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Thursday, 19 April 2018

(Tradeview 2018) Buy on Weakness, Sell on Strength (Hengyuan, PetronM, KSSC, MediaC, VS, Uchitect)
















Dear fellow readers, 

Once again, these writings are just my humble highlights (not recommendation), feel free to have some intellectual discourse on this. You can reach me at :


Website / Blog : 
http://www.tradeview.my/

or Email me to sign up as private exclusive subscriber : tradeview101@gmail.com
_____________________________________________________________________________














US and China trade war took centre stage for the past 3 weeks creating huge market volatility across the global markets. US market alone corrected close to 15% from its high. SP500 drop 11% from a high of 2872 to 2581 and Dow dropped 12% from 26,616 to 23,533. There is a saying that the modern warfare of today is the war of economy, no longer arms. If so, tariffs would be the main weaponry. On top of that, Malaysia's Parliament has dissolved and the country will be facing the GE14 on 9th May. This may appear to be main theme for the next 1 month for KLCI and of course some of the concerns include Syria airstrike by the alliance consisting of US, UK and France. This led to the rally in safe havens and the oil price as well nearing almost 70 USD per barrel. 













Many asked Tradeview how come we are not recommending as many buys as we did in the past? Are we taking a prudent stance hence the reduction in recommendation? Actually we did reduce but we have been calling a number of stocks especially in our private group. We do this very carefully and based on our specific FA metrics. Most importantly, we time our buys, meaning we only choose to buy if the market is weak and sell when the market is strong. Some stocks we buy and hold until the true value gets realised. Usually this are mid to long term stocks. However, there are those where the opportunity to buy is so good and we get such a good price, then it moves within a short span of time as it rebounded strongly. Today, we would like to share with all the very basic concept of buying on weakness and selling on strength. 




Usually, most people understand but few have the ability and foresight to practice such investment method. Even long time fundamentalist or FA investors, they find it hard to do. After all, who can time the bottom? Who can time the market so perfectly? It is extremely difficult to find the bottom what more time it to precision. Hence, we usually advocate this rule too our readers, if the stock price fall below our Tradeview FA metric and the levels is attractive enough with the right margin of safety, then you can consider. However, always wait for the price to stabilise before making the call. We will show some of the examples of the calls we have made recently during the buy low sell high period.

Image result for hengyuan 


1. Hengyuan 

Our initial valuation for Hengyuan was around RM10. When it went to a high of RM17 last year, many asked us repeatedly why we didnt call Hengyuan and arent we bullish with the prospect. We are conservative and prudent. Since we missed and the valuation was too high, we said can wait for opportunity to collect on weakness. We called at any price below RM6.50 for Hengyuan on 4th and 5th April as per the above chat group message. The rest is history. Hengyuan rebounded shortly after that when the trade war concern subsided a little and went up to as high as RM9.50. This is close to 40% return in less than 2 weeks. 

 Image result for petron


2. PetronM

Similarly for PetronM, our initial valuation for will be RM9 and we called on 4th and 5th March for any price below RM7.50 was good to buy. This is our prudent estimation without taking into account of the full year growth. PetronM reboounded to RM9.60 in less than 2 weeks.



 Image result for vs industry


3. VS Indsutry

Our initial valuation for VS would be around RM2.50. When the share price fell to RM2 and slightly below, we knew this was the opportunity and called a buy on 5th April as well. VS rebounded to as high as RM2.40 in subsequent days and became among out top gainers that week.

Image result for kssc malaysia

4. KSSC

Till today KSSC remains as one of our under the radar favourite gem. I remembered when we chose KSSC as our 2017 value pick, many were upset as the share price did not reflect. Until this year, it shot up all the way to 75 sens before retreating gradually. It is a significantly undervalue but it was a short span of time. Later on KSSC management declared dividend of close to 5% to reward shareholders. We maintain our initial valuation for KSSC to be RM0.65. When the market fell the other day, it fell to as low as 38 sens. That was a no brainer. Today it is hovering around 47 sens with more upside intact.

Image result for uchitec malaysia logo

5.  Uchitect

Our initial valuation for Uchitect is RM3. This was even before the capital repayment to shareholders were announced. When the market was weak, it fell to as low as RM2.30. We advocated to all our readers to consider buying on weakness. It remain was one the big gainers and rebounded strongly from Rm2.30 up to RM2.80 in less than 1 week. 

Image result for media chinese logo 

6. MediaC

MediaC goes without saying is one of our solid and safe buy. Many would have known by now the reason for the surge is due to their separate listing in HKEX, One Media Group's 10% stake in Most Kwai Chung which saw a 2000% over subscription for the retail portion during a recent IPO in end March. While this is a valuation play, the fact is also because we believe MediaC is undervalued with only upside, not downside. We believe buying now on weakness is an opportunity for when it is time to rebound. There are many factors to consider, one of it is the assets of the company  surpass its share value, and whilst the earnings are indeed dwindling, the group may receive bumper earnings from election period. 


https://www.bloomberg.com/news/articles/2018-02-07/buying-the-dip-works-nicely-a-30-year-history-of-routs-shows

There are definitely others to the list of stocks we have watched, observed, consider, and called. Mostly with the market continuously being volatile, May is coming, election is soon, earnings season fast approaching, there is no doubt that we will see opportunities like this appear in the market. Hence, when the time comes, opportunity knocks, and value surfaces, what would you do? 

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Website / Blog : 
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Food for thought: 

 Image result for buy on dips quote


Wednesday, 21 March 2018

(Tradeview 2018) Value Pick No. 2 : Poh Kong Holdings Bhd.

Image result for poh kong

Dear fellow readers, 

This is my No. 2 Value Pick for 2018. 

Once again, these writings are just my humble highlights (not recommendation), feel free to have some intellectual discourse on this. You can reach me at :


Website / Blog : http://www.tradeview.my/

or Email me to sign up as private exclusive subscriber : tradeview101@gmail.com
_____________________________________________________________________________

Value Pick No. 2 : Poh Kong Holdings Bhd. (Initial Valuation RM 0.65 sens) 



The global markets have been quite volatile with some retracement since President Trump announcement on protectionist tariffs. On top of that, Malaysia is facing GE14 in the next 2 months. With a series of unpredictable events, we are looking at Poh Kong currently at RM0.54 sens. 

This is an old company in Malaysia with many years of experience  in the industry. Well run management holding down a traditional family business. It has over 102 outlets nationwide and many sub brands like Hemera, Love etc. Fundamentally it is a sound company that has solid dividend policy over the years. In a way, the growth is rather stagnant with some narrow margins until 2017, they started showing bigger revenue and margin in the same year. Traditionally, it is around 1.4%, as of 2017, the margin has rised to 3.4%. This is an encouraging sign for us as it may seem there is a growth path there. 



Additionally, if you look at the 5 year track record, as of half year 2018, the revenue is close to RM 490 Million, which is more than 2017. The diversified product range, new brands and different market segment penetration is enlarging the customer base for Poh Kong from the traditional ones of the past. Also, if you look at the NTA of Poh Kong, it is worth RM1.27. The current share price is RM0.54. With market cap of Rm220 million but net value of RM363 million and generating free cashflow of Rm60 million per annum, the balance sheet of Poh Kong is extremely strong.




Poh Kong is trading at a substantial discount on PTBV and PER compared to regional peers like Hong Kng jewelers such as Chow Tai Fook despite similar operations albeit a smaller brand name. If we take trailing earnings, Poh Kong is trading at 7x PER and PTBV of 0.44x.  While the DY is not great at aroud 1.85%, at least the company has been declaring consistent dividend over the years. Many good companies that are expanding even after doing well refuse to reward shareholders, with 0 Dividend Policy through out the years. So far, first 2Q of 2018 have exceeded first 2Q of 2017, this in effect shows a steady path of grow for the company and may further solidify its market leader position in Malaysia.




The good news is some of the substantial shareholders has been acquiring recently and loading up more position in the counter. This include some of funds which usually focus only on strong value counters. 

Our initial valuation for will be RM0.65 based on the back of 6.5 EPS at 10x PER. This is our prudent estimation without taking into account of the full year growth. For those who likes a solid management, boring but fundamental business with a strong assets and track record, can consider Poh Kong.



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Food for thought: 


Monday, 19 February 2018

(Tradeview 2018) - Ancient Chinese Philosophy & Investment Thesis For Business




Dear fellow readers, 

Gong Xi Fa Chai & Happy Chinese New Year 2018. We would like to take this opportunity to wish all who celebrates a wonderful CNY festive season and others happy holidays. 

Once again, these writings are just my humble highlights (not recommendation), feel free to have some intellectual discourse on this. You can reach me at :


Website / Blog : http://www.tradeview.my/

or Email me to sign up as private exclusive subscriber : tradeview101@gmail.com
_____________________________________________________________________________

In conjunction with Chinese New Year, our team would like to share a perspective on looking at businesses from a different lens. We would like to take the opportunity in this new year to talk about Ancient Chinese Philosophy and analysing certain aspects of the corporate world.

As one of the oldest civilizations in the world, and with the largest population, China has produced internationally known statesmen, philosophers, thinkers, and leaders; yet we see so little on Chinese leadership or management philosophy by Chinese scholar. This is not until recent years; the Chinese economy has become a major driver of global growth and a shaper of global markets that people start to pay attention to the possibility of ancient Chinese philosophy may be a valuable source of inspiration for contemporary management and business strategy.

There are many Chinese philosophies and ideologies such as Daoism, Legalism, and the Art of war appreciate by many business leaders, they reflect that their business value and their decision-making foundation to regulate with the vagaries of challenges are shaped by ancient Chinese philosophies. One of the world’s richest and most influential men, Mr. Li Ka Shing emphasized in his recent interview, the importance of check and balance in business methodology that can be achieved by using western management model with Confucian school of thought as internal philosophy, and he has proven that it works well by the success of his business. Feel free to watch bloomberg video interview of Li Ka Shing as source of reference.



Today we will discuss a well-known Chinese teaching by Meng Zi also known as Mencius, with the aspiration of “he who rules the world that has the hearts of the populace”. (得人心者得天下)

The inspiration for Meng Zi to come out with this quote is from his observation on; those kings, who know the needs of the people, try his best to provide to those needs and are kind to his people will eventually win the crown. Vice versa, those rule by fear will be overthrown if aforementioned leaders rise among peasant. In Meng Zi’s archive, he discussed two kings, Jie and Zhou. He noticed that those failed Kings share some similarity in their characteristic; both are extremely intelligent and rich, however, they egoistically assumed that with their vast knowledge, skill, financial power, and reputation, they were invincible, thus did not appreciate the talents and ignore ideas and feedback from his trustee. They were blinded by their success and enjoyment and couldn’t see that people of the land living in misery. They ruled by injecting fears to the people and suppressing resistance by administering cruel punishment.

Predictably, people could no longer bear with this leadership style and turn to another leader. Meng Zi concluded that, in order to become a successful leader, one must be recognized by the followers, to be recognized by the follower, the leader must understand the needs of the follower and fulfill them. By doing so, trust and support of the people will be earned.

When it comes to Politics, there is no doubt the above age old wisdom is applicable throughout. Good world leaders are few and far between, if there is, usually they wont last. Hence, Machiavellianism and Utilitarianism have often been the preference of most leaders be it in the political or business world. It is very careless for mankind to fall into the slippery slope of contemplating end goals as means to justifying their actions when philosophy should be the guiding principle in running a country or company.

At Tradeview, we are apolitical. Hence, we will only look at things from the perspective of businesses. If we look at some of the best business leaders today, few names are truly respectable. From the western world, there is the likes of Mr. Warren Buffet, Mr. Ingvrad Kamprad and from the east there is Mr. Li Ka Shing, Mr Robert Kuok. 


























If you notice, there will always be some similarities between the above titans of the industry. Firstly, they rarely come by, possibly once in a generation. It will take decades before the next one comes along. Secondly, they are usually there for a very long time (sustainable and consistent). Thirdly, they are usually humble, low profile, never flashy and always grounded. Fourthly, they are usually at the helm of their company, involve in day to day business operations even at an advance age, personally attending to issues and overlooking the business - in short tireless work ethic and always hardworking. The list can go on but if you were to ask anyone on the street, most would agree, if we were to invest in any of these companies held by the above mentioned business leaders back 30-40 years, we would be sitting on huge amount of wealth to last a a lifetime. 

The sad thing today is the generation only looks to instant gratification and fast returns without any basis. Without actual fundamentals to back any of the investment thesis, people will blindly follow the herd and crowd. When we invest our hard earn money, we should always ask ourselves, how many plates or bowl of noodles one has to sell in order to make this much money over a duration of time? If we ask ourselves such questions, we would tend to be more careful before simply putting our money behind a company just because our friends told us to do so. 





Case in point No. 1 - Bitcoin. Many months back, we had lots of readers and subscribers asking us about Bitcoin and if Tradeview would recommend buying. We have maintained the same position from Day 1 until present, how do you value something that has no intrinsic value? How do you assess the fundamental viability and worthiness of the item? Isnt it just a bubble and Ponzi scheme waiting to burst? In order to not offend those who invested, we just answer, we do not invest in things we do not understand. This is not an "I told you so", but a form of discussion. Hindsight is always 20/20. Fact is, we know the value of Bitcoin and other cryptocurrency lies in the Blockchain Technology, not the cyrptocurrency itself. Hence, it is always important to know what one should invest in. 



Bitcoin few months back vs Today


Case in point No. 2  - MLM. MLM has existed a long long time. Since the Tupperware parties days in 1950 or Avon cosmetic products until present day. This is a sensitive topic as we know many have different views when it comes to MLM. Supporters think it is a Godsent which help provides livelihood and sustenance. Dissenters think it is a scam which monetises personal relationship, erodes the ethics of hard work, stifle creativity and ingenuity etc. There are many successful MLM companies today that is still doing well such as Tupperware, Amway, Coway and others. Equally, the number of MLM scams are abundant. One thing to note, we acknowledge MLM as a form of efficient business model but we do not recognise MLM as creating value for society or being a part of it equates to entrepreneurship. Everyone throws the word of entrepreneurship around just because it is "sexy" but how many truly understand the concept of building business or creating value? MLM supporters often adopts campaigns and large scale conferences to show a collective front and efficiently using the herd mentality to convince, motivate, propagate to new joiners and members them to be part of the movement. We will save this topic for another day but we hope that young minds will focus their energy, capability and creativity on truly building businesses and creating value instead of rushing in for the quick gratification of short term monetary gains and lose out on meaningful long term goals in life.




A very wise business leader of one of the blue chip company in Malaysia once told me, the key to sustaining a company is the "Value". Only the right company's value can ensure the it survives the test of time. An example would be Mitsui Fudosan, which has been around for over 300 years. The current business leaders of Mitsui attributes their success to the "value of the leader or founder".


Whenever new readers ask Tradeview about our investment philosophy, we always say we focus on the Fundamental Analysis as the key and Technical Analysis as guide. What we seldom share is our strength is the ability to analyse and dissect a company beyond the financial records. We look into the business itself and the people behind the business before we come to a conclusion whether to proceed to put our money behind the investment. If the numbers adds up but we do not like the business leader or management team, no matter how enticing, we will skip. However, if the business leader or management team displays an extraordinary grit, charisma, work ethic, value and brilliance, we would focus our attention and monitor the company very closely. In a nutshell, we should always assess businesses on the following 

1. business model, 
2. nature, 
3. business leader, 
4. management team, 
5. company's philosophy, values & principle.


PS: We would like to share the credit of this article with the writer, a brilliant up and and coming consultant who first wrote an article Titled : Ancient Chinese Philosophy as a Source of Inspiration for Talent Management / Leadership Management. For those who understands Mandarin, can read the following.

桀纣之失天下也,失其民也;失其民者,失其心也。得天下有道,得其民,斯得天下矣。得其民有道,得其心,斯得民矣。得其心有道,所欲与之聚之,所恶勿施尔也。

“夏桀和商纣之所以丢掉天下,是因为民众不再支持他们;之所以不再支持,是由于对他们失望。要得天下的办法就是去获得民众的支持,做到了就能得到天下;要获得支持的办法就是获得他们的认可,做到了就能得到; 要获得民众认可的办法就是做民众期望的,不要做他们反感的。

《得人心者得天下》选自《孟子·离娄上》

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Food for thought: 




Sunday, 7 January 2018

(Tradeview 2018) Value Pick No. 1 : QL Resources Bhd.


Image result for ql resources


Dear fellow readers, 

This is my No. 10 Value Pick for 2017. 

Once again, these writings are just my humble highlights (not recommendation), feel free to have some intellectual discourse on this. You can reach me at :


Website / Blog : http://www.tradeview.my/

or Email me to sign up as private exclusive subscriber : tradeview101@gmail.com
_____________________________________________________________________________

Value Pick No. 1: QL Resources Bhd. (Initial Valuation RM 5) 


QL Resources Bhd is one of our favourite back in 2015. When we called it at RM 2.40, we had a TP of RM 3.50 in mind. As it continued to be one of the Forbes best under billion company in Malaysia, we held on with a max FV of RM 4.30. We fully disposed at RM 4.30 in 2016. The key reason being the growth was stagnant. Their poultry, egg was doing alright but not great. The surimi business division is still the biggest contributor to the group. While we still had confidence in the company, especially under the stewardship of Chia Song Kun along with the other founding family members, there was a growth issue which indicates QL did not matter warrant the premium valuation with over 25x trailing PE.

Image result for family mart


Entering 2018, we decided to initiate on QL once again. This is not because the lack of ideas but rather because the growth story and trajectory has appeared in this family run business. In fact, the growth story is so enticing we should have noticed earlier. 2 words - Family Mart. Why is Family Mart such a game changer? Usually analyst do not like it when a company diversify their business into areas not related to the core business. Two reason behind it - 1. It shows the lack of confidence in the existing core business 2. The company may have to assume certain risk in entering new business / industry. This was also one of our early hesitance. However, as of today, our doubts were all clear.


A simple question to ask is would you enter a 7-11 or Family Mart if it was side by side? Additionally, the small snack / food segment of Family Mart is booming. Attracting crowds of all age. Their onigiri, green tea ice cream and curry balls. Of course if we were to share QL based on these alone, we are sure we will be severely criticised. So let’s go into the financial metrics and business side of things.

If you look at the past 5 year chart, it is obvious that QL have been performing consistently with both revenue and profit growing steadily. Of course, it would appear it reached a stagnant between 2015 to 2017. However,  on the back of their expansion with the Family Mart business, things are looking to improve. Usually businesses diversification takes a longer time to reap fruits but the quick expansion abundant in retail lot supplies and low rental environment, it would appear that QL would be moving into profit territory quickly.




If we annualise the first 2Q of 2018, it would seem that QL may be able to achieve Rm3 billion in revenue + RM200 million in profits. Both are extremely good thresholds to break and it will only grow further in the coming years. Additionally, last year QL further declared a special dividend bringing the year dividend to 7.25 sens close to their record year. While the DY is not great, for the coming year, I will be more optimistic especially if Family Mart break evens. Additionally, a company that rewards shareholders albeit it is still expanding its business is better than a company that refuse to reward shareholders under the guise of expanding the business. Many good companies that are expanding even after doing well refuse to reward shareholders, QL management has maintained a consistent Dividend Policy through out the years.



This brings me to the next point, investing in QL is a also a valuation play. How so? Traditionally, QL has been valued as a poultry, surimi and feed company. Now with their convenience store business, their valuation will alter. This would be especially true if they can win market share from 7-11 or MyNews. If you look at both companies' valuation, you will be amaze with the premium attached to both companies. SEM (7-11 Malaysia) is trading at 43x trailing PER and MyNews is trading at 40x trailing PER. QL is only trading at 34x PER with an expanding convenience store business arm. Hence, to us, QL is a very solid mid to long term valuation play.


Image result for jaya grocer deal

We would like to point out to all, another interesting business that was given premium valuation for a similar business model. Jaya Grocer reported a profit after tax of RM1.05mil on the back of a revenue of RM283.08mil for its FY14 ended June 30. This gives it a profit after tax margin of a mere 0.37%. The company has total assets of RM77.87mil. Jaya Grocer will be paid RM300mil for the grocery chain, valuing the entity at more than 30 times the price-earnings ratio (PER). It started in 2007 with its first outlet in Jaya 33 in Petaling Jaya. It has 16 outlets located mainly in the Klang Valley including The Intermark, Empire Shopping Gallery and KLIA2. 

The reason we are sharing this is to indicate the valuation of grocery chain vs Family Mart. Although Family Mart business model would be more like 7-11, you can benchmark the business valuation to get an indicative value with discounts / premiums for store fronts and inventories. The similarity is the cash business and so long the cash flow management is strong, it will be a valuable gem.

https://www.thestar.com.my/business/business-news/2016/05/11/jaya-grocer-chain-sold-for-rm300mil/

Our initial valuation for QL will be RM5 based on the back of 12.65 EPS at 40x trailing PER. This is our prudent estimation without taking into account of the growth of the other businesses within the group. For those who likes a solid management, boring but fundamental business with a expansion horizon, can consider QL.



________________________________________________________________________________

Telegram channel : https://telegram.me/tradeview101

Website / Blog : http://www.tradeview.my/

Facebook : https://www.facebook.com/tradeview101/or 

Email me to sign up as private exclusive subscriber : tradeview101@gmail.com

Food for thought: 

Image result for investment quotes