Posted by kcchongnz > 2013-05-30 09:19 | Report Abuse

jtpc2006, I thought I have already rested my case about Ivory. Since you asked, I just want to reiterate that Ivory is a lemon. True true true, its share price has risen since the last time I said it is a lemon, but now I still say it is a lemon. So if it is a rotten lemon, I don't bother to look at if it is a cheap buy. A rotten lemon can't be eaten even if you get it free (just exaggerate a bit). Please read my comment below if you are interested.

Posted by kcchongnz > Mar 5, 2013 07:52 AM | Report Abuse X

Ivory has released its annual financial results ending 31/12/2012. Revenue and earnings have increased by big margins from 132m and 24.4m to 212m and 32.5m respectively. From the income statement, the revenue and profit appear to be from its ordinary business of property development and hospitality business, as there is no gain/loss of any “extra-ordinary items”. Very good so far. a huge annual growth, or is it? Earnings per share is 8.8 sen. With the present price of Ivory at 49 sen now, the PE ratio is only at 5.5. Isn’t it damn cheap? A value stock? Hold on until you look carefully into the details of financial statements.

Out of the 32.6 m profit, “other operating income” which forms part of the EBIT is RM51.3m, just what is this “other operating income”? A look at their cash flows statement may provide some clues. Cash flow from their ordinary business is negative at RM38.3m. Where is the hard cash when they declared that they made 32.5m? Digging deeper into the CFFO shows that they have booked in 36.6m in “Bargain purchase gain on acquisition of subsidiaries” as part of the EBIT, which should rightfully be an extra-ordinary gain at the bottom of the income statement. Isn’t there a conflict of the statement of income and the cash flow statement? Is it financial misstatement or financial shenanigan? Neither is credible for Ivory. I was curious about who the external auditor is. OMG, it is KPMG. This cannot be. I must have made a wrong inference.

That means for the last two years, though Ivory announced that they have made more than 10 sen per share each year, none of the year has yield any real cash from operations. In actual fact, more cash has to be found to carry out its business. Last year, a right issues was called to get 102m and borrowed another 214m from bank to carry on its business as well as paying back 220m debt. Some 26m worth of land was also sold to help in its cash flow. Ivory’s latest total debt is RM287m, or 64 sen per share. Total receivables of 177m is 0.83 times revenue, or it will take more than 8 months to collect. How much are these receivables collectible?

Posted by jtpc2006 > 2013-05-30 10:28 | Report Abuse

thanks bro kcChongnz. Sori, I missed your earlier update of March 5th, at that time Ivory did not come under radar.
True, a lemon is a lemon....

Posted by kcchongnz > 2013-05-30 11:30 | Report Abuse

Posted by joe2703 > May 27, 2013 06:11 PM | Report Abuse
@kcchong, I'm your fan and I learn a lot of things from you, you have given a lot of useful information and advice. Thanks.
What do you think about TA Global ? Need your advice.

TA Global, property development and investment all over the world! Wow!! Don't really know much about this company but I doubt it is really that lucrative to invest all over the world where many places you are not familiar with.

Just by looking at its latest financial statement ended 31/1/2013, I don't see it meet my view of a good company. Huge outlay of total capital of 3.6 billion with debts closed to equity. Net income is just a pittance of 92m, for a ROTC of just 4%, a huge destroyer of economic value. This is one type of company I would like to avoid. Below is my assessment.

TA Global a Good company? 0.315
Good governance ?
Durable business No
Growth No
ROTC No 4% <<WACC
Balance sheet Neutral
Cash flow Yes

Screens for investing
ROTC No 4% <<WACC
P/B Yes 0.7 <2.0
PE ratio Yes 18.2 <20

Posted by kcchongnz > 2013-05-30 13:55 | Report Abuse

Posted by jtpc2006 > May 30, 2013 10:28 AM | Report Abuse
thanks bro kcChongnz. Sori, I missed your earlier update of March 5th, at that time Ivory did not come under radar.
True, a lemon is a lemon..

jtpc2006, can we say Ivory is a lemon when its share price rose from 50 sen 3 months ago when I posted a bad comment about it above to 74.5 sen now? My answer is a resounding yes yes and yes.

One of the most glaring attributes of a bad company is the management keeps on deceiving the shareholders by convicting financial shenanigans. The latest report ended 31/3/2013 shows the glaring fraud again committed by the management.

The first quarter results show the company made 2.1 m net profit. One would be surprised that the gross margin this quarter is closed to 40%, twice that of the corresponding quarter last year. But a peep on its cash flows statement shows that again there is no cash flows from operation. CFFO is at a negative value of 13.4m. Why? The riddle was solved when you see there is this item of "Change in property development costs" amounts to 12.4m which is net off from the CFFO. This appears to me Ivory booked in a fishy 12.4m as profit from the "Change in property development costs". Like that also can? Can any accountant enlighten me?

So can you say Ivory is a good company? And a good investment? Yeah I know I know, those who bought this share 6 months ago at 50 sen would have made 50%. Yeah share price does not necessary follow fundamentals. But don't forget those who bought it about 3 years ago at about 84 sen are still in the red at about 11.3%.

Posted by kcchongnz > 2013-05-31 08:20 | Report Abuse

Daya, follow the expert
Posted by skyland > May 29, 2013 08:29 AM | Report Abuse
how about daya recommend by cold eye?

Not only cold eye recommended this, Philip Capital also recently strongly recommended this. This is what PC said:

"We like Daya for its huge outstanding order book of RM1.3bn which is 5x of its market cap. Despite the huge orders in hand, the management is still pushing for aggressive expansion. Investors looking for "cheap" share and trading at reasonable valuation yet has huge potential, Daya is a good choice."

Should we follow the expert? Daya is another construction company. Does it stand out as "special"? Well as far as growth is concerned as given by PC, it does seem Daya meets an attribute of a good company.

For me, I have Pintaras. Hence to invest in another construction company, it must be very good. Its net profit margin was only 7.1%. ROE and ROIC for 2012 is only 8.5% and 9% respectively. Nothing to shout about. In fact they are way below my requirement. Its balance sheet is ok lah with D/E ratio of 0.3. However there is no free cash flow. But of course its first quarter results 2013 has improved. But to me it is still too early to judge if the full year results will be also good.

I have said many times before as a civil engineer involving in construction. High order book doesn't necessary will translate to good profit. Often it is the contrary. To me high margin is more important.

So I will not be interested in it. Below is my assessment.

Daya a Good company? 0.270
Good governance ?
Durable business ?
Growth Yes
ROE No 8.5% <12%
ROTC Neutral 8.9% about WACC
Balance sheet OK D/E 0.33
Cash flow Neutral

Screens for investing
ROTC Neutral 9% about WACC
P/B Yes 1.4 <2.0
PE ratio Yes 17.0 <20

Posted by Joshua Lee > 2013-05-31 10:46 | Report Abuse

Anyone has any views on EFORCE? With Bursa 'heating up' now, the prospect for EFORCE looks good. And it gives good div too!

Posted by nhkch > 2013-05-31 11:58 | Report Abuse

Hi kcchongz. Would like to know how you view redtone. Personally i think this counter going to perfrom well. The profit margin is high. From the financial report, it seem that the free cash flow is increasing.

Posted by passerby > 2013-05-31 14:00 | Report Abuse

ex-contractor, have a look at HL Industrial Bhd (3301).....

Posted by yfchong > 2013-05-31 14:14 | Report Abuse

bro KC from nz, any change to comment on Parkson..

Posted by Melvin G > 2013-05-31 19:14 | Report Abuse

http://www.intellecpoint.com/2013/05/should-one-relook-at-parkson-now.html yfchong for your reading pleasure.

Posted by kcchongnz > 2013-06-01 10:17 | Report Abuse

Is HLI a good company?

Posted by ulalar > May 29, 2013 08:56 AM | Report Abuse
alo contractor, tengok-tengok 3301......low volume, low profile, no coverage....super good management & super good dividend

I guess so as it is a well established diversified group with many industrial and construction products, and if I take your words that it has super good management (but I know working as a senior manager in HL group is not easy, very very stressful). But before we conclude that, let's look at its financial performance.

It has consistent and very good quality earnings with CFFO more than net income most of the time. Its ROE is still great at 15% but that was because it has increased its borrowing by huge amount to 910m as at 31/12/2013 from 563m nine months ago. Why does HLI embark in such a high leverage now at D/E of 0.8 now? One reason I can think of is HLI is trying to grow its business. It is heavy now and growth seems to have stalled. With the high gearing now, its return in total capital is ok lah but not as good as in my book. ROIC is just about 11%, slightly higher than the cost of capital.

So is HLI a good company now? Actually it is individual opinion. What do you think? If one think it is still a great company, then if you want to embark on this strategy of investing in a good company, then go ahead. Its valuation is undemanding as assessed by me below:

HLI a Good company?
Good governance Yes
Durable business Yes
Growth No
ROE Yes 15.0%
ROTC Yes 11% >WACC
Balance sheet Neutral
Cash flow Yes CFFO/NI>1.0

Screens for investing
ROTC Yes
P/B Yes 1.2 <2.0
PE ratio Yes 10.5 <20

Posted by kcchongnz > 2013-06-01 11:57 | Report Abuse

Posted by ZenZenD > May 29, 2013 09:40 AM | Report Abuse
kcchongnz...wud u put a thumbs up for Century Logistics? Started to move of late. Tks

No sorry ZenZen, I won't put my thumb up for Century. Yeah I know, at 1.77, Century is selling cheap now as shown below:

P/B Yes 0.8 <2.0
PE ratio Yes 9.6 <20

But this strategy is about investing in a good company. I used to like Century as one of the leading logistic company. It had great growth in revenue and earnings of more than 40% a year in 2009 and 2010. Its ROE and ROIC were in double digits of 15% and above then. Don't know what happen to it last year when ROE and ROIC contracted badly to about 7% only, less than the cost of its capital. It is trailing further and further away from its peers like Freight Management and Tasco. So how can I place it as a good company? Below is my assessment:

Century a Good company?
Good governance ?
Durable business ?
Growth No
ROE No 7.4% <12%
ROIC No 7% <WACC
Balance sheet OK D/E 0.4
Cash flow Yes CFFO/NI>1.0

Screens for investing
ROIC No
P/B Yes 0.8 <2.0
PE ratio Yes 9.6 <20

Posted by ZenZenD > 2013-06-01 12:25 | Report Abuse

Tks for ur advice, kcchongnz. Wl sell it off and move on to something else. What do u think of Cuscapi?

Posted by ZenZenD > 2013-06-01 12:31 | Report Abuse

Btw, what do u think of KPJ? Hv been keeping it since day 1. Not sure whether it's fully valued at this current price. Ur comments, pls, kcchongnz. Many tks

Posted by ulalar > 2013-06-01 12:53 | Report Abuse

@kcchongnz, boss you even got spy within HLIND. I'm facing some problem with the EPS CAGR for 5-year & 10-year estimation, my figure deviated far from Dyanquest publication....so need to cross check with other reference. What is your EPS CAGR 5Y & 10Y for HLIND?

si bek boh eng recently...gotta go now. thank in advance

Posted by KAHFIEHLAI > 2013-06-01 13:14 | Report Abuse

Ulalar

Why give uself this name? Like to ular here and there? for sure si bek boh eng cos lu tiam tiam ular mai
hahaha

Posted by ulalar > 2013-06-01 13:18 | Report Abuse

@kopi mari

nola, early of the year, i keep on hearing this MyFM promoting ulalar campaign Snake CNY on radio....think think think, ehhh ular year wor.....so mah choose ulalar to mark the time i register lo, kikikikik

see, so easy to remember when i joined now, ular year mah

Posted by ulalar > 2013-06-01 13:19 | Report Abuse

boh eng now, gotta go, cya

Posted by kcchongnz > 2013-06-01 15:53 | Report Abuse

Posted by ZenZenD > Jun 1, 2013 12:25 PM | Report Abuse
Tks for ur advice, kcchongnz. Wl sell it off and move on to something else. What do u think of Cuscapi?

ZenZenD, please remember I never advise others whether to buy of sell a stock. I will never know how a stock will perform in the future. I only look at its business and its performance to come to a conclusion. And those are historical data. The future may be different but I am just an armchair investor, not a professional, and have no possession of any insider information. Nor am I having any privilege to talk to the management about its future plan and prospects. Don't come and blame me after you sell off your stock and its share price jumps.

Regarding your question about Cuspati, below was my reply to somebody some time ago. I don't think things have changed for Cuspati. Judge yourself if it is a good company to invest.

Posted by kcchongnz > Feb 3, 2013 12:31 PM | Report Abuse X
necro, you seem to be very interested in apa ini cuscapi. Why? Insiders/big boys going to goreng? Somebody going to acquire it and pay big bucks? Going privatization with big payoff? Any plausable stories? You know I have never heard of Cuscapi until you mentioned it. But since you are so keen on this counter, I will try to look at it and give my litte informed opinion here.

Cuscapi, a e-commerce outfit listed in Ace Market providing services such as call order delivery services and other F&B management solutions, operating locally and internationally especially in China. It obtained a couple of awards, ‘Top 10 Most Satisfying F&B Management Software’, and ‘Innovative Award for China E-Commerce Enterprise’ as mentioned in its 2011 annual report. Sounds interesting and unique business model. But how is its economic moat? Is the business in demand? Is there high barrier of entrance from other competitors?
Let’s look its growth for the last few years to gauge its economic moat. Table 1 below shows it revenue and net profit for the last 5 years since listing in Mesdaq in 2007.

Table 2: Growth, value in thousands
2011 2010 2009 2008 2007 CAGR
Revenue 53595 48903 38925 36280 38000 9.0%
NI 8631 9123 262 980 8500 0.4%

Revenue grows at a compounded annual rate of 9% for the last 5 years, doesn’t really appear to be a high growth company as claimed. Growth in net income (NI) of 0.4% a year is at best uninspiring. In fact during the last US sublime crisis in 2008 and 2009, NI was seriously affected with NI less than RM1 m as shown. How is its ROE?

Table 2: DuPont Analysis
Year 2011 2010 2009 2008 2007
ROE 15% 21% 1% 3% 22%
NI 16% 19% 1% 3% 22%
AT 0.794 0.930
FL 1.143 1.220

Table 2 above shows that ROE bounces around and it is inconsistent. During better time say in 2010, ROE appears to be good at 21% achieved with NI of 19%, asset turnover (AT) of just 0.9, meaning not enough turnover or jobs. The financial leverage is low though which appears to be good. However other companies of similar service-based businesses have better metrics than these. Moreover, you can see the deterioration of its operating efficiencies from 2010 to 2011 when ROE worsen from 21% to only 15%. In fact there doesn’t seem to be any improving for the last 9 months ending 30/9/2012 with NI of RM4.8 m only.

What about its cash flows? Table 3 below shows its cash flows for the last two years:

Table 3: Cash flows
Year 2011 2010
CFFO 4560 11414
Capex 5100 4933
FCF -540 6481

There are some free cash flows of 6.5 m in 2010. However, there is no free cash flow last year after spending money on software development and purchase of plant and equipment. So where is the beef? But never mind, a not so good stock can be a great investment if the price is cheap.

At the closing price at 32 sen on 31/1/2013, PE ratio works out to be 8.4, not really very cheap for an ACE stock with not much of economic moat, in my opinion.

Posted by ccs999 > 2013-06-01 16:02 | Report Abuse

Hi kcchongnz, any comments on Cenbond 7171 & SBCCORP?
Appreciate your commenrs and thanks.

Posted by kcchongnz > 2013-06-01 18:01 | Report Abuse

Posted by ulalar > Jun 1, 2013 12:53 PM | Report Abuse
@kcchongnz, boss you even got spy within HLIND. I'm facing some problem with the EPS CAGR for 5-year & 10-year estimation, my figure deviated far from Dyanquest publication....so need to cross check with other reference. What is your EPS CAGR 5Y & 10Y for HLIND?

Say for example EPS in 2006 is 20 sen, it is 50 sen in 2012, 5 yr CAGR of EPS is (50/20)^(1/5)-1=20.2%

For 10 yrs is (EPS12/EPS01)^(1/10)-1

Posted by kcchongnz > 2013-06-01 18:29 | Report Abuse

Is Eforce a good company?

Posted by Joshua Lee > May 31, 2013 10:46 AM | Report Abuse
Anyone has any views on EFORCE? With Bursa 'heating up' now, the prospect for EFORCE looks good. And it gives good div too!

It does appear that Eforce is a reasonably good company with steady revenue and net profit for the past 2 years. ROE and ROIC though meet my minimum requirement, I would expect this type of technology, asset light company should have ROE and ROIC of more than 20% as they generally have high margins. It needs to have more jobs to increase its asset turnover in order to increase its ROE.

Well you if know this company well and it is good in your opinion, it is good to invest as its valuation is ok lah as shown in my assessment below:

Eforce a Good company? 0.330
Good governance ?
Durable business ?
Growth Neutral
ROE Yes 13% >12%
ROTC Yes 15% >WACC
Balance sheet Yes D/E 0.03
Cash flow Yes

Screens for investing
ROTC Yes 15% >WACC
P/B Yes 1.7 <2.0
PE ratio Yes 13.0 <20

Posted by soon5728 > 2013-06-01 18:46 | Report Abuse

I am holding Amprop since long time,now only at the gain.Is Amprop a good company to hold? can anyone help,tks.

Posted by iafx > 2013-06-01 19:07 | Report Abuse

since 40c? long time ago means u could be having 100% gains by now, congratulate! amprop is fortunate to have recurring rental, highway & power income, properties development is niche rather than theme driven, balanced with UK international properties market. healthy cash level with sustainable DY. once recommended by coldeye, certainly a counter to be considered especially in time of uncertainty.

juz a cheap view, yr $ yr choice :

Posted by jalenheng > 2013-06-01 19:24 | Report Abuse

Can share ur view on tecnic?

Posted by soon5728 > 2013-06-02 00:08 | Report Abuse

tks,iafx. my average price is 72c when shares consolidate long time ago.

Posted by kcchongnz > 2013-06-02 05:30 | Report Abuse

TanKW, yes, the link you provided is the way to calculate WACC, the "academic" way. My last example to calculate didn't adjust the tax shield for cost of debt. for example if borrowing cost is 6%, the after-tax cost of debt is 6%*(1-25%)=4.5%; assuming tax rate is 25%.

Risk free rate you can use the FD rate, but the more appropriate rate may be the 20-year MGS rate. Beta is the movement of the stock price in relation to the market obtained through a statistic analysis of standard deviation of the stock price. Risk premium is what an investor required over and above the risk free rate. Calculation of beta is tedious but in the US market, beta is provided from many free sites. I am not sure in Bursa. Anybody knows where to get it appreciate can let me know.

The above is too academic. Actual finance and investment need not to be that precise. So I normally make my own judgement. for example if a company has healthy balance sheet and good cash flow, my required return is 10%, 15% if the company is risky with big bets, poor balance sheet and not much cash flow.

Hope the above help.

Posted by kcchongnz > 2013-06-02 09:10 | Report Abuse

Is Redtone a good company? Is it a great investment?

Posted by nhkch > May 31, 2013 11:58 AM | Report Abuse
Hi kcchongz. Would like to know how you view redtone. Personally i think this counter going to perfrom well. The profit margin is high. From the financial report, it seem that the free cash flow is increasing.

I agree with you the above.

It does seem to me Redtone is a good company simply because of the turning around and the expected explosive growth in the near future.

[The Company is principally engaged in the telecommunication business. Operations are carried out in Malaysia, Singapore and People's Republic of China. Its direct subsidiaries are REDtone Telecommunications Sdn. Bhd., which is engaged in the research, development, manufacturing and marketing of computer-telephony integration products, and provision of communication services; REDtone Technology Sdn. Bhd., which is a provider of total solutions in business communication and telecommunication; REDtone Network Sdn. Bhd., which is engaged in the research and development and marketing of communication applications; REDtone Marketing Sdn. Bhd.; REDtone Multimedia Sdn. Bhd., and REDtone Software Sdn Bhd., which is engaged in the research, design, develop and commercialization of voice over Internet protocol (VOIP) customer premise equipment.]

The twelve month trailing revenue increased by 13% from 107m to 121m while earnings multiplies by 5.7 folds from 1.8m to 10m for fy ended 30/6/2013. This compared well when you consider Redtone was in the red for the same amount as at 30/6/2011. Margin expanded to double digit with ROE improved tremendously from 2% to 13%. ROIC is particularly impressive at 23%. Quality of earnings is great with ttm CFFO amounts to 20m. Will this great feat of Redtone continues? Hope someone in the know can shed some light on this.

And how about whether Redtone is a good investment now especially in view that its share price has jumped by more than 70% from about just 40 sen a month ago?

At the close of 71 sen last Friday, Redtone was traded at a PE of 7 times and 3.5 times its book value. The market must be having great expectation for Redtone. Below is my assessment on Redtone for you to judge for yourself if Redtone is a good investment.

Redtone a Good company? 0.71
Good governance ?
Durable business ?
Growth Yes 13% in revenue
ROTC Yes 23% >WACC
Balance sheet Yes 0.05 D/E
Cash flow Yes 163% CFFO/NI

Screens for investing
ROTC Yes
P/B No 3.5 >2.0
PE ratio No 27.4 >20

Posted by ZenZenD > 2013-06-02 09:43 | Report Abuse

Many tks, kcchongnz. Appreciate ur comments. Can I hv ur coments on KPJ as to whether it is fully valued at this current price?

Posted by kcchongnz > 2013-06-02 09:46 | Report Abuse

ZenZenD, why don't you look at KPJ's financial statement and let us kow if it is fully valued? We can discuss about your assessment and any doubt of your method of assessment here.

Posted by kcchongnz > 2013-06-02 12:28 | Report Abuse

Is Parkson a good company? Is it a good investment?

Posted by yfchong > May 31, 2013 02:14 PM | Report Abuse
bro KC from nz, any change to comment on Parkson..

Yeah, felicity has written a good analysis on Parkson and there are also valuable comments there. Go and have a read.

For me I still think Parkson is a good company. That is despite that its growth has slowed down considerably these two years. Its margin has also contracted, quite badly to 15% based on its 2013 ttm results, down from 20% a year ago. ROE and ROTC also suffered quite badly, retreating to 12% and 5% respectively. This is mainly due to the slowdown in the China market. Parkson has forayed into Indonesia, Vietnam and Sri Lanka. So Parkson’s continuous success very much depend on the recovery of China’s economy and the success in those new countries.

Below is my assessment of Parkson if it is a good company and a good investment.

Parkson a Good company? 3.82
Good governance Yes
Durable business Yes
Growth No 2.3% in revenue
ROTC No 5% <WACC
Balance sheet Yes 0.33 D/E
Cash flow Yes 157% CFFO/NI

Screens for investing
ROTC No
P/B Yes 1.5 <2.0
PE ratio Yes 14.4 <20

Posted by kcchongnz > 2013-06-03 10:26 | Report Abuse

Cenbond, is it a good company? Is it a good investment?

By looking at how its share price jumped from 90 sen to RM1.61 at the close of the market on 31/5/2013, there must be something about this company, isn’t it?

Cenbond business includes paper packaging, plastic packaging, contract manufacturing and packing sale of household care products and adhesive products, and investment and property holding.

Revenue for fy ending March 31 2013 shows an improvement of just 3% from 182m to 187m. However its net profit jumped by 32% to 20.6m. Margin improved by 2.6% which is substantial for this type of industry which could positively affect its bottom line. This helps in its return of total capital which improved from 15% to 17%, way above its cost of capital.

Is Cenbond reasonably priced after the jump in its share price recently. Yeah of course. Below is my assessment whether Cenbond is a good company and a good investment.

Cenbond a Good company? 1.610
Good governance ?
Durable business Yes
Growth Yes
ROE Yes 13% >12%
ROTC Yes 17% >WACC
Balance sheet Yes D/E 0.03
Cash flow Yes

Screens for investing
ROTC Yes 17% >WACC
P/B Yes 1.3 <2.0
PE ratio Yes 10.1 <20

Posted by kcchongnz > 2013-06-03 15:42 | Report Abuse

Is SBCCorp a good company? Is it a good investment?

Posted by ccs999 > Jun 1, 2013 04:02 PM | Report Abuse
Hi kcchongnz, any comments on Cenbond 7171 & SBCCORP?
Appreciate your commenrs and thanks.

SBCCorp’s share price shot up from RM1.00 to RM1.58 now, for a 60% gain just in 3 months. Wow! Even at this price, it is trading at a PE of just 5 and a price-to-book value of just 0.5, damn cheap isn’t it? So the momentum is there and the valuation is undemanding, what are you waiting for?

But wait, this thread is about finding a good company to invest, then only check if it’s valuation is not to high before investing. Let’s don’t jump the gun and evaluate if SBC is a good company or not first.
Siah Brother has been an established name in construction, in particular the superstructure construction. By superstructure I mean the building from above the ground, after contractor like Pintaras has done its foundation and basement work. Superstructure construction works has been a very competitive work and margin and profit is low. In fact the margin for SBCCorp is surprisingly high at 21% last fy. That was because of the inclusion of investment and other income. However the turnover of SBC is surprisingly low at 127m last year. Even with such seemingly good results last year, ROE is only at 9.2%, below my required return. ROIC at 8.8% is also not good enough, hardly above the weighted average cost of capital.

There is also up and down in construction and with many inherent problems in the industry. Unless that company is big and has influence, or it has a niche (like my favourite Pintaras), it is really hard to survive in this dog eat dog environment. Many construction companies, some high fliers, have vanished into the thin air after each crisis. Hence I could not myself rate SBCCorp as a good company. Below is my assessment:

SBCCorp a Good company? 1.580
Good governance ?
Durable business No
Growth No
ROE Yes 9.2% <12%
ROTC Yes 8.8% *=WACC
Balance sheet Neutral D/E 0.26
Cash flow ok

Screens for investing
ROTC Neutral 9% *=WACC
P/B Yes 0.5 <2.0
PE ratio Yes 5.0 <20

Posted by iafx > 2013-06-03 15:48 | Report Abuse

Suria Capital, SBC Corp in RM1.8b Sabah JV: http://biz.thestar.com.my/news/story.asp?file=/2013/5/22/business/20130522094320&sec=business

http://www.bursamalaysia.com/market/listed-companies/company-announcements/1297869

Posted by kcchongnz > 2013-06-04 06:32 | Report Abuse

Posted by jalenheng > Jun 1, 2013 07:24 PM | Report Abuse
Can share ur view on tecnic?

Is Tecnic a good company? Is it a good investment?

While many stocks surged in price in last year, Tecnics’s share price retreated from a high of RM4.10 to RM3.17 now. Is Tecnics necessarily a bad company? I don’t think so.

Tecnics operates in two segments: plastic wares and moulds. It is engaged in the manufacture and supply of plastic wares, which it offers the products in the areas of household, consumers, industrial and electronics. In addition, the Company is also engaged in the manufacture, fabrication and sale of moulds, which are used in the areas of electronics, automobile and plastic injection moulding.
Revenue for 2012 dropped marginally by 8% to 194m last year due to the decrease in order from its clients on the electronic and electrical moulds. Net profit for 2012 was down by 14% to 17.4m. However its ROE remains high at 17% and ROIC at 22%, way above the cost of capital. Cash flow is ok on average over the years and it has a healthy balance sheet. If things improve in the future, Tecnics should be doing very well again. Most of all, its valuation is undemanding as shown in the assessment below:

Tecnic a Good company? 3.170
Good governance ?
Durable business Yes
Growth No
ROE Yes 17% >12%
ROTC Yes 22% >WACC
Balance sheet Yes D/E 0.06
Cash flow Yes good quality

Screens for investing
ROTC Yes 22% >WACC
P/B Yes 1.3 <2.0
PE ratio Yes 7.4 <20

Posted by faberlicious > 2013-06-07 08:09 | Report Abuse

bro kcchong,

I'm looking at Tguan which looks cheap in terms of PER but not sure if it is a good company to invest in. I'd appreciate it very much kc if you take a closer look at it .

Posted by KY Lau > 2013-06-08 01:17 | Report Abuse

how u think mkh n tsh?

Posted by kcchongnz > 2013-06-08 18:02 | Report Abuse

Is Thong Guan a good company? Is it a good investment?

Posted by faberlicious > Jun 7, 2013 08:09 AM | Report Abuse
bro kcchong, I'm looking at Tguan which looks cheap in terms of PER but not sure if it is a good company to invest in. I'd appreciate it very much kc if you take a closer look at it .

Thong Guan Industries Berhad is principally engaged in trading of plastic and paper products. The Company's business segments include plastic products, food and beverages, and consumable products and machinery. It carries its operations in Malaysia and China.

Faberlicious, don't know too well about Thong Guan but looking at its business, I think it is a ok business. TG was doing quite well before the sublime crisis in its growth and profitability. It was hit quite hard during the crisis. Since then it has recovered nicely with revenue growing rapidly in double digits albeit with much slower growth in profit especially for last year at just 1% for shareholders.

Operating efficiency wise it is ok with ROE and ROIC at about 10%, closed to the cost of equity and total capital.

So personally I would rate Thong Guan as a slightly above average company. As investment wise, yes, it is very cheap and hence could be an excellent investment. Below is my assessment:

Thong Guan a Good company? 1.640
Good governance ?
Durable business Yes
Growth Yes
ROE ok 11% close to 12%
ROTC ok 9.6% about WACC
Balance sheet Yes D/E 0.2
Cash flow Yes good CFFO/NI>100%

Screens for investing
ROTC ok 10% about WACC
P/B Yes 0.7 <2.0
PE ratio Yes 6.3 <20

Posted by kcchongnz > 2013-06-09 17:26 | Report Abuse

Is KPJ really worth RM6.50 a share?

Posted by ZenZenD > Jun 2, 2013 09:43 AM | Report Abuse
Many tks, kcchongnz. Appreciate ur comments. Can I hv ur coments on KPJ as to whether it is fully valued at this current price?

This thread is about whether a company is a good company or not, and if it is, then only we check if it is still worthwhile to invest at the market valuation. It is not so much if the stock is undervalued or not.

Everybody seems to think that KPJ is a very good company; great business, stable and growing in revenue and profit, good cash flows, good governance, and high return in capital etc, but is it really that fantastic?

I would say ok lah at this stage because KPJ's growth has slowed down considerably. It borrows quite a bit of money with debt higher than equity now. However its return of total capital is just about 10%, slightly higher than the cost of capital.

But what do you think of its market valuation? For me I won't pay for a stock with a PE ratio of 31 and a price-to-book value of 3.7. Obviously the market is expecting that the fantastic growth of KPJ will continue for a long long time. No, a good company is not a good investment if the price is too high. Not for me.

Posted by necro > 2013-06-09 21:04 | Report Abuse

KPJ?...
Who never get treatment from KPJ please raise your hand!...

Posted by faberlicious > 2013-06-10 07:42 | Report Abuse

Bro. kcchong,many thanks for your answer on Thong Guan.Wow, now you have become the sort of unofficial "investment adviser" on i3.

Posted by aunloke > 2013-06-10 07:51 | Report Abuse

In the moonlight you just shine like a beacon on the bay.......

Posted by faberlicious > 2013-06-10 07:52 | Report Abuse

I totally,completety, absolutely 100% agree with you on KPJ. Way too pricey.

Posted by kcchongnz > 2013-06-10 19:30 | Report Abuse

Is TSH a good company? Is it a great investment?

Posted by KY Lau > Jun 8, 2013 01:17 AM | Report Abuse
how u think mkh n tsh?

TSH is a darling stock for most investment bankers and analysts. Phillip Capital is one of them who has been continuously recommending this stock since three years ago. They expect TSH will have explosive growth for the next 20 years for its palm oil production! Analysts have projected the planting and increased in acreage in its palm oil crop and I believe they have done a thorough job.

We will let the job of projection to the analysts as this is their rice bowl. But we just peep through the recent past and see how TSH has been doing in its business. The Table below shows it revenue and net income from 2006 to 2012.

Year 2012 2011 2010 2009 2008 2007 2006 CAGR
Revenue, m 984 1134 910 989 1110 862 625 8%
EBIT, m 112 167 115 89 101 117 74 7%
Net Income, m 84 130 92 64 85 110 73 3%
EPS, sen 9.1 14.4 10.3 6.7 9.8 11.5 8.6

I personally don’t see the “explosive growth in this company, especially the last three years since Phillip Capital started to make the projection. Do you? Ok I know I know, it is the future, the next 17 years. It is just that I am a suspicious person who doesn’t easily believe anything until I have seen it.

The following table shows the cash flow of TSH for the past few years.

Year 2011 2010 2009 2008 2007 2006
CFFO, m 17 153 120 147 15 48 91
Capex -225 -225 -225 -225 -225 -225 -225
FCF -208 -71 -104 -78 -209 -177 -134
CFFO/NI 20% 118% 131% 230% 18% 43% 124%

What is the problem with its cash flow? Why is the quality of earnings so bad last year with CFFO only 20% of net income? Do you see any positive free cash flow, even in a single year?

How is its balance sheet then? The table below shows how its debt has been increasing each year and it is now closed to a billion ringgit of total debt now.

Year 2012 2011 2010 2009 2008 2007 2006
Total debt, m 975 740 722 603 468 261 186

How is its performance for the past years in term of ROE, ROIC? Do you find them impressive?

Year 2012 2011 2010 2009 2008 2007 2006
ROE 8.5% 13.7% 10.9% 7.8% 11.6% 15.2% 13.9%
ROIC 5.4% 8.5% 6.9% 6.0% 8.2% 11.6% 10.6%

What about its valuation with its share price closing at RM2.50 today? Judge yourself from my assessment below.

TSH a Good company? 2.500
Good governance ?
Durable business Yes
Growth ?
ROE No 9% <12%
ROTC No 6% <WACC
Balance sheet No 1.10 D/E>1
Cash flow No No FCF for years

Screens for investing
ROTC No 6% <WACC
P/B No 2.4 >2.0
PE ratio No 27.4 >20

Posted by necro > 2013-06-10 20:35 | Report Abuse

Im still prefer THPLANT than TSH....
I dont know why....
But when i like the company then few month later surely price meletop2....
Hahahaha

Posted by kcchongnz > 2013-06-12 05:46 | Report Abuse

Management and corporate governance of a good company. A Look at Pintaras Jaya.

Most investors view the value of management as reflected by its stock price. There is some truth to this over the long run, but strong performance in the short run doesn't guarantee good management. One of the best example in Bursa is KNM group. Everyone is familiar with how the flamboyant CEO has been doing to jack up its share price by repeatedly issuing misleading statements about its future, engaging in company share buybacks to jack up the share price, engaging in acquisition spree all over the world which destroy value etc, instead of concentrating in improving the operation efficiencies and the bottom-line of the business. One better example is the failed Enron Corporation in this book, “Conspiracy Theory: the True Enron Story”.

Both the key man in Pintaras Jaya, Chairman and Managing Director Dr Chiu Hong Keong, aged 58, the founder of Pintaras , and Ir Khoo Keow Pin, aged 56, an Executive Director, are geotechnical engineer by training and have worked in the construction industry, in particularly the geotechnical works involving design and construct heavy foundation and retaining structure works for the whole of their career. The valuable specialized knowledge they possess ensures the effective operations and management of the company.

The management is compensated fairly with their salary each year. Total management compensation for last year was RM2 million, just about 1% of its turnover last year. There has been no options granted to anybody in the management before. Dr Chiu who holds the position of both the Chairman and Managing Director paid himself for less than RM800k a year, even though the company made a profit before tax of RM54m last year.

In actual fact, Dr Chiu and his management team does not required to be paid high salary for their commitment to the company. Dr Chiu and his spouse hold about 73% of the total of 80 m shares in Pintaras. When a dividend of 20 sen was paid last year, they pocketed about RM12m. So why is there a need to have high salary and compensation from the company? This high percentage of insider holding in itself aligns the interest of shareholders and the management and hence minimize the agency problem in a corporation.

In corporate governance, the Board comprises 4 Executive Directors, a Non-Independent Non-Executive Director and 3 Independent Non-Executive Directors. They have a vast range of experience and knowledge in the areas of business, engineering and finance. The Independent Non-Executive Directors do not form part of the management and are not connected with major shareholders. They provide a fair representation of the shareholder’s interest. So far, there have not been any unfair related party transactions in the company.

The management also has a focus strategy in its business. It concentrates in what the company can do the best, i.e. to embark on design and construction works of its niche market in deep foundation and basement work with less competition and higher margins, rather than engaging in every kind of construction work where the competition is keen and margin is low.

The above are some of the high quality of management I think one should focus on when investing in a company.

Posted by calvinwky168 > 2013-06-14 21:50 | Report Abuse

Hi, can take a look at silk holdings?
This is a company recently came out from pn17. While currently, nothing to shout about. I feel it is worth investing. But would like other sifus for 2nd opinion.
This is what I know.
Silk has 2main buss.
Toll highway = cash cow, steady revenue. Heard the traffic at their highway is increasing. They are widening the highway by building additional lanes.
Tug boat service to O&G, got Petronas license. All boat capacity are fully booked, so they have placed additional orders for new boats.
Currently, the debt is high, but their loan term is unique. Compulsory payment from their revenue. Auto deduction from account. So, once the debt go down, the cash flow and financial health should improve quickly. No dividend, as they need to pare down debt.
Any comment is welcome.

Posted by kcchongnz > 2013-06-15 14:17 | Report Abuse

calvinwky168,
I think you lost you way? This thread is about in search of excellence; looking for good company to invest for long term. How could you consider a PN17 company which has been making persistent losses in the last few years; making only 15 m for the last two quarters; while having a total debt of 1.6b and annual interest payment of more than 100m to pay, a good company?

Posted by Darren Kho > 2013-06-15 14:33 | Report Abuse

kcchongnz,
Please have a look at P&O, is it a good company and worth for long term investment? Appreciate your comment so much and thank you for that :)

Posted by houseofordos > 2013-06-15 17:21 | Report Abuse

KC,

Nice sharing... I think Muar Ban Lee, Willowglen also fits nicely into this criteria... To add...

P/B ratio of 2 may not be too expensive if we are looking at asset light companies so again comparison to sector average or peers will tell a better picture

P/E ratio of 25 is a good starting point, P/E =25 = earnings yield of 4% which exceeds FD rate. P/E ratio should be further compared to the sector or index average before decision is made...

Other screens I normally use are :-
Debt to equity < 0.5
Dividend yield > 5%