Buying index ETF save you a lot of time compared investing in individual stock that you need to study well the individual company financial issue.

Most stocks do not outperform index, only a few gem and name in the market does.

No answer, none of the above is valid for me. Terrible choice, perhaps the original poster (not the thread starter) is in dreamworld.

aite thanks dawg, yoh a good helper aite.

what about equity funded and debt funded dawg? the more debts the company has, the riskier it is? or the more growth potential it has? vice versa.

meh know this is back to skool question aite dawg, but meh didnt go to no skool for long time, so very rusty

I don't know how to read your "English".

Aggroboy,

There are ONLY one worthwhile ETF to buy in Malaysia. There are NO TRUE index fund in Malaysia.

Dreamer

It is perfectly fine English to me... AliG's brand of English that is.

To Dreamer101:

What is the difference btw buying a foreign based fund like Vanguard vis-a-vis a local fund invested in foreign market e.g OSK Glabal Equity Fund

I think OSK's KLTracker has a beta of abt 1 wrt to KLCI and it holds the exact composition of counters as KLCI-30, hence I think it is the closest to a true index fund in Bolehland.

Xuzen

xuzen,

1) Vanguard

0% sales load plus 0.5% annual maintenance fee. You probably has to buy ETF since you do not qualify for mutual fund because you are not US resident.

2) Malaysia UT like OSK

5% to 7% sales load plus 1% to 2% annual maintenance fee..

<< I think OSK's KLTracker has a beta of abt 1 wrt to KLCI and it holds the exact composition of counters as KLCI-30, hence I think it is the closest to a true index fund in Bolehland. >>

Why are you paying

<<5% to 7% sales load plus 1% to 2% annual maintenance fee..>>

When there is a true ETF alternative in Malaysia that is a lot cheaper??

I cannot remember the name of the ETF now.. It is ETF of the 30 largest stock in KLSE.... Could someone else please post it and provide the expense ratio.

Dreamer

FTSE BURSA MALAYSIA KLCI ETF

Stock code: 0820EA FBMKLCI-EA

Manager's Fee (% p.a): 0.50
Trustee Fee (% p.a): 0.06
License Fee (% p.a): 0.04


Fees reasonable and comparable to all the big overseas ETF. Very reasonable compare to any of the local unit trusts / mutual fund.
The easiest way to have a big cap portfolio tracking KLCI for local retail investor.
Acceptable tracking error to KLCI index.

Downside: If your fund is a few million - this might not be liquid enough?

I am holding it as part of portfolio.

I am thinking abt another counter... I-Cap (closed ended fund). But I could not figure how to place this counter in portfolio yet.

I am not sure if I should use it as a counter for punting, hedging or investment?

Can I solicit some advise from other forumers'?

Xuzen

P/S Currently I use the OSK-UOB KLTracker as an index fund... 1% per transaction, 1.5% p.a. Mngt Fee. So far the return have exceeded my expectation.

Can take out money from EPF to buy this?

How do u define value? What is undervalued?

i do a lot of research on stocks, there are dozens of ways of evaluating a company, but I've found what I believe to be the best.

Here are some of the other "interesting" ways of evaluating a stock. hint hint: this isnt actually what I use.

1)Taking the cash holdings of the company out of the market capitalization, if the company has a market cap of 150 million at RM1.00 per share and an NTA of RM1.60 and holds 90million in cash. You take out the cash holdings from their market cap, essentially the business is being valued at RM0.40. So here you have a business that is capable of generating cash of RM0.60 but is being sold for 40 cents.

2)Identifying turn around companies, these are companies where they used to be profitable, but because of a slowdown their stock price has been hammered down till unreasonably low levels. The companies earnings have shown a steady recovery, but the stock price has been staying at the price it was at when business was terrible.

3)Identifying gaps between a shares price and its earnings per share. If the earnings of the share has been steadily increasing but it's price has stagnated, is it undervalued?

4)Balance sheet clean ups, companies that have cleaned up their balance sheet by reducing and getting rid of all their debt while maintaining an unreasonably high NTA vs their share price. EG: Company A has 200million in assets but holds 100 million in debt, the company gets rid of all their debt, so they have 100 million assets and no debt, but their share price is only 30~40% of what they are worth, eg:the market cap is only 30million. The rational is that by reducing all their debt, they have taken away any risk of defaulting on their loans, hence no more risk, but the business is still being valued below NTA.


and many more...

just for the record,

TGUAN (Thong Guan), qualifies for 1,2,4 of these methods of identifying an undervalued company. So is it undervalued?

Another issue you might miss which is the most important, is the future of the company aka future profitability of the company.

Share price at Rm0.30, NTA is Rm1.00, if the company is making constantly loss and future is expected to do so, it cannot be considered undervalued.

Remember, stock market most care is the future profitability of the company.

Cheers.

Profitability is sort of implied when I say the balance sheet has been cleaned up... . Since u sell off less useful assets to pay off ur debt.

Basically ur saying a whole lot of nothing... What if profitability has been increasing for 5 years in a row but the business equity hasn't risen at all?

What I previously highlight is that even NTA > share price, we cannot conclude it is undervalued. You just need a significant loss, write-off, customer default, then can wipe out chunck of the previous NTA shown.

Just like financial stocks, you just need the NPL to increase several %, then the whole P&L can turn into severe NTA eventually shrink your balance sheet aka NTA/NAV.

Balance sheet is one thing, profitability is another thing.
Clearing off balance sheet and debt, doesn't mean future profitability is good.

Clearing off balance sheet means financial situation become healthy which is good, no doubt.
But to make profit side, is another story.

While equity pricing is more about future profitability of the company.

talking rubbish

plc255,

Thank you for posting that.

Dreamer

Xuzen,

Why are you paying 2.5% for something that you can get at 0.6%?? They are both index tracker.

How smart is that???

If KLSE is doing well, the one that costs less will pay you more.

Dreamer

This post has been edited by dreamer101: May 17 2010, 06:59 PM

Just curious, how to see the NTA of the ETF

mind elaborating on point 1 and 4? i do not get why the business will be valued at RM0.40 and capable of generating RM0.60 and being sold for RM0.40. how did you get those figures?

also, in point 4, 100 million assets and no debt with share price being 30% of what they are worth, you mean 30% of the assets right? i dont get it, coz im new to this thang

Point 1)
Say you have a company that is selling at RM1.00 at the stock market with an NTA of RM1.60. This company has RM0.60 in cash holdings, because the cash is not being used to run the business, it is not part of the business. So when you value the business, you take out the RM0.60 from their share price, because essentially if u buy over the business for RM1.00 per share, you will get RM0.60 in cash, the rest of the business that has managed to generate that RM0.60 is only being valued at RM0.40. RM1 - RM 0.60 = RM0.40.

So this RM0.40 is the price of the business after taking away its cash holdings. Hence the 40 cents price tag.

Point 4)
Give u an example, say there is a company that is being sold in the stockmarket for RM0.30 per share, but their NTA is RM1, this company is selling very much below their NTA, hence it is seriously undervalued is it not? But the reason for it being undervalued is because it has not been very profitable and they hold a large amount of debt. If there was a very bad year the potential for bankruptcy might be quite high since they owe RM100million. So they clear all their debt and sell off all their assets that are not generating money. They now have RM100million worth of assets and zero debt, but their stock price hasnt taken into account the balance sheet clean up that they have gone through, it is still being priced as if they might go bankrupt because of high debt.

OK me talking rubbish again.


There are a number of stock that is debt free. But NTA wise is Rm3-4, but share price is trading at Rm1.xx-2.xx

Reason?
Because the company can only generate about 10 cents profit each year or less than that, not because there are in debt or having risk of bankrupt, which the share price on market move based on the PER which how much investor can get a return from the share price through dividend which generated from the profit.

Point 1 is pretty valid, and true.
But. As a minority shareholders, if the major shareholders are not treating well the minority shareholders, then miniroty shareholders are getting zero from the cash value of the company holds.
As company can opt to hold on those cash forever without distributing at all.
So generally market reaction and pricing is towards profit and dividend given.
No doubt, it is very good in term of "undervalued" situation.
But you just need an event of mis-managed, or whatever unfavourable circumstance, then the cash position can go within short period of time.

Point 4
Clean balance sheet now can still turn 'dirty' balance sheet afterwards, if the company is making a loss afterwards due to whatever reason, from irrecoverable receivables to making net loss in margin.
Which in turn, even a company has significant net cash value, a loss making in the future can eat into the cash position as well.

Yup, debt free is definitely good, which mean little risk of the company going down. But a loss making and negative cashflow resulted from it can eat into the cash position.
NTA can shrink pretty fast without any debt built up with significant loss making with negative cashflow.