myinvestingnotes.blogspot.my (Bullbear Buffett Stock Investing Notes)

Keep INVESTING Simple and Safe (KISS) ****Investment Philosophy, Strategy and various Valuation Methods**** The same forces that bring risk into investing in the stock market also make possible the large gains many investors enjoy. It’s true that the fluctuations in the market make for losses as well as gains but if you have a proven strategy and stick with it over the long term you will be a winner!****Warren Buffett: Rule No. 1 - Never lose money. Rule No. 2 - Never forget Rule No. 1.

Sunday, 8 November 2009

HELP — grossly undervalued and expanding aggressively

HELP — grossly undervalued and expanding aggressively

Tags: HELP International Corp | InsiderAsia

Written by InsiderAsia
Thursday, 05 November 2009 19:58

LAST week, we took a look at HELP International Corp's (RM1.50) recent third-quarter FY October 2009 (3Q09) results, which saw growth momentum accelerating further. Today, we take a look at the education company's expansion plans and underlying asset valuations.

HELP has consistently delivered double-digit earnings growth over the last few years, even during the recession. Indeed, its earnings have grown over 20% per year since 2006, and remain on track this year.

For FY October 2009, we expect net profit to rise 21.1% to RM14.3 million, or 16.1 sen per share. At RM1.50, the stock is trading at only 9.3 times FY09 earnings, and 8.5 times FY2010.

These valuations are very attractive for a company with strong and yet defensive, recession-proof earnings — and a solid brand name. Its underlying price-to-earnings (P/E) is much lower if we subtract the sizeable cash reserves, although much will be invested in the new campus.

HELP has a very strong balance sheet. Net cash stood at RM72.4 million in July 2009, as compared with a market capitalisation of RM133.2 million. This translates into a significant 82 sen per share — or 55% of the current share price of RM1.50.

Strong, understated balance sheet
HELP's present net trading asset (NTA) of RM1.02 per share is also severely understated.

The company's main property asset is Wisma HELP, an 11-storey building in the prime Damansara Heights suburb of Kuala Lumpur. The 29-year old building has 269,086 sq ft of built-up space on 43,292 sq ft of freehold land. This property is carried in its books at only RM32 million — or just RM119 psf for the built-up space.

Although the building is relatively old at 29 years, the valuation is far too low compared with current market prices of RM520-750 psf in the wider Damansara Heights, Bangsar and Mont'Kiara areas, as well as current replacement costs.

As a comparison, an even older nearby building, the 37-year old Wisma Damansara was sold last year by HELP's parent, Selangor PROPERTIES [], to a joint venture between Selangor Properties and E&O Property Devt for RM371 psf (the venture was later unwound due to the financial crisis).

If we place a conservative value of RM350 psf for Wisma HELP, we would arrive at a value of RM94.2 million for the building. Thus, the value of the building and cash alone would total RM168.8 million — or RM1.90 per share, or 27% above the current share price.

This implies — at the current share price — investors are getting HELP's other assets, including the underlying business, valuable franchises and strong branding built up for over 20 years, for effectively free.

Solid branding
HELP's strong branding has helped to expand its student population base, extend its presence overseas and increase the appeal of its own home-grown degrees awarded under the "HELP University College" banner.

From just 8,600 students in October 2007, HELP now has about 11,500 students, including 1,500 from HELP-ICT. This excludes over 1,000 students studying for HELP accredited courses overseas in Vietnam, Indonesia and China through franchising arrangements.

The company has been growing its student base through acquisitions and new branch campuses, organic growth and overseas tie-ups that are now featuring more strongly.

Fraser KL campus to open in early 2010
In November 2007, HELP acquired the loss-making HELP-ICT (the former Sepang Institute of TECHNOLOGY []), giving it various new courses and a student base of about 1,500 students.

We understand the institute will be relocated to the new Fraser Business Park campus in downtown Kuala Lumpur, in line with branding the new campus as a hub for vocational courses. This will also increase economies of scale at the new city campus.

The campus at Fraser Business Park will open in January 2010. HELP will lease space in the business centre, which can accommodate up to 5,000 students. It will cater largely for post-graduate, technical and vocational courses, including a wide range of new courses such as culinary, hospitality, performing arts, physiotherapy and others.

Subang campus to anchor longer-term growth
Further out, the longer-term expansion plans will centre on the Subang 2 campus in Sungei Buloh. Located on 23.3 acres, the land was acquired for just RM20 psf, or RM20.3 million, which is being finalised. The entire campus is expected to cost around RM100 million, including land cost. HELP hopes to start building next year.

The first phase, with 300,000 sq ft of built-up space will cost RM50 million, excluding land cost. This can be easily funded through annual cash flows, although it will take advantage of the current low interest rate regime. The full-fledged campus will support its application for full university status.

HELP's home-grown degrees, granted under the HELP University College brandname are also gaining popularity — not just locally but abroad as well. The company was awarded "University College" status in 2004, enabling it to design and award its own degrees. The shift towards more home-grown degrees has helped improve overall margins.

Overseas ventures faring well
HELP's overseas ventures in Vietnam, Indonesia, China and Saudi Arabia are also taking off well. Its ability to penetrate the international market is a strong testimony to its brand.

The overseas ventures involve a "franchise" or "twinning" like arrangements with low risks and entry costs, but high international visibility and earnings potential. HELP provides software, syllabus, training, technical and academic support, without heavy investment in buildings or physical assets.

There are currently over 1,000 students studying overseas for HELP's degrees, most of them in Vietnam and some in Indonesia and China. It is also exploring opportunities in other parts of Indochina.

The Vietnam venture is the largest and involves twinning programmes with Vietnam National University in Hanoi. Under these arrangements, students will transfer to Malaysia after a year or two in Vietnam to obtain HELP or other accredited degrees.

Similar "twinning" arrangements are being done with several Indonesian and Chinese colleges, but on a smaller scale. We understand the company has also been invited to explore similar ventures in other parts of Indochina.

Note: This report is brought to you by Asia Analytica Sdn Bhd, a licensed investment adviser. Please exercise your own judgment or seek professional advice for your specific investment needs. We are not responsible for your investment decisions. Our shareholders, directors and employees may have positions in any of the stocks mentioned.

http://www.theedgemalaysia.com/business-news/153072-help-grossly-undervalued-and-expanding-aggressively.html

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My 18 points guide to Successfully compounding your money in Stocks

Be a good stock picker.
Think as a business owner.
Always look at value rather than the price. Do the homework.
Buy and hold is alright for selected stocks.
Compounding is your friend, get this to work its magic.
Mr. Market is there to be taken advantage of. Do not be the sucker instead. BFS;STS.
Always buy a lot when the price is low.
Never buy when the stock is overpriced.
It is alright to buy when the selected stock is at a fair price.
Phasing in or dollar cost averaging is safe for such stocks during a downtrend, unless the price is still obviously too high.
Do not time the market for such or any stocks.
By keeping to the above strategy, the returns will be delivered through the growth of the company's business.
So, when do you sell the stock? Almost never, as long as the fundamentals remain sound and the future prospects intact.
The downside risk is protected through only buying when the price is low or fairly priced.
Tactical dynamic asset allocation or rebalancing based on valuation can be employed but this sounds easier than is practical, except in extreme market situations.
Sell urgently when the company business fundamental has deteriorated irreversibly.
You may also wish to sell should the growth of the company has obviously slowed and you can reinvest into another company with greater growth potential of similar quality. However, unlike point 16, you can do so leisurely.
In conclusion, a critical key to successful investing is in your stock picking ability.

http://myinvestingnotes.blogspot.com/2012/07/my-18-points-guide-to-successfully.html

11 Lessons From Peter Lynch

Peter Lynch taught me:

1. Behind every stock is a company. Find out what it’s doing.
2. Never invest in any idea you can’t illustrate with a crayon.
3. Over the short term, there may be no correlation between the success of a company’s operations and the success of its stock. Over the long term, there’s a 100% correlation.
4. Buying stocks without studying the companies is the same as playing poker – and never looking at your cards.
5. Time is on your side when you own shares of superior companies.
6. Owning stock is like having children. Don’t get involved with more than you can handle.
7. When the insiders are buying, it’s a good sign.
8. Unless you’re a short seller, it never pays to be pessimistic.
9. A stock market decline is as predictable as a January blizzard in Colorado. If you’re prepared, it can’t hurt you.
10. Everyone has the brainpower to make money in stocks. Not everyone has the stomach.
11. Nobody can predict interest rates, the future direction of the economy, or the stock market. Dismiss all such forecasts and concentrate on what’s actually happening to the companies in which you’ve invested.

Lynch’s advice had a profound effect on my stock market approach. He taught me that investment success isn’t the result of developing the right macro-economic view or deciding when to jump in or out of the market. Success is about researching companies to identify those that are likely to report positive surprises.

Capital Expenditure

A great company with a Durable Competitive Advantage will have a ratio of Capital Expenditures to Net Income of less than 25%. Less is better.

Capital Expenditures are expenses on:
- fixed assets such as equipment, property, or industrial buildings
- fixing problems with an asset
- preparing an asset to be used in business
- restoring property
- starting new businesses

A good company will have a ratio of Capital Expenditures to Net Income of less than 50%.

A great company with a Durable Competitive Advantage will have a ratio of less than 25%.

Less is better.

Benjamin Graham's 113 Wise Words

The true investor scarcely ever is forced to sell his shares, and at all times he is free to disregard the current price quotation. He need pay attention to it and act upon it only to the extent that it suits his book, and no more. Thus the investor who permits himself to be stampeded or unduly worried by unjustified market declines in his holdings is perversely transforming his basic advantage into a basic disadvantage. That man would be better off if his stocks had no market quotation at all, for he would then be spared the mental anguish caused him by other persons' mistakes of judgement."

Philip Fisher's Wise Words

"The refusal to sell at a loss, while completely natural and normal, is probably one of the most dangerous in which we can indulge ourselves in the entire investment process.

More money has probably been lost by investors holding a stock they really did not want until they could 'at least come out even' than from any other single reason. If to these actual losses are added the profits that might have been made through the proper reinvestment of these funds if such reinvestment had been made when the mistake was first realized, the cost of self-indulgence becomes truly tremendous."

(Common Stocks and Uncommon Profits)

The Ultimate Hold-versus-Sell Test

Here is the overriding primary test, followed by observations on why it is so critically important:

Knowing all that you now know and expect about the company and its stock (not what you originally believed or hoped at time of purchase), and assuming that you had available capital, and assuming that it would not cause a portfolio imbalance to do so, would you buy this stock today, at today's price?

No equivocation. Yes or no?

Answers such as maybe or probably are not acceptable since they are ways of dodging the issue. No investor probably buys a stock; they either place an order or do not.

Here is the implication of your answer to that critical test: if you did not answer with a clear affirmative, you should sell; only if you said a strong yes, are you justified to hold.

Some thoughts on Analysing Stocks (KISS)

Ideally a stock you plan to purchase should have all of the following charateristics:

• A rising trend of earnings dividends and book value per share.
• A balance sheet with less debt than other companies in its particular industry.
• A P/E ratio no higher than average.
• A dividend yield that suits your particular needs.
• A below-average dividend pay-out ratio.
• A history of earnings and dividends not pockmarked by erratic ups and downs.
• Companies whose ROE is 15 or better.
• A ratio of price to cash flow (P/CF) that is not too high when compared to other stocks in the same industry.

Margin of Safety Concept: Stocks should be bought like groceries, not like perfume

The high CAGR in the early years of the investing period, due to buying at a discount, tended to decline and approach that of the intrinsic EPS GR of the companies over a longer investment time-frame.

Chapter 20 - “Margin of Safety” as the Central Concept of Investment

A single quote by Graham on page 516 struck me:

Observation over many years has taught us that the chief losses to investors come from the purchase of low-quality securities at times of favorable business conditions.

Basically, Graham is saying that most stock investors lose money because they invest in companies that seem good at a particular point in time, but are lacking the fundamentals of a long-lasting stable company.

This seems obvious on the surface, but it’s actually a great argument for thinking more carefully about your individual stock investments. If most of your losses come from buying companies that seem healthy but really aren’t, isn’t that a profound argument for carefully studying any company you might invest in?

myinvestingnotes.blogspot.my (Bullbear Buffett Stock Investing Notes)

Sunday, 8 November 2009

HELP — grossly undervalued and expanding aggressively

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All equity security investments present a risk of loss of capital

The Ultimate Hold-versus-Sell Test

Some thoughts on Analysing Stocks (KISS)

Benjamin Graham

Sell the losers, let the winners run.

Investment Style

Warren Buffett

Political and Economic News

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