M’sian capital market need more informed investors

by Chin Kee Leong. Posted on November 1, 2010, Monday

MIRI: The Malaysian capital market need more informed investors who are encouraged to trade online.

Q&A SESSION: (From left) Shin, Mo and Tan on stage fielding questions from the floor during the roadshow.

OSK Investment Bank Bhd (OSK) organised Market Chat 2010 roadshow in Grand Palace Hotel here recently that provided insights on stock market investment to educate and create awareness on the securities market as well as to encourage online trading amongst retail investors.

“A good investor is an informed investor – creating more informed investors is one of the goals of our Market Chat roadshows,” said Bursa Malaysia Bhd (Bursa Malaysia) head of surveillance research and development (R&D) and market surveillance, Arshad Azizi Kamaruddin in his opening speech.

Arshad welcomed some 150 participants who turned up at the fourth season of Market Chat roadshow.

“Retail investors have always been a crucial investor segment of our Malaysian capital market.

“We have been steadfast in working hand-in-hand with our stakeholders and broker partners to stimulate interest amongst Malaysians to invest in our stock market,” said Arshad who explained the main aim in boosting the retail stock market with Market Chat started in 2006.

According to him, Bursa partnered with nine selected brokers which included OSK, and has since conducted 117 roadshows and reaching nearly 18,000 investors in the past three years.

“We were able to generate nearly 3,600 new CDS accounts over the period.Naturally, we intend to make Market Chat bigger and better each year,” he said.

He hoped to see expansion to more cities and non-urban areas, and eventually reach out to all segments of society.

“Our government is committed to make Malaysia more business-friendly to investors.

“The call for the divestment of government stakes in public listed companies are examples of measures to promote vibrancy, free float and liquidity in our market to enhance the attractiveness of the Malaysian capital market.

“These developments hold opportunities for all investors like you,” he said.

In order to achieve greater efficiency and offering convenience to the public, Bursa has introduced the eDividend to enhance payment efficiency.

“We would like to see the younger generations take keener interest in the stock market. It is very important for stakeholders to collaborate in enhancing the pool of retail investors,” he said.

He urged participants to spread the word and encourage others to participate in future roadshows.

“I believe that there are always opportunities if we know what we’re looking for. And yes, there are hidden gems in our capital market,” he added.

During the Q&A session, he replied to a participant that he will bring up the matter with Bursa of introducing similar e-payment systems for the Warrants and Futures trade, which involve larger sums of money.

The main speakers were Shin Kao Jack of OSK Research Sdn Bhd, Kuala Lumpur (KL) who presented ‘Market sOutlook’, Eric Tan of OSK Investment Bank (Derivatives and Structured Products), KL with ‘Understand Call Warrants and ETF’, and Grace Mo of OSK Investment Bank, Sibu with ‘How to trade KLCI Futures and CPO Futures’.

The guest speakers were Sarawak Plantation Bhd (SPB) corporate finance manager Koay Bee Eng, and Naim Cendera Holdings Bhd senior director Ricky Kho who enlightened participants with the portfolios of their respective companies listed on the stock exchange.

http://www.theborneopost.com/?p=72153

What have happened to these companies since December 2009?

On 28th December 2009, I posted the charts of a few companies that had gone up continuously from the lows of March 2009.

Click here to see what have happened to these companies since Dec. 2009.

Adventa, Latexx, Latexx WA and HaiO have corrected significantly since the end of 2009.  Their prices now are at levels of the end of 2009.  The prices of these companies have corrected due to deteriorating fundamentals in their businesses, which maybe temporary but for a prolonged period (as per the glove companies) or permanent (as per the MLM company).

Sime Darby shares dropped precipitously in May 2010 due to reported losses in their business.  However, it has since rebounded, almost back to its previous price levels.

As for the other companies, Petdag, PBB, LPI, GAB, HLBank, QL, KPJ, JobSt, KLK, & IOICorp,, their prices reached new highs in the present bull market. 


Lessons derived from the above:


1.  Sell when the fundamentals of the companies deteriorate.  Often this is evident from one or two quarters of "bad" results, especially in those companies with businesses having no durable competitive advantage.


2.  A good company that hits a temporary setback and where its price is sold down may presents a good opportunity to invest.  A large established good company is resilient and has the resources to recover.  


3.  Buying high quality companies at fair or bargain prices, but not overpaying for them, will often turn out to be profitable investments long term.

Guinness

Date announced 3-Nov-10
Quarter 30/09/2010 Qtr 1
FYE 30/06/2011

STOCK GUINNESS
C0DE  3255 

Price $ 8.83 Curr. PE (ttm-Eps) 16.20 Curr. DY 5.10%
LFY Div 45.00 DPO ratio 89%
ROE 32.2% PBT Margin 14.1% PAT Margin 10.6%

Rec. qRev 366631 q-q % chg 19% y-y% chq 22%
Rec qPbt 51638 q-q % chg 8% y-y% chq 44%
Rec. qEps 12.81 q-q % chg 8% y-y% chq 45%
ttm-Eps 54.50 q-q % chg 8% y-y% chq 36%

Using VERY CONSERVATIVE ESTIMATES:
EPS GR 5% Avg.H PE 14.00 Avg. L PE 12.00
Forecast High Pr 9.74 Forecast Low Pr 6.80 Recent Severe Low Pr 6.80
Current price is at Upper 1/3 of valuation zone.

RISK: Upside 31% Downside 69%
One Year Appreciation Potential 2% Avg. yield 7%
Avg. Total Annual Potential Return (over next 5 years) 9%

CPE/SPE 1.25 P/NTA 5.22 NTA 1.69 SPE 13.00 Rational Pr 7.09



Decision:
Already Owned: Buy Hold Sell Filed Review (future acq): Filed Discard: Filed
Guide: Valuation zones Lower 1/3 Buy Mid. 1/3 Maybe Upper 1/3 Sell

Aim:
To Buy a bargain: Buy at Lower 1/3 of Valuation Zone
To Minimise risk of Loss: Buy when risk is low i.e UPSIDE GAIN > 75% OR DOWNSIDE RISK <25%
To Double every 5 years: Seek for POTENTIAL RETURN of > 15%/yr.
To Prevent Loss: Sell immediately when fundamentals deteriorate
To Maximise Gain & Reduce Loss: Sell when CPE/SPE > 1.5, when in Upper 1/3 of Valuation Zone & Returns < 15%/yr

Integrax

Date announced 26/08/2010
Quarter 30/06/2010 Qtr 2
FYE 31/12/2010

STOCK Integra
C0DE  9555

Price $ 1.33 Curr. PE (ttm-Eps) 9.42 Curr. DY 2.26%
LFY Div 3.00 DPO ratio 21%
ROE 8.1% PBT Margin 77.1% PAT Margin 58.4%

Rec. qRev 23483 q-q % chg 2% y-y% chq 17%
Rec qPbt 18094 q-q % chg 38% y-y% chq 33%
Rec. qEps 4.56 q-q % chg 54% y-y% chq 50%
ttm-Eps 14.12 q-q % chg 12% y-y% chq 14%

Using VERY CONSERVATIVE ESTIMATES:
EPS GR 3% Avg.H PE 8.00 Avg. L PE 4.00
Forecast High Pr 1.31 Forecast Low Pr 0.88 Recent Severe Low Pr 0.88
Current price is at Upper 1/3 of valuation zone.

RISK: Upside -5% Downside 105%
One Year Appreciation Potential 0% Avg. yield 3%
Avg. Total Annual Potential Return (over next 5 years) 2%

CPE/SPE 1.57 P/NTA 0.76 NTA 1.75 SPE 6.00 Rational Pr 0.85



Decision:
Already Owned: Buy Hold Sell Filed; Review (future acq): Filed; Discard: Filed
Guide: Valuation zones Lower 1/3 Buy; Mid. 1/3 Maybe; Upper 1/3 Sell

Aim:
To Buy a bargain: Buy at Lower 1/3 of Valuation Zone
To Minimise risk of Loss: Buy when risk is low i.e UPSIDE GAIN > 75% OR DOWNSIDE RISK <25%
To Double every 5 years: Seek for POTENTIAL RETURN of > 15%/yr.
To Prevent Loss: Sell immediately when fundamentals deteriorate
To Maximise Gain & Reduce Loss: Sell when CPE/SPE > 1.5, when in Upper 1/3 of Valuation Zone & Returns < 15%/yr

Padini

Date announced 26/08/2010
Quarter 30/06/2010 Qtr 4
FYE 30/06/2010

STOCK  PADINI 
C0DE  7052 

Price $ 5.2 Curr. PE (ttm-Eps) 11.27 Curr. DY 4.33%
LFY Div 22.50 DPO ratio 49%
ROE 24.9% PBT Margin 16.3% PAT Margin 10.3%

Rec. qRev 114389 q-q % chg -18% y-y% chq 16%
Rec qPbt 18654 q-q % chg -22% y-y% chq 182%
Rec. qEps 8.97 q-q % chg -32% y-y% chq 320%
ttm-Eps 46.15 q-q % chg 17% y-y% chq 145%

Using VERY CONSERVATIVE ESTIMATES:
EPS GR 5% Avg.H PE 9.00 Avg. L PE 7.00
Forecast High Pr 5.30 Forecast Low Pr 3.10 Recent Severe Low Pr 3.10
Current price is at Middle 1/3 of valuation zone.

RISK: Upside 5% Downside 95%
One Year Appreciation Potential 0% Avg. yield 6%
Avg. Total Annual Potential Return (over next 5 years) 6%

CPE/SPE 1.41 P/NTA 2.81 NTA 1.85 SPE 8.00 Rational Pr 3.69


Decision: Already Owned: Buy Hold Sell Filed; Review (future acq): Filed; Discard: Filed
Guide: Valuation zones Lower 1/3 Buy; Mid. 1/3 Maybe; Upper 1/3 Sell

Aim:
To Buy a bargain: Buy at Lower 1/3 of Valuation Zone
To Minimise risk of Loss: Buy when risk is low i.e UPSIDE GAIN > 75% OR DOWNSIDE RISK <25%
To Double every 5 years: Seek for POTENTIAL RETURN of > 15%/yr.
To Prevent Loss: Sell immediately when fundamentals deteriorate
To Maximise Gain & Reduce Loss: Sell when CPE/SPE > 1.5, when in Upper 1/3 of Valuation Zone & Returns < 15%/yr

Parkson

Date announced 24/08/2010
Quarter 30/06/2010 Qtr 4
FYE 30/06/2010

STOCK Parkson
C0DE  5657 

Price $ 5.95 Curr. PE (ttm-Eps) 21.33 Curr. DY 1.01%
LFY Div 6.00 DPO ratio 22%
ROE 15.2% PBT Margin 24.2% PAT Margin 9.0%

Rec. qRev 620370 q-q % chg -18% y-y% chq 8%
Rec qPbt 150129 q-q % chg -27% y-y% chq -2%
Rec. qEps 5.46 q-q % chg -33% y-y% chq -1%
ttm-Eps 27.89 q-q % chg 0% y-y% chq -4%

Using VERY CONSERVATIVE ESTIMATES:
EPS GR 5% Avg.H PE 20.00 Avg. L PE 17.00
Forecast High Pr 7.12 Forecast Low Pr 4.74 Recent Severe Low Pr 4.74
Current price is at Middle 1/3 of valuation zone.

RISK: Upside 49% Downside 51%
One Year Appreciation Potential 4% Avg. yield 1%
Avg. Total Annual Potential Return (over next 5 years) 5%

CPE/SPE 1.15 P/NTA 3.25 NTA 1.83 SPE 18.50 Rational Pr 5.16



Decision: Already Owned: Buy Hold Sell Filed; Review (future acq): Filed; Discard: Filed
Guide: Valuation zones Lower 1/3 Buy; Mid. 1/3 Maybe; Upper 1/3 Sell

Aim:
To Buy a bargain: Buy at Lower 1/3 of Valuation Zone
To Minimise risk of Loss: Buy when risk is low i.e UPSIDE GAIN > 75% OR DOWNSIDE RISK <25%
To Double every 5 years: Seek for POTENTIAL RETURN of > 15%/yr.
To Prevent Loss: Sell immediately when fundamentals deteriorate
To Maximise Gain & Reduce Loss: Sell when CPE/SPE > 1.5, when in Upper 1/3 of Valuation Zone & Returns < 15%/yr

HAI-O

Date announced 29/09/2010
Quarter 31/07/2010 Qtr 1
FYE 30/4/2011

STOCK HAI-O
C0DE  7668 

Price $ 3.08 Curr. PE (ttm-Eps) 11.85 Curr. DY 3.86%
LFY Div 11.88 DPO ratio 38%
ROE 24.5% PBT Margin 19.7% PAT Margin 14.3%

Rec. qRev 54751 q-q % chg -45% y-y% chq -63%
Rec qPbt 10785 q-q % chg -32% y-y% chq -59%
Rec. qEps 3.91 q-q % chg 31% y-y% chq -58%
ttm-Eps 26.00 q-q % chg -17% y-y% chq -8%

Using VERY CONSERVATIVE ESTIMATES:
EPS GR 1% Avg.H PE 10.00 Avg. L PE 5.00
Forecast High Pr 2.73 Forecast Low Pr 1.30 Recent Severe Low Pr 2.85
Current price is at Upper 1/3 of valuation zone.

RISK: Upside -24% Downside 124%
One Year Appreciation Potential -2% Avg. yield 3%
Avg. Total Annual Potential Return (over next 5 years) 1%

CPE/SPE 1.58 P/NTA 2.91 NTA 1.06 SPE 7.50 Rational Pr 1.95


Decision:
Already Owned: Buy Hold Sell Filed Review (future acq): Filed Discard: Filed
Guide: Valuation zones Lower 1/3 Buy Mid. 1/3 Maybe Upper 1/3 Sell

Aim:
To Buy a bargain: Buy at Lower 1/3 of Valuation Zone
To Minimise risk of Loss: Buy when risk is low i.e UPSIDE GAIN > 75% OR DOWNSIDE RISK <25%
To Double every 5 years: Seek for POTENTIAL RETURN of > 15%/yr.
To Prevent Loss: Sell immediately when fundamentals deteriorate
To Maximise Gain & Reduce Loss: Sell when CPE/SPE > 1.5, when in Upper 1/3 of Valuation Zone & Returns < 15%/yr

UMW

Date announced 20/08/2010
Quarter 30/06/2010 Qtr 2
FYE 31/12/2010

STOCK UMW
C0DE  4588

Price $ 6.83 Curr. PE (ttm-Eps) 13.38 Curr. DY 2.93%
LFY Div 20.00 DPO ratio 59%
ROE 14.1% PBT Margin 13.5% PAT Margin 6.5%

Rec. qRev 3282075 q-q % chg 8% y-y% chq 27%
Rec qPbt 442266 q-q % chg 45% y-y% chq 138%
Rec. qEps 18.74 q-q % chg 59% y-y% chq 159%
ttm-Eps 51.04 q-q % chg 29% y-y% chq 34%

Using VERY CONSERVATIVE ESTIMATES:
EPS GR 5%
Avg.H PE 12.00
Avg. L PE 8.00
Forecast High Pr 7.82
Forecast Low Pr 5.50
Recent Severe Low Pr 5.50
Current price is at Middle 1/3 of valuation zone.

RISK: Upside 43% Downside 57%
One Year Appreciation Potential 3%; Avg. yield 6%
Avg.Total Annual Potential Return (over next 5 years) 9%

CPE/SPE 1.34
P/NTA 1.89
NTA 3.62
SPE 10.00
Rational Pr 5.10



Decision:
Already Owned: Buy Hold Sell Filed Review (future acq): Filed Discard: Filed
Guide: Valuation zones Lower 1/3 Buy Mid. 1/3 Maybe Upper 1/3 Sell

Aim:
To Buy a bargain: Buy at Lower 1/3 of Valuation Zone
To Minimise risk of Loss: Buy when risk is low i.e UPSIDE GAIN > 75% OR DOWNSIDE RISK <25%
To Double every 5 years: Seek for POTENTIAL RETURN of > 15%/yr.
To Prevent Loss: Sell immediately when fundamentals deteriorate
To Maximise Gain & Reduce Loss: Sell when CPE/SPE > 1.5, when in Upper 1/3 of Valuation Zone & Returns < 15%/yr

Coastal

Date announced 24/08/2010
Quarter 30/06/2010 Qtr 2
FYE 31/12/2010

STOCK COASTAL
C0DE  5071 
Price $ 2.42 Curr. PE (ttm-Eps) 4.52 Curr. DY 1.24%

Rec. qRev 138619 q-q % chg -2% y-y% chq 46%
Rec qPbt 48583 q-q % chg 13% y-y% chq 44%
Rec. qEps 13.32 q-q % chg 11% y-y% chq 43%
ttm-Eps 53.55 q-q % chg 8% y-y% chq 65%

Using VERY CONSERVATIVE ESTIMATES:
EPS GR 5% Avg.H PE 5.00 Avg. L PE 4.00
Forecast High Pr 3.42 Forecast Low Pr 1.56 Recent Severe Low Pr 1.56
Current price is at Middle 1/3 of valuation zone.

RISK: Upside 54% Downside 46%
One Year Appreciation Potential 8% Avg. yield 2%
Avg. Total Annual Potential Return (over next 5 years):     10%

CPE/SPE 1.00
P/NTA 1.64
NTA 1.47
SPE 4.50
Rational Pr 2.41

Decision:
Already Owned: Buy Hold Sell Filed; Review (future acq): Filed; Discard: Filed
Guide: Valuation zones Lower 1/3 Buy; Mid. 1/3 Maybe; Upper 1/3 Sell.

Aim:
To Buy a bargain: Buy at Lower 1/3 of Valuation Zone
To Minimise risk of Loss: Buy when risk is low i.e UPSIDE GAIN > 75% OR DOWNSIDE RISK <25%
To Double every 5 years: Seek for POTENTIAL RETURN of > 15%/yr.
To Prevent Loss: Sell immediately when fundamentals deteriorate
To Maximise Gain & Reduce Loss: Sell when CPE/SPE > 1.5, when in Upper 1/3 of Valuation Zone & Returns < 15%/yr

LATEXX

Date announced 6/8/2010
Quarter 30/6/2010 Qtr 2
FYE 21/12/2010

STOCK LATEXX
C0DE 7064

Price $ 3.11
Curr. PE (ttm-Eps) 8.38
Curr. DY 0.64%

Rec. qRev 134483 q-q % chg 7% y-y% chq 81%
Rec qPbt 24115 q-q % chg 4% y-y% chq 111%
Rec. qEps 10.39 q-q % chg -1% y-y% chq 77%
ttm-Eps 37.10 q-q % chg 14% y-y% chq 113%

Using VERY CONSERVATIVE ESTIMATES:
EPS GR 5%
Avg.H PE 8.00
Avg. L PE 6.00

Forecast High Pr 3.79
Forecast Low Pr 2.37
Recent Severe Low Pr 2.37
Current price is at Middle 1/3 of valuation zone.

RISK: Upside 48% Downside 52%
One Year Appreciation Potential 4% Avg. yield 1% Avg.
Total Annual Potential Return (over next 5 years):     5%

CPE/SPE 1.20
P/NTA 2.99
NTA 1.04
SPE 7.00
Rational Pr 2.60


Decision: 
Already Owned: Buy Hold Sell Filed
Review (future acq):  Filed
Discard: Filed
Guide: Valuation zones Lower 1/3 Buy; Mid. 1/3 Maybe; Upper 1/3 Sell.

Aim:
To Buy a bargain: Buy at Lower 1/3 of Valuation Zone
To Minimise risk of Loss: Buy when risk is low i.e UPSIDE GAIN > 75% OR DOWNSIDE RISK <25%
To Double every 5 years: Seek for POTENTIAL RETURN of > 15%/yr.
To Prevent Loss:   Sell immediately when fundamentals deteriorate
To Maximise Gain & Reduce Loss:    Sell when CPE/SPE > 1.5, when in Upper 1/3 of Valuation Zone & Returns < 15%/yr

BUFFETT’S COMPANY ANALYSIS TEMPLATE.

BUFFETT’S COMPANY ANALYSIS TEMPLATE.

Below is a Summary of what Warren Buffett targets in a company’s three Financial Statements and his use of his Equity Bond Theory in order to evaluate a company and to determine a preferable purchase price.

In my opinion, one could regard all these requirements as a form of COMPANY ANALYSIS TEMPLATE with which an Industrial type company should comply in order to satisfy Buffett’s Investment Criteria, which should, in turn, lead to a profitable long-term investment.

_______________________________________________________________

INCOME STATEMENT.

GROSS PROFIT :- Gross Profit = Cost of Sales/Revenue >40%

SG&A EXPENSES :- SG&A < 30% x Gross Profit 

R&D EXPENSES :- Little or Nil 

DEPRECIATION :- Depreciation < 10% x Gross Profit

INTEREST EXPENSE :- Interest Expense < 15% x Operating Income (i.e. EBIT)

PRETAX INCOME :- VERY IMPORTANT NUMBER, especially for previous 12 months

NET EARNINGS :- Net Earnings > 20% x Total Revenue

EARNINGS PER SHARE :- 10 Year Trend showing Consistency & Upward Trend

_______________________________________________________________

BALANCE SHEET.

ASSETS.

CASH & SHORT TERM INVESTMENTS :- Ongoing increase from Business Operations NOT from One-Time events

INVENTORY :- Corresponding Rise in both Inventory & Net Earnings

CURRENT RATIO :- Current Assets/Current Liabilities < 1, due to Strong Earning Power

PROPERTY, PLANT & EQUIPMENT :- Low as possible

LONG TERM INVESTMENTS :- Large as possible. Should be Quality Investments, preferably in other DCA companies

RETURN ON ASSETS (ROA) :- High BUT with Large Total Assets to reduce Vulnerability

LIABILITIES.

SHORT TERM DEBT :- Avoid bigger borrowers of Short Term money rather than Long term money 

LONG TERM DEBT DUE :- Little or Nil

LONG TERM DEBT :- Long Term Debt < 3 x Annual Net Earnings

DEBT/SHAREHOLDER’S EQUITY :- Debt/S.H.Equity < 0.8 where S.H.Equity INCLUDES Value of Treasury Stock

PREFERRED STOCK :- Nil RETAINED EARNINGS :- Annual Increase > 7%

TREASURY STOCK :- Should appear and be regularly purchased

RETURN ON SHAREHOLDER’S EQUITY (ROE) :- Net Income/S.H.Equity > 25%

_______________________________________________________________

CASH FLOW STATEMENT.

INVESTING OPERATIONS :- Based on +/-10 Year Period, Capital Expenditure/Net Earnings < 50% For DCA company this ratio is consistently < 25%.

FINANCING ACTIVITIES :- “Issuance (Retirement) of Stock, Net” to be a regular NEGATIVE Value. This indicates a NET Buying Back of its own Shares compared to a NET Issuance of its Shares. _______________________________________________________________

BUFFET’S EQUITY BOND. THE THEORY.

Companies with DURABLE COMPETITIVE ADVANTAGE (DCA) can be seen as an EQUITY BOND with a COUPON.

Equity Bond = Share Price Bond

Coupon = Pretax Earnings/Share

DETERMINE SHARE PRICE.

 Stock Market will price a DCA company’s Equity Bond at a level that approximately reflects the Value of its Earnings RELATIVE to the Yield on LONG TERM CORPORATE BONDS (LTCB)

Equity Bond = Share Price = Coupon Rate/Long Term Corporate Bond Rate (LTCBR)

Coupon Rate/LTCBR = Pretax Earnings/LTCBR

WHEN TO BUY.

 (1) Buy during Bear Markets or when share prices are depressed due to no fault of the company

 (2) Buy when Share Price < Pretax Earnings per Share/LTCBR by a reasonable discount

WHEN TO SELL.

 (1) Sell when presented with a BETTER company at a BETTER Price

 (2) Sell when a current DCA company is losing its Durable Competitive Advantage

 (3) Sell during Bull Markets or when prices are at unrealistically HIGH levels

 (4) Sell when P/E ratios > 40+, especially if the stock’s price far EXCEEDS THE LONG-TERM ECONOMIC REALITIES OF THE BUSINESS

http://siliconinvestor.advfn.com/readmsg.aspx?msgid=26423391

My day as a fund manager wannabe

What do the people you entrust your savings do all day? Our reporter joins the First State team in Edinburgh to find out what they get up to.

By Emma Wall
Published: 8:00AM BST 30 Oct 2010

39 Comments

Personal finance reporter Emma Wall

In the grand surroundings of St Andrew Square, Edinburgh, lies First State Investments. Famed for its long and successful track record in emerging markets equities and star managers such as Angus Tulloch and Martin Lau, you could forgive the preconception that behind the big glass door would be deluxe leather chairs, corner offices and traders barking orders into phones. I spent a day there to experience a fund manager's life at first hand.

8AM

At a time when most people are just leaving for work, a dozen members of First State's global emerging markets (GEM) and Asia Pacific investment teams are gathering round a table, preparing for a cross-continent meeting.

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We are crowded into what resembles a sixth-form common room, with photos of employees' weddings and nights out pinned to a board on the wall. At the foot of the table is a large television screen, where we are to expect images of similar scenes to appear, beamed from First State's Singapore and Hong Kong offices.

This is one of three meetings a week in which managers, directors and analysts meet to discuss companies in the region that may qualify for one or more of the GEM and Asia Pacific funds.

"If you took minutes of these meetings, you'd realise that we never draw any conclusions," said one of the team. "We often disagree about a company and one of us may choose to hold it in their fund while the other managers think it's a bad idea. There is not a house view."

After a few technical difficulties – "it was decided a while ago that Asia would call us, rather than us calling them, as we can't master the technology" – the meeting is up and running, chaired by Singapore-based Alistair Thompson, deputy head of Asia Pacific excluding Japan equities.

Themes discussed include infrastructure, currencies, interest rates and inflation – in Britain, Australia and Asia – as well as the hot topic of the moment, gold, and whether its price could double.

The group also reviews the big buyers and sellers of stocks – trades over $1m – that the funds hold and what this could mean for the funds' performance.

Banter is rife. Team members seem to revel in antagonising one another or demanding reasons for their stock positions, and there is little indication of hierarchy.

The First State approach to investing is to be accountable to investors rather than a benchmark. Managing partner Stuart Paul said investors knew their approach was as much about capital preservation as making returns. "You can outperform a benchmark but still lose money," he said. "That's not something we're interested in. Sometimes we might not make as much as an upmarket, but in 2000 when the MSCI emerging markets index lost 25pc, we only lost 9.5pc."

10AM

"We think it's in the interest of the client not to be too clever," said Mr Tulloch, explaining the absolute return style of investing his team champions.

Institutional investors make up just over half of First State's global emerging markets and Asia Pac Oeic (open-ended investment company) business. The team is required to keep in regular contact with its large clients, and so next on the agenda is a call to a European public pension scheme.

Mr Tulloch described how investors' location governed their interests, with Britain having a bias towards Asia Pacific and old Commonwealth allies, US investors preferring global emerging markets and in particular South America, and the Baltic region interested in Russia. This particular client has been invested since 2004 and is updated every quarter on the fund's performance, outlook and portfolio changes.

Staff changes within First State are explained, as are big buys and sells and any mistakes managers may have made. The client questions the impact of Chinese inflation on the fund and interest rates as well as property market speculation. Technological developments in 3G mobiles, the Thai elections and food prices are also on the agenda.

While this meeting is going on, other team members make research calls to Asia – these have to be in the morning because of the time difference. The team travels to meet remote companies, and is out of the country for about eight weeks a year. On top of this, members spend two months a year in either the Hong Kong or Singapore offices.

The house prefers not to have single-country funds, hence the Greater China fund is also invested in Taiwan, Hong Kong and Singapore.

Alan Nesbit, deputy head of global emerging markets, said they preferred not to match the index weightings, as that made you focus on the past. "If you follow the index, you are constantly looking in the rear view mirror," he said. "The biggest emerging market changes – not that long ago it was Mexico."

12.30PM

Over a team lunch – a rare treat, I am told – we discuss the First State philosophy further. Millar Mathieson, senior analyst and portfolio manager, explained how even though Mr Tulloch was the boss, they felt just as comfortable questioning his investment decisions as those of the junior members of the team.

"There is no hierarchy like that – as you saw this morning," one said. "One of us can disagree with another, and just because Angus or Stuart believe something doesn't mean we have to toe their line."

2.30PM

In the afternoon there is an office visit from a Malaysian manufacturer with links to the medical industry, who is pitching for First State to invest. The manufacturer brought material samples along so that the team could touch and feel them; they have fun passing the products around. The company is assessed not just on profits and financial performance but also on the company's culture and ethics – whether they source raw materials sustainably and the ecological impact of production and waste disposal.

4PM

Most of the team's time is spent researching companies and prospective investments. Even if a company is not suitable for investment now, it is monitored for potential in the future.

Jonathan Asante, the head of global emerging markets, said that when the team met companies they were often told they asked different questions from other investment houses. He said: "We are concerned about the companies' culture; whether they are trustworthy, honest and good to their shareholders. We don't want to see a spreadsheet and a business model, anyone can mock those up."

The biggest companies in emerging markets are often state owned, so First State spends some time educating companies about the value of small shareholders.

Since 2004 First State has been limiting new investment into the Asia Pacific fund and has actively discouraged new investors from the Latin America fund.

The team is finding that prices are high at the moment and the best companies come at a premium. "We have written to clients saying it is difficult at the moment – don't invest any more. Sit tight," Mr Asante said. "You can always find rubbish that's cheap, but we're not interested in rubbish."

4.30PM

I head for the exit, while Mr Tulloch and his colleagues continue to chew over the endless facts, figures and research notes that pass their desks. They tell me they rarely leave before 7pm.

http://www.telegraph.co.uk/finance/personalfinance/investing/8097596/My-day-as-a-fund-manager-wannabe.html

Tongher

Date announced 17/08/2010
Quarter 30/06/2010 Qtr 2
FYE 31/12/2010

STOCK TONGHER
C0DE  5010 

Price $ 1.91
Curr. PE (ttm-Eps) 12.41
Curr. DY 2.62%

Rec. qRev 63560 q-q % chg 8% y-y% chq 42%
Rec qPbt 10015 q-q % chg 76% y-y% chq 2529%
Rec. qEps 4.98 q-q % chg 69% y-y% chq -832%
ttm-Eps 15.39 q-q % chg 58% y-y% chq -2%

Using VERY CONSERVATIVE ESTIMATES:
EPS GR 4%
Avg.H PE 10.00
Avg. L PE 4.00

Current price is at Upper 1/3 of valuation zone.
RISK: Upside -17% Downside 117%
One Year Appreciation Potential 0% Avg. yield 3% Avg.
Total Annual Potential Return (over next 5 years):    3%

CPE/SPE 1.77
P/NTA 0.86
NTA 2.23
SPE 7.00
Rational Pr 1.08


Decision:
Already Owned: Buy Hold Sell Filed
Review (future acq) Filed
Discard Filed
Guide: Valuation zones Lower 1/3 Buy Mid. 1/3 Maybe Upper 1/3 Sell

Aim:
To Buy a bargain. Buy at Lower 1/3 of Valuation Zone
To Minimise risk of Loss. Buy when risk is low i.e UPSIDE GAIN > 75% OR DOWNSIDE RISK <25%
To Double every 5 years. Seek for POTENTIAL RETURN of > 15%.
To Prevent Loss Sell immediately when fundamentals deteriorate
To Maximise Gain & Reduce Loss Sell when CPE/SPE > 1.5, when in Upper 1/3 of Valuation Zone & Returns < 15%/yr


How to value a cyclical stock, like Tongher?

A reasonable method is using the asset valuation method.  Tongher is trading below its NTA.

It is more challenging to use earnings to value cyclical stocks.  Tongher's earnings are affected by the business cycle of its sector.  I have averaged all the existing ttm-EPS figures that I have over the last 26 quarters and this gives an average ttm-EPS of 27.3 sen.  Before the recent global crisis, Tongher was earning about 15 sen per quarter.  It's latest quarter's EPS was 4.98 sen.

Using a conservative estimated ttm-EPS 30.0 sen and the signature PE of 7, I derive a rational value for Tongher of 2.10.  As this value will be on the low side due to the very conservative assumptions made in its derivation, at its current price of 1.91, Tongher is undervalued.


Date announced 17/08/2010
Quarter 30/06/2010 Qtr 2
FYE 31/12/2010

STOCK TONGHER
C0DE  5010 

Price $ 1.91
Curr. PE (ttm-Eps) 6.37
Curr. DY 2.62%

Valuation using Estimated ttm-EPS
ttm-Eps 30.00 sen

Using VERY CONSERVATIVE ESTIMATES:
EPS GR 4%
Avg.H PE 10.00
Avg. L PE 4.00

Current price is at Lower 1/3 of valuation zone.
RISK: Upside 87% Downside 13%
One Year Appreciation Potential 18% Avg. yield 6%
Avg. Total Annual Potential Return (over next 5 years):     24%

CPE/SPE 0.91
P/NTA 0.86
NTA 2.23
SPE 7.00
Rational Pr 2.10

Dutch Lady

Date announced 18/08/2010
Quarter 30/6/2010 Qtr 2
FYE 31/12/2010

STOCK DLADY
C0DE 3026

Price $ 18
Curr. PE (ttm-Eps) 15.16
Curr. DY 3.65%

Rec. qRev 188919 q-q % chg 9% y-y% chq 7%
Rec qPbt 25546 q-q % chg -10% y-y% chq 28%
Rec. qEps 29.56 q-q % chg -9% y-y% chq 23%
ttm-Eps 118.74 q-q % chg 5% y-y% chq 46%

Using VERY CONSERVATIVE ESTIMATES:
EPS GR 5%
Avg.H PE 14.32
Avg. L PE 12.30

Current price is at Middle 1/3 of valuation zone.
RISK: Upside 38% Downside 62%
One Year Appreciation Potential 4% Avg. yield 6%
Avg. Total Annual Potential Return (over next 5 years):  10%

CPE/SPE 1.14
P/NTA 5.86
SPE 13.31
Rational Pr 15.80


Decision: 
Already Owned: Buy Hold Sell Filed
Review (future acq): Filed
Discard: Filed
Guide: Valuation zones: Lower 1/3 Buy; Mid. 1/3 Maybe; Upper 1/3 Sell.

Aim:
To Buy a bargain: Buy at Lower 1/3 of Valuation Zone
To Minimise risk of Loss: Buy when risk is low i.e UPSIDE GAIN > 75% OR DOWNSIDE RISK <25%
To Double every 5 years: Seek for POTENTIAL RETURN of > 15%.
To Prevent Loss: Sell immediately when fundamentals deteriorate
To Maximise Gain: Sell and Replace when CPE/SPE > 1.5, when in Upper 1/3 of Valuation Zone & Returns < 15%/yr

Public Bank Berhad

Date Announced 18/10/2010
Quarter 30/09/2010 Qtr 3
FYE 31/12/2010

STOCK PBBANK
C0DE  1295 

Price $ 12.88
Curr. PE (ttm-Eps) 15.58
Curr. DY 4.27%

Rec. qRev 2877383 q-q % chg 7% y-y% chq 18%
Rec qPbt 1051377 q-q % chg 7% y-y% chq 23%
Rec. qEps 22.35 q-q % chg 7% y-y% chq 21%
ttm-Eps 82.66 q-q % chg 5% y-y% chq 13%

Using VERY CONSERVATIVE ESTIMATES:
EPS GR 5%
Avg.H PE 14.00
Avg. L PE 12.00

Current price is at Middle 1/3 of valuation zone.
RISK: Upside 54% Downside 46%
One Year Appreciation Potential 3% Avg. yield 6% Avg.
Total Annual Potential Return over next 5 years 9%

CPE/SPE 1.20
P/NTA 3.70
SPE 13
Rational Pr 10.75


Decision: 
Already Owned: Buy Hold Sell Filed
Review (future acq):  Filed
Discard:  Filed
Guide: Valuation zones Lower 1/3 Buy; Mid. 1/3 Maybe; Upper 1/3 Sell.

Aim:
To Buy a bargain: Buy at Lower 1/3 of Valuation Zone
To Minimise risk of Loss: Buy when risk is low i.e UPSIDE GAIN > 75% OR DOWNSIDE RISK <25%
To Double every 5 years:  Seek for POTENTIAL RETURN of > 15%/yr
To Prevent Loss:  Sell immediately when fundamentals deteriorate
To Maximise Gain & Reduce Loss:    Sell and Replace when CPE/SPE > 1.5, when in Upper 1/3 of Valuation Zone & Returns < 15%/yr

Guinness

Date Announced 4th Aug 2010
Quarter 30/06/2010 Qtr 4
FYE 30/06/2010

STOCK  GUINESS 
C0DE  3255

Price $ 8.68
Curr. PE (ttm-Eps) 17.17
Curr. DY 5.18%

Rec. qRev 308713 q-q % chg -17% y-y% chq 12%
Rec qPbt 48010 q-q % chg -23% y-y% chq 26%
Rec. qEps 11.81 q-q % chg -23% y-y% chq 30%
ttm-Eps 50.54 q-q % chg 6% y-y% chq 8%

Using VERY CONSERVATIVE ESTIMATES:
EPS GR 5%
Avg.H PE 14.00
Avg. L PE 12.00

Current price is at Upper 1/3 of valuation zone.
RISK: Upside 16% Downside 84%
One Year Appreciation Potential 1% Avg. yield 7%
Avg. Total Annual Potential Return over next 5 years 7%

CPE/SPE 1.32
P/NTA 5.56
Sig. PE 13
Rational Pr 6.57


Decision: 
Already Owned:  Buy Hold Sell Filed
Review (future acq):  Filed
Discard:  Filed
Guide: Valuation zones:   Lower 1/3 Buy Mid. 1/3 Maybe Upper 1/3 Sell

Aim: 
To Buy a bargain:. Buy at Lower 1/3 of Valuation Zone
To Minimise risk of Loss:  Buy when risk is low i.e UPSIDE GAIN > 75% OR DOWNSIDE RISK <25%
To Double every 5 years:   Seek for ANNUAL POTENTIAL RETURN of > 15%.
To Prevent Loss:   Sell immediately when fundamentals deteriorate
To Maximise Gain:    Sell and Replace when CPE/SPE > 1.5, when in Upper 1/3 of Valuation Zone & Returns < 15%/yr

Nestle’s 3Q net profit up 42%

Nestle’s 3Q net profit up 42%
Tags: Nestle (M) Bhd | third quarter

Written by Financial Daily
Friday, 29 October 2010 11:30


KUALA LUMPUR: Nestle (M) Bhd’s net profit for the third quarter ended Sept 30, rose 41.9% year-on-year (y-o-y) to RM113.19 million or 48.3 sen a share while revenue gained 11.8% to RM991.08 million.

For the cumulative nine-month period, net profit totalled RM352.14 million or 150.2 sen a share and revenue was at RM3.06 billion, a y-o-y gain of 32.6% and 9.6%, respectively.

Nestle attributed the strong 3Q performance to satisfactory growth in most of its product categories, especially for Nestle liquid drinks and chilled dairy, which achieved double-digit growth.

Meanwhile, capitalising on the investments made in major production lines for coffee and coffee creamers in the past two years, Nestle said its export business also registered strong double-digit growth for 3Q.

It said, although its gross profit margin deteriorated by 110bps y-o-y as a consequence of input cost pressures and product sales mix, this effect was mitigated by less marketing and promotional activities during 3Q and the timing of some fixed overhead expenses, hence enabling profit margin before tax to still improve by 140 bps from the previous year’s 3Q.

For the remaining three months, Nestle said it would leverage on positive economic trends to continue growing both its top and bottom line. It will also increase its marketing investment to expand its market share.


This article appeared in The Edge Financial Daily, October 29, 2010.

----


STOCK NESTLE
C0DE 4707

Price $ 43.8
Curr. PE (ttm-Eps) 23.43
Curr. DY 3.42%

Rec. qRev 991076 q-q % chg -6%  y-y% chq 12%
Rec qPbt 132652 q-q % chg 13% y-y% chq 25%
Rec. qEps   48.27 q-q % chg 13%  y-y% chq 42%
ttm-Eps 186.94 q-q % chg  8%  y-y% chq 28%

Using VERY CONSERVATIVE ESTIMATES:
EPS GR 6%
Avg.H PE   22.00
Avg. L PE 19.00

Current price is at  Middle 1/3 of valuation zone.  
RISK: Upside 56% Downside 44%
One Year Appreciation Potential 5%   Avg. yield  6%
Avg. Total Annual Potential Return over next 5 years 11%

CPE/SPE 1.14
P/NTA 18.10
Sig. PE 20.5
Rationale Pr  38.32

Petronas Dagangan

STOCK PETDAG
C0DE  5681 

Price $ 11.9
Curr. PE (ttm-Eps) 15.82
Curr. DY 5.04%

Date  24/08/2010
Qtr Ending  30/06/2010
Qtr 1  FYE  31/03/2011

Rec. qRev 5456472 q-q % chg 1% y-y% chq 14%
Rec qPbt 277223 q-q % chg 20% y-y% chq -2%
Rec. qEps 20.10 q-q % chg 24% y-y% chq -3%
ttm-Eps 75.20 q-q % chg -1% y-y% chq 35%

Using VERY CONSERVATIVE ESTIMATES:
EPS GR 4%
Avg.H PE 12.00
Avg. L PE 10.00

Current price is at Upper 1/3 of valuation zone.
RISK: Upside -45% Downside 145%
One Year Appreciation Potential -2% Avg. yield 6% Avg.
Total Annual Potential Return over next 5 years 5%

CPE/SPE 1.44
P/NTA 2.48
Sig. PE 11
Rational Pr 8.27

LPI

STOCK LPI
C0DE  8621 

Price $ 11.5
Curr. PE (ttm-Eps) 18.51
Curr. DY 3.67%

Rec. qRev 216952 q-q % chg 15% y-y% chq 5%
Rec. qPbt 47445 q-q % chg 32% y-y% chq 11%
Rec. qEps 16.85 q-q % chg 40% y-y% chq 13%
ttm-Eps 62.13 q-q % chg 3% y-y% chq 11%

Using VERY CONSERVATIVE ESTIMATES:
EPS GR 4%
Avg.H PE 17.00
Avg. L PE 13.00

Current price is at Middle 1/3 of valuation zone.

RISK: Upside 37% Downside 63%
One Year Appreciation Potential 2%  Avg. yield 5%
Avg. Total Annual Potential Return over next 5 years 7%

CPE/SPE 1.23
P/NTA 2.31
SPE 15
Rational Pr 9.32


(CPE = Current PE, SPE = Signature PE)

Warren Buffett's Priceless Investment Advice

It is great when you can find high quality stocks offered at bargain prices.  However, most of the time, you will find that they are selling at fair prices. 

It is only during certain periods in the market when these high quality stocks are again offered at bargain prices.  These bargains are often not large, as those holding these stocks are often smart, long term investors who know the 'intrinsic' value of their shares.

Well, if you have to invest regularly, you can either wait for a 'right' time when stocks are offered at relative bargain prices.  Alternatively, you can actually acquire these stocks 'almost immediately' and 'regularly' as many are trading at their fair prices.

Here is a strategy you may wish to adopt profitably into your investing strategies.  

Click here:  Warren Buffett's Priceless Investment Advice

"It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price."

If investing in wonderful companies at fair prices is good enough for Warren Buffett -- arguably the finest investor on the planet -- it should be good enough for the rest of us.

The devil is in the details

Buying great companies at reasonable prices can deliver solid returns for long-term investors. The challenge, of course, is identifying great companies -- and determining what constitutes a reasonable price.

Buffett recommends that investors look for companies that deliver outstanding returns on capital and produce substantial cash profits. He also suggests that you look for companies with a huge economic moat to protect them from competitors. You can identify companies with moats by looking for strong brands that stand alongside consistent or improving profit margins and returns on capital.

How do you determine the right buy price for shares in such companies? Buffett advises that you wait patiently for opportunities to purchase stocks at a significant discount to their intrinsic values -- as calculated by taking the present value of all future cash flows. Ultimately, he believes that "value will in time always be reflected in market price." When the market finally recognizes the true worth of your undervalued shares, you begin to earn solid returns.

Bursa raps and fines Liqua, six former directors

"Harapkan pagar, pagar makan padi."

Saturday October 30, 2010

Bursa raps and fines Liqua, six former directors

PETALING JAYA: Liqua Health Corp Bhd and six former directors were publicly reprimanded yesterday and fined a total of RM1.63mil by Bursa Malaysia Securities for failing to discharge their duties.

In addition, Liqua’s former managing director Goh Bak Ming and former executive director See Keng Leong were required to pay back Liqua a total sum of RM15.67mil, which equalled the amount the company had paid to Wynsum Healthy Living Sdn Bhd for the sale and distribution of certain health products. A total sum of RM13.2mil obtained from banking facilities were paid to Wynsum.

“Notwithstanding the payments made to Wynsum, the products were never delivered,” according to a Liqua statement.

Bursa Securities said it had found that the former directors of Liqua failed to ensure the payments made to Wynsum and the corporate guarantees issued to secure the financing “were fair, and reasonable,” as well as “not to the detriment of Liqua and its shareholders.”

Goh was slapped with a RM1mil fine, while See RM500,000. The other four directors Dr Fei Chong Ming, Ng Weng Cheong, Leow Yan Seong@ Liew Pin and Rohaya Hashim were fined RM10,000 each.