Can use many methods to get the fair value.

For me, I try the KISS, keep it as simple method i.e P/E. Sort of lazy to learn more complicated methods. In the end, it is not the sole factor to sell you shares.

If I think BN could not win a 2/3 majority in GE, I might sell off the shares too.

Just one of the methods, certainly not the best you can get.

This post has been edited by SKY 1809: Nov 5 2010, 01:55 PM

Sounds good too.

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Added on November 5, 2010, 2:05 pmYa, some of these methods , we just learned once and forget one unless you are sort of fund managers.

Even Analysts do not like to use these methods often.





This post has been edited by SKY 1809: Nov 5 2010, 02:05 PM

Book Values do not work very well for Plantation and property stocks in the past.

The book value for agriculture lands and commercial lands differ a lot. And seldom people want to sell lands at plantation price though the book says it is only worth that much.

Bjcorp , Realized Net Asset Value is above rm 2, ( forgot the exact number )

This post has been edited by SKY 1809: Nov 5 2010, 02:14 PM

Though, many glove stocks are fundamentally strong ones, they cannot run away from the problems of QE 2, where raw material prices are jumping up, and US $ is falling fast.

This post has been edited by SKY 1809: Nov 6 2010, 12:18 PM

PE is neither perfect too.

Most beginners would just use the historical PE ( published somewhere or info appeared in the trading system ) ) as the numbers to buy a certain stock. That is one school of thought. expecting constant future economic performances as if today.

The other school of thought would like to use the forward PE , meaning some kind of future earnings are used. Like to take into account of future good CPO prices at above rm 3,000/tonnes.

The price you pay for the stock actually counts the number of years the company would earn back that amount of money in the future.

Let say for PE of 5x, you do expect the company would earn back this money in 5 years , kinda shorter is better.

That is why another school thinks you should use the forward PE.

Logically it makes sense since we all hope the company we buy would make good profits in the future, not the other way round.

If there is a likely recession in the near future, stock price would start to sink first, Forward PE recognises that.

If you are still using the historical PE as a yardstick, you need to know where you stand in the future.

This post has been edited by SKY 1809: Nov 6 2010, 12:21 PM

DCF might not be the same as the actual cashflow of the company. Anyway, any assumptions or projections made are not actual. Kinda simulations to me.

For me, actual cashflow of the company is important, and most analysts are not of accounting/financial background , many tend to overlook this important issue.

For example, not too long ago, LCL was top graded by most analysts, but some of financial/accounting trained investors tend to shy away from this company. LCL ( at the time of top rating ) took too long ( more than one year ) to collect the payments from their customers. Signs of some troubles were written on the wall.

However, none of the stock analysts pointed that out at that time.

For me, I focus on the undervalued small capital stocks, so good cashflow management of those companies is my top pick if for long term.

Not saying DCF is no good, just saying that priority has to be given ( for lazy investor like me )

Just my view.

This post has been edited by SKY 1809: Nov 6 2010, 12:46 PM

True also, IF Kenmark or LCL turned PN 17 on that day, then you could find the true fair value on the day from TA point of view.

But for FA, signs ( like LCL/Kenmark ) signs could be written on the walls. Even for Kenmark, too big of debtors may require more in depth study before you invest.

Those ekor numbers come out as First prizes, are in fact first prize numbers reflecting the true fair value, no argument on that. TA is right in that sense.

This post has been edited by SKY 1809: Nov 6 2010, 02:12 PM

QL for one more , but must give a good timeframe for it lah.


But for value investors , the biggest setback/mistake is to set a short timeframe or having too high an expectation.

This post has been edited by SKY 1809: Nov 6 2010, 09:06 PM

In Malaysia, you still can get some haha corporate information every now and then ( some pieces and not completely ) , but it does not mean you should share it openly with everyone you know of .

This post has been edited by SKY 1809: Nov 6 2010, 07:57 PM

Well,

I find the discussions are rather fruitful, only you are the one who spoils the soup.



P/s . I thought the 5 are requested by you, and our forumers obliged by our Malaysian friendly Culture.

This post has been edited by SKY 1809: Nov 6 2010, 09:11 PM

I do not know who invented the theory of " Discounted Cash Flow".

For me , at best it should be called " Assumed Income Flow"

In today world, incomes could not as easily classified as CASH. The Dubai crisis and even bank mini bonds went bust. Perhaps , QE 2 may bring back Incomes closer to CASH, but still not very right to assume Incomes = Cash.

IF you are the traditional Chinese businessmen, DCF is nonsense because it has nothing to do with CASH, at best a promise to receive CASH sometimes in future dates.

To the laymen, the word DCF is grossly misleading . Otherwise incomes in IOU could be termed as CASH.

In Malaysia, you can easily find construction contracts to do, but the chances of not receiving payments or so called HARD CASH is very high or a long delay is highly possible. You may have a good DCF model here, but ..........looks good on papers only. No HARD CASH is coming in.

BTW, Cashflow is neither profit as well. " Discounted" sounds confusing to Accountants too.

Using DCF, Malaysia could build another 10 100th floor Towers perhaps, but where is the real cash to come from ?

And there would not be any Dubai Crisis at all.


Just my view.

---------------------------

Discounted cash flow models are powerful, but they do have shortcomings. DCF is merely a mechanical valuation tool, which makes it subject to the axiom "garbage in, garbage out". Small changes in inputs can result in large changes in the value of a company. Instead of trying to project the cash flows to infinity, terminal value techniques are often used. A simple annuity is used to estimate the terminal value past 10 years, for example. This is done because it is harder to come to a realistic estimate of the cash flows as time goes on.

http://www.investopedia.com/terms/d/dcf.asp

This post has been edited by SKY 1809: Nov 7 2010, 09:20 AM

Just keep an opened minded that there are such things around, and meanwhile you can still stick to your own methods that you are comfortable with.

IF you think it is good , you may adopt some of the ideas ( added on ) to your own practices.

This is just a round table type of discussion.

Do not take it too seriously.

This post has been edited by SKY 1809: Nov 7 2010, 08:52 AM

Thanks for your sharings esp on Muhibbah.

I think we are on the same track/ tune now.


I also love this stock from FA point of view , contracts of 2.5 billions in hand for a small size company, and many more to come. Good PE and so on.

But a word of cautious is that they have rm 200 m stuck in a project called Asia Petroleum Hub apparently abandoned now. I do not know the latest outcome , and thus unable to update you.

IF they were to write off this amount, of rm 200m, the impact is huge. It could take a couple of years to earn back the losses. IF they could recover back the amount owing to them, Muhibbah does have good prospect.

For the purpose of sharing only.

Do not mean Muhibbah is no good.

Happy Investing.

A broker analysis is attached here

This post has been edited by SKY 1809: Nov 7 2010, 08:29 PM


Attached File(s)
 Muhibbah_100903_RN2Q10.pdf ( 50.22k ) Number of downloads: 20

Muhibbah up today . Good Pick