Ibrahim Ali is absolutely right on Chua Soi Leck

To ask or hope another to do something to your becking is definitely a harder proposition; yet we should try.  However, there are so many things one can do for oneself, without needing to wait for approval from others.

Ibrahim Ali is absolutely right when he said, "I pity Chua Soi Lek as Perkasa is the only excuse he could think of."

Chinese abandoned MCA before Perkasa was born, says Ibrahim

Prices of these counters have tripled or quadrupled over the last 1 year or so.

Let us look at the prices of glove companies.  Prices of these counters have tripled or quadrupled over the last 1 year or so.  These prices can be understood by looking at the components driving them:

Price = PE x Earnings

Price of stock (++++) = PE (+)  x Earnings (+++)

Price of stock (++++) = PE (+)  x  Sales (+)  x  Profit margin (++)

Envisage what will happen to the price of the stock should profit margins be halved.  This is not impossible, especially when the present build-up in capacity reached the stage where the gap between supply and demand is abolished.

Those holding glove stocks may wish to enjoy the ride for the moment.  

Comparative Analysis of Glove Companies

Comparative Analysis of Glove Companies
http://spreadsheets.google.com/pub?key=tiEBLAmYR0EJiE7ccJcc8bw&output=html

A quick look at Hartalega (26.4.2010)

Hartalega Holdings Bhd

Wright Quality Rating: CANN Rating Explanations






A quick look at Hartalega (26.4.2010)
http://spreadsheets.google.com/pub?key=t1RgI9NIq_v_mXN5GGkePwA&output=html

A quick look at PPB (26.4.2010)

PPB Group Berhad Company

PROFILE BRIEF

PPB is a well-diversified conglomerate engaged in a wide spectrum of activities ranging from sugar refining, flour and feed milling, edible oils processing, oil palm cultivation, environmental engineering and waste management, shipping, commodity trading, film exhibition and distribution to property development.

Business Description:
PPB Group Berhad. The Group's principal activities are cultivating and refining sugar. Other activities include wheat and maize trading, flour milling, manufacturing of animal feed, exhibition and distribution of cinematograph films, manufacturing of chemical products, development of residential and commercial properties, construction works specialising in water and environmental industry, provision for waste management, manufacturing of steel drums, plastic containers, polyethylene and polypropylene woven bags and fabric, production of day-old chicks and eggs, engineering contracts, shipping, and investment holding. The Group operates in Malaysia, Indonesia, Singapore, East Asia, Other Asean countries, East Asia, other Asia countries, European countries,America and Asia Pacific countries and other countries.

A quick look at PPB (26.4.2010)
http://spreadsheets.google.com/pub?key=tE0GXuaeXQQUaFfmQdemCXg&output=html

A quick look at Pantech (26.4.2010)

Pantech Group Holdings Bhd Company

Business Description:
Pantech Group Holdings Bhd. The Group's principal activities are trading, supplying and stocking high pressure and specialised steel pipes, fittings, flanges, valves and other related products for use in the oil and gas, gas reticulation, marine, onshore and offshore heavy engineering, power generation, petrochemicals, palm oil refining and other related industries. Other activities are manufacturing and supplying butt-welded carbon steel fitting such as elbows, tees, reducers, end-caps and high frequency induction long bends for use in the oil and gas and other related industries. The Group is also involved in investment holding, property investment and management service. Operations are carried out in Malaysia and Singapore.

Wright Quality Rating: DANN Rating Explanations











A quick look at Pantech (26.4.2010)
http://spreadsheets.google.com/pub?key=t3zI0ldlAvJCuRJQIBPSJ9g&output=html

iCap Financial report for Q3 ending 28.2.2010

In the third quarter, iCap invested in a new un-named security and also made further investments in Suria Capital Holdings Bhd.

Subsequent to 28th February, 2010, iCap raised its cash holdings by selling all its stakes in KLK, LionDiv, PohKong, Swee Joo and Astro.

Reasons given:  Astro was sold as it was perceived to have limited upside; the other counters were sold due to concern a trade war between US and China would break out, with severe consequences for the global economy should it happen.

Let us make some wild guess.  It is an estimate that iCap probably raised a total of about $48 million cash from the sales of the above counters.  Adding this amount to its cash balance of $34.9 at the end of Q3 2010, meant that iCap's  has cash of about $83 million to invest.  As on 22.4.2010, iCap's NAV per share was $2.16 giving it a market capitalisation of $302.4 million, therefore the cash:equity ratio was probably 27%:73%.


Announcement date: 23.4.2010
http://announcements.bursamalaysia.com/EDMS/edmsweb.nsf/ba387758ae37412b482568a300466fb6/b77de936b272c7944825770e00399821/$FILE/3rd%20Q

Also read:

When to Sell? 

Invest Malaysia 2010 Conference

Invest Malaysia 2010 Conference

Plenary Session

• Keynote Address, Prime Minister of Malaysia YAB Dato' Sri Mohd Najib Tun Abdul Razak 
  
• Government Transformation Programme :
  Social Re-engineering to Achieve Vision 2020 
  YB Dato' Sri Idris Jala,CEO of Performance Management and Delivery Unit (PEMANDU)
  
• "New Economic Model"
  YB Tan Sri Amirsham Aziz, Chairman NEAC
  
• " Malaysia's Challenges & Opportunities"
1. Sean Darby 
   (Chief Strategist, Asia ex-Japan, Nomura)
   
2. David Jones
   (Chairman of EU-Malaysia Chamber of Commerce & Industry)
   
3. Lorraine Tan
   (Director of Research Asia, Standard & Poor's Equity Research)

Corporate Presentations

• IJM Corporation
  Dato' Krishnan Tan (CEO & MD)
  
• MAYBANK
  Dato' Sri Wahid Omar (President & CEO)
  
• PARKSON RETAIL GROUP 
  Mr Alfred Cheng Yoong Choong (MD)
  
• YTL CORP 
  Tan Sri Francis Yeoh (Managing Director)
  
• POWER SERAYA 
  Mr John Ng (CEO)
  
• SAPURACREST
  Rohaizad Darus (CEO)
  
• TENAGA NASIONAL 
  Dato' Seri Che Khalib ( President & CEO)
  
• TANJONG 
  Ir Dr Ong Peng Su (Executive Director/CEO)
  
• SUPERMAX 
  Dato' Seri Stanley Thai (Executive & CEO)
  
• HARTALEGA
  Mr Kuan Mun Leong (Deputy MD)
  
• DIGI.COM
  Mr Stefan Carisson (CFO)
  
• TOP GLOVE CORPORATION
  Tan Sri Dato' Lim Wee Chai (Chairman)
  
• IOI CORPORATION 
  Dato' Lee Yeow Chor (Group Executive Director)
  
• KPJ HEALTHCARE 
  Datin Paduka Siti Sa'diah Sheikh Bakir (MD)
  
• MALAYSIA AIRPORT HOLDINGS
  En Faizal Mansor (CFO)
  
• SIME DARBY
  Dato' Azhar Abdul Hamid (MD)
  
• MALAYSIA RESOURCES CORPORATION BERHAD
  En Mohamed Razeek Hussain (CEO)
  
• AMMB HOLDINGS
  Mr Cheah Tek Kuang (Group MD & CEO)
  
• Wah Seong Corporation Berhad
  Mr Giancario Maccagno (Deputy MD)

Common stock dividends, an old idea for retirement income, are in vogue again

By Tom PetrunoMarket Beat

April 24, 2010

What will you do for income in retirement?

Draw a pension, if you're very lucky. Collect Social Security. Beyond those two sources of money, most people will have to rely on their savings — bank accounts, investments, home equity or an annuity.

And the challenge for many American retirees won't just be to generate income from their nest egg, but to generate rising income to keep up with inflation.

Looking for a strategy to fill that bill, some investment advisors are turning to a solution that was familiar to Eisenhower-era retirees but increasingly has been lost on generations since then: common stock dividends from big-name companies, which in this era means firms such as Johnson & Johnson, H.J. Heinz Co. and utility PG&E Corp.

"We're pushing this idea with clients now," said Rich Weiss, who as chief investment officer at City National Bank in L.A. oversees about $55 billion. "There's a great case to be made for it."

It isn't difficult to find shares of brand-name consumer products companies with annualized dividend yields of 3% to 3.5%. (A stock's yield is the dividend divided by the current share price.) Yields on utility shares average about 4.4%.

Those dividend returns compare with an interest yield of about 2.6% on a five-year U.S. Treasury note.

Yet the dividend story is likely to be a very hard sell with many people, for eminently understandable reasons.

Retirement is supposed to be about financial stability and reduced investment risk. After the stock market crash of late 2008 and early 2009 — the worst decline since the Great Depression — equities naturally seem dicier than ever to countless Americans.

That's why people have turned to bonds in huge numbers, pumping hundreds of billions of dollars into bond mutual funds over the last 15 months.

Agreed, bonds almost certainly will be a safer place for your money than stocks, particularly over any short time period. But if it's income you're going to need in retirement, bonds aren't the slam-dunk answer they may seem to be.

One reason is that, thanks to the Federal Reserve's cheap-money policies and investors' rush for havens over the last year, interest rates on many types of bonds are well below where they were for most of the last 15 years. So you're starting out with a smaller income reward.

More important is that once you buy a fixed-rate bond (or a bank CD, for that matter), your yield is set until the security matures.

As Kurt Brouwer, principal at financial advisory firm Brouwer & Janachowski in Tiburon, Calif., puts it: "The issuer of a bond is never going to call up and say, ‘We want to pay you more.' "

What about bond mutual funds? Fund investors' income can rise over time if market interest rates go up and the fund buys new bonds paying higher yields. But predicting future interest payments on a fund in a rising rate environment isn't easy because of all the variables involved — including the types of bonds the manager buys, their maturities and whether the fund has more cash leaving than coming in.

And of course you face the risk that higher market interest rates will devalue older, lower-yielding bonds in a fund, depressing the value of your shares.

Dividend-paying stocks, by contrast, can offer what individual bonds can't: the potential for rising income over time, offsetting or more than compensating for inflation.

Healthcare products company Abbott Laboratories, for example, has lifted its dividend 60% since 2005, from an annual payment of $1.10 a share that year to the current annual rate of $1.76. Johnson & Johnson's dividend has risen 71% in the same period; Heinz's payout is up 47%.

All three dividends far outpaced the U.S. consumer price index, which rose about 13% in that period.

But if only the dividend story were that simple, everyone would buy into it. Although your income may rise with a dividend-paying stock, there is the ever-present risk that the share price itself, in the short run or long run, could lose far more than any dividends you'll earn.

The other major risk is that companies can cut their dividends. Some very big firms, including General Electric Co., Macy's Inc. and CBS Corp., did exactly that in 2008 and 2009 as the recession devastated their earnings.

Worse, many banks either slashed or eliminated their payouts altogether. The financial industry had long been one of the favorite sectors of dividend-seeking investors.

So why take a chance on dividend-paying stocks now? Because amid the economy's recovery more companies are boosting their payouts. A total of 284 U.S. firms lifted their dividends in the first quarter, up from 193 in the year-earlier quarter, according to Standard & Poor's. And the number of firms reducing or omitting their dividends plunged to 48 last quarter from a horrid 367 a year earlier.

Also, the Obama administration has signaled that it wants to largely preserve the favored tax treatment of dividends as put in place by President George W. Bush. The Bush tax cuts expire at the end of this year, but Obama supports keeping the dividend tax rate at 15% for couples earning less than $250,000 a year.

For investors who own stocks and bonds outside of tax-deferred retirement accounts, the Bush tax cuts gave dividends a huge advantage over bond interest, which is taxed at ordinary rates.

Josh Peters, who tracks and recommends dividend-paying stocks for investment research firm Morningstar Inc. in Chicago, says his frustration at the moment is that he views most solid dividend-paying stocks as fairly priced, at best — meaning it's hard to find genuine bargains after the market's 13-month surge.

That means the same would be true of the dividend-focused mutual funds and exchange-traded funds that offer an easy way for small investors to invest for dividend returns, albeit without the level of control they'd have by building a portfolio of 15 to 20 individual stocks.

Still, Peters expects that some of his favorite dividend-growth plays, including Waste Management, food-service-industry products distributor Sysco Corp. and payroll-services firm Paychex, will be able to boost their dividends at least 7% a year over the next five years.

He believes that more investors nearing retirement will begin to focus the power of dividend growth in a diversified portfolio.

"I think baby boomers will realize that if they need growth of income they can't just do the bond thing," he said.

tom.petruno@latimes.com

http://www.latimes.com/business/la-fi-petruno-20100424,0,1332567,full.column

A quick look at KSL (25.4.2010)

KSL Holdings Berhad Company

Business Description:
KSL Holdings Berhad. The Group's principal activities are developing residential and commercial properties and investing in properties for rental. Other activities include the provision of management services and investment holding. The Group operates in Malaysia.

Wright Quality Rating: DAB0 Rating Explanations






A quick look at KSL (25.4.2010)
http://spreadsheets.google.com/pub?key=tCChV0H1jrV_V_XdHm3mjgA&output=html

A quick look at Ajiya (24.4.2010)

Ajiya Berhad Company

Business Description:
Ajiya Berhad. The Group's principal activities are manufacturing and supplying materials used in the construction and related industries. It offers metal, zinc and aluminum products for roof building, ceiling, window, and door frame and other similar products, as well as safety glass and other glass related products. Other activities include carrying on business as manufacturers, commission agents, manufacturers' agents, contractors, sub-contractor and dealers in all types of metal products and building materials, as well as providing, designing and installing metal sheet roofing and insulator materials. It also operates as an investment holding company. Operations are carried out in Malaysia and other countries.


Wright Quality Rating: LAB1 Rating Explanations







A quick look at Ajiya (24.4.2010)
http://spreadsheets.google.com/pub?key=tD3AF4z8Z_78wCEiKBcca6Q&output=html

Comment:
Profitable.
Strong balance sheet.
Low ttm-PE of 6.17, DY 2.10%
PE is low, reflecting its earnings growth potential.

The percentage volume increase required to maintain profit, for discounts given.

Giving discounts for volume is a very slippery slope.  Let's imagine a salesperson is with a customer, and that customer demands a price cut - not requests, you understand, but demands, 'Five per cent or there's no order'.  She is, however, an understanding customer, and she knows that the salesperson will want something in return, so offers him some extra business.  The question for the salesperson is:  how much more volume is required if profit is not to go down?

Table:
The percentage volume increase required to maintain profit, for discounts given.  
http://spreadsheets.google.com/pub?key=t2Lxh7iEVIhpXIkhjO4SR0g&output=html

Shareholder value and Total Shareholder Return (TSR)

While profits are owned by the shareholders, they are not necessarily paid out as dividends, and may be retained  in the business to fund its growth.  For instance, biotech companies often do not pay a dividend to their shareholders.

In reality the return a shareholder sees is the increase in the share price over time, and the cash dividends received from the company.  Typically this TSR is normally calculated over the past 3 to 5 years.

This can be further complicated by using discounted cash flow to reflect the fact that money earned in the future is worth less than its worth today.  TSR calculated in this way is used by a number of companies, but there is little evidence that the stock markets have adopted this as a measure of shareholder value over more conventional measures such as the share price and profit performance.

A drawback of looking at TSR is that we are either

• looking at historic performance over the last 3 to 5 years (which is not necessarily an indication of future trends) or 
• we are estimating future values (say, for the share price) which are not always borne out in practice.

Shareholder value and Economic Profit

Shareholders invest in a company to make a profit.  This can come from an increase in the share price and/or the dividends the company pays.

The challenge is to find a measure of business performance that correlates with share price movements.  Then, if we plan our business to raise this measure, we should raise the share price, and hence create value for our shareholders.



EBITDA

Earnings before interest, tax, depreciation and amortisation (EBITDA)

Profit is not a good measure of the value a business is generating for its shareholders.  Ultimately, a shareholder is interested in the amount of cash generated, rather than profit (which is after all only an accounting calculation). It is cash which enables the business to expand and develop, and pay dividends.  And it is the expectation of future cash flows that drives the share price up, and creates values for shareholders.

In calculating profit, depreciation is included as a cost.

Depreciation and amortisation are not cash transactions but an accounting exercise to balance the reducing value of assets over time.  We can measure earnings before interest, tax, depreciation and amortisation - EBITDA!  This is the amount of operating profit that will eventually be turned into cash.  But EBITDA alone doesn't tell us if we are creating value.


Economic profit or Economic Value Added (EVA)

Economic profit (EP) takes account of the fact that investors have choices.  They can invest in your company, or your competitor; in art; in another industry; or put their money in the bank.  Every investment has a certain amount of risk, and a level of reward.

If your company generates more cash for each pound invested than other investments with a similar level of risk, it is making an 'economic profit'.  

• Studies of real companies show clearly that an increase in EP correlates strongly with an increase in share price, and the creation of shareholder value.  
• A fall in EP goes with a reduction in share price, and destruction of shareholder value.

Economic profit is calculated by taking the cash flow generated by the business (EBITDA) and subtracting a 'charge' for the 'cost of capital'.  The cost of capital is the profit the business must make, simply to meet the expectations of investors who take this level of risk.

If the company was financed only by shareholders' funds, the cost of capital would be the average return of investments after tax with the same level of risk; for example, a group of companies of similar size in the same industry.  This is the 'cost of equity'.

Most companies are financed partly by shareholders' funds, and partly by bank loans.  So, their cost of capital is not simply the cost of equity, but takes into account the interest paid on loans as well.  This is known as the 'weighted average cost of capital', or the WACC rate.

Economic profit is calculated by

• subtracting a capital charge (the net asset value of a business multiplied by the WACC rate) from EBITDA.  
• Tax is also deducted because this is paid out of cash flow.  
• Interest is not deducted, as the capital charge has already taken this into account.

Economic profit = Profit (Earnings) - Tax - Capital charge

Capital charge = Net Asset Value of a business X WACC rate


Example of application of Economic Profit
http://spreadsheets.google.com/pub?key=t7BiKoYpNh8QNDvzcZoN8xA&output=html

How much should you pay for a business? Valuing a company (6)

Cash flows

When considering purchasing a company, another way to value the business is to examine what cash it will generate over a period of time.

• This can be in straight cash terms not taking into account inflation, price erosion etc. 
• You may also wish to apply discounted cash flow principles to arrive at a net present value (NPV) for the company, or 
• even an internal rate of return (IRR) on the purchase.
• 
  

Perhaps the most useful way to value it is to estimate the economic benefits that the business will generate in the next few years and then apply the NPV process to them. All valuations based on forecast figures are essentially educated guesses, but this analysis is likely to pinpoint the best opportunity for creating value, if the forecasts turn into reality.

Also read:

Valuing a company (1)

Valuing a company using Asset Value (2)

Valuing a company using Multipliers (3)

Valuing a company using Market Capitalisation (4)

Valuing a company using Non-Financial Measures & Balanced Scoreboard (5)

Valuing a company using Cash Flows (6)

How much should you pay for a business? Valuing a company (5)

Balanced Scoreboard

As already mentioned, there are often non-financial considerations to valuing a company. A scoreboard that balances financial and non-financial measures can be used to help manage a company and also help us value one. Non-financial measures might include:

• Health, safety and environment - many companies have policies relating to these factors and would seek an acquisition that might enhance their position in these areas. This could include accident rates, environmental impact and energy usage.

• Production measures - these will vary from one industry to another but might include production efficiencies, output per worker, waste levels and how up to date the production processes are.

• Intellectual property - the potential value of patents, trademarks and brands.

• Employees - the skills, motivation, satisfaction levels, productivity and loyalty of the people who work in the company.

• Marketing - geographical coverage, customer satisfaction and loyalty, market share and potential fit with existing activities have a value that can be different for different purchasers. The outlook for future growth might lead to an expectation of a better performance in the future, as could the rate of product and process innovation, and percentage of sales from new products.

• Strategic fit - difficult to quantify, and used to justify high acquisition costs! Companies will also claim to be able to gain synergies and cost savings through merging the two organisations.

Also read:

Valuing a company (1)

Valuing a company using Asset Value (2)

Valuing a company using Multipliers (3)

Valuing a company using Market Capitalisation (4)

Valuing a company using Non-Financial Measures & Balanced Scoreboard (5)

Valuing a company using Cash Flows (6)

How much should you pay for a business? Valuing a company (4)

Market capitalisation

The value of a company can be ascertained by multiplying the number of issued shares by the current share price. This is known as market capitalisation.

A case for asset stripping? 

• The concept of asset stripping is to buy out a company's shares for less than the value of the assets and then to sell these at a profit. 
• This is why company directors get worried when their share price falls too low!

Also read:

Valuing a company (1)

Valuing a company using Asset Value (2)

Valuing a company using Multipliers (3)

Valuing a company using Market Capitalisation (4)

Valuing a company using Non-Financial Measures & Balanced Scoreboard (5)

Valuing a company using Cash Flows (6)

How much should you pay for a business? Valuing a company (3)

Multipliers

Another simple approach is to use a multiplier to calculate a company's value. These multipliers will vary for different industries. One way of deciding what figure to pick for a multiplier is to analyse previous company takeovers within that sector, examining what was paid for these businesses compared to their sales or profit levels.

Caution must be taken in ensuring that the level of sales or profits in the accounting period being analysed is sustainable and does not contain one-off or abnormal conditions.

Sales multiplier

The sales multiplier uses a multiple of sales to assign a value to that company.

• This could be less than or greater than 1, depending on expectations for future growth. 
• Sales multipliers are particularly popular in start-up companies that are not yet profitable (eg. dot.com companies).

Profit multiplier
In the case of the profit multiplier, the multiplier used tends to be greater than 1 and will be based on 

• how many years' future profit are to be factored into the value of a business as well as 
• expectations for future profit growth.

So if a profit multiplier is 10 was used you might expect a 10% return for the next 10 years, with no change in business conditions to pay for this investment.

Also read:

Valuing a company (1)

Valuing a company using Asset Value (2)

Valuing a company using Multipliers (3)

Valuing a company using Market Capitalisation (4)

Valuing a company using Non-Financial Measures & Balanced Scoreboard (5)

Valuing a company using Cash Flows (6)

How much should you pay for a business? Valuing a company (2)

Asset value

An obvious starting point for valuing a company is to look at the asset base of that organisation. On this basis the company would be worth its net asset value. There are some limitations to this approach:

Book value - Accountants usually value fixed assets at what they cost, depreciated to reflect the reducing value as items are worn out in use. Book value may not be an accurate reflection of the real value.

• This can apply when land and buildings were bought some time ago, and have grown in value; or 
• if the value of these assets has reduced significantly since purchase, due to new technologies. 
• There may also be a factor that has previously been ignored, such as environmental issues. Disposal or land remediation costs could wipe out any asset value.

Normally a company will have a fixed asset register that lists all its assets, and the current depreciated book value of those assets. A similar register might also exist for its other assets.

Working capital - Again, we must understand whether these items are accurately stated.

• Stock (inventory) is usually valued by accountants at what it cost. This may be far more than we can sell it for, especially if it is out of date. 
•  Debtors (receivables) is money owed to us by customers. How much of this might be bad debt (i.e. invoices that may never get paid)? 
•  Creditors (payables) is money we owe our suppliers. How much has our company avoided paying to improve its cash flow?

Intangible assets - This can take the form of

• goodwill (the difference between what we pay for an acquisition and what the assets are valued at) or 
• capitalised costs (such as research or start-up costs).

As there are no physical assets to underwrite these, the net assets may be overstated if these elements are high.

Investments - There might be some investments in other companies, which accountants will value at what was paid for them, rather than their realisable value in the market.

Unstated assets - Accountants usually put no value in the books on such things as people, brands, intellectual property, market position, forward order book etc. This means that the net asset figure alone might seriously understate the company value. This can apply especially in service-based businesses that have few tangible assets.

Also read:

Valuing a company (1)

Valuing a company using Asset Value (2)

Valuing a company using Multipliers (3)

Valuing a company using Market Capitalisation (4)

Valuing a company using Non-Financial Measures & Balanced Scoreboard (5)

Valuing a company using Cash Flows (6)