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 |  09 Dec 2023, 7:33:34 AM
From a ROE perspective, except for 2023, Barakah ROE was lower than those for my 2 reference Bursa energy services companies – Dayang and Deleum.
The only except was for 2023 where Barakah posted a 40% ROE. This seemed like a turnaround after the negative ROE of 177 % in 2022.
But when I dug deeper, this positive 40% was because it had an after-tax loss of RM 4 million divided by a negative equity. It was a positive 40% due to arithmetic.
Moral of story – when numbers look funny, you better dig deeper
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| 08 Dec 2023, 7:15:08 AM
“It’s built into the system that stocks get mispriced,” Warren Buffett said at the 2012 Berkshire Hathaway Annual Meeting.
There are several reasons why mispricing can occur from market inefficiencies to behavioural factors. I don’t really try to analyse the reasons for the mispricing, but rather look for opportunities for this.
I think Armada is a potential mispricing.
Armada ROE had been trailing those of my 2 reference Bursa energy services companies – Dayang and Deleum for many years since 2012. But over the past 2 years, Armada ROE had overtaken those of Dayang and Deleum
At the same time when you look at the trends of the ROE and market price for Armada, you can see that while the ROE has shown improvements over the past 4 years, there has hardly been any improvement in the market price.
I would consider this a mispricing opportunity that warrants a deeper look.
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| 07 Dec 2023, 1:36:54 PM
Warren Buffett has famously said that “I don't look to jump over 7-foot bars: I look around for 1-foot bars that I can step over.” This reflects his investment philosophy, emphasizing the importance of simplicity and avoiding challenging situations.
I think Alam is a 7-foot bar. Alam share price has been declining from its 2014 high. You should not be surprised since the last time its ROE was positive was in 2015. If you were hunting for Bursa energy services companies, there are companies with better fundamentals such as Dayang and Deleum. Of course, you still have to consider the margin of safety when looking at them
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| 06 Dec 2023, 7:27:58 AM
The marine charter business has caused a lot of headaches for the Bursa oilfield services companies. This is best illustrated by the ROE of Dayang and Deleum.
Both are in the topside maintenance services business. The different between them was that Dayang ventured into the marine charter business in the early part of the last decade
You can see that the returns for Dayang were badly affected in 2017 and 2021 by impairments due to poor vessel utilization.
Moral of the story? The wrong strategic choice can cause great problems
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| 05 Dec 2023, 10:31:35 AM
Dayang is an oilfield services company operating mainly in Malaysia. It initially focussed on topside maintenance services where it is one of the big boys in the offshore hook-up and commissioning business.
The company did very well in the topside maintenance services segment and got into trouble when it expanded its marine charter business in the early part of the last decade with the acquisition of Perdana Petroleum.
Business was good for the Malaysian marine charter scene until crude oil prices dropped to about USD 60 per barrel in 2016/17. The demand for marine charter services declined tremendously and many of the Bursa marine charter companies got into trouble. Dayang faced similar problem with its marine charter segment.
While crude oil prices today are 1/3 higher than the lows in 2016/17, the marine charter business has yet to fully recover. While Dayang topside services business is doing very well, its performance has been pulled down by the marine charter segment. The table below shows the relative performance of the 2 segments for Dayang.
Dayang spent tons of money on the marine charter business. With hindsight shareholders would have been better off if this was paid out as dividends rather than spent it on Perdana Petroleum. Did management do a good job in allocating capital?
For more insights into Dayang, go to Is Dayang one of the better Bursa stocks?
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| 04 Dec 2023, 9:35:52 AM
The company has yet to generate any positive annual return. From a fundamental perspective, I am sure that there are better hospitality counters
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| 04 Dec 2023, 9:32:11 AM
From a ROE perspective, Kim Loong had achieved better returns than my 2 reference Bursa Plantation companies – KLK and BPlant. But when you look at the price trend, the current price is about the past decade high. You might have missed the boat.
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| 03 Dec 2023, 3:33:38 PM
One of the metrics I used to screen for companies is the ROE. I then compared the ROE trends for the target company with the ROE of one or two reference companies where I have detailed fundamental analysis. If the ROE is better, then I will dig further into the fundamentals. When I did this comparison for Kluang with my 2 Bursa Plantation companies – Bplant and KLK, I did not find it to be good enough to dig further
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| 01 Dec 2023, 8:42:01 AM
The Malaysian oil and gas services companies have had a challenging time over the past few years. They have not benefitted from the high crude prices. The last time Velesto had a positive ROE was in 2014, about 10 years ago
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| 01 Dec 2023, 8:36:39 AM
Whenever I hunt for Bursa Plantation companies to invest in, I screen them by comparing their performance with my 2 reference companies – KLK and BPlant. These are companies where I have detailed fundamental analysis. The relative performance will give me a good sense on whether to dig deeper into them.
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| 30 Nov 2023, 12:13:37 PM
While often used interchangeably, there are differences between trading and investing. Firstly, they have different goals.
- Traders focus on generating short-term profits by taking advantage of price fluctuations
- Investors aim to build wealth over the long term by investing in fundamentally sound assets.
But there have been successful traders who incorporate fundamentals into their trading analysis
I would like to offer the ROE trend vs the share price trend as one toolkit for the traders.
The example for JTiasa below is one example.
While this is classified as under the Bursa Plantation sector, its ROE is worst than my 2 reference companies – BPlant and KLK. So I would not hunt here to look for long-term investment opportunity from a fundamental perspective.
But if you are a stock trader, wouldn’t you consider a rising ROE without a corresponding uptrend in price yet a trading opportunity?
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| 29 Nov 2023, 1:41:30 PM
Over the past decade, IOI performance in terms of its ROA had been above than the sector upper quartile ROA. This is one of the better Bursa Plantation companies.
IOI achieved a 10-years peak in ROA in 2022. There seemed to be a corresponding market price uptrend. The ROA has since declined and so has market prices.
But when you look at the past 10 years ROA vs market price pattern, you can see that the current market price is lower than those from 2017 to 2021. In contrast the current ROA is better than those achieved from 2017 to 2021.
Is the market suggesting that the ROA in the coming year will decline? But if the fundamentals don’t suggest this, would this be an investment opportunity?
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| 27 Nov 2023, 10:07:10 AM
Over the past few years, the ROE of Innoprise has overtaken that of my 2 Bursa plantation companies – BPlant and KLK. For those hunting for good plantation companies, you might have missed the boat at the company is currently trading around PE 14 whereas a year ago you could have gotten it at PE 6
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| 26 Nov 2023, 12:33:29 PM
BPlant – I am accepting the offer as it is at a fantastic price.
I recently received the Offer Notification for my BPlant shares.
I bought the shares years ago and started selling in middle of the year when the share price started to go up.
At that juncture, I did not have any idea that it was going to be taken over by KLK. Anyway, by the time KLK announced the takeover at RM 1.55 per share, I already had sold off more than 90% of them. Yes, I left lots of money on the table.
Then came the termination of the sale and the subsequent offer by LTAT to buy the shares at the same price of RM 1.55 per share.
I am of course accepting the offer. It is not just because the offer price is above BPlant NTA or that the listing status would not be maintained.
It is because it is a fantastic price given the earnings power of BPlant.
If you look at the history of BPlant, a very significant part of the earnings was from land sale and not the plantation operations.
- From 2013 to 2020, the Group achieved RM 1.1 billion of PAT. Over this period the gain from the disposal of land and securities amounted to RM 1.2 billion. The plantation operations incurred cumulative losses for the period.
- Of the 2022 PBT of RM 729 million, RM 459 million came from asset sale.
Assuming a PE of 15, the company would have to generate an EPS of RM 0.10 per share yearly from the operations to justify the price.
Do you think that the company would be able to do so give the poor track record over the past 10 years. They will have to work very hard or find another buyer. I think we shareholders are very lucky to have this offer.
For my insights into BPlant refer to "Is BPlant one of the better Bursa Malaysia stocks?”
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| 25 Nov 2023, 7:26:01 AM
The company had not delivered any positive return over the past decade. This is company is transitioning from a planation company to a property company. Well the property sector is a cyclical one and is not exactly booming currently. At the same time, it will take time to build up the property business. So I expect a few more tough years. If you are a fundamental investor, there are better Bursa plantation companies to look at. There are also better property counters to invest in.
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| 24 Nov 2023, 8:21:07 AM
From a ROE perspective, the return of Hap Seng is in between that of KLK and BPant. It is better than BPlant but not as good as KLK. These are my 2 reference Bursa Plantation companies where I have detailed fundamental analysis.
The comparative ROE trend and share price trend shows a good link. Prices are currently low relative to the ROE. If you are hunting for stocks with price-fundamental discrepancy to invest in, this is one company worth a deeper look.
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| 23 Nov 2023, 11:04:50 AM
From a fundamental perspective, Harn Len ROE is more volatile that that of my 2 Bursa plantation reference companies – Bplant and KLK. Worst still over the past 7 years, there was only 1 year that Harn Len did better than either of them.
From a share price perspective, I think the market price has run ahead of its ROE. Unless you are a speculator, you should be worried about this pattern.
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| 22 Nov 2023, 7:41:49 AM
There are 2 Bursa companies in the service station sector – Petronas Dagangan and Petron Malaysia. The former is about double the size of the latter in terms of revenue. You may think that this may give Petronas Dagangan some advantage
But you can see from the chart below that Petron Malaysia is no pushover and is able to compete.
So which would you chose to invest from a fundamental perspective?
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| 21 Nov 2023, 9:10:10 AM
From a fundamental perspective, the company ROE over the past decade is worse than my reference Bursa plantation company. I use BPlant and KLK as the benchmark. Secondly its price trend over the past few years reflected its poor returns. There are better Bursa plantation companies to look at.
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| 19 Nov 2023, 10:26:58 AM
The company has both plantation and property development activities. If you compare its performance with that of the Bursa Plantation sector, you will find that Golden Land ROE for the past decade was much lower than that of my reference company – KLK.
Secondly, the Malaysian property sector is not exactly booming currently.
Looking at its share price trend, you can see that it reflects its business performance. Unless you expect a significant improvement in the business performance, I am not sure why the share price will uptrend.
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