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Sunday, May 24, 2015

Investing Without Tears

Investing is never 100% risk free. No matter how diligent and careful you are, a certain amount of risk is there. But with some knowledge and a good strategy, risk can be mitigated. Here are some guidelines:

1. Be an investor not a trader

Every stock has a company behind it. If you do an in-dept study of the company and you are convinced that the company is fundamentally sound and that your principal is safe in additional to an adequate return before you buy, you are investing. 

2. Don’t buy liabilities

A company with high gearings and no earnings or very little earnings is a problem company. It is liability. Don’t buy it; don’t buy somebody’s problem. 

3. Follow the trend

Prices move in trends. A trend in motion is likely to move in the same direction. Follow it. When you see higher highs and higher lows in a chart, that’s an uptrend. A down trend is when you have lower lows and lower highs. 

4. Avoid the herd mentality

Just because all your friends are buying a certain stock, and therefore it is safe to follow, is a wrong way of thinking. In the stock market, there is no safety in numbers. You need to think independently as an investor. 

5. Be aware of what is cheap and what is low price

Many people assume that a low-priced stock is cheap. In reality, a higher-priced stock is often cheaper. You must look at the intrinsic value before you decide which is cheaper relative to its price.

6. A stock market is not a casino

The stock market has no mercy for those who treat it as a casino. All amateur gamblers lose money. Trading and speculations are akin to gambling. 

7. Be aware of your own ability

The problem with most people is that they tend to over estimate their own ability. 
Imagine what chance you have if you pit yourself against the professionals who are there ‘playing’ the market full-time.

8. Insist on value when you buy

A stock has three prices. It has a market price, a book value and an intrinsic value.
The market price is easy to understand. It is the last traded price at the end of a trading day. 

The book value is simply the net tangible asset (NTA) as shown in its balance sheet. 

The intrinsic value is the most difficult to calculate. I do not know of any formula for this. At most, it is only an estimation. You have to factor in many metrics such as barrier of entry, calibre of management, earnings potentials (present and future) growth prospects, patents, etc.

So, what should we do? For me, I make it simply. I look at the track record relative to its earnings, earnings growth and dividend yields. The higher these are, the higher the value. 

Buying a stock at high earnings per share (PE) is risky. Unless the forward PE is  expected be much lower, avoid stocks trading with high PE. (A PE of over 16 is too high for me.) 

To value a stock, here are some metrics or key ratios to consider: EPS( earnings per share); D/Y (dividend yield); NTA (net tangible assets); PEG (price to earnings growth); NPM (net profit margin); ROE (return on equity); D/E (debt to equity ratio) C/R (current ratio); PCF (price to cash flow). One other thing to carefully consider is the core business of the company. Here, you need to think about barrier of entry, patents and competition.


9. When is the best time to sell a stock

Close to 100% of all stocks will at one time or another be selling at extremely high valuation that they should be sold. At other times, they will be selling at overly undervalued prices that they should be bought. We want to sell a stock when it is very much overvalued.

Understanding the value of a stock is crucial in this respect, and with the help of technical analysis, you have the advantage of the competitive edge.  

10. Control your emotion

Taking action for action sake is a weakness that many people fail to control. Some people need to move in and out of the market often enough to overcome boredom. 

They forget that transaction costs eat into their earnings. 

Buy and sell with good reasons and not simply with intuition and the need for action.

Following the guidelines mention above will go a long way to help you to invest intelligently. 

If you like the above article and wish to join my group known as “Intelligent Investing” please install Telegram into your phone and contact me.  My number is: 016-9321849 


Monday, April 27, 2015

An above average-company at below-average prices


In early 2014, PRK was the subject of a capital restructuring and repayment exercise. The investment arm of the Perak State Government (PSG) and some other parties had proposed to privatise the company at RM3.90 per share. Sime Darby considered the price too low, and as a result the proposal did not materialise.  Indeed the price was too low considering that the NTA value of PRK was at that time more than RM5 plus per share. 

PRK had a 15.74% stake in Integrax. Recently it sold this block of shares to TNB at RM3.25 per share. This will add in some RM153 million to the coffers of PRK with a gain of about RM50 million or 50 sen a share. 

Before this transaction, PRK was already cash-rich with RM100 million in cash although it had about an even amount in debt. 

PRK is building a township in Perak and in a joint venture with the Sanderson Group to develop a theme park in the vicinity of its township. The Sanderson Group is a specialist in operating theme parks. Hence, the success of this theme park is likely to be odds in favour.

The media has reported that the theme park would be ready for operation by early 2016. There is bound to be some furore when the theme park is launched. This will have a positive impact on the price of the stock. At the last traded price of RM2.96, this is a buy. 

The PSG has failed to privatise the company in its first attempt. I don’t think it will stop at one. I strongly believe that it will make another attempt in the not too distant future, probably within the next 12 to 18 months. It could even be within the next 6 months. The offer if it does come could be as high as RM4.50 per share. This is not a wild guess but a logical conjecture. 

I am long on the stock. I intend to accumulate more before it shoots above the RM3.30 level. This is an above-average opportunity to make a good profit. 

Whatever action you take as a result of this article, you do so at your full responsibility. In other words, you buy, sell or hold the stock at your own risk absolutely. 





Thursday, March 26, 2015

MMSV My Stock for 2015

I highlighted MMSV on Dec 08, 2014 as a good buy at 53.5 sen. 
At 11.50 am today, the share price has gone up to 62.5 sen. This is an increase of 9 sen. Together with the interim dividend of 1 sen, the gain is 10 sen or 18.69% over a period of 3 months and 18 days. While this is not something to shout about, nevertheless, the gain can be considered as commendable. 

What is the status quo of MMSV now? Let us take at look as its latest balance sheet. As at 31 Dec 2014, the key statistics are as follows:
Share Issued: 163 ml shares
Par Value: 10 sen
Revenue for the year: RM39.691 ml
Net Profit: 10.645 ml
Net Profit Margin: 26.343%
EPS: 6.41 sen
Total dividend for the year: 2 interim dividend of 1 sen each
Total non-current assets: RM9.922 ml
Total current assets: RM30.468 ml of which RM15.715 is in cash and cash equivalent
Total equity: RM31.402 ml
Total non-current liabilities: RM503,000 
Current liabilities: RM8.486 ml
Current ratio: 3.59
Quick ratio or acid-test ratio: 2.72
Return on equity: 33.90
Debt to equity ratio: Not applicable, as the company has zero borrowings

Some of the things I like about this stock are as follows:

Current ratio of 3.59 means that the company is solvent and solid.
Its cash position is high. Thus, the company does not have any cash problem.
The Return-on-equity ratio of 33.9 shows that the management is competent.
As for growth, the company’s profit has surged 109% in 2014 when compared to the profit of the preceding year.

Inter alia its filings with Bursa are the following statements:

Financial period-to-date against preceding year corresponding financial period 
The Group’s total revenue of RM39.691 million for the year ended 31 December 2014 marked a hefty increase of 49% (RM13.017 million) as compared to RM26.675 million reported in the previous financial year. The higher revenue was contributed by the higher volume of machines delivered to meet the surge in the market demand of smart phones/devices together with the LED related products. This higher revenue was attributed to the Group’s ability to penetrate into the niche market of smart phones/devices. 
Profit before tax surged by a significant 109% (RM5.479 million) to RM10.510 million from RM5.031 million in the preceding year, mainly attributable to the increase in revenue coupled with the favourable forex gain during the financial period under review. 
  • Prospects
    The Board of Directors foresees that the current positive market momentum will enable the Group to continue delivering another good set of results for the quarters to come. The Board is confident of reaping benefits arising from the continued growth of both the LED and smart devices industry. Besides, our huge cash resources will come in handy for use of the Group in any future prospective business opportunities that may arise.
    The Board is also pleased to announce that the Group has obtained approval in principle from Malaysian Investment Development Authority (MIDA), a 10-year 100% tax exemption under Pioneer Status for one of its subsidiaries. This is a very promising development which bodes well for the Group’s future.
  • Conclusion
  • My view is that this stock will have a good run in 2015 and beyond. The present price is a good entry point. 
  • As usual, you buy at your own risk. 


Saturday, January 03, 2015

Stock Investing & Some Predictions for 2015

When it comes to investing in the stock market, you need to be extremely choosy in selecting stocks to buy if you want to survive in the survival of the fittest.  You can’t simply buy a stock, sit on it and hope to be profitable. 

Without an in-dept study of a stock before buying it, your chance of being profitable is less than that of the player in a poker game who plays without looking at his cards. 

My first priority in stock investing is safety of principle. For this reason, I always insist on value when I buy. 

Every stock has a company behind it. You need to check up the company and find out what it is all about. Some of the things, you must look into are: the balance sheet, the cash flow statement, the income statement and the Chairmen/CEO’s statement. This will tell you a lot about the company and how it is likely to fare going forward. 

In our computer world, this is not too difficult a task. Nowadays, every listed stock has a website where you can look into at your own convenience. 

I like to combine Fundamental Analysis (FA) and Technical Analysis (TA) when I buy. This is to ensure that what I buy are fundamentally sound and at the right time. 

Knowing FA & TA alone is not enough to guarantee success. You have got overcome one big obstacle….. Yourself. 

The stock market is controlled by Greed, Hope and Fear. Greed causes you to hold on to an overvalued stock. Hope causes you to hold on to a losing position which may cause irrecoverable damages to your portfolio if you average down indiscriminately. And Fear causes you to sell in a panic sale when you should be buying. 

To overcome these potent forces, you must have knowledge, wisdom, discipline and patience. Lacking in any one of them is most undesirable.

When you are in the stock market, you are competing with some of the best money makers in the world. Fortunately, the market is also full of  simpletons, the naive and the inexperienced. 

Stock investing or stock trading is a zero-sum game. 

You can’t expect to make money from someone who is as good or better than you. Thus, if you want to succeed, you have to keep upgrading yourself all the time. 

The stock market is never efficient. The price does not always reflect the value of a stock. Very often stocks become overvalued because of over-optimism; they can become undervalued because of over-pessimism as well. Those who know can exploit this inefficiency to invest profitably. 

In concluding this article, here are my parting words:

Never buy a stock without doing an in-depth study of it.
Never overpay for a stock even though it is a great one.
Never buy a stock without having a good look at its chart.
Never be impatient. (Many mistakes are made because of hastiness.)
Never go against your charts.
Never buy in a downtrend, especially when the downtrend is at the start after a prolong uptrend.
Never fail to use a stop-loss and a trailing stop-loss if you trade.
Never fail to change with the circumstance. (It is not the most intelligent who can survive in a crisis but those who have the ability to adapt well.)

My predictions for 2015 are as follows: 
Crude oil prices will remain low unless productions at some producing countries are disrupted by one thing or another. By low, I mean below US$75 per barrel.

Malaysian Ringgit will remain subdued against the US$.

GST will impact our stock market negatively.

The FBM KLCI high of 1892 will not be surpassed in 2015.

Equities listed in the US will do well.

Equities listed in Bursa will not do well except for a few export-oriented stocks.

Europe will recover slowly.

WLC.TO., a stock listed at the Toronto SX will have a great run this year and the next. (The stock is lasted traded at C$0.57.)

If you like this article, please send me a Friend Request at FB where I am known as Ben Gan.

The New Year 2015 has just commenced. May all my readers be blessed with good luck and have a fruitful year. 


Tuesday, December 16, 2014

Why Oil Has Fallen and What It Means To You

The price of oil has fallen by nearly half in just six months, a surprising and steep plunge that has consumers cheering, producers howling and economists wringing their hands over whether this is a good or bad thing.
The price of a barrel of oil is just under $58, down from a summer high of $107, and lower than at any time since the U.S. was still in recession in the spring of 2009.
So what's going on? A global imbalance of supply and demand that is rippling across the world economy, for better and worse.

Monday, December 08, 2014

MMSV A Hidden Gem

MMSV was established as the investment holding company of MMSV Group in conjunction with the listing of MMSV on the ACE Market (Formerly known as MESDAQ Market). Currently, MMSV has 2 subsidiary companies namely Micro Modular System Sdn Bhd ("MMS") and Evolusys Technologies (Malaysia) Sdn Bhd ("Evolusys"). MMS is designing and manufacturing industrial automation, as well as designing precision die sets, jigs and fixtures. Evolusys is developing hardware and software for automation and test solutions. For more information, click here.

For the 9 months ended 30.09.14, the EPS of the company is  5.36 sen. In the corresponding period of the previous year, the EPS was 2.46 sen. This is an improvement of 117%. 

The company is progressing well. The Board of Directors expects the result for the remaining quarter to be reasonably good. Assuming that the last quarter comes in at 2.88 sen which is the same as the third quarter, then the EPS for fiscal year ended 31.12.14 will work out to be 8.24 sen. At the last traded price of 53.5 sen per share, the forward PE works out to be 6.49 which is undemanding. 

For the fiscal year ended 31 Dec 13, some key statistics of the company are as follows:
Net Profit Margin: 22.17%; Return on Equity: 31.09%; Current Ratio: 2.09; Quick Ratio 1.61. 
EPS: 3.08 sen. Total debt to total equity: 0.0012. These statistic figures are expected to be further improved for fiscal year 2014. 

Dividend per share was 1 sen last year. In view of the improving result, I expect dividend for this year to be 2 sen. 

My overall view is that at 53.5 sen, this growth stock is a buy.


Investment is not without risk. Be aware of the forwarding-looking statements in this article and buy at your own risk. You are fully responsible for your own action. 

Friday, October 24, 2014

ECS Moving Higher


The trend at ECS has reversed. It is now on track to move higher. The stochastic is in a strong momentum.