Please Note: The articles i wrote are merely for sharing purpose only. All data are pending verification and It is not a buy call.
Also, these articles are for value investors and mature thinker only. Please do not read on if you are speculators.
RGB, my favourite stock so far in Bursa. I was attracted to their long recovery journey as per what i have written back in month of 28 May 2015. http://klse.i3investor.com/blogs/RGB/77353.jsp
LET SEE THE PRICE ACTION of RGB for YTD:
1 - I have start to accumulate RGB when i first notice RGB in May 2015 concurrently with my first article on RGB. It was about 0.17 per share at that time
2 - the market when viral during Aug 2015 and the PRICE was beaten down to 0.105. This is a massive 38% down. I managed to add a significant position at stage 2 at around 0.125 as i not able to get at 0.10
3 - The price was then lifted by a good set of 2Q result from 0.105 to as high as 0.20 per share. A massive 90% jump from 0.105. If you are a contrarian, you are fated to earn that 90% paper profit in 3 months.
"What you going to do?" - RGB has recently released a set of result, which to me "nothing to worry", but to many is equal to "end of the world". The price was beated down again to 0.15 and now at 0.16.
Look at above price action, you probably agree with me now. Bursa is definetely not for everyone.
A few key point worth to have deep thought:
First: When RGB is on nice recovery journey and the price was at 0.17, while fundamental is getting better, the price can be beaten down to as low as 0.105. The only conclusion to this is, market is irrational during panic. This is more or less like, when a gambler is in crisis mode, they can just sell their wife or kids just for the sake of saving themself.
2nd: Just how many really look at P&L and Balance Sheet when investing in Bursa?
3rd: How about the future of RGB? Should i hug it untill forever? Or when should i actually must sell the RGB and move to other companies?
LET SEE MY ACTUAL ACTION on RGB for YTD:
First of all, I must say that nobody suppose to show their actual share holdings in public. However, i was recently challenge by a speculator and crowned me as I3 Holland King. Hmm, i take it as compliment.
I hold the principle where good people, with good intention, with good heart and positive thinking and action, will eventually receive good vipe. This is basic of "Law of Attraction". I have deciced to show to all value investors, how i win small, and hope to win big in Bursa.
Above is my holding of RGB in bursa on 14 November 2015 (1) before the price adjusted down again. If i would to act like gambler / speculator, i doubt i can get 25.5% gain (4) in 6 months ( May to Nov). A typical act of speculator, they will either cut loss at 0.15 back in august, or take profit back in November. Note that my holding was stood at 1.6xx million (2) and the average price is 0.1514 (3). By the way, the share price actually went to as high as RM 0.20 per share, that was 32.1% in 6 months.
I didnt sell the holding, as i learned a great quote from MR OTB, "LET THE PROFIT RUN". To win big, we must be brave! To be brave, you need to learn from winner, I have 2 sifu, MR KCCHONG and MR OOI TEIK BEE. Both are of different in investment nature, but both are winners.
Above is my holding as of today 28 nov 2015. Many will probably say i'm stupid as i didnt take the profit when it was at 0.20. My paper profit shrink all the way and left merely 4.85%. Slightly better than bank FD. I didnt cry like many, since i have the experience at 0.105. The famous quote from Mr Cold Eye: " I'm not afraid of share price being beated down, I'm very scare when a company got rotten".
Look at no. 2 and no.3, Notice that my shareholding actually increase to 1.7 million? Instead of average "down", i choose to average "UP". I actually bought more, and therefore, average price now become 0.1526, instead of 0.1514.
What trigger me to buy more at higher price? What if the price continue to drop and reach 0.10 again? What if what if and what if.....
Let go back to fundamental.
Whoever interested can read on my earlier post on RGB by following link :
After that post, there are 2 quarters of results being announced. Since then, the fundamental of this company actually get better and better from my point of view. I see value, many see rubbish. People sell, I buy. As simple as that.
Of course, i must say, nothing is guaranteed. Not even the performance of a company. Recent case of johotin is one very good example. But again, that is merely 1 quarter, but we have seen someone cry like baby and start to blame here and there. Perhaps he/she treat a businesses to have a life span of just 3 months. Not 30 years. A quarter of bad result, the company will be sentence to death. Personally, I see as the company is not dead, but that speculator has killed himself.
Below is the latest 4 Q of balance sheet from RGB:
After 4 quarters:
1- Cash and bank balances + deposit increased from RM 60.6 million to RM 76.7 million (+26%)
2 - Total Asset increased from RM 267.8 million to RM 311.8 million (+16.4%)
3 - "Foreign currency translation reserve" has touched RM 29.8 million. One key note is that, RGB is a clear beneficially of weak ringgit, but the foreign exchange gain is not reflected as earning just like other semi conductor biz / furniture biz. I suspect this is due to RGB functional currency is on USD. But presentation currency is in RM. Therefore, such gain in foregn currency can only classified into translation reserve and reflected in total equity. Wheareas for other local semi con / furniture companies, the functional and presentation currency are all in RM, hence, any change in currency exchange will reflect in earning. However, i'm not really sure about this and i hope any expert consultant can guide on this.
4 - Non current borrowing has drop from RM 38.9 million to RM 25.9 million (- 33.4%)
5 - Current Borrowing (commercial paper) has drop from RM 27.8 million to RM 17.9 million ( - 35.6%)
6 - Total Liability reduced from RM 147 million to RM 113 million (-23%)
7 - Net asset per share increase from 9 sen to 14 sen (+55%)
How about Cash Flow:
|Quarter Ended||Dec 2014||March 2015||Jun 2015||Sept 2015|
The business able to continue to generate great cash flow to lower down the debt and fund the operation of the company.
The management has recently consolidated all the commercial paper payable and enjoyed a lower interest rate from principal banker. The recent Private Placement has also allowed them to secure more fund to paired down the debt and save finance cost.
By the way, just what is Commercial Paper? Not a common loan took by companies in bursa. I try to search Investopedia and below the explaination.
"High Credit Ratings and credit Worthiness" - Ok, this give more confident to me.
LET come to the equally important part of Company, The Earning Part:
From RGB website, we can actually download the corporate presentation of performance. I like RGB as they always stay communicated with the shareholders. Here is the link: http://rgbinternationalbhd.com/pdf/1H2015-AnalystBriefing.pdf
From many news sources from website, RGB's MD has actually set a target of 1400 machines for the full year of 2015. This test my investment sense. Is the target achieveable? Well, having read through all the material i have and RGB' journey of recovery, I CHOOSE to believe that target is achieveable.
Then, it was reported in their corporate presentation that for the first 6 months of the 2015, only 350 units of machines being recognised in SSM revenue. How about the balance 1050 units?
I try to tabulate below segment infomation:
|Quaters Revenue ('000)||Q1||Q2||Q3 (LATEST)|
|Result (prior expenses)||% gross margin||% gross margin||% gross marin|
Based on the guidance provided by the management, the Q1 & Q2 SSM is actually for 350 machines. If i would to average the total sum (18,916,000 + 27,524,000 = RM 46,440,000) is roughly translated into about RM 133k per machine. Based on info from blogger, http://klse.i3investor.com/blogs/koko888/83521.jsp, he highligted that per machine is at RM 116k per unit based on 400 machines. So i think my guess is not far away.
For Q3, the SSM reported 57,237,000, i "GUESS" that was for 430 units of machines. Added up the 350 for 1st half, total is 780 machines. Still there is a short of 620 machines. or revenue of RM 82,460,000 (44% up from Q3) that will appear in Q4?
I DO NOT KNOW. I'M NOT GOD!
As usual, i try to forecast the earning:
IF, the whole sum of RM 82.46 million is to be registered into Q4 SSM, adding TSM division of RM 22 million, that will total up to about RM 104.46 million. Based on average of 12.77% margin for SSM, that should be about RM 10.5 million gross profit, addiing up 5.9 million from TSM, it will be RM 16.4 million or 29% higher gross profit.
Initially i done my calculation based on the above figures and the result should be good. And I anticipate result to be very good. I cannot say i m dissapointed with Q3 result. The SSM did register a higher revenue, so the where are the "problems that causes lower earning?
Accoding to management explaination, the lower profit was due to higher depreciation cost and spare parts use to upkeep the machine.
|Others*||18,301||26,166||53,266 (sudden surged)|
|Profit before tax||5,340||7,426||6,984|
|Foreign currency translation gain||8,602||3,914||31,052|
|Total Comprehensive Income||12,971||10,557||36,888|
I see the main culprit is not the depreciation, but fall under the others, which is the spare part and upkeep for the machines which is part of COST of GOOD SOLD. Well, i can only think this way, any business will incur such sudden repair and maintainance cost. If i do the business, the similar cost will incurrec too. So, i m not particular alarming as i see admin cost is well maintained.
See the Foreign currency translation gain? Massive RM 36.88 million! But back to same reason of functional and presentation currency, so i guess that amount can never category as gain, buth will continue enhancing the equity of the company.
RGB is very smart. They have present themself very well in Philippine. See below report from BusyWeekly.
Notable Philipine has the highest CAGR of Gaming business in the region. As high As 13%. Well some will start to worry, the profitability has drop most. Let me give a possible reason: Higher CAPEX. Philippine is currently under massive expansion on casino and integrated resort concept and i will see it as the next asia las vegas.
RGB managed to have their main foot hold in philippine. I'm very pleased on this.
Some tourism statistic:
China is 5th largest contribution to the tourist to philipine. Perhaps this is why the gaming biz slow down happened in SG and Macau casino is not felt in Philippine.
If you like to know more about the development about philippine and world gaming business, you can click below:
I source a lot of infomation from here.
Besides ColdEye 5 yardsticks of valuing a company, his famous concept in share investing is:
" I DO NOT KNOW IF THE SHARE PRICE WILL UP OR DOWN, I RATHER STUDY IF THE BUSINESS IS DOABLE OR NOT, GOT MONEY TO EARN OR NOT".
With that, Thanks for reading this KOPI-O RESEARCH. thanks to Zbaikitree, or so call the Optimus Group
I find this term KOPI-O research a very interesting description. Ha ha
28 Nov 2015
I can never be 100% correctly predict the performance of the company I invest in. My investment strategy is very simple, If the business fundamental has not change, i will buy in whatever amount i can when there is a price correction. On the other hand, once i start noticing sign of deterioration, i will immediately cut the profit / losses. I only take care of downside, the upside will take care of itself
If i missed any investment opportunity, i will acknowledge i missed it. If i make a mistake on judging the source of info or material i read on certain company i invest in, i will do the same.
My strategy is FA come first, and forever FA.
I only have 2 sifu, one is KCChong, One is OTB. Take courses from these 2 sifu, and do your own practice. I believe in: the master leads you to the door, the rest is up to you.
I have a idol, Bursa Dummy.
I have several investors that i pay high regards to: ICON8888, RicheHo, Justabouttheprofit, SooJinHou, Noby.
I dont have enemy.