margin of safety

Track growth, at least some growth over a 10 year period, av of the begining 3 years and the most recent 3 years.

Cash generating capability and dividend policy is highly important.

SGX, Pne,

margin of business, NP should be lower than 5 even if that is industry norm

Decent valuation using standard PE, PB

Little, or no debt

 

Other approaches,

big neglected companies at down cycles

Golden agri, YZJ

YZJ OCF still ok....

Golden agri is worse

 

Cash generating machine, with growth potential

PNE, namlee???

Others??

sigh....

nam lee pressed

understanding the business.

Key risks

-carrier, bulk of business

The reduction in sales translate directly into reduction in revenue for nam lee

HDB projects, easily tracked

Good cashflow, decent dividends, survived crisis

Need to compare with other metal companies.

Moat;

1) One supplier worldwide to carrier

15 reasons for investment:

clarity of earnings next few year, track HDB projects, carrier sales est.

worthwhile margin? compare with peers...

management???

Important calculation

Inventory t/o

Balance Sheet Line Item	Amount
Cost of goods sold	$4,075,000
Direct materials expense	$1,550,000
Raw materials inventory	$388,000
Total inventory	$815,000

To calculate total inventory turnover, the accounting staff creates the following calculation:

$4,075,000 Cost of Goods Sold
--------------------------------------   =   5 Turns Per Year
$815,000 Inventory

To determine the number of days of inventory on hand, they divide the number of turns per year into 365 days, as follows:

Cost of Goods Sold
365 /    -----------------------
Inventory

=

$4,075,000 Cost of Goods
365 / ---------------------------------
$815,000 Inventory

= 73 Days of inventory

CCC	=	# days between disbursing cash and collecting cash in connection with undertaking a discrete unit of operations.
	=	Inventory conversion period	+	Receivables conversion period	–	Payables conversion period
	=	Avg. Inventory COGS / 365	+	Avg. Accounts Receivable Credit Sales / 365	–	Avg. Accounts Payable Purchases / 365

 

readings from common stocks and uncommon profits

Different from Warren, looking for that growth stock, stock that has a propensity to grow.

15 points to look at:

1) Earning visibility for next 2-3 years. 2 years at least

2) Earning visibility for the long term. (Track records, not just the numbers, but the timing of execution, etc)

3) Research and development of new products (Property, does it matter? High end and lower end)

4) Sales team and executive competence, how fast is sales moving, (inventory t/o, receivables t/o), how honest is the executives in recognizing the profits. 

5) Profits margin (Is it stable, it is losing as compared to its peers)

6) any niche or "moats"

7) Short term or long terms outlook? How to tell???

8) Financial strength, for both expansion and collapse

9)Integrity, cannot tell

 

Property counters' case study

CDL is considered to have a strong balance sheet, its net debt to equity ratio stands at 0.2 while CDLstands at 0.67. Av. is 0.7, above 1 is risky like heeton, thats why its being undervalued, being mark down, cash flow and cash balance is important too

Heeton cash balance can't pay for the current liabilities.

WIngtai balance is strong, businessmodel seems sound, why is market giving such a big discount?? Poor track records? Losses?? Earning visbility??

How to research on a company?

Basic valuation metrics trends: (Long term)

1) Revenue, GP, NP, GP and NP margins

2) Segments R, GP, NP and margins

3) Debt level, ROE, ROA, FCF

Quarter to quarter:

1) Inventory turnover

2) Receivables size(relative to revenue) and turnover

 

Business model:

1) Any sustainable moats (Leadership position/ brandname)

2) Key staff turnover and remuneration (Red flags, remuneration increase when profits is falling)

3) Industry your cycle of competence. Understanding the tracking of property prices, calculation of RNAV, etc

Investment metric and considerations

1) Trend of EPS

2) Av. of EPS for business cycle and decades

3) Net current assets (Working capital), trend andaverage

4) ROE and ROA

5) FCF

6) PE, P/B, Net assets

7) Margin

8) Capital structure, Loan ratio

Qualitive take away

never buy when all is good,

-> bear market

->Temporary poor quarter results,

marginal company, only perform when market is favorable, check how company perform during crisis and industry downturn.

Other instructments to consider -index fund, preferences shares of large leaders position companies,