Thursday, July 30, 2015

Pmcorp news updated from AGM-payout of cash reserves

邱继炳,曾经也是像陈致远、杨忠礼,郭令灿建立起很强大的商业王国,拥有很强的政治后台。
马联控股(MUIIND)的业务也包山包海,百货零售、酒店、产业、证券、零食什么都做。
邱继炳应该是很爱国的,他旗下众多公司都以马来西亚来命名,例如:马联产业、泛马机构、泛马控股、泛马资本。。。。
控制和持有这些众多子公司的母公司就是马联控股,就像陈致远的母公司是成功机构,杨树斌的母公司是杨忠礼机构。
为了参加马联控股六月举行的股东大会,我远赴播迪升海滩,在这里我看不到金发比基尼女郎,我只看到一个字“晒”。
我在马联控股投入了不少的资金,这是一间Asset play的公司,公司虽然一直亏钱,但有很多很值钱的资产。我从吉隆坡赶到播迪升,就是为了安抚我纸上亏损的心情,以及确认我的看法是对的。
我首先开炮,因为该公司两年内会有500m的长期债务到期,加埋短期债务350m共850m,以该公司的流动资产750m,肯定是不足以偿还的,我问邱老爷公司要如何应付这笔债?
邱老爷果然是见过大风浪的大人物,马上给我一记强心剂:“马联控股值50亿令吉,还债绝对不是问题。”
50亿令吉是多少?
就是rm5,000,000,000,扣除所有债务1b,还有4b,除以总票数3b,等于该公司每股值1.3令吉,目前的股价两毛是净值的十分之一不到。
公司也表示为了还债会变卖某些资产,这我到是很期待会卖什么资产,因为该公司最值钱的就是Jln Ampang的Corus Hotel以及英国伦敦Hyde Park的Corus Hotel,加起来应该值2b。
不过该公司的所有酒店的平均入住率仅六成,也就是说其余四成是空的。算是很差一下,因为TA enterprise的酒店的平均入住率都在八成以上。
他也提到一直以来都有买家要买马联控股的产业,但他觉得仍不是时候。不过公司的债务要到期,他不卖也不行,科科。
邱继炳也讲回一些陈年往事,80年代马联控股的股价曾经去到15块,那时候为了配合新经济政策,每间上市公司都要把30%的股权分给土著,结果那些土著一拿到马联控股的股份就马上卖掉,简直就是榴莲倒塌,赚翻了。那时邱继饼很赌懒,跑去跟马哈迪complaint,马哈迪讲okok,我会跟他们讲不要乱卖,结果还是乱卖。
所以新经济政策始终是不work,土著无法靠股票来分享国家最大份的经济蛋糕。没有办法,土著始终是天生天养的种族,在他们的基因里面没有危机意识。
有一位女士持有了马联控股三四年,向邱老爷申诉她持有了马联控股的股票三四年了,公司连年亏钱,股价一直往下掉,她很担心马联控股会变成PN17。
邱老爷就个人向她担保马联绝不会掉入PN17,因为该公司值50亿令吉,区区10亿的债务其实不值一提。
另外,邱老爷也向这位女士担保他不会跑人,因为他常年都住在大马。
至于该公司其余的业务的进展我就不提了,反正该公司年年的营运现金流都是正数。只要是正数,代表公司不断有在生钱,而不是烧钱,尽管账面上可能会是负数。
其余的我也不记得了,反正都不是重点。
游光春买不买得成泛马控股在大会也没有提到,我觉得市场反应太大且没有耐心,就算卖不成给游光春也可以卖给别人的嘛。而且游光春这位股票达人在马联控股跟马联产业持有一些股份,所以他的利益跟我们小股东是一致的。
反正,邱老爷没有子女要继承他的事业,他都酱老了不卖掉还要干嘛。而且他的亲人都对他的家产虎视眈眈,上演的是经典的TVB豪门剧“溏心风暴”。
后记:这位女士也持有太久了,期间有很多她可以放票的机会,而她却打算长期持有等收息。真的是再不疯狂就等死了。
我没那么长情,每只股我顶多是持有两年,等两年我都赚不到钱我就真的要收皮了,客户都会跑掉了。
另外马联控股这三十年来的股价也是在令人唏嘘,想当年15块的两张马联控股可以买一辆马塞地,现在两张的马联控股连红米都买不到。

泛马机构(PMCORP,4081)
股价:0.19仙
本益比:271倍
股价净有形资产比:0.38倍
股票总票数:708m

当然我也去了马联控股的子公司--泛马机构(PMCORP)的股东大会
如果说马联控股有的是资产,那么泛马机构有的就是现金了。
去它的股东大会,就是为了comfirm它的现金有那么多,以及不会乱乱花掉。
PMcorp的核心业务是制造巧克力,并外销到亚洲各国,目前专攻中国市场。
泛马机构卖的巧克力品牌有Tudor Gold,Tango以及小时候我们都很喜欢吃的Crispy。
管理层解释,制造巧克力的原材料有可可奶油及棕油,前者贵后者便宜。当然,一分钱一分货,使用可可奶油的巧克力比较香滑。公司目前的生产策略是要主打使用棕油的Tango和Crispy,因为成本便宜相对来讲利润就较高。
问题是现在巧克力市场那么竞争,产品架上的品牌那么多,而且进口的牌子也很多,公司到底要怎样去竞争?
管理层说,现在本地的市场确实非常竞争,不但达到饱和,而且进口品牌不断涌入市场。但是该公司在中国的市场已经打开了知名度,有一定的市场份额,所以未来的发展方向肯定是在中国。
管理层也说要特地保留位于香港葵涌的仓库,因为经由香港专卖到中国,印上香港的地址,产品都会比较吃香,因为中国人对香港的食品管制有信心。这个仓库在账面上值1m,于1999年买入,年度报告上估计目前已增值至7m,但并没有重估。
我也提问到为什么公司不学Cocoaland把公司卖给大型的食品集团?管理层答,公司目前没有买家要买,因为pmcorp不像Cocoaland酱有料。
该公司今年的打算是要投资90m更换残旧的生产线,因为该公司对增加中国的市场份额有信心。
我心想,哎呦,公司又要烧钱了。
我最想要知道的就是该公司一共有85m的海外非上市公司的可赎回优先股,根据年报,其中有一半42m将会在今年赎回。
令我失望的是管理层表示今年只会赎回20m。由于这个不是一到期就一定要赎回的优先股,而是看双方商议要赎回多少。
原来这间公司就是Reagent Corporation,其实就是马联控股的联号公司, Reagant Corp负责Laura Ashley百货公司连锁店加盟以及品牌执照事宜。简单来讲,如果你要拿Laura Ashley的franshise就要找Reagant谈。
这几年来Laura Ashley的股价慢慢攀升,该公司的分店散布欧美,由于市场已饱和,没有成长空间,公司就把赚到的钱分回给股东,所以算是派息股。现在欧美的行情也算不错,酱我就放心了。
然后我也很关心到底赎回的优先股可以反映多少的账面盈利?你知道啦,赚到的钱只有反映在盈亏表上,股价才会起。
管理层没有给予明确的回复,就只是说应该有赚,然后要交给会计师来计算。我心想,现在美元那么强大,马币又那么疲弱,换回来,起码应该不会亏本吧,希望如此。
派息是几乎是所有股东大会股东最殷切关注的话题,就像男人用只会关注女人的身材和样貌那么现实。
管理层表示,公司会在年尾透过股本削减来把现金回退给股东,但是公司有累计亏损,在程序上会比较麻烦。之前提到公司要耗资购买新的机器,所以暂时只能回退10m到20m的钱给股东。
若回退20m,大约就是每股2.8仙,除以股价19仙,周息率为15%。但是大家要记得,这是属于一次性的派息,以后就没有了。
后记:其实这是一间worth dead more than alive的公司,也就是公司清盘把钱全部退回给股东比继续经营来得划算。
当然,这是站在股东的立场来看,站在管理层的立场就完全不同了:“公司清盘,也就是说我被炒鱿鱼,我酱老了,哪里找得回同样薪水,同样等级的职位,我的房贷、车贷,孩子的教育费不就没有着落了?”
邱老爷持有泛马机构66%的股权,为什么不直接把公司给私有化或清盘?
很简单,人类是有感情的动物。这些都是跟你共事二十多年,把青春给了这间公司的同事。你看着他们踏入社会,结婚,建立家庭,生小孩。每个月底都有有一群人等你出粮开饭,而且整天有人帮你擦鞋,那种高高在上的感觉是很爽的。所以就算你明知道你养的一群米虫,你也不忍心把它们给灭掉。
要买入泛马机构必须要做好守两年的打算,因为这种asset play的股价是很考验人的耐心。股价可以常年不起,好不容易起了一点你以为来了它可以马上打回原形,如此来回数次,让你空欢喜好几场。但是这种资产股一起就会冲天,有心脏病的朋友慎入。
 

Monday, July 27, 2015

Predictability of long range stock return using ROE kcchongnz

Predictability of long range stock return using ROE kcchongnz

Author: kcchongnz   |   Publish date: Mon, 27 Jul 2015, 07:51 PM 

This comment below appears in my post: http://klse.i3investor.com/blogs/kcchongnz/80238.jsp
Posted by Icon8888 > Jul 22, 2015 10:32 PM | Report Abuse http://cdn1.i3investor.com/cm/icon/trans16.gif
kc, stock market not easy. Not easy. If I can border line pass, I contented already

Hey, why is it not easy? Isn’t someone out there offering to teach you how to be a super investor?
In a paper titled “The Super Investors of Graham and Doddsville”, Warren Buffet showed the track records of each of nine disciples of Benjamin Graham that they all generated annual compounded returns (CAGR) of between 18% and 29% over track records lasting between 14 to 30 years.
So to me a super investor is one who can generate the kind of return in his investment in the stock market consistently over a long period of time as mentioned above.
But I agree with you. It is not easy to make money in the stock market, especially in the short term. Otherwise Bursa and everywhere will be filled with super rich people without having to work for it.

In awarding the 2013 Nobel Prize for economics, the Royal Swedish Academy of Sciences noted the following in its press release:
There is no way to predict the price of stocks and bonds over the next few days or weeks. But it is quite possible to foresee the broad course of these prices over longer periods, such as the next three to five years. These findings, which might seem both surprising and contradictory, were made and analysed by this year’s Laureates, Eugene Fama, Lars Peter Hansen and Robert Shiller.”
So even Nobel Prize winners for economics also mention that trying to predict the stock price in the short term is very hard work, but calling it long term may not be that difficult.

Investing is about process and probability. There is no sure thing in investing. The key to success is to develop a process that attempts to increase your probability of being right more often than wrong; and when you make, make it big but when you lose, lose it small.
Heads I win (big); Tails I don’t lose much” The Dhandho Investors
There are many ways investors can make extra-ordinary return from the stock market. For example, Buffett invests in awesome companies at reasonable prices. Walter Schloss, one of the super investors mentioned by Warren Buffett above, invested in cheap companies with little debts, etc. Those different strategies employed by different super investors above all have one common characteristic, a plausible reason. For example buy good companies by Warren Buffett, buy cheap by Walter Schloss.
Yes, whatever investing method used, it must be plausible, and predictble. If not, what is the logic that your investment can provide you with extra-ordinary return? Unless you are a syndicate, institutional investor or heavyweight who has the clout to manipulate and move stock prices, but that is only for the short term.
So give me a plausible story. Let me give you one first.

Return on Capital or Growth in Earnings
In his book, “the Warren Buffett Way”, Robert Hagstrom wrote this:
Customarily, most investors measure annual company performance by looking at earnings per share (EPS). Did they increase over last year? Are they high enough to brag about? For his part, Buffett considers EPS a smokescreen. Most companies retain a portion of their previous year's earnings as a way of increasing their equity base, so he sees no reason to get excited about record EPS. There is nothing spectacular about a company that increases EPS by 10%, if at the same time, it is growing its equity base by 10%. That's no different, he explains, from putting money in a savings account and letting the interest accumulate and compound. Worse still, there are many companies borrow huge amount of money to improve EPS, but the marginal return is way below its borrowing costs.

The test of economic performance, he believes, is whether a company achieves a high earnings rate on equity capital ("without undue leverage, accounting gimmickry, etc."), not whether it has consistent gains in EPS. To measure a company's annual performance, Buffett prefers return on equity or ROE. -- The ratio of operating earnings to shareholders' equity
.”
Let us examine the above with some numerical examples. Assuming you want to invest RM1000 and your required return is 10%. You have the option to invest in two different Islamic banks below which distribute interest according to their financial performance. Bank A is able to give you an interest rate of 10% through the 5 years you invest with them, and Bank B a declining interest rate from 10% initially to 8% in year 5. It is obvious that if you are a rational investor, you would want to invest in Bank A, as after 5 years your initial equity, or capital would have built up to 1611, but for Bank B, your capital will only build up to RM1538 in 5 years, or 4.7% more for Bank A than Bank B as shown in Table 1 below.
Table 1:
 
Bank A
     
Bank B
   
Year
Beg Capital
Interest
End Capital
Interest
 
Year
Beg Capital
Interest
End Capital
Interest
1
1000
100
1100
10%
 
1
1000
100
1100
10.0%
2
1100
110
1210
10%
 
2
1100
105
1205
9.5%
3
1210
121
1331
10%
 
3
1205
108
1313
9.0%
4
1331
133
1464
10%
 
4
1313
112
1425
8.5%
5
1464
146
1611
10%
 
5
1425
114
1538
8.0%

The return of your capital, or equity (ROE) from Bank A is 10% every year, whereas ROE for Bank B is obviously less than 10%, the cost of your equity. Similarly, the compounded annual growth rate (CAGR) of your interest is 10% for Bank A, and less than 10% for Bank B. Obviously there is a plausible reason that investing in Bank A with a higher ROE is better than Bank B, isn’t there?
It is a simple decision which bank to put your money for the above example. Let us make life a little more complicated in the next example.
Table 2: Additional capital for Bank B
Year
Beg Capital
Interest
Capital Inject
Add Interest
Total interest
End capital
Interest
Growth
1
1000
100
  
100
1100
10.0%

2
1100
105
100
10
114
1314
9.5%
14%
3
1314
118
200
18
136
1650
9.0%
20%
4
1650
140
300
26
166
2116
8.5%
22%
5
2116
169
500
40
209
2825
8.0%
26%

Assuming you invest in Bank B with an initial capital of RM1000, but you put in additional capital each year; RM100, RM200, RM300 and RM500 respectively for year 2, 3, 4 and 5. Now compared with Bank A, your interest will grow faster from RM100 in year 1 to RM209 in year 5 compared to just RM146 for Bank A as shown in Table 1. The growth rate of interest for Bank B is consistently higher at 14%, 20%, 22% and 26% for year 2, 3, 4 and 5 respectively compared to just 10% of Bank A throughout the years. So which option would you take?
The above example is synonymous to investing in a company. The amount of money you put in the bank is your equity. The interest is the profit you get with the interest rate as return on equity (ROE), and the additional money you put in the “Rights issues”, private placement, bond issues, additional bank borrowings or whatever you call it. The growth in your interest is the equivalent profit growth. Yes, the profit growth for Bank B is phenomenon, more than double that for Bank A. But that growth is a result of additional capital put in, not generated from the “business”, and earns a return lower than your required return of 10%. Again, great profit growth but declining ROE, lower than the cost of capital. Is it still better than Bank A?
What did Buffett say above?
What if instead of putting your extra capital in Bank A earning a return of 10% instead of Bank B at a declining interest rate? Table 3 below shows that your interest in Bank A will grow to RM267 in year 5 compared to RM209 for Bank B as shown in Table 2 above, or 27.5% more. Your equity will increase RM2936 as compared to RM2825 for Bank B as shown in Table 2, or 4% more.
Table 3: Additional capital for Bank A
Year
Beg Capital
Interest
Capital Inject
Add Interest
Total interest
End capital
Interest
Growth
1
1000
100
  
100
1100
10.0%

2
1100
110
100
10
120
1320
10.0%
20%
3
1320
132
200
20
152
1672
10.0%
27%
4
1672
167
300
30
197
2169
10.0%
30%
5
2169
217
500
50
267
2936
10.0%
35%

So what is more important in investing, profit growth or higher ROE? Isn’t that obvious?
But there is this argument that investing is for the future, accounting number ROE is obtained from the past, i.e. audited account, no use. Is this reasoning plausible?
Let’s say Tan Sri Datuk Liew Kee Sin (LKS) of EcoWorld and Bill Ch’ng Chong Poh are starting a property SPAC and you intend to invest in one. You check LKS and found that based on the past record in SP Setia, he has built tremendous shareholder value for investors. Then you check the record of Bill Ch’ng in MPCorp, and he has made thousands of investors lost their pants, but he tells you the past is immaterial, it is the future that is important. He expects you will make tons of money in my SPAC in the future based on this and that projection of his.
So which property SPAC will you chose to invest in? Which SPAC has a more plausible reason to invest?
Plausibility is also often required in academic research in economics and other fields. Otherwise the result of the research can be considered as spurious.
What about predictability? Which metric is more predictive, high ROE or high profit growth? I haven’t read any research saying that high profit growth expectation has earned extra-ordinary return yet, but I give you one on the predictability of high ROE.

Predictability of ROE: Academic research
Dr. Joseph Belmonte's in his research using the S&P 500 stocks for the years 1990 through 2002 shows that portfolios of stocks with high, average ROE adjusted for non-operating earnings and equity of a four-year holding period outperformed the market average consistently. In fact every portfolio with high ROE which was predicted to outperform the S&P index did indeed do so whether the holding period was a one year or a four year holding period. The charts below shows the result of the research. The red bar shows the average ROE of S&P, and the green ones are portfolios of above-average ROEs.



Do you have academic research showing that an investing strategy basing just on profit growth for the next one or two quarters work? We would like to see that.
So there are evidences that high ROE stocks do outperform. But critics will say that is in US. In Bursa, it won’t work. Bursa is different, no good and lasting companies.
Well I don’t know if there is any academic research showing that but I do have a little recorded experience investing since about three years ago as published in i3investor. Of course I have much longer records but those were not published before, and talk is of no use.

My personal experience using return on capital
I have published two stock portfolios in i3investor since January 2013. Sorry I have to use these portfolios again to illustrate, otherwise what else can I base on?
Almost all my stocks in the two portfolios were selected basing on high return on capital. I actually use a different parameter for the return on capital, i.e. return on invested capital. But basically the principle is the same, invest in companies with high return on capitals, whether it is ROIC for the firm, or ROE for just the equity shareholder.
http://klse.i3investor.com/blogs/kcchongnz/75985.jsp
The results of my investment in two separate portfolios are shown in the link below:
http://klse.i3investor.com/blogs/kcchongnz/78390.jsp
The result of the portfolio of 10 stocks in the first portfolio shows an average return of 120.2% and median return of 74.5% compared to the broad market return of just 12% during the same period. All stocks in that portfolio made positive returns and there were no loser, absolutely none. Only 2 out of 10 stocks under-performed the broad market, and just marginally.
The result of the portfolio of 11 stocks in the second portfolio shows an average return of 86% and median return of 45% compared to the broad market return of just 3.3% during the same period. All stocks in that portfolio made positive returns except two but at average of small single digit losses.
Those stocks with high ROIC of more than 30% such as Pintaras, SKPResources, Jobstreet, Prestariang, Homeritz and Datasonic all returned more than 300% as at to date in less than two and a half years. Nothing was mentioned about growth in profit when the stocks were selected. But of course there were growth in profit as a result of the high ROE, a growth from the internally generated funds, a reinvestment of its earnings and cash flow to yield equally high ROIC.
My portfolio selection actually incorporate another parameter that is the valuations in term earnings yield for the firm, i.e. Earnings before interest and tax over the enterprise value.
Why the valuation metric?
The price you pay determines your rate of return” Warren Buffett
It should be me who should ask why your stock selection never consider what the price is but just profit growth.
A good company is not necessary a good investment, a bad company can also be a good investment. It all depends on the price you pay”.

Conclusion
What is more plausible and has a better predictive power in investing, based on backward looking return on capitals from audited account, proven record, and buy when they are selling cheap, or a forecast based on a quarter or two of profit growth, without even have to look at the financial statements, and even not bothering about the price you pay for the stock?
Your call now.
This article is for sharing of investment philosophy and strategy. All constructive criticisms are welcomed. After all, sharing is caring.

K C Chong.