Thursday, April 20, 2017

DO NOT SELL WCE, Airasia and Ekovest

This is a reminder that I gave to myself. Everyone will have their own preferences according to what they are comfortable with. I am comfortable with Airasia, Ekovest and WCE. Those are obvious. In investment as what are mentioned by the top notched investors - it is difficult to find gems all the time.

To some people, they may like diamond, some may like ruby. Others may like Emerald. To me, investments is the same.


However, I am very comfortable with what I have found. Some people may be very comfortable with Top Glove for example as they know the business. Some may be very comfortable with Inari as again they know the business and are confident of their views on the semiconductor sector.

For the 3 stocks, I discovered WCE back in 2013/14. Those people who read my blog would know I have done lots of research on the company and its business. This article is not about me saying again what I have said on the business and company as you can find them here.

Then 2015, Airasia went to ridiculous low price. Around RM1.50 was my price point of buying in. You know the fantastic thing is that I knew while oil price was dropping like from USD100 to USD50, many people were focusing on Airasia's debt which it definitely can service - they were ramping up to fight, hence the debt but those assets were already generating cashflow. Not all high debts are bad! So, while the stock price should have gone up, people were selling down - I should have thanked the Hong Kong research house. So who says Malaysians are not smart - we were buying, they were selling (or could it be talking it down to buy?) - Perhaps, they are smarter. I was perhaps the stupid guy who was telling the truth on how cheap and good Airasia was.

(You would also know I was negative on Airasia X, but not Airasia. I am right until now.) So, you may ask - how is it that businesses in almost the same space can be different although run by the same management? I can be wrong in terms of share price in the short term, but in the long run, I hope I am right.

Last year, 2016 was when I realised Ekovest is realising its asset value and having a fantastic business. They are not the best of contractors but good enough. The thing is though, again I shall say this - they have fantastic assets, which many are already realising cashflows.

Yes, of course I can make mistakes. However, you would note that in many cases of businesses that I have put positive comments - they are good businesses run by good people. Some may face the wrath of situations - such as Parkson, Aeon example. Even YFG - look at how they really try hard to revive the business!

Whenever, I write here - I do not write for purchase in the short term - hit and run. Or pump and dump. The above three stocks are testimony of that. The same goes for Padini, Power Root, Insas, Tropicana, TA, Freight Management etc.

My style is very different. You can read this article and if you believe the same as me - one does not need to read another article of mine for next 3 years. Come back when there is a major catastrophe or war in the Middle East. I am very different from many of the "sifus" out there (which I am not on par with them, because they can work wonders by buying a SCADA system company which they do not understand about - as they only look at the financial numbers.) As mentioned here, I look at business first then financials (although I am a financial person). Note, they are definitely not wrong as there are many ways to skin a cat.

BTW, that SCADA system company is a good company, just that I do not feel comfortable enough to put lots of my money into it. 

I am also not the type of feeling remorse when I did not buy Inari (although I know enough of them) when it was trading at 35 sen 6 years back - this company has achieved a 10 bagger - as I was not comfortable enough - again. Why? Because it was a single customer company - Avago (today's Broadcom). Who knows how its "taiko" is going to treat them? Today, it is still largely single customer although it tries to diversify. Again, some people may know enough to be comfortable. That feeling discomfort caused me lots of potential gain, but I would have sold them long time ago anyway.

In the longer run (10-20 years), things can change. Airasia can be facing new challenges for example or it could have gone overpriced. Similar to Ekovest or even WCE. Sometimes, even in the short term, it can be particularly bad for some companies - example oil price goes through the roof for airlines business. Airasia could be facing regulatory challenges in India and Indonesia or even Vietnam.

I am always (or hope) aware of these. Again, I am not sleeping with my stocks but I am also not careless to sell them when they are growing. This is like you have prepared and provided for your 18 year kid - when is time to realise the benefit - we stop supporting them.

Wednesday, April 12, 2017

Sold some Insas and Bought Power Root

Recently as Insas grew to a price point which I think I would like to forgo, I decided to sell a portion of the share and move a safer (I presume) stock.

Hence, I have decided to sell 10,000 units of Insas and Bought Power Root.

For those whom do not know Power Root, it is a company that sells the Alicafe and Ah Huat coffee brand. If I am a normal investor, I would have thought it would struggle in a crowded ready to drink coffee market. This market has Nescafe, Oldtown, Aik Cheong, Super brand, Pappa Rich and several more (even Starbucks included).

Despite these challenges, perhaps these figures would change some person's mind. Me included.

Power Root's financial numbers over last 7 years
I have separated the financial revenue into local sales versus international sales. This is because I think it is important to separate out and highlight its numbers from it overseas sales which has been rather impressive. From my reading a huge portion of its sales is from the Middle Eastern market. Today, Power Root has a plant in UAE as it has grown to a certain size which allows it to decide to build one and logistically, I think it will be positive for its operations in the future.

Translating those numbers into a chart, perhaps this is clearer and shows that the overseas revenue has grown from a negligible RM5 million in 4Q10 (Dec 2009-Feb2010) to RM50 million in its latest quarter. That is a 10x.

Local sales on the other hand has a respectable growth although not as strong as its overseas sales. Based on that trend, I would not be surprise that its overseas sales would exceed its local sales in the near future.

In terms of profitability?

I am not one of those who would sweat over quarter to quarter numbers. However if you look at the long term trend, it is fantastic. This shows that despite the tough market environment, the players are pretty obedient in terms of keeping their margin in check. I did not show the revenue numbers in comparison between Oldtown and Power Root but I can say that Oldtown's ready to drink business is smaller than Power Root. However, Oldtown's margin is better. Oldtown's challenge is its cafe chain, which I think is also doing a turnaround (although this is a different article from me in the future).

As I have seen, the management of Power Root are pretty solid. They are founded by three people and just recently, they have done an exercise to include a substantial shareholder towards its International Sales GM. It has converted the shares in UAE into the holding company. I think looking at its performance towards its international sales, it is fair.

Additionally, its dividend yield is at an attractive 4.35% and seems like growing. This business has very strong cashflow and I think I am just back to basics i.e. buying cashflow based company and with very minimal debt.

Tuesday, April 11, 2017


I just sold Ecoworld International's WA as it is too small in number that I owned, and also the premium is just too high with its exercise price at RM1.45 and the shares is selling at RM0.395.

I just would like to add that the recent craze over penny stocks as well as warrants running much faster than its parent share is just too unbelievable. It should not happen this way but stock markets are never efficient right?

I still believe in the stock market for this year as we had very poor run over more than 3 years for Bursa. However, one should also be wary of some of the stocks being over-run.

I do not want to mention stock names as people can be saying that I am discouraging investments. Do however look for companies that have yet to make any movement while those that have very little fundamentals but yet they have moved 50% or more.

One must also consider that in times like this, everyone is a super investor and smart. This is also the time for owners of weak companies to dispose to the smaller shareholders as they do not intend to hold to their stocks anymore. In times like this, it is more often that non-fundamental companies to run as the owners may not even be focusing on their business but become a stock market player.

Only the good companies with focused management will focus on running their businesses as it is the harder thing to do rather than playing the market.

Sunday, April 2, 2017

Ecoworld International - 2000 units

Ecoworld International is to be listed on 3 April 2017. I have just been allocated 2000 units of the shares as I have held Ecoworld Development prior to this. The subscription price is RM1.20 per share.

Below is the details. Additionally, Ecoworld International comes with 2 for 5 warrants.

Latest update for the portfolio is here.