio, FCF used by them of course is your FCF after everything else (inlcuding tax payments, capex) but before what you have to pay them (principal plus interest)

Posted by Eric Wong > 2013-12-08 10:47 | Report Abuse

#kchongz - Can i have your email? Want to ask your advices and guidance for FCF calculations and others. Mine is ericwong84@hotmail.com.

Thanks.

Posted by kcchongnz > 2013-12-08 11:10 | Report Abuse

Posted by Eric Wong > Dec 8, 2013 10:47 AM | Report Abuse

#kchongz - Can i have your email? Want to ask your advices and guidance for FCF calculations and others.

Eric, you may not get the right person to give you advice. I am just an ordinary retail investor, not a professional, nor am I an accountant. A lot of things i pick up myself through reading books and other forumers here. There are a lot of knowledgeable here like sense maker, houseofordos etc.

However, if you need my opinion, just post here or those places (this thread is ok as it was started by me)you are reading through, like in my posts where I used cash flow and FCF etc. I will try to answer you if possible. It is just sometimes people asked too general a question, it is hard for me to answer.

By discussing in i3, I would be able to learn from others too. Frankly, I am not sure what I am talking is correct or not sometimes.

Posted by Eric Wong > 2013-12-08 11:37 | Report Abuse

kcchongz, u're humble to urself. Ok, let me start one. It's just simple for most of ppls here but i want to confirm.

1st case: Notion VTEC - Based on 2012 Annual Report

Cash flow from operation = 104312000(cash from ops) - 34780000(depreciation of PPE)

Is there anything that need to be added in?

Posted by kcchongnz > 2013-12-08 12:14 | Report Abuse

The statement of cash flows from operations gives you the CFFO of 104.3m and that is it, CFFO. CFFO includes the Depreciation and Amortization added back to the net profit as D&A is non-cash items. You don't minus that from CFFO to get your CFFO.

Only you want to get the free cash flow, you minus the "purchase of property, plant and equipment" or PPE from the statement of "cash flow from investing activities".

Posted by Eric Wong > 2013-12-08 12:23 | Report Abuse

Ok, should be like this :

FCF = 104312000 - 72077000 (purchase of PPE) or we just use net cash from investing activities?

So, Notion FCF should be around 32m, right?