Invest Conservatively, Sleep Well

The Magic Formula Portfolio 2015Q4 Review

noreply@blogger.com (Unknown) — Wed, 06 Jan 2016 13:03:00 +0000

Happy New Year 2016!

In 2014Q2, I started building up The Magic Formula Portfolio following the buy and sell criteria listed in the blog post titled Start Building Up The Magic Formula Portfolio.

As stated in the above blog post, I will review the performance of the portfolio quarterly. The following is the result of 2015Q4, loss 21.32% on 31 Dec 2015.

I sold the following stocks on 4 January 2016 as these three stocks no longer exists in the Magic Formula list.

Total available investment capital is $969.28. On the 5 January 2016, I added the following stocks to the portfolio, cost $988.89, the balance of investment capital $-19.61:

Stay tune to the next quarter! :)

Which ETF? The Market Vectors Wide Moat ETF (MOAT), Let's Me Tell You Why

noreply@blogger.com (Unknown) — Sun, 22 Nov 2015 07:49:00 +0000

The author published the analysis report here is for his own reference only. It is not an indication of the author's business interests for companies or funds being analyzed. It is definitely not an investment advice, please see the full disclaimer located at the bottom of the blog post.

In the page of 122 of Why Moats Matter book, I discovered the Morningstar Wide Moat Focus Index (MWMFT) has generated annualized returns of 15.9% versus 8.8% for the S&P 500 since its inception on Sep 30, 2002 through Sep 30, 2013.

Let's see some real comparison on the following ETFs (To be exact, WMW is an ETN)

SPDR® S&P 500® ETF (SPY)
ELEMENTS Morningstar WideMoat Focus Total Return ETN (WMW) - the ETN is chosen in this comparison as it has the longest track record of ETF-type of fund in the market

View Latest Chart Data

Still not impressed? Let's me show you the money! See the following chart for how much your $10K grow if you invested into WMW since its inception:

Source: Morningstar

Okay, WMW is used for comparison purpose only, I would like to introduce you the real ETF that tracked MWMFT: Market Vectors Wide Moat ETF (MOAT) which commenced on Apr 24, 2012. Personally, I'm favored MOAT over WMW due to credit risk and lower expense ratio (0.49% - 0.5% vs. 0.75%), you can find out more about ETF vs ETN here. If you still worry MOAT is not as good as WMW, please see the following chart:

View Latest Chart Data

What is MOAT? Please see the following short description and growth performance chart extracted from the MOAT's fact sheet (click the link to see the latest data)

You can find out more about MWMFT by viewing the longer description I extracted from Prospectus of MOAT here.

Please let's know if you found US-focused ETF that perform better than MOAT.

Thanks for reading till the end, I hope the writing above benefit you and worth your reading time.

I'd love to hear comments from you! :)

The Magic Formula Portfolio 2015Q3 Review

noreply@blogger.com (Unknown) — Sat, 03 Oct 2015 06:47:00 +0000

In 2014Q2, I started building up The Magic Formula Portfolio following the buy and sell criteria listed in the blog post titled Start Building Up The Magic Formula Portfolio.

As stated in the above blog post, I will review the performance of the portfolio quarterly. The following is the result of 2015Q3, loss 18.2% on 30 September 2015.

I sold the following stocks on 30 September 2015 as these three stocks no longer exists in the Magic Formula list.

Total available investment capital is $999.70. On the 1 October 2015, I added the following stocks (NLS and VNCE) to the portfolio, cost $631.10, balance of investment capital $368.6:

Stay tune to the next quarter! :)

The Magic Formula Portfolio 2015Q2 Review

noreply@blogger.com (Unknown) — Wed, 01 Jul 2015 03:30:00 +0000

I sold the following stocks on 30 June 2015 as these three stocks no longer exists in the Magic Formula list.

Total available investment capital is $1,151.22. On the 1 July 2015, I added the following stocks (CLCT, MSB and RPXC) to the portfolio:

Stay tune to the next quarter! :)

The Magic Formula Portfolio 2015Q1 Review

noreply@blogger.com (Unknown) — Tue, 07 Apr 2015 13:52:00 +0000

I sold the following stocks on 6 Apr 2015 as the first three stocks no longer exists in the Magic Formula list and TZOO is the greatest loser.

Total available investment capital is $1,811. On the 7 Apr 2015, added the following stocks to the portfolio:

Stay tune to the next quarter! :)

2014 Portfolio Review

noreply@blogger.com (Unknown) — Thu, 01 Jan 2015 13:58:00 +0000

Happy 2015! Time is passing fast, it is time for annual review. :)

Portfolio Summary

Cost is based on market open price on 1 Jan 2013 except My Malaysia Portfolio.
Gain/(Loss) calculation with dividends included.

From the table above, it is clear that return of all portfolio items are decent compare to last year except My HK Portfolio. My US Portfolio is beating both Dow Jone 15 and Fortune 10, +21.57% and +9.45% respectively. My HK Portfolio is lossing both Hang Seng HK 15 and Hang Seng Mainland 12, -14.39% and -3.65% respectively. My Malaysia Portfolio is beating FBMKLCI, +33.2%. In conclusion, my last year investment performance achieved decent return, 2014 is definitely a good year to me :). Please see tables below for detail of each index fund.

US Market
Dow Jones 15

Fortune 10

Hong Kong Market
Hang Seng HK 15

Hang Seng Mainland 12

The Magic Formula Portfolio 2014Q4 Review

noreply@blogger.com (Unknown) — Thu, 01 Jan 2015 04:26:00 +0000

I sold the following stocks on 31 Dec 2014 as they are no longer exists in the Magic Formula list.

Total available investment capital is $2,689.65 ($1,795.47 from the balance of investment capital, $20.49 from total dividend received from EBIX and PETS in 2014, and $873.69 from proceeds of sold stocks). On the 2 Jan 2015, I will add the following stocks except NHTC (as it is an OTC/unlisted stock) to the portfolio:

At this point, it is considered the completion of the build up of the Magic Formula portfolio.

Stay tune to the next quarter! :)

Note (edited on 3 Jan 2015):
6 stocks above added to the portfolio successfully.

The Magic Formula Portfolio 2014Q3 Review

noreply@blogger.com (Unknown) — Thu, 02 Oct 2014 14:31:00 +0000

On the same day, I added the following stocks to the portfolio:

Approximate 15.3% of the portfolio fund allocated equally to ETM and LQDT. 4 more stocks to go to complete build up the portfolio

Stay tune to the next quarter! :)

The Magic Formula Portfolio 2014Q2 Review

noreply@blogger.com (Unknown) — Sat, 05 Jul 2014 06:36:00 +0000

On 01 July 2014, I added the following stocks to the portfolio:

Approximate 25% of portfolio fund allocated equally to ONE, STRA and TZOO.

Stay tune to the next quarter! :)

Start Building Up The Magic Formula Portfolio

noreply@blogger.com (Unknown) — Tue, 01 Apr 2014 15:23:00 +0000

After finished gone through The Little Book That Beats The Market, I find out that the following Magic Formula promoted by the book author, Joel Greenblatt make a lot of sense to me:-

Buy shares in good businesses (ones with high returns on capital) but only when they were available at bargain prices (priced to give us a high earnings yield)

So I decided to give it a shoot by building up $5,000 Magic Formula Portfolio on today, April Fool of 2014. I plan to build up 12-stocks portfolio gradually by buying 3 stocks on the first market day of a quarter. For example today is first market day of quarter 2, I bought 3 stocks today. I will buy 9 more stocks on next 3 quarters and should filled up the portfolio by 1 Jan 2015.

What to Buy
I created the stock list with the following steps:

Retrieve the list of stocks from http://magicformulainvesting.com/ where the market capitalization is between $88M to $1,000M ($1B)

Further narrow down the stocks with F-Score >= 7 by using GuruFocus.

Retrieve DER and DY of stocks from http://money.msn.com/stocks/. Lower DER and higher DY take precedence.

Today 25% of portfolio fund allocated equally to EBIX, PETS and SPRT.

When to Sell
The portfolio will be reviewed on March 31, June 30, September 30, December 31 of the year. I will sell the stocks of the portfolio which meet any criteria below:

The stock no longer exists in the list of stocks of http://magicformulainvesting.com/

There's new set of stocks created by following 3 steps above to replace the portfolio's poor performers (Sell the losers; Keep the winners.) ~~stocks that hold more than 1 year (Validity of this criteria to be determined on 1 Jan 2015).~~

I'd love to hear your comments!

Happy Investing! :)

Version History
29 Dec 2014 Edited item 2 of When to Sell
31 Dec 2014 Edited item 2 of What to Buy. Use GuruFocus to find out F-Score instead of http://www.grahaminvestor.com/quotes/.
25 Mar 2015 Added a description of the Magic Formula

2013 Portfolio Review

noreply@blogger.com (Unknown) — Wed, 01 Jan 2014 09:52:00 +0000

Goodbye 2013, hello 2014, time is passing fast, it is time for annual review. :)

Portfolio Summary

Cost is based on market open price on 1 June 2011. Gain/(Loss) calculation with dividends included.

From the table above, it is clear that return of all portfolio items are decent compare to last year. My US Portfolio is beating both Dow Jone 15 and Fortune 10, +16.32% and +2.92% respectively. My HK Portfolio is beating both Hang Seng HK 15 and Hang Seng Mainland 12, +8.97% and +13.68% respectively. My Malaysia Portfolio is beating FBMKLCI, +12.61%. In conclusion, my last year investment performance beating all these index funds, 2013 is definitely a good year to me :). Please see tables below for detail of each index fund.

US Market
Dow Jones 15

Fortune 10

Hong Kong Market
Hang Seng HK 15

Hang Seng Mainland 12

2012 Portfolio Review

noreply@blogger.com (Unknown) — Wed, 02 Jan 2013 15:08:00 +0000

Goodbye 2012, hello 2013, it is time for annual review.

Portfolio Summary

Cost is based on market open price on 1 June 2011. Gain/(Loss) calculation with dividends included.

From the table above, it is clear that return of all portfolio items are decent compare to last year. My US Portfolio is beating both Dow Jone 15 and Fortune 10, +8.91% and +0.19% respectively. My HK Portfolio is beating both Hang Seng HK 15 and Hang Seng Mainland 12, +5.36% and +6.59% respectively. In conclusion, my last year investment performance beating all these index funds, 2012 is a good year to me :). Please see tables below for detail of each index fund.

US Market
Dow Jones 15

Fortune 10

Hong Kong Market
Hang Seng HK 15

Hang Seng Mainland 12

Comparison of Companies in the Glove Industry

noreply@blogger.com (Unknown) — Tue, 03 Apr 2012 07:09:00 +0000

The author published the analysis report here is for his own reference only. It is not an indication of the author's business interests for companies being analyzed. It is definitely not an investment advice, please see the full disclaimer located at the bottom of the blog post.

If you are regular reader of this blog, you can see that most of the stock analysis blog post is a comparison of a pair of stocks. How do I pick the pair? I attempt to analyze and compare two companies doing similar businesses or operating in the same industry sector. I think this approach make sense, otherwise what is the point of comparing apple to orange?

Table below is the basic ratio analysis for companies in the glove industry based on the closing price of 03 April 2012.

Given data above, I can pick two companies for further analysis and comparison.

I would like to invite you to join me for creating a similar table for industry sectors such as timber, iron, packaging, automobile parts, etc. which you would like to start studying and analysis. Would you be interested?

Updated: Add KOSSAN and RIVERSTONE, update all prices to closing price of 03 April 2012 and related reading.

United Malayan Land vs. Daiman Development

noreply@blogger.com (Unknown) — Fri, 30 Mar 2012 10:30:00 +0000

The author published the analysis report here is for his own reference only. It is not an indication of the author's business interests for companies being analyzed. It is definitely not an investment advice, please see the full disclaimer located at the bottom of the blog post.

United Malayan Land Berhad's (hereafter called "UMLAND") principal activities including property development, property investment, investment holding and leasing of lands. Daiman Development Berhad's (hereafter called "DAIMAN") principal activities including property development, property investment, sale of building materials, operation of golf, sports and recreation clubs, operation of bowling centre, nursery operation and investment holding.

Side-by-side Comparison

Capitalization
Measure by size, UMLAND is slightly larger than DAIMAN, 476 millions and 389 millions

Income Items
Important items under this section is per share earnings and dividend, DAIMAN is the all-time winner for both per share earning and dividend except averaged earned per share in 2009 to 2011 period.

Balance Sheet Items
DAIMAN have very solid balance sheet compared to UMLAND, Cash or cash equivalents almost can cover the Total liabilities, it is a cash-rich company which liquidity per share is 0.46.

Ratios
By look at Price ratios, DAIMAN is more attractive at the moment given it sell at lower multiple of 2011's earnings and much lower Price/book value per share, even UMLAND achieved slightly higher dividend yield.

DAIMAN advantages are much higher profit margin, almost double of UMLAND as shown by Net income/sales, but lower return on book value measured by Earnings/book value per share, which may due to the adoption of higher leverages by UMLAND.

UMLAND has much better earning growth rate compared to DAIMAN, please take note that DAIMAN achieved negative earning growth in 2009-2011 compared to 2005-2007.

Price Record
UMLAND and DAIMAN has comparable growth rate in near-term price record, but UMLAND achieved better growth in long-term, which may due to it's price start from a low base.

Financial Summary

UMLAND's Financial Summary

By looking into detail of the financial summary of UMLAND, the historical growth records doesn't look good, merely single digit growth, especially making a loss in 2008. The bright side of data above is UMLAND achieved acceptable 5 years average profit margin which recorded 15.9% and 14% for operating margin and net margin.

DAIMAN's Financial Summary

DAIMAN has better historical growth record compared to UMLAND, recorded CAGR for 13.58% in sales and 17.4% operating income, but low and unstable net income and earning per share, 6.7%. The bright side of this company is the management buyback it's own shares in the market which reduce 2.2% of it outstanding shares. Also, DAIMAN achieved impressive 5 years average profit margin which recorded 34.2% and 29.78% for operating margin and net margin, which more than double of UMLAND.

As conclusion, the ultimate winner of this comparison is DAIMAN.

How Much DAIMAN Worth?
Given the company CAGR of EPS is 6% (approximately 6.7% in the past 5 years) and Dividend Per Share is 5% in the next 10 years, the EPS of the company will be RM$0.235 in 2020 (included adjustment of 2 bad years in 10 which reduce 30% of group's net profit) and the forecast dividends received over the 10 years period totaling RM$0.64 (included adjustment of 2 bad years).

If the stock price of DAIMAN sell at 8 times earning in 2021, it is RM$1.88 and RM$2.53 (included total dividends received) per share. Given annual 6% inflation rate in next 10 years, the discounted rate is 0.591898. So, RM$2.53 discounted to today price, it is RM$1.50 per share.

The discounted price is 23.7% lower comparing to today (30 March 2012) closing price at RM$1.85. The stock is overvalued! What do you think?

I'd love to hear comments from you!

CB Industrial Product Holding vs. Muar Ban Lee Group

noreply@blogger.com (Unknown) — Tue, 27 Mar 2012 09:19:00 +0000

The author published the analysis report here is for his own reference only. It is not an indication of the author's business interests for companies being analyzed. It is definitely not an investment advice, please see the full disclaimer located at the bottom of the blog post.

CB Industrial Product Holding Berhad's (hereafter called "CBIP") principal activities including investment holdings, manufacturing and trading palm oil mill equipment and related spare parts, provision of engineering support, commissioning and contracting works for palm oil mills, cultivation of oil palm and production of crude palm oil and palm kernel, constructing mills, factories, building, composting efflluent plants and contracting works. Muar Ban Lee Group Berhad's (hereafter called "MBL") principal activities including manufacturing oil seed expeller and related parts and automated kernel crushing plants and related parts.

Side-by-side Comparison

* Data of both companies above is extracted from it's unaudited 4Q report of 2011. MBL was listed in 2009.

Capitalization
Measure by size, CBIP was a lot bigger than MBL, approximately 9 times the size of MBL.

Income Items
Important items under this section is per share earnings and dividend, CBIP is all time winner in per share earnings and dividend.

Balance Sheet Items
CBIP have adequate balance sheet, it's Current assets is close to cover the Total liabilities, however MBL have very solid balance sheet, as it's Cash and cash equivalents is more than enough cover their Total liabilities. MBL is a cash-rich company.

Ratios
Price-wise, both companies traded equally at multiples of their most recent earning. MBL more attractive at the moment given it sell at much lower multiple of book value per share currently compared to CBIP. The Net income/sales of CBIP is slightly better than MBL. CBIP achieved much better return on book value per share compared to MBL, 12% different. From the surface, this may due to CBIP's adoption of leverages measured by Total liabilities/book value, 0.75. But when look closely, merely 102 millions out of 261 millions of Total liabilities is bank borrowings.

Earning growth rate of CBIP was really impressive. No comparable data for MBL as it was listed in 2009.

Price Record
CBIP has much higher price growth rate in the near-term (taking consideration of it's recent bonus issue 1 for 1) and long-term.

Financial Summary

CBIP's Financial Summary

By looking into detail of the financial summary of CBIP, the company achieved impressive historical results, growing it's sales and profit every year except 2009 which gain lower sales and profit. Rates of return and profit margins are impressive also especially in 2011. As 50 millions of 127 millions of pre-tax profit of CBIP was contributed from oil palm plantation & milling segment based on the unaudited 4Q2011 report, the disposal of two main plantation subsidiaries of the company and acquisition of 94% of 32,812 hectares oil palm plantation land located in Kalimantan Tengah, Indonesia (related reply to Bursa Malaysia) will have significant impact to the capital allocation and future profitability of the company, the historical results of company have no indication to it's future profitability, further analysis required after the completion of disposal and acquisition.

MBL's Financial Summary

By looking into detail of the financial summary of MBL, the company achieved impressive result, growing it's sales and profit every year except 2011 which gain lower profit. 3-year average of return on average equity is 16% and profit margin is 24%, the management is doing the job well given the company adopt minimal leverages.
As CBIP required further analysis in third quarter of 2012, I will value how much MBL worth in this post.

How Much MBL Worth
Given the company CAGR of EPS is 15% (approximately 18.9% in the past 3 years) and Dividend Per Share is 15% in the next 10 years, the EPS of the company will be RM$0.193 in 2021 (included adjustment of 2 bad years in 10 which reduce 40% of group's net profit) and the forecast dividends received over the 10 years period totaling RM$0.66 (included adjustment of 2 bad years).

If the stock price of MBL sell at 5 times earning in 2021, it is RM$0.96 and included total dividends received, it is RM$1.62 per share. Given annual 6% inflation rate in next 10 years, the discounted rate is 0.591898. So, RM$1.62 discounted to today price, it is RM$0.96 per share.

The discounted price is 11.38% lower comparing to today (27 March 2012) closing price RM$0.85. In my opinion, the stock is discounted in moderate margin, what do you think?

Tracking Malaysia's Public Listed Companies Announcements Using News (RSS) Feeds

noreply@blogger.com (Unknown) — Mon, 12 Mar 2012 09:17:00 +0000

Note on 08 Jun 2015: The RSS service is not longer supported.

If you are tracking announcements of more than ten Malaysia's public listed companies in your portfolio, you would know the current process of tracking is very inefficient and time-consuming.

Given web syndication technologies such as RSS and Atom, it is far more efficient to deliver announcements from the targeted companies to your favorite news reader such as Internet Explorer, Microsoft Outlook, Mozilla Firefox, Mozilla Thunderbird or other feed readers.

Picture above is how the announcement feed of public listed companies display in Google Reader and on the right is how it display in my blog using Blog List gadget. (The companies being tracked is just shown as samples, the author may or may not had interests on it, please see the full disclaimer located at the bottom of the blog post.)

At the moment, the web syndication system was created for personal use only. However, I am happy to open it to my valued readers, please let's me know if you are interested in this services.

I'd love to hear your comments!

Edited on 28 Mar 2013: The service above open to public for FREE today, please see the user guide on how you can make use of it too. :)

How Much Money Do You Need to Retire Comfortably?

noreply@blogger.com (Unknown) — Sat, 03 Mar 2012 06:09:00 +0000

Please see the full disclaimer located at the bottom of the blog post.

Most of us have a thought on retirement plan in our late twenty or late thirty, but it is just a rough idea in our mind. When we are working hard on our businesses or our investments, have a crystal clear idea of the financial outcome we want to achieve is crucial to reach the destination we aimed for. Do you know how much money do you need to retire comfortably?

In my opinion, a good retirement plan shall target for annual income equals to 13 times of the last drawn salary prior to retirement. Why 13 times? It is equivalent to your 12 months basic salary plus 1 month bonus, don't you want to have bonus even after you retired? Let's say in our hypothetical example, the last drawn salary is $10,000, targeted annual income after retirement is $130,000.

Why $10,000? I think $10,000 is the minimum monthly income you need to have your retirement comfortably. Let's do the math.

Given input for Today's Amount is $3,000, Annual Inflation Rate is 6% (conservative measure), Number of Years is 20. The first result (Reduced Amount) is $935.41, which represents the value of $3,000 in 20 years. The second result (Required Amount) is $9,621.41, which is amount of money that you need in 20 years to match the purchasing power of $3,000.

How do you still making $130,000 annually when you are retired? It is not a top secret, just start accumulating assets that produce recurring passive income such as rental income, dividend income, interest income, business income, etc.

Table above is that rate of return and total asset required to achieve annual income $130,000. In this case, if your accumulated assets produce 12% return annually, your total asset value must at least worth $1.083 million. So, $1 million is a good number to start to establish your asset portfolio. Warren Buffett had written a great section regarding asset classes available for investors, please see The Basic Choices for Investors and the One We Strongly Prefer (A text that I extracted from 2011 Berkshire Hathaway Shareholder Letter).

Lastly, you may have higher or lower requirement for targeted annual income after retirement which different from $130,000, please do your own math using Inflation Calculator and Retirement Fund Calculator.

I'd love to hear your comments!

Batu Kawan Berhad vs. Kuala Lumpur Kepong Berhad

noreply@blogger.com (Unknown) — Fri, 06 Jan 2012 14:01:00 +0000

The author published the analysis report here is for his own reference only. It is not an indication of the author's business interests for companies being analyzed. It is definitely not an investment advice, please see the full disclaimer located at the bottom of the blog post.

Batu Kawan Berhad's (hereafter called "BKAWAN") principal activities including investment holdings, oil palm plantation, chemicals manufacturing, money lending, general transportation services, letting of storage warehouse facilities, manufacture and sale of methyl chloride and manufacture of sulphuric acid products. Kuala Lumpur Kepong Berhad's (hereafter called "KLK") principal activities including the business of plantation, producing and processing palm products and natural rubber on its plantations, manufacturing, retailing, property development and investment holding. BKAWAN is major shareholder of KLK, holding 46.57% equity interests at financial ended 31 September 2011.

Side-by-side Comparison

Capitalization
Measure by size, KLK was a lot bigger than BKAWAN, almost 4 times the size of BKAWAN.

Income Items
Important items under this section is per share earnings and dividend, BKAWAN is all time winner in per share earnings and dividend.

Balance Sheet Items
Both BKAWAN and KLK have very solid balance sheet, their Current assets is more than enough cover their Total liabilities. But BKAWAN is better, as it's Cash or cash equivalents is more than enough cover the Current liabilities and close to cover the Total liabilities.

Ratios
Price-wise, BKAWAN is much more attractive at the moment given it sell at much lower multiple of earnings currently compared to KLK. The Net income/sales of BKAWAN is meaningless here given over 90% of it's profit before tax was contributed by it's key associate, KLK.

Earning growth rate in both companies in near-term and long-term are very much parallel due to the reason mentioned in previous sentence. These numbers is not applicable to MSC as it experienced significant loss in 2010.

Price Record
BKAWAN has much higher price growth rate in the near-term where KLK has higher price growth rate in the long-term.

Financial Summary
As over 90% pre-tax profit of BKAWAN was contributed by KLK, the title of this post is more appropriate to named as "Batu Kawan Berhad and Kuala Lumpur Kepong Berhad" instead of "Batu Kawan Berhad vs. Kuala Lumpur Kepong Berhad". When you invest into BKAWAN, you are largely invest into KLK. Let's look into financial summary of both companies as usual.

BKAWAN's Financial Summary

By looking into detail of the financial summary of BKAWAN, it doesn't grow it's sales much and grow it's operating income moderately in 2007 to 2011, performance of these two items is bumpy. Fortunately, BKAWAN still managed to achieve favorable average operating profit margin as recorded by Operating Income/Sales, 25.34%. It was great that BKAWAN involved in stock re-purchasing program which reduce it's outstanding shares, -0.9% every year.

KLK's Financial Summary

KLK has high historical growth record in the past 5 years, recorded Compounded Annual Growth Rate (hereafter called "CAGR") for 20.67% in sales, 24.1% in operating income, 22.66% in net income and earning per share and comparable moderate growth in total liabilities, 16.41%. All numbers are great except numbers of 2009. KLK doing well in return on average equity (ROAE), return on average asset (ROAA) and profit margin, all numbers achieved double digits in percentage terms except year 2009.

Given today's closing price of both BKAWAN and KLK, the market capitalization of BKAWAN is 7,725 millions and KLK is 26,240 millions, 46.57% of KLK is currently valued at 12,220 millions. By invest into BKAWAN with today quotation, you are taking 36.78% discount to invest into KLK indirectly.

As conclusion, BKAWAN is the winner of this comparison due to it's lower valuation and favorable reason above.

How Much BKAWAN Worth?
Given the company CAGR of EPS is 18% (approximately 22.3% in the past 5 years) and Dividend Per Share is 15% in the next 10 years, the EPS of the company will be RM$2.44 in 2021 (included adjustment of 2 bad years in 10 which reduce 50% of group's net profit) and the forecast dividends received over the 10 years period totaling RM$9.11 (included adjustment of 2 bad years).

If the stock price of BKAWAN sell at 10 times earning in 2021, it is RM$24.40 and included total dividends received, it is RM$33.52 per share. Given annual 6% inflation rate in next 10 years, the discounted rate is 0.591898. So, RM$33.52 discounted to today price, it is RM$19.84 per share.

The discounted price is 6.85% lower comparing to today (06 January 2012) closing price RM$18.48. In my opinion, the stock is only discounted in narrow margin, what do you think?

2011 Portfolio Review

noreply@blogger.com (Unknown) — Tue, 03 Jan 2012 03:51:00 +0000

As I established Investment Yardstick for US and Hong Kong Market in June 2011, it is time for annual review.

Portfolio Summary

Cost is based on market open price on 1 June 2011. Gain/(Loss) calculation with dividends included.

It is 7 months review instead of full year annual review. From the table above, it is clear that none of the portfolio is doing well, all turn red except Fortune 10. My US Portfolio is beat by both Dow Jone 15 and Fortune 10, -2.82% and -5.08% respectively. My HK Portfolio is beat by both Hang Seng HK 15 and Hang Seng Mainland 12, -3.81% and -4.81% respectively. In conclusion, my investment performance in these 7 months cannot match with these index funds. Please see tables below for detail of each index fund.

US Market
Dow Jones 15

Fortune 10

Hong Kong Market
Hang Seng HK 15

Hang Seng Mainland 12

Further Analysis of Malaysia Smelting Corporation Berhad

noreply@blogger.com (Unknown) — Wed, 28 Dec 2011 04:05:00 +0000

The author published the analysis report here is for his own reference only. It is not an indication of the author's business interests for companies being analyzed. It is definitely not an investment advice, please see the full disclaimer located at the bottom of the blog post.

Malaysia Smelting Corporation Berhad's (hereafter called "MSC") principal activities including the smelting of tin concentrates and tin bearing materials, the production of various grades of refined tin metal under the MSC brand name and the sales and delivery of refined tin metal and by-products.This analysis report is continuation of previous blog post titled "Malaysia Smelting Corporation vs. Perusahaan Sadur Timah Malaysia (PERSTIMA)". Let's start looking into detail of the company.

Company Events
In 2007, MSC adopted the following diversification plans:

In March 2007, a wholly-owned subsidiary PT MSC Indonesia, acquired a 60% equity interest in PT Tenaga Anugerah for a total cash consideration of RM411,000 (USD120,000). The intended principal activity of the newly acquired subsidiary is to carry on offshore mining operations in Indonesia. Incurred RM123,000 loss for the year.
On 18 September 2007, the Company entered into an Underwriting Agreement with its associate, Australia Oriental Minerals NL (AOM) relating to its renounceable rights issue exercise. Upon completion of the exercise in October 2007, the Company had subscribed for a total of 226,863,490 new shares amounting to approximately RM5.5 million (AUD 1.8 million) and the Company's direct shareholding in AOM has increased from 39.45% to 49.11%. Profit for the year RM1,846,000; Loss in 2006 RM2,296,000.
The Group has a 40% equity interest in Redring Solder (M) Sdn Bhd. Redring Solder's principal activities are the manufacture and sale of both the tin lead and lead free solder products for jointing and semi-conductor applications in the electrical and electronic industries.
In October 2007, MSC entered into a joint venture agreement with Guangxi Guilin Jinwei Realty Co. Ltd and Vertex Metals incorporation of Taiwan to enable it to own and operate a tin smelting plant in the Guangxi province. The Company's stake in this joint venture is 40%. The smelting plant is located in Linqui, Guangxi and is expected to have a targeted annual production capacity of 10,000 tonnes of refined tin and tin based products, including tin chemicals and is projected to commence operations in the second quarter of 2008.
In December 2007, MSC acquired a strategic interest in a nickel development project in Vietnam through the subscription of 12.8% shares in the Canadian listed Asian Mineral Resources Limited (AMR) with provision to increase is shareholding further up to 18.96%. AMR's nickel project offers high grade massive sulphide nickel deposit which is being developed to become low cost nickel producer with a short lead time to production and is expected to commence in early 2009.
In March 2008, MSC chalked up another historic milestone following its strategic entry into the gold sector with the acquisition of 18.9% interest in Beaconsfield Gold NL, a company listed on the Australian Securities Exchange. Beaconsfield is a mid-tier gold producer operating a high grade underground gold mine in Tasmania, Australia.

(All items above are taken from MSC's 2007 Annual Report)

In April 2008, the Group proposed acquisition of a 30% interest in a high grade polymetallic copper, gold, zinc and silver project in the Philippines at an estimated cost of approximately USD18.9 million pursuant to a strategic alliance agreement with LG International Corp and Korea Resources Corporation.
In July 2008 the Company, jointly with its 42.7% Australian listed associated
company, Australia Oriental Minerals NL (AOM) announced the acquisition
of a strategic 30% interest by the Company and AOM respectively in a coal
development project in Kalimantan, Indonesia for a cash consideration of
USD6.75 million for the 30% equity interest each. The capital required for
this coal project was originally planned to be financed from the proposed
rights issue. With the deferment of the proposed capital raising the Company
and AOM will limit the investment at the existing level.
In July to August 2008, MSC subscribed for 7 million right issue shares and underwrote another 13 million shares to increase its shareholding to 90 million shares, representing 22.48% of the enlarged paid up capital of BCD.

(All items above are taken from MSC's 2008 Annual Report)

Let's look at the effect of the diversification plans to the bottom line of the company in recent years:

Oops! The diversification plans drag the company's bottom line down to the bloody red in 2008 and 2010, and barely profitable in 2009. What happened in these years and what's wrong with the diversification strategy? Please see the following items:

The Group incurred a pre-tax loss of RM28.16 million for the financial year 2008 compared with a pre-tax profit of RM120.99 million in 2007 mainly due to
the RM55.29 million unusual charges (impairment charge and write-offs of its mining assets and its exploration and development expenses.) and RM28.98 million exchange loss.
Development and construction of high grade nickel sulphide project in Vietnam by the Group's 18.20% Canadian listed associate, Asian Mineral Resources Limited was suspended in October 2008 due to the downturn in nickel prices and consequently certain losses were equity accounted in the Group's results for the year.
At the Group's 22.48% listed gold associate in Australia, Beaconsfield Gold NL, development and turn-around expenses written down in 2008 further affected the Group's overall results for the year. Beaconsfield managed to achieve a successful turnaround and returned positive results in January 2009.

(All items above are taken from MSC's 2008 Annual Report)

Consequent upon a decision made in 2009 to reposition the Group to focus on its original core business of tin, MSC has initiated a programme to divest some of the Group's non-tin investments and assets.The Group's non-tin investments comprise 22.12% interest in a listed gold and copper associate in Australia, BCD Resources NL; a 18.22% interest in a Canadian listed nickel associate, Asian Mineral Resources Limited; a 30% interest in a polymetallic mine (producing copper, zinc, gold and silver in concentrates) in the Philippines; a 76.91% Australian listed subsidiary, Australia Oriental Minerals NL (AOM); and a 53% effective interest in a coal development project in Indonesia.
PT MSC Indonesia and the Company's 40% associate, PT Tenaga Anugerah, commenced tin mining operations during the second half of the year, with one gravel pump mine operating in Bangka Island and three cutter-suction dredges for offshore operations. The Group expects to commence generating positive results from these operations in the first half of 2010.
The Company's joint-venture company named Guilin Hinwei Tin Co. Ltd for smelting and refining of tin, and the production and sale of tin and tin-based products in the People's Republic of China has not made much progress as GGJR has not been able to fulfill certain obligations within the specific time frame.

(All items above are taken from MSC's 2009 Annual Report)

Rationalisation efforts were undertaken in respect of the Group's other tin interests held through its subsidiary, PT MSC, which is developing on-shore tin operations in Indonesia, and its 18.54% interest investment in TMR Ltd/PT Tenaga Anugerah (PT TA) which undertakes off-shore tin mining operations in Indonesia. These investments are expected to generate positive results in 2011.
The divestment of the Group's interest in BCD was completed and the Group ceased to be a shareholder.
AMR has been actively pursuing equity and debt funding to complete the nickel mine development project in Vietnam. Pending the conclusion of the proposed fund raising exercise, MSC will continue to evaluate its options on how best to maximize its value by divesting its investment in AMR.
The agreement for the sale of the coal development project in Indonesia has been executed and the disposal is expected to be completed in the first half of 2011.
The divestment of the Group's interest in KM Resources Inc may take a bit longer than expected. As a result of rising copper, gold, silver and zinc prices, the valuation of KM Resources Inc has also risen and MSC is seeking to enhance shareholder value by ensuring it sells the project at prices reflecting this increase in value.
After providing for exceptional items totalling RM154.48 million, the Group recorded a loss before tax of RM78.46 million compared with a Group net profit before tax of RM109.84 million in 2009. The exceptional items mainly comprised the loss incurred on the disposal of investments in BCD and impairment provisions on the Group's non-tin assets. The 2009 net profit included a surplus of RM65 million on the valuation of the Group's interest in KM Resources Inc.
On January 27, 2011, MSC listed in secondary listing on the Singapore Stock Exchange, a total of 25 million new shares was issued, raising the enlarged issued and paid up share capital of MSC to RM100 million, comprising 100 million MSC shares. Total proceeds of approximately SGD43.75 million (equivalent to RM104 million) will be used mainly for development of new mines and the balance for expansion of current operations and general working capital.

(All items above are taken from MSC's 2010 Annual Report)

From all items above, it was clear that the adoption of the diversification plans is a mistake. Fortunately, a decision made by management in 2009 to reposition the Group to focus on its original core business of tin, the Group has initiated a programme to divest the Group's non-tin investments and assets.

It is anticipated that the Group will take at least 5 years from 2009 to complete this divestment plans to unlock the investments and provisions, normalize the level of gearing and better use of capital resources of the company.

Tin Industrial Usages and Applications

Diagram above is taken from London Metal Exchange

For more information, please see Tin's Application and Future Markets for Tin section of MSC's 2010 annual report at page 41 to 44.

Tin Historical and Future Price

Tin price of cash seller and settlement graph above is taken from London Metal Exchange

From the graph above, you can see the current market price of tin is far from the peak of early 2011 and slightly below the peak of mid 2008. In worst time, the tin price can fall down to US$10,000 approximately as it happened in early 2007 and 2009. This indicated fluctuation of tin price is high.

Table above is taken from London Metal Exchange

From the table above, tin futures of 3 months and 15 months traded at price higher than current price (Cash). This is the indication of growth potential of tin's market price.

In conclusion, I think the tin price is in upward trend. Unless the debt crisis of euro zone explode to critical stage in 2012, this trend should be continue.

How Much MSC Worth?
It is challenging to value MSC properly given the Group's bumpy results in recent years. I will attempt to value it using much conservative numbers.

Given the company CAGR of EPS is 12% (approximately 12.09% in the past 5 years) and Dividend Per Share is 10% in the next 10 years, the EPS of the company will be RM$1.118 in 2021 (included adjustment of 2 bad years in 10 which reduce 40% of group's net profit) and the forecast dividends received over the 10 years period totaling RM$2.78 (included adjustment of 2 bad years). Please take note that the 2011 EPS is RM$1.00 (at least 25% discount from expected) and 2011 Dividend is RM$0.30 is used in the calculation.

If the stock price of MSC sell at 5 times earning in 2021, it is RM$5.59 and included total dividends received, it is RM$8.37 per share. Given annual 6% inflation rate in next 10 years, the discounted rate is 0.591898. So, RM$8.37 discounted to today price, it is RM$4.95 per share.

The discounted price is 19% higher than yesterday (27 December 2011) closing price RM$4.01. In my opinion, the stock is in bargain, what do you think?

Malaysia Smelting Corporation vs. Perusahaan Sadur Timah Malaysia (PERSTIMA)

noreply@blogger.com (Unknown) — Sat, 24 Dec 2011 07:39:00 +0000

The author published the analysis report here is for his own reference only. It is not an indication of the author's business interests for companies being analyzed. It is definitely not an investment advice, please see the full disclaimer located at the bottom of the blog post.

Malaysia Smelting Corporation Berhad's (hereafter called "MSC") principal activities including the smelting of tin concentrates and tin bearing materials, the production of various grades of refined tin metal under the MSC brand name and the sales and delivery of refined tin metal and by-products. Perusahaan Sadur Timah Malaysia (PERSTIMA) Berhad's (hereafter called "PERSTIM") principal activities including operation related to the manufacturing and sale of tinplates and tin free steel.

Side-by-side Comparison

MSC's data is from latest quarterly unaudited report 3Q of 2011, PERSTIM's data is from 2011 annual report

Capitalization
Measure by size, both companies are similar, MSC is slightly bigger than PERSTIM, 23 millions approximately.

Income Items
Important items under this section is per share earnings and dividend, MSC earnings are beating PERSTIM except the Average Earned per share, 2009-2011, as it experienced significant loss in 2010 which drag it dividend down to 0.023 per share. The winner of dividend payment is PERSTIM.

Balance Sheet Items
PERSTIM has very solid balance sheet, Cash or cash equivalents is almost enough cover the Current liabilities and even the Total liabilities. Current assets is more than enough cover the Total liabilities. Even MSC has much higher Liquidity per share, 2.41 compared to PERSTIM, 0.76, this advantage is offset by it's high Current liabilities, 749 millions.

Ratios
Price-wise, MSC is more attractive at the moment given it sell at lower multiple of earnings currently except Price/earnings, 2009-2011, but it is questionable whether it's current earning momentum is sustainable (more study need to be done). The main concern of MSC is it's level of gearing is comparably high, which recorded 1.83 times. This concern maybe less worrisome as it fully covered by Current Assets where 235.1 millions is Cash or cash equivalents.

PERSTIM is selling at higher valuation at the moment, but it is understandable and reasonable as it has much better number than MSC in all items under this section especially Dividend yield, 8.09%. An exception is it achieved slightly lower return measured by Earnings/book value per share.

PERSTIM has steady earning growth rate in both near-term and long-term. These numbers is not applicable to MSC as it experienced significant loss in 2010.

Price Record
PERSTIM has slightly higher price growth rate in the long-term where MSC has slightly higher price growth rate in the near-term.

Financial Summary

MSC's Financial Summary

By looking into detail of the financial summary of MSC, it experienced 2 bad years out of 5, which is 2008 and 2010. The results in these two years greatly distort the growth numbers and average numbers of the company and make some of these numbers not applicable and meaningless. However, it's 2011 Q3 results are promising which may worth the effort for further study and analysis.

PERSTIM's Financial Summary

PERSTIM has low historical growth record in the past 5 years, recorded Compounded Annual Growth Rate (hereafter called "CAGR") for 6.61% in sales, 6.85% in operating income, 7.1% in net income and earning per share. When look in the detail of growth records in year on year basis, it recorded negative growth rate in earnings in 3 out of 5 years. So, the earning growth of PERSTIM in past 5 years was very much flatten, if not negative. The bright spot in the financial summary is the company recorded 19.48% CAGR in dividend per share and 51.3% reduction of the total liabilities in 2010. A question come to mind is "Is the growth of dividend payment of PERSTIM sustainable?" To answer this question, let's look at a new item: Liquidity per share in the financial summary. I am confident that the company wouldn't have problem to maintain it's level of dividend payment in next 5 years as long as the CAGR of Liquidity per share grow in parallel with Dividend per share. The annual growth of dividend payment may not as high as 19%, but I think 10% annually growth is not a problem.

As conclusion, the ultimate winner of this comparison is PERSTIM.

How Much PERSTIM Worth?
Given the company CAGR of EPS is 7% (approximately 7.1% in the past 5 years) and Dividend Per Share is 8% in the next 10 years, the EPS of the company will be RM$0.636 in 2021 (included adjustment of 2 bad years in 10 which reduce 30% of group's net profit) and the forecast dividends received over the 10 years period totaling RM$3.00 (included adjustment of 2 bad years).

If the stock price of PERSTIM sell at 5 times earning in 2021, it is RM$3.18 and included total dividends received, it is RM$6.18 per share. Given annual 6% inflation rate in next 10 years, the discounted rate is 0.591898. So, RM$6.18 discounted to today price, it is RM$3.66 per share.

The discounted price is 1.34% lower comparing to today (23 December 2011) closing price RM$3.71. In my opinion, the stock is in fairly value, what do you think?

DKSH Holdings vs. Harrisons Holdings

noreply@blogger.com (Unknown) — Thu, 22 Dec 2011 07:44:00 +0000

The author published the analysis report here is for his own reference only. It is not an indication of the author's business interests for companies being analyzed. It is definitely not an investment advice, please see the full disclaimer located at the bottom of the blog post.

DKSH Holdings (Malaysia) Berhad's (hereafter called "DKSH") principal activities including general trading, warehousing, and distribution of consumer, pharmaceutical, bio-medical, chemical, and industrial products, and also sale of the Famous Amos chocolate chip cookies. Harrisons Holdings (Malaysia) Berhad's (hereafter called "HARISON") principal activities including marketing, sales and distribution of consumer, engineering, building materials, wines and chemical products and the operation of shipping, insurance and travel agencies.

Side-by-side Comparison

Capitalization
Measure by size, HARISON is slightly bigger than DKSH, 17 millions.

Income Items
Important items under this section is per share earnings and dividend, HARISON is the all-time winner for both per share earning and dividend.

Balance Sheet Items
HARISON have more solid balance sheet compared to DKSH, Liquidity per share is 1.67 and 0.84, where Book value per share is 3.97 and 1.11.

Ratios
By look at Price ratios, HARISON is much more attractive at the moment given it sell at lower multiple of earnings currently and historically and much higher current dividend yield.

HARISON advantages are higher profit margin and appropriate return on book value with adequate gearing as shown by Net income/sales and Total Liabilities/book value. DKSH's level of gearing might be a concern as it is recorded 5.18 times.

HARISON has better historical earning growth rate compared to DKSH in both near-term and long-term.

Price Record
DKSH has much better historical price growth rate in near-term and slightly better in long-term compared to HARISON.

Financial Summary

DKSH's Financial Summary

By looking into detail of the financial summary of DKSH, it show better records in 2010 and 2009 except increase of total liabilities 115 millions, 14.57% in 2010. Record of past two years make the growth numbers look great compare to records of 2006 to 2008. The new management deserved a great applause by achieved a decent operating result (improve return of shareholding equity and profit margin significantly, at the same time reduce the gearing of the company).

HARISON's Financial Summary

HARISON has great historical growth record, recorded CAGR for 8.1% in sales and 21.58% operating income, 29.53% in net income and earning per share and 29.17% in dividend per share. The company CAGR on the previous mentioned items better than DKSH, except net income and earning per share which may due to DKSH start from a low base. Historically, HARISON is more conservative financially compare to DKSH, as it utilized more appropriate level of financial leverages (D/E ratio 76%) compared to DKSH (D/E ratio 517.53%). Even HARISON has much better return on average equity, 5 years averaging 11.4%, compared to DKSH 8%, but DKSH has slightly better return on average equity in 2010 and 2009. However, HARISON has much better return on average assets, 5 years averaging 6.23%, compared to DKSH 1.15%, which may due to it has smaller asset base. Even DKSH has lower operating overhead than HARISON, 5 years averaging 0.78%, HARISON still in the winning side as it 5 years average profit margin is much higher, 2.33% compared to 0.34% of DKSH.

As conclusion, HARISON is the ultimate winner in this comparison.

How Much HARISON Worth?
Given the company CAGR of EPS is 15% (approximately 29.5% in the past 5 years) and Dividend Per Share is 12% in the next 10 years, the EPS of the company will be RM$1.074 in 2021 (included adjustment of 2 bad years in 10 which reduce 30% of group's net profit) and the forecast dividends received over the 10 years period totaling RM$1.85 (included adjustment of 2 bad years).

If the stock price of HARISON sell at 5 times earning in 2021, it is RM$5.37 and included total dividends received, it is RM$7.22 per share. Given annual 6% inflation rate in next 10 years, the discounted rate is 0.591898. So, RM$7.22 discounted to today price, it is RM$4.27 per share.

The discounted price is 19% higher comparing to yesterday (21 December 2011) closing price RM$3.46. The stock is in bargain! What do you think?

I'd love to hear comments from you!

Plenitude vs. Asas Dunia

noreply@blogger.com (Unknown) — Thu, 01 Dec 2011 06:39:00 +0000

The author published the analysis report here is for his own reference only. It is not an indication of the author's business interests for companies being analyzed. It is definitely not an investment advice, please see the full disclaimer located at the bottom of the blog post.

Plenitude Berhad's (hereafter called "PLENITU") principal activities including property development, property investment and investment holding, provision of management services for hotel industry and travel operations and trading of construction materials. Asas Dunia Berhad's (hereafter called "ASAS") principal activities including property development, building construction, investment holding and property investment.

Side-by-side Comparison

Capitalization
Measure by size, PLENITU is more than double the size of ASAS, 518.4 millions and 228.93 millions

Income Items
Important items under this section is per share earnings and dividend, PLENITU is the all-time winner for both per share earning and dividend.

Balance Sheet Items
PLENITU have much solid balance sheet compared to ASAS, Cash or cash equivalents is double the total liabilities, it is a cash-rich company which liquidity per share is 1.24 and cash available after pay off all liabilities is 169.38 millions (0.63 per share).

Ratios
By look at price ratios, PLENITU is much more attractive at the moment given it sell at lower multiple of earnings currently and historically and higher current dividend yield.

PLENITU advantages are higher profit margin and much higher return on book value as shown by Net income/sales and Earnings/book value per share. Even PLENITU has higher gearing compared to ASAS, it is not a concern at all as the company's cash is more than enough to pay off all liabilities.

PLENITU has much better earning growth rate compared to ASAS, 60.36% and 25.89%.

Price Record
PLENITU and ASAS has comparable growth rate in near-term price record, but PLENITU achieved better growth in long-term.

Financial Summary

PLENITU's Financial Summary

By looking into detail of the financial summary of PLENITU, it show a steady historical growth records, recorded Compounded Annual Growth Rate (hereafter called "CAGR") for 7% in sales and operating income, 12% in net income and earning per share, and 8% in dividend per share. It achieved this steady result with minimal financial leverages and minor increment of total liabilities. Both return on average equity and assets are moderate, but satisfactory. I particularly like the low operating overhead attribute of the company (5 years average 7.01%) shown by narrow margin of Operating Income/Sales and Net Income/Sales.

ASAS's Financial Summary

ASAS has great historical growth record too, recorded CAGR for 12% in sales and 25% operating income, 33% in net income and earning per share. The company CAGR on the previous mentioned items better than PLENITU, but the loser is dividend payment, the company pay 2 dividends of similar amount out of 5 years. Historically, ASAS is more conservative financially compare to PLENITU, as it utilized minimal financial leverages (D/E ratio is less than 15%) compared to PLENITU, this may due to the company is short of liquidity. However, both return on average equity and assets are low, 5 years averaging 2.8% and 2.4%. Even the company have lower operating overhead than PLENITU, 5 years averaging 2.35%, PLENITU still in the winning side as it 5 years average profit margin is higher, 25.3% compared to 19.3% of ASAS.

As conclusion, the ultimate winner of this comparison is PLENITU.

How Much PLENITU Worth?
Given the company CAGR of EPS is 10% (approximately 12.2% in the past 5 years) and Dividend Per Share is 8% in the next 10 years, the EPS of the company will be RM$0.422 in 2021 (included adjustment of 2 bad years in 10 which reduce 30% of group's net profit) and the forecast dividends received over the 10 years period totaling RM$0.80 (included adjustment of 2 bad years).

If the stock price of PLENITU sell at 8 times earning in 2021, it is RM$3.37 and included total dividends received, it is RM$4.17 per share. Given annual 6% inflation rate in next 10 years, the discounted rate is 0.591898. So, RM$4.17 discounted to today price, it is RM$2.47 per share.

The discounted price is 24.8% higher comparing to today (1 December 2011) closing price RM$1.98. The stock is in great bargain! What do you think?

I'd love to hear comments from you!

TDM vs. Glenealy Plantations

noreply@blogger.com (Unknown) — Fri, 25 Nov 2011 07:47:00 +0000

The author published the analysis report here is for his own reference only. It is not an indication of the author's business interests for companies being analyzed. It is definitely not an investment advice, please see the full disclaimer located at the bottom of the blog post.

TDM Berhad's (hereafter called "TDM") principal activities including management of oil palm plantation, processing and trading of palm oil and related products, also provision of consultancy and management services to specialist medical centres and owner of specialist medical centres. Glenealy Plantations (Malaya) Berhad's (hereafter called "GNEALY") principal activities including operation of oil palm plantations, oil mills and quarries.

Side-by-side Comparison

Capitalization
Measure by size, both companies are similar, TDM is slightly bigger than GNEALY, 77 millions approximately.

Income Items
Important items under this section is per share earnings and dividend, GNEALY is the all-time winner for per share earning, but TDM pay higher dividend.

Balance Sheet Items
Both companies have solid balance sheet, Cash or cash equivalents is more than enough cover the Current liabilities. Current assets is more than enough cover the Total liabilities. GNEALY is stronger financially as it's Cash or cash equivalents is more than enough cover the Total liabilities.

Ratios
Price-wise, TDM is more attractive at the moment given it sell at lower multiple of earnings currently and historically and much higher current dividend yield. TDM achieved higher return on book value, but with lower profit margin. TDM has much better earning growth rate compared to GNEALY, 381.9% and 103.6%.

GNEALY advantages are higher profit margin and much stronger balance sheet as shown by Net income/sales and Current assets/current liabilities. A question come to mind is ... Is the overwhelming availability of current assets of the company showing the incompetency of management in capital allocation? At the same time, the current dividend payout is less than 25% of earning and yielding much lower return compared to TDM.

Price Record
TDM has much higher growth rate in both the long-term and near-term price record, the growth of price is reflected the growth of earnings.

Financial Summary

TDM's Financial Summary

By looking into detail of the financial summary of TDM, it show an amazing historical growth records, more than 50% in operating income, net income, earning per share, dividend per share with an exception in financial year 2009. It achieved this great result with reduction in total liabilities every year in the past 5 years except financial year 2010. Both return on average equity and assets are moderate, but it perform better in the past 3 years. Every year the company have lower and lower utilization of financial leverages shown by D/E ratio. I particularly like the low operating overhead attribute of the company (5 years average 4.54%) shown by narrow margin of Operating Income/Sales and Net Income/Sales.

GNEALY's Financial Summary

GNEALY has great historical growth record too (more than 20% in operating income, net income, earning per share), but less appealing compared to TDM. Historically, GNEALY is more conservative financially compare to TDM, as it utilized minimal financial leverages (D/E ratio is less than 30%) compared to TDM. But this advantage is disappear compare to recent record of TDM as it achieved D/E ratio 28.5%. Also, the company have much higher operating overhead, 5 years averaging 14.59%, 10% higher than TDM.

As conclusion, the ultimate winner of this comparison is TDM.

How Much TDM Worth?
Given the company CAGR of EPS is 20% (approximately 56.1% in the past 5 years) and Dividend Per Share is 15% in the next 10 years, the EPS of the company will be RM$0.635 in 2020 (included adjustment of 2 bad years in 10 which reduce 50% of group's net profit) and the forecast dividends received over the 10 years period totaling RM$1.30 (included adjustment of 2 bad years).

If the stock price of TDM sell at 10 times earning in 2021, it is RM$6.35 and included total dividends received, it is RM$7.65 per share. Given annual 6% inflation rate in next 10 years, the discounted rate is 0.591898. So, RM$7.65 discounted to today price, it is RM$4.52 per share.

The discounted price is 31.1% higher comparing to today (25 November 2011) closing price at RM$3.45. The stock is a great bargain! What do you think?

I'd love to hear comments from you!

BLD Plantation vs. Kwantas Corporation

noreply@blogger.com (Unknown) — Thu, 24 Nov 2011 07:39:00 +0000

The author published the analysis report here is for his own reference only. It is not an indication of the author's business interests for companies being analyzed. It is definitely not an investment advice, please see the full disclaimer located at the bottom of the blog post.

BLD Plantation Berhad's (hereafter called "BLDPLNT") principal activities including operation of a palm oil refinery and kernel crushing plant, cultivation of oil palm, processing of fresh fruit bunches and sales of related products. Kwantas Corporation Berhad's (hereafter called "KWANTAS") principal activities including operation of oil palm plantations, palm oil mills, kernel crushing plant, palm oil refinery plant, shortening plants, oleochemical plants, biomass power plant, bulking installation and trading of palm oils and fats products.

Side-by-side Comparison

Capitalization
Measure by size, both companies are similar, KWANTAS is slightly bigger than BLDPLNT, 43 millions approximately.

Income Items
Important items under this section is per share earnings and dividend, BLDPLNT is the all-time winner.

Balance Sheet Items
BLDPLNT has much stronger and healthier balance sheet compared to KWANTAS.

Ratios
On the first glance, KWANTAS is more attractive by looking at Price/earnings ratio, given 5.41 times earning. But it is not the case when look into the following items:

Price/earnings, 2009-2011: BLDPLNT has more appropriate valuation compared to KWANTAS, 11.42 times earning and 38.6 times earning.
Current assets/current liabilities: BLDPLNT has adequate level of working capital, where KWANTAS was at alarming level, short of 30%.
Earning growth per shares: Both near-term and long-term of earning growth of KWANTAS is negative.

Price Record
The current price level of BLDPLNT reaching it record level since it listed in 2003, where KWANTAS at the low end of it's historical price level.

As conclusion, the winner of this comparison is BLDPLNT.

Financial Summary

BLDPLNT's Financial Summary

By looking into detail of the financial summary of BLDPLNT, it show a amazing historical growth records with one exception in financial year 2009.

The recent return on average equity (hereafter called "ROAE") is in appropriate level, but return on average asset (hereafter called "ROAA") and profit margin is in single digit. I think this is due to the company involved in trading business.

How Much BLDPLNT Worth?
Given the company CAGR of EPS is 20% (approximately 37.4% in the past 5 years) and Dividend Per Share is 10% in the next 10 years, the EPS of the company will be RM$1.104 in 2020 (included adjustment of 2 bad years in 10 which reduce 50% of group's net profit) and the forecast dividends received over the 10 years period totaling RM$0.98 (included adjustment of 2 bad years).

If the stock price of BLDPLNT sell at 10 times earning in 2021, it is RM$11.04 and included total dividends received, it is RM$12.02 per share. Given annual 6% inflation rate in next 10 years, the discounted rate is 0.591898. So, RM$12.02 discounted to today price, it is RM$7.11 per share.

The discounted price is merely 4.14% higher comparing to today (24 November 2011) closing price RM$6.83. I don't think the stock is undervalued, what do you think?

I'd love to hear your comments!