Ahpek and his "undervalued" Icapital

Ahpek and his "undervalued" Icapital

 

One of the most difficult tasks when buying a property in the secondary market is to "determine the actual value" of the property subject, especially in hot locations. On one hand, the seller is determined to be the next record price seller while the buyer is at a loss of losing out the bid if he does not agree to the seller's price.

Even if that buyer painfully agrees to the sale, he must be prepared for more uncertainties and perhaps "shocks" when he applies for a housing loan. And if the down payment is not much which means he must apply for a bigger loan, he will discover that the loan could be rejected because the bank does not value his property according to the sale and purchase agreement's price. In another words, the bank is undervaluing his property in their own valuation.

How do you feel now that you realised that your purchase is "overvalued" in the eyes of the bank? Hence, the bank will have to "undervalue" your property according to their valuation.

Who is right to say your property should be valued at this price or at that price according to their "so-called fair" valuation?

This brings me to the subject of Undervalued and Overvalued for stocks. Who is right to say that this counter is undervalued or overvalued or fairly valued?

A Google search produced the Definition

of "Undervalued'"and "Overvalued" as below:

Undervalued

A financial security or other type of investment that is selling for a price presumed to be below the investment's true intrinsic value. A undervalued stock can be evaluated by looking at the underlying company's financial statements and analyzing its fundamentals, such as cash flow, return on assets, profit retention and capital management, to determine said stock's intrinsic value.

While Investopedia explains 'Undervalued' as:

Buying stocks when they are undervalued is a key component of mogul Warren Buffett's value investing strategy. Value investing is not foolproof, however. There is no guarantee as to when or whether a stock that appears undervalued will appreciate. There is also no single correct way to determine a stock's intrinsic value - it is basically an educated guessing game.

Overvalued

Definition of Overvalued By Dave Manuel :

What is the definition of the term "overvalued" as it applies to the stock market? What does the term overvalued mean? When somebody claims that a stock is "overvalued", they are saying that the stock is currently trading for more than it is worth.

Overvalued - Definition - FinanceNow, calling a company "overvalued" is obviously completely subjective - some may believe that a company is overvalued, while others might believe that it is undervalued.

The most common way to value a company is through its Price/Earnings ratio. The problem with the Price/Earnings ratio, of course, is that it doesn't properly value fast-growing companies that may be closing to turning the corner and reaching profitability. Is a stock overvalued, undervalued or valued perfectly? These are the questions that haunt investors and traders on a daily basis.

Icapital Biz Bhd.

Back to Bursa Malaysia, one company that has been hogging the headlines recently in the Chat Box of www.stocks-unleashed.com is Icapital Biz Bhd, (Icap) a closed-end fund that was listed on October 2005.

One online user by the name of "Ahpek" has been vigorously promoting Icap for several days. He said that Icap was trading at a  20-25% discount to Net Asset Value (NAV) and also "fundamentally undervalued".

A few other online users hit back . One by the name "Kh" said that Icap is just an average performer, citing that its major holding of Parkson and Boustead as having average capital appreciation. Kh prefers LPI Capital Berhad  which is trading at cheaper valuation than Public Bank Berhad.

Let us ask ourselves some simple logic questions. If Icap is really trading at a discount, why is the market not reacting to it? Why is it still trading at below its NAV for so many years? Is the market full of inefficient players not knowing how to grab this "undervalued"  stock trading at a 20-25% discount? Or is the market knowing something that we do not know?

Ahpek, perhaps one way to boast or stake your claim is to buy a handful of Icap shares at current prices and show it to others. As the saying says, don't just talk the talk, walk the talk and you can surely set yourself up with pride with serious justification of your claim.

Even then, there will still be others arguing/debating with you over this. But at least this time, you can ask them back, have you bought any of your so-called undervalued shares at current price? If they claimed their shares are undervalued, they should also be the first to buy a lot. Yet they are not buying. Why?

Always be brave enough to buy at current price. Then only you have the strongest rights to claim it is really trading at undervalued levels.

So, Ahpek, are you listening now?

Incidentally discussing about Icap, the writer was one of the early bird investors, buying 2,000 shares at RM1.36 on November 15th, 2006. On January 18th, 2008, the writer sold Icap at RM2.53, netting in a profit of RM2,291.06, resulting in a 83% return for a holding period of 14 months. At that time, I felt it was "fully valued" as the market was on a strong rally. I was hoping to buy back when it retreated to below RM2. Icap actually retraced back to below RM2, in fact at around RM1.50 levels. Strangely, I didn't  buy back or else I would be sitting on another round of profit (or paper profit) as at today and watch with amusement the current debate of Ahpek and the rest.

Again in a unrelated issue, the writer also sold 3,000 shares of Swee Joo Berhad at RM1.59 on the same day the Icap shares were sold. The 3,000 shares of  Swee Joo were bought on October 17th, 2006 at 0.86 sen. That day was Swee Joo's listing day at Bursa Malaysia. The writer netted in a profit of RM2,139.14, also resulting in a  83% return for a holding period of 15 months. It was a lucky move by the writer to take profit as we all know, a few years later, Swee Joo was eventually delisted due to its loan problems.

See, luck also plays an important role for us when it comes to investing and taking profits. No particular reason why I sold the Swee Joo shares, maybe I just wanted to feel the actual feeling of real profit in cash rather than just paper profits.

On a lighter, market seems more efficient when it comes to Tuesday at most KFC counters. Unusual large crowds could be seen lining up to make purchase. In case you do not know why or fried chicken is not your favourite, on every Tuesday, KFC is offering 25% off for its Snack Plate! Chicken lovers surely know when to smell when there is a real bargain!

Decision to invest the simple ways

Decision to invest

the simple ways

Several years ago in Penang, there was this nice semi corner three storey ground floor apartment for sale at a then record price of RM300K. (It was a record price because at that time, never has there been a sale of more than RM300K or near it in this low density gated apartment).

This ground floor unit’s balcony and kitchen’s views are excellent, over-looking a big playing field with plenty of big trees. In the early morning and evening, many people would be exercising, taking a walk or jogging there. Such a nice place to stay.

This “good friend of mine” was real keen to purchase the unit for his staying with his family. Having a real feel of the unit when the broker allowed him for a viewing, he was real, real upbeat to pay the record price. (At that times, several people were also viewing the unit).

But this “good friend of mine” was unsure whether he would be paying too much for this unit. He consulted a few of his good friends for their views before making the purchase. None of them agreed to the asking RM300K price. They felt the price was too much. They valued the unit’s price should not be more than RM280K. 

Encouraged by his “expert” friends’ valuation price, this “good friend of mine” refused to pay the asking price. Instead he offered RM280K which was flatly rejected. But this “good friend of mine” still liked the unit very much. So this “good friend of mine” decided to increase his offer to RM285K which was also rejected.

The broker advised this “good friend of mine” to just pay the asking price and secure his dream home just like that. But because this “good friend of mine” was influenced by the views of his friends’ lower valuation price, he refused and only offered to increase his price to RM290K the next morning. Still it was rejected.

But this “good friend of mine” was convinced that this unit was a real nice happy place to stay, he decided to increase his offer to RM295K by the afternoon. And if still rejected, then he would give to his asking price of RM300K.

So in the afternoon, when he called the broker again, (convinced that he would close the deal), he was shocked to learn that someone else had purchased it at the asking price only one hour earlier!

This “good friend of mine” was devastated that such a nice unit would not be his anymore. (Not that he could not afford, but because he wasn’t willing to pay for the asking price initially). Even until today, each time he drives pass that area, there is this painful feeling in his heart of missing out to purchase and stay in this nice ground floor unit).

What can we learn

from the above true story?

It is only natural to seek others’ views when deciding to purchase a property that most probably costs such a big amount of money. But different people will give different views. If only this “good friend of mine” had seek even more views, there could be just one simple view from someone else who may just ask this “good friend of mine” this simple question : Do you really like to stay in this unit? Would you be happy to stay there? Can you afford within your means? If the answers are yes, then just pay the asking price. Unfortunately, this “good friend of mine” did not meet that someone who would be asking him that three questions. Instead what he was told was that the concerned property was too overvalued.

It is also natural that when it comes to investing in Bursa Malaysia, we tend to seek the views of other “experts”. The more “experts” we seek out to ask, the more views one will get until it becomes too complicated for one to digest.

Actually, one should not be too concerned about this. For there is always two sides to a coin for everything. There are always pros and cons too.

I do not seek the views of others, but I do read their views if possible. Who knows, sometimes they would be seeing from another different angles which I will not see it. But in the end, I seek my own views, decide on it finally when it comes to investing. I like to look for small companies that are making reasonable consistent profits, have some cash, paying our regular dividends and trading at undemanding levels. Their businesses must also be easy to understand. Better still if their businesses are there to stay for years and years to come.

That is the way how the writer makes

his decision to invest the simple ways.

So dear Jeremiah Jonas-Lee, I hope to clear your doubts about investing regarding YSPSAH which in the email, you expressed your concerned about this numbers ie:

1. ROE  of around 7%

2. 5 year average ROE of 9%

3. Profit margin of 7%

4. Decreasing EPS

5. Payout ratio over 60%

    (for a company supposedly expanding?)

6. Dividend growth rate of only 3%

Do not be too worry about all this numbers. For each time, a company announces its quarterly reports, the above numbers would not be the same anymore.

There is no such thing called a perfect stock. There are always some element of risks involved when it comes to investing.  There is no free lunch when it comes to investing. Even the “most perfect” stock that one has invested may turn out into the most hated and sick stock when its business could not compete with its competitors and suffers declining sales and eventually leading to making loss. When that happens, you can bet that its share price will also be going down somewhere.

In short, do not be too confused and complicated by too much views of many. Make it simple. Make investing a joy especially when it comes to receiving dividends that is above average fixed deposit’s rate and seeing some capital appreciation in the share price.

Happy investing, Jeremiah!

Soaring Apollo and Falling Star

 

Soaring Apollo

and Falling Star

How fortunes have fallen in contrasting ways for the long term shareholders of both Apollo Food Holdings Berhad and Star Publications (M) Bhd in recent times.

Although both companies continue to report profits year after year and dishing our dividends to shareholders year after year, the direction of both the companies’ share price continue to move in different directions especially this year.

Apollo soaring into the orbit

Thanks to a continuous improvement in profits, Apollo has seen its share price doubling from RM2.40 plus in 2006 to RM4.80 plus in 2013. That is a 100% increase in its share price. Apart from its reliable dividends payouts, its cash holdings is also up to RM64 million according to its 2013 Annual Report.

Apollo registered a turnover of RM222.75 million for the financial year ended 30 April 2013, an increase of 11.07% as compared to RM200.55 million in 2012. This was mainly due to the improvement of demand in both export and domestic markets.

The profit after tax increased by 47% to RM32.08 million from RM21.74 million as recorded in the previous financial year. Similarly earning per share also increased from 27.18 sen to 40.10 sen over the same period. The higher revenue and improved cost structure had contributed to the higher profit.

Apollo’s 1st Qtr for financial year April 2014 is the strongest compared to all its previous’ quarter earnings. It reported a impressive net profit of RM10,713 Million. Earning per share stood at a high of 13.39 sen, the highest quarter ever recorded. Annualised and that would be a record earning per share of 53 sen. For that kind of earnings, long term investors can happily expect at least a minimum dividend of 25 sen to a most probably 30 sen dividend for financial year 2014.

As Apollo will be paying out a 25 sen dividend for financial year 2013 on January 9th 2014 (ex-date is December 10th 2013), any investor willing to buy now and hold on the stock to until at least the next ex-date in December 2014 (for its at least a minimum dividend of 25 sen to a most probably 30 sen dividend for financial year 2014 again most probably payable around January 2015), that investor would be receiving at least a total of a 50 sen to 55 sen dividend for a holding period of 15 months.

That is a more than 10% dividend return

for an investment of around RM4,800.00

for a 1,000 Apollo shares in 15 months!

As I have posted in the chat-box column of the website of www.stocks-unleashed.com before with this simple sentence : Children love the tasty and delicious food produced by Apollo Food Holdings Berhad, but long term shareholders love the consistent good dividends and its ever appreciating share price even more.

How more true could the above sentence be?

The Star is falling from the sky

The Star is an English-language, tabloid-format newspaper in Malaysia. It is the largest English newspaper in terms of circulation in Malaysia, according to the Audit Bureau of Circulations. It has a daily circulation of between 290,000 to 300,000

The Star is owned by the Malaysian Chinese Association.

The Star (daily) and Sunday Star are published in five editions - two editions which cover the northern peninsular states of Penang, Kedah, Perlis, Kelantan and northern Perak, while another two editions cover the rest of the country. The newspaper has a separate Sarawak edition.

The Star has fallen from the sky which it used to stay for up there steadily for the last decade. It has not yet fallen into the ground as its share price has dropped to a ten year low of RM2.40 in 2013 from its average steady price of RM3.40 during the last decade. That is a fall of only 30% drop in its share price.

The Star is holding on steadily at around RM2.40 as it is still making profit and paying our regular dividends, except that it is earning less profits and paying out less dividends.

Its latest interim dividend of 6 sen for financial year 2013 is lower compared to its previous interim dividend of 9 sen due to its weaker earnings. That is the first time The Star has paid out a lower dividend as compared to all its usual previous interim dividend payout.

Having paid out the interim dividend of 6 sen, the final dividend of another 6 sen is most likely judging by the company’s earning per share of 7.4 sen for the first half of 2013.

The Star has been embarking on several measures to boast up its circulations and advertising revenue. If you are a keen observer of The Star, you would have noticed that it is opening up its advertising to more flexible ways to suit advertisers’ demands. For example, The Star has recently allowed advertisers to advertise its products in a “wrapping style” that cover the first, second and the last third and fourth page. That must have cost the advertiser some big money. Only the big boys (big companies with deep pockets) could only afford this type of advertisements.

Another way The Star is trying to increase its revenue is by offering spot colour and full colour in its obituary section. And really, I did see some of those advertisements in full colour. Even those congratulations advertisements are being offered in spot and full colour.  The Star’s Annual Report also featured several pages of advertisements, too. Guess there is always rooms for extra revenues.

You can bet that The Star would be fighting tooth and nail all the way to make the company more efficient and transform it into a higher-performing and lean organization.

Again, nothing is more serious than a memo signed by its Acting Group CEO Datuk Seri Wong Chun Wai. The memo confirmed that The Star will be embarking on a Voluntary Separation Scheme (VSS) for the first time in its history. The VSS will only be offered to staff from Star Publications and not including its subsidiaries. The VSS will likely take place before the end of the year.

Perhaps the last sentence of the memo summed it up: “The Star continues to be a stronghold in the media industry but to stay that way, we must step up our game. Only then can we remain leaders in our field.”

The writer remains confident that The Star will not fall to the ground, but will somehow remains somewhere in the sky, perhaps not too far from Earth.

Will it or Will it not

or When Will it?

Take a guess about the above sentence of Will it or Will it not or When Will it? Which stock am I referring to? I am talking about a stock which its directors are being “criticized”  for their stinginess in sharing their big cash hoard with its minorities shareholders.

Yes, I am referring to the expected “Bumper Dividend” from Keck Seng (M) Bhd which should be declared before the end of the year.  Time is running out for the board of directors of Keck Seng to decide.

Judging from its very strong share price runs during the last few days, I believe many investors are betting ahead of its “Bumper Dividend” announcement due anytime. And if it really happens, I strongly believe that there could a knee-jerk reaction of at least a 50 sen rise from its current share price of around RM6 plus.

Then again, it might not happen as in life, we should always expect the unexpected.

Before I sign off, I like to share this comment taken from http://klse.i3investor.com. The interesting comment by “prudentinvestor” reads : It is not the end of the world even if Keck Seng fails to pay the special dividend that every small share holder is expecting. The directors are only thinking of themselves. While many small investors are able to claim back a portion or all of the 25% tax that has been deducted, the directors may not be able to do this. The happiest people if Keck Seng does not make full use of the 108 balance would be those from the Lembaga Hasil Dalam Negeri.