TEO GUAN LEE CORPORATION BERHAD VALUE EVALUATION

Teo Guan Lee Apparel is one of the garment manufacturers targeting specifically for the young children clothing. With such a special niche, the company has no doubt able to differentiate themselves among the already crowded industry. Leveraging on its niche position, TGL can easily penetrate into the nationwide departmental stores at there are not much competitors around. In other words, they distribution network covers quite a big coverage where it can almost be found anywhere as long as there is departmental stores within the area. Another point about children apparel is that trend preference is not highly sought as children has not much demand in terms of apparel. Therefore, problematic inventory issues will not bother the manufacturer much. At the same time, size is also not much concern as one particular size is able to suit several children body size with a range of ages which is cost saving.

As attractive as it sound, downturns of such a niche market must also be expected. First of all, most children is not obsess with fashion at all. Therefore, demand only present when their guardians or parents do the purchases and selections for them particularly only during festivals. Unlike adults’ apparel, a series of combination and varieties are highly sought to meet several occasions. Another problem is that, in order to meet children’s demand for their favourite character to be displayed on their clothing, the company need to pay for the trademarks to realize the demand. As animated character is always updating and will come up with a new one, constant expenditure on “borrowing” the “character image” is quite costly to the company itself. When we look at the demographic breakdowns of Malaysia, family planning is starting to get popular as more and more couples are filled up with their respective career and at the same time to meet their stringent budget in the midst of fierce inflation.

Although it is quite beneficial as to its current monopolistic position, future prospect is dim with the stated problems. Filtered.

Stock: TGL Code: 9369 

TAN CHONG MOTOR HOLDINGS BERHAD VALUE EVALUATION

Tan Chong is no stranger to the dealership of foreign car in Malaysia. Tan Chong also lengthen its business arm by venturing into other field such as financial services, property and education services. Tan Chong group sees the market in a packet where such industries are interconnected with each other which we can observe from automobile assembling to after sales service and nurturing its workers with skills and knowledge. Designs of Nissan is never inferior compared to the others. By capturing the niche of upper middle class with its world class features, Nissan is undoubtedly standing firm challenged by different factors. When we look into Nissan itself, its brand is well established with its sports car featuring in blockbuster movies which to me, is undoubtedly a strong publicity advantage. Also, with its own financial sector, Tan Chong is able to provide extra options for its customer such as leasing where there is tax break element when it is utilized for business use. 

 When it comes to automobile industry in Malaysia, foreign brand encounters disadvantages as in heavy duty imposed which ultimately boost up the price. Price war is eventually scrolling in as local players are launching low deposits with their already low prices. Also, judging from the statement of the new Proton chairperson, it is likely that heavy duty will be continuously imposed to protect the local players. Furthermore, Malaysia government encourages mostly on the sale of locally assembled energy efficient vehicles where the rest will left vulnerable to heavy duty and challenges. 

Based on the disadvantages above, it disregard my interest towards such well-managed company. It reminds me of the textile business hold by Berkshire Hathaway in the 1970’s where good management must be tied with good business in order to strive. Filtered out.

Stock: TCHONG Code: 4405

SPRITZER BHD VALUE EVALUATION

Being the sole listed drinking water company in Malaysia, Spritzer has always being thriving in water business. Although there are competitors in and out of the business, Spritzer is standing firm on its feet all these years. Focusing on the market specifically for natural drinking water with the least flavouring, Spritzer did a pretty good job differentiating themselves with the greenish and bluish labelling which enables easy recognition. Despite establishing a strong branding within Malaysia, Spritzer is not contained by their own achievements. Instead, they go all out evaluating different kind of trends and expanding their market shares by identifying those needs such as water dispenser and vitamin water which is highly sought by modern families demanding equipment to ease their house works burden and at the same time being able to maintain their health in shape. As for their business nature, Spritzer don’t need much research and development to survive in the market. With only one water reservoir, all they need is to improve the extraction of mineral water. However, this doesn’t apply to their recently launched water dispenser product.

When it comes to consumer side, pricing is a major factor to be taken in consideration whenever purchase is being made. With guaranteed quality, Spritzer is of course priced higher than most of its competitors in the market in terms of drinking and mineral water. Furthermore, water purifying systems are made for easy maintenance and repairmen nowadays. Expansion of the use of system will directly damage Spritzer newly launched water dispenser. (When you have a trusted water dispenser or purifier, why would you buy the liquid behind the plastic bottle anyway? No offense.) Finally, I notice that there is only one water reserve which is able to provide raw water for the company. I mean like what if something happens because it’s actually the company backbone? (Touch wood)

According to the table above, operating cash flows is growing at an annual rate of 5% for the past 10 years. Looking into its efficiency ratio, both ratios performance are moderate but not superior. Personally, I hope to uncover some of company with higher efficiency, filtered out of my list. 

Stock: SPRITZR Code: 7103

PPB GROUP BERHAD VALUE EVALUATION

PPB group is a giant conglomerate venturing into the food, property and entertainment industry. This enables the company to ride on a bullish trend and receive less shock when there is a global financial slowdown with their diversification products and services. As Malaysia sole largest private flour miller without much government intervention, PPB group leverage this position and offer cake baking flour series while producing breads out of its own wheat. As there is no middle chain in between extraction and manufacturing, this low expense margin segment turns out to be a profitable venture. Aside of that, frozen food with “Marine” branding is a deluxe picking by households with their exceptional and restaurant suited taste. Compared to other frozen products, Marine raises a sense of enjoyment instead of staple food which specifically targets for higher middle group. Making its way into entertainment field, the group owns Golden Screen Cinema which can be found all over Malaysia. Their standings are further established with the opening of two new cinemas in Sarawak. With the trend of youngsters favouring cinema movie, screening business is never too obsolete which enables the group to continuously enjoy their cash inflow from cinema business. The benefits prolong with the group acquisition of Vietnam’s Galaxy Entertainment where they capture a rising market over there. At the same time, it is also a great sources of collecting advertising revenue where airing time is quite costly and lucrative.

For the bread manufacturing industry, PPB group distribution network is sort of left behind compared to Gardenia. Take into the example of Sabah where there is local bread manufacturer by BTC, Gardenia’s bread is still able to survive and its coverage is wide be it the rural or urban areas. The moderate distribution network can also be reflected through its frozen products where it is only found in certain urban areas where foreign products are also brought in making the competition more crowded. Golden Screen Cinemas are also cornered in a five ways battle with so much theatre operators already in Malaysia. Consumers are able to choose which cinemas to go to despite of having the same movie. Therefore, a lot of marketing expenses and collaborations are needed to attract the respective markets.

Obviously, the operating cash flow for PPB Group is sliding down from years to years. With  extensive expansions for the several years, failing to boost up and even maintain the cash from below reflects that the business is not generating enough cash altogether. Thus, it is not a desirable picking.
STOCK: PPB CODE: 4065

POWER ROOT BERHAD VALUE EVALUATION

Power Root is one of the major beverage producer originating from Malaysia itself. With products such as coffee and energy drink, it is targeting the growing market within Malaysia as well as markets in the Middle East where demand for energy booster is rising high up. In terms of branding, Power Root formulates its marketing plan in ways such as lucky draw, sponsorship and events organizing. With all these promotional activities, Power Root has established a very strong goodwill foundation. It’s remarkable marketing milestone also include Ah Huat white coffee blending in the diversification of Malaysia’s cultures which capture its audience easily. For an energy drink manufacturer, the company might as well retain its drink formula and generates strong cash from it without reinvesting much of their cash into research and development. As Power Roots focus much on Islamic consumer with their packaging which includes “Tongkat Ali” and “Kacip Fatimah”, it can successfully capture the unique market shares compared to other energy drinks such as Red Bull. As the asset gaps is relatively huge, no comparison can be done but the advantageous position owned by Power Root is undeniable. Power Root has also done a very good job in terms of distribution network where their products can be seen not only on major retailers, but also restaurant and rural area outlets which is exceptional.

However, competition is levelled at an extremely competitive bound. In terms of pricing, even an ordinary Red Bull is able to match RM2.5 set by power root where their economics of scale is far more superb than Power Root. As for their Middle East market, some countries have started to restrict the sale of energy drinks which might damage the revenue growth for Power Root in the future. Also, as for my own observation (no offense), Power Root products are less desirable when it comes to consumer’s preference. This is further supported by my long study of power root’s shelves spaces where it has been reduced by over 30% in the past one year. When it comes to a fundamental of business, you can have the best packaging, networking and marketing in the whole world but without the co-existence of sound products, the business itself hardly come to a success.

Since the fundamental is not sound enough, Power Root might just be filtered out from my list.

Stock: PWROOT Code: 7237

PANASONIC MANUFACTURING MALAYSIA BERHAD VALUE EVALUATION

A long time branded electrical appliances manufacturer, Panasonic has successfully positioned the consumer’s brand with its high quality products. When it comes to durable goods, purchases are only stimulated when economy is considered stable and don’t fluctuate much. Therefore when the trend is there, consumers tend to pick electrical appliances that are branded rather than the low ends because of the utilization of their money value. With the emergence of popular retailers like Harvey Norman and SenHeng, these outlets further provide credit for consumers to pay in instalments which further diminish the price difference between Panasonic high ends to the other products. Of course, it is undeniable that the presence of multiple competitors in the market is stiffer than ever, making it difficult to expand its market shares. Therefore, Panasonic started to emphasize on controlling their operating cost in a more efficient and stable way. In electrical manufacturing industry, much research and developments are needed to satisfy the every complicating consumer’s demand. In Panasonic case, an average of RM15 million capital expenditure is utilized which is in my opinion insignificant with its strong RM600 million revenue.

As company like this is consider a cyclical revenue generator, its income is highly affected by the economic situations domestically and internationally. Upon economic downturns, durable goods are the first thing to be listed off from the consumer’s wish list. At times of global index positioning at the price earning of 17, I don’t think it’s a suitable time for a cyclical stock to strive. Aside of that, surviving in appliance manufacturing industry, maintenance of inventory is extremely complicated compared to food and clothing industry, regular checkup is needed for stocks with low turnover. 

In order to obtain an average growth rate, growth of cash flow is derived from 2005 to 2013 figure which makes up 9% of compounding rates for eight years which is still satisfactory. As for ROA is above standard unlike ROE. It’s performance reflects a moderate growth which does not fulfil my stock picking criteria. Filtered out. 

Stock: PANAMY Code: 3719

PADINI HOLDINGS BERHAD VALUE EVALUATION

Established as a garment industry player, Padini is no stranger to the Malaysian locals especially the youngsters from teens to their 30’s. We all might have known each company builds up their branding by targeting certain consumer groups. As for Padini, it is mainly going for the 20’s to 30’s where their spending power is not too dynamic but with a certain degree of fashion adoption. Going through the chairman statement, I notice that the company takes a different approach by putting themselves into the shoes of their customer group where they are concern about how the youngsters optimize their spending. This leads Padini to manufacture their products up to the money value and at the same time, putting their design in line with their international competitors. Padini group also owns Vinci, famous shoes outlet dedicated specially for ladies. According to my observation, their pricing and products never fail to attract consumers regardless of geographical and culture factors. Again, there is many kinds of fashion outlet, however, the reputation and branding built by Padini along with its strategic pricing and designing model, it stands out from the aggressive competition. Provided Padini is able to continue to fulfil customer’s expectation, I can see its positive position in ten years’ time. With fashion conglomerate like Mark&Spencer striving in the market for decades, Padini itself is certainly filled up with a lot of potential prospects. Capital expenditure is being allocated at a very minimal amount where purchase of new plants and equipment is aimed at boosting manufacturing capacity and driving cost efficiency up.

 Venturing into an industry that is not only by local but also international competitors, it is another dog eat dog situation. Compared to 2008, the company selling and distribution cost increased by almost 100% from RM100,000 to RM 200,000 in just 7 years. Advertisement cost has never been so high when especially, invention of smartphone has changed the rule of marketing. With so much people using smartphone now, conventional method hardly reaches its audiences effectively and thus driving the company to search for more marketing channel. As mentioned by the chairman himself, the company finds it hard to fulfil the consumers’ every changing preference. Failing in prediction might drive their customer flows openly to their competitors.

According to the operating cash flows, there is a wild movement between these ten years. However, the cash flow shows a result of upward trend. Annual compound rate for the cash flow is calculated at 25%, however, taking into the recent spike, it’s adjusted to 20%, which is still superb. As for both ratios, they are no issue as the company is efficient in utilizing their assets and equities. As for cash management, the group does the financing by termed loans, short borrowings and issuance of shares. With a combination these sources, it is able to decrease its gearing which is currently at only 5%. There is a strong RM135 million cash reserves which shows the group readiness for future expansions and plans. Intrinsic value (Calculated with 8% rate and Margin of Safety for 40%) is valued at RM2.75 which are above the market price of RM2.0. Despite these fair results, I noticed that there is a change in boardroom and audit committee with the reason being personal commitment. However, resignations from these independent personnel which are submitted on 30^th of April 2014 might raise a few eyebrows. It’s better to stay cautious before jumping in.

Stock: PADINI Code: 7052

ORIENTAL FOOD INDUSTRIES HOLDINGS BERHAD VALUE EVALUATION

Oriental Food is a local manufacturer of confectionary and snacks. My attention is converged to the company’s snacking division line. Already known for its cheese balls which fill up the childhood for most people, its snack series come with a rather low price and guaranteed recipe. Although the snacking market is already filled up with popular international brand like Lays and Mister Potato, Oriental Food’s line market share has never deteriorated. Utilizing its position of cheap and unique recipe, it continually captures the taste and preference of fellow Malaysians. The group further extend their advantageous position by offering their products at a smaller quantity. With the already low price offered, it just get cheaper and reach extensive target groups than usual. The group has also done quite a splendid job by allowing plenty of factory visits for charitable organizations and schools. Marketing efforts are seen where the group seeks distribution channel through family carnivals by sponsorships. Capital expenditure is undergoing a rather inconsistent pattern as there is a high of annual RM14 million spending and there is zero spending on the other extreme. However, the chairman indicates that the group is focusing on innovating new products to defend their market share. As there will be large scale research and development going on, I don’t see the group’s cash reserve allows it with only RM15 million which is equivalent to only 1 year spending.

As mentioned above, the company is competing in a market where a lot of competitors are aggressively fighting for their own market share. ( Note that it’s not the word ‘increase’ I’m using, instead it’s FIGHTING) Promotion of lower prices are often held regardless of festivals or special events. Also, people’s awareness has increased towards their diet. With this trend going on, snacking business will be more difficult to survive with stricter monitoring of the food process. 

The operating cash flow is growing steadily with an annual growth rate of only 4.61%. ROA and ROE has rather poor performance. With the three poor quantitative indicators, the firm has still spaces of improvements. Filtered out of my list.

Stock: OFI Code: 7107

INTERNATIONAL BUSINESS MACHINES CORP. VALUE EVALUATION

As one of the leader of commercializing computers from personal use to super computer fit for giant corporate needs, IBM has established a very solid brand that is envied by many. Initiating its business mainly in hardware segments, the company spread its wing further to other ventures such as business solutions, city planning, cloud drive management and anything you could imagine when you start a company which requires information technology services. As an early innovator, IBM gains a lot of experience and come up with a very good company structure with specific task segregations and specializations as what we can see from its websites. This is why IBM is still standing strong despite the rise of various startups and dot com bubbles burst where its expertise is fit for the practical usage in many companies. IBM further put itself in a very advantageous position by opening branches all over to world where it can effectively expand its network and business opportunities. Throughout these few years, IBM future prospects seems eroded. To me, the potential is still there. Imagine even when Google conquer the IT world, practical business solutions are still needed to keep companies’ massive administrative tasks running. ( To me, wearing glasses and watches simply cannot replace the conventional method isn’t it? ) For IT company like IBM to fend off its workers, much research and developments are needed for innovation purposes. Opposing to traditional do it in your lab method, IBM welcomes more collaboration from other parties in carrying out more innovations where it is more efficient and cost saving.

When diversification is overly adapted, a company will lose its focuses and this will eventually invite unwanted disasters. Cost are reported rising in an explosive manners in various reports. IBM also sold their server business as less profitability is generated. These are all resulted from the company inability to manage such a diversity of products and services even with a large scale work force. As a matter of fact, IBM has been focusing much more on restructuring their cost and converging their business with several disposals along the way. 

Based on the 10 years cash flow, the company has generated a very steady growth of operating cash flow level with an annual growth rate of 15.27% which is astounding! Not to mention both ratios performing at a satisfactory level. Unfortunately, the ratio has dropped for almost 4% for ROA where it record a decline in net profit. IBM’s debt has been following a consistent pattern where they pay almost 80% of their debt at the respective year. This indicates a healthy financing practice. At the same time, the company is also maintaining its cash at level about $10 billion. As above strong suggestion for the business’s future prospect, the company intrinsic value is amounted at $196.13 (note that I used the high beta and after a 20% margin of safety) compared to the current price of $192.27. At time of writing, I am owning the shares of IBM.

Exchange: NYSE Stock: IBM

KAMDAR GROUP BERHAD VALUE EVALUATION

Kamdar is a department store which bring in different concept for the local shopping experience. Aside of conventional products like casual wears, Kamdar also provide varieties of fabric for clothing and decorating uses. This has become a one stop shopping center for most of the housewives (This is where most of the male individuals suffer waiting and giving comments.) As I did evaluations for several garment manufacturer and trader before, I discover that Kamdar present its products in a way that fits middle and lower class needs where everything comes with a very low margin and thus push up the sales volume at the same time providing products with the moderate quality. Compared to other department stores, Kamdar put a very heavy emphasize on selling its fabric which is displayed in a very big portion of its floor space. As there are not much value added process like logo printing, packaging and clothing designing, this enables Kamdar to manage its inventories at lower cost without doubt. In order to expand its distribution network to reach more consumers, the company opened several branches across different states in Malaysia. Therefore, most of Kamdar’s capital expenditure goes to opening these branches for maintaining revenue level.

As purchase of garments and fabrics is a highly seasonal affected, customers flow will only increase when there’s festivals or huge sales promotions. Therefore, business will strive for a certain period and drop to bottom at another time. This causes a major cash flow problem where the company’s cash is stuck with the inventories for a very long time and lower the ability to order up to trend products. Aside of that, operating and maintaining department stores will lead to a very high cost. When stocks are mark up with very low margin, increasing overhead will slice the company’s profit lower. Recently, it is reported that there is substantial amount of unapproved cash withdrawals from its subsidiary where it reflect the company’s internal control is weak. This incident, however doesn’t deteriorate the fact that Kamdar’s ability of generating future earnings and hence it might be opportunities to buy it at fair price.

Although there is positive indication, the company’s operating cash flow is undergoing an extreme fluctuations for the past ten years. For evaluation purpose, I will eliminate 2012 to smoothen the cash flow annual growth rate calculation which is 12.14%. As for returns on assets and equities, it is quite weak and shows inefficiencies for ten years straight. I have no reason to go further after interpreting these basic data. Filtered out of my list.
Stock: KAMDAR Code: 8672

NTPM HOLDINGS BERHAD VALUE EVALUATION

Tissues branding like PREMIER, COMPACT, ROYAL GOLD have long penetrated the market shelf space.  These products aim for their respective markets such as common household sanitary use, toilet use and quality use which has established a very strong branding image and awareness among the public for a long time. They are all originated from NTPM Holdings which is located in Penang. Recognizing the opportunity of turning low cost pulps into tissue products from China, the company is born with multiple product mixes including rolls, boxes and pocket tissues. As human civilization evolves, hygiene plays a big part when it comes to our daily routine. Therefore, use of tissue will remain resilient in the next decade regardless of the scientific breakthrough (I mean, people still need to wipe their sweat and clean their mouth even if there’s a robot helping them right?) Recently, competitors from Indonesia have started to join the competition. Even Malaysia’s giant retailer such as Giant and Tesco do not miss out the party. However, NTPM’s Compact branded rolls which are known for its thick and solid content is far enough to fend off these emerging competitors. As the company eventually diversify into personal care products, capital expenditure has been increasing. For year ending 2013 alone, capital expenditure is amounted at RM50 million which consumes 70% of the company’s net income.

Hygiene problem is highly encountered by undeveloped and developing countries which originate from water source and living cultures. Use of tissue is inevitability important for hygiene purpose. But, human awareness towards environmental issues are getting higher than before. Consumption of tissues is not environmentally friendly after all (Although Malaysian’s awareness towards this issue if far from preparation, the evolution will eventually come where people decrease the use of disposable sanitary products, but the timeline is still vague for me). Diversifying into personal care where there is a lot of existing competitors, I don’t see there’s too much of growth potential in the future unless the product mixes are somehow undertaking different innovations and strategies. But yet, I don’t see any at the moment.

As for operating cash flow, the company record an annual growth of 5% for the last ten years. It’s rather a low cash level compared its EPS. As for both of the ratios, it turn out to be satisfactory return for assets and equities. Prior to the company’s expansion plan, a lot of financing resources are needed. Drawdowns of loan has also scratched the figure averaged at RM30 million. Not to mention current liabilities ranging near RM100 million. Possessing cash amounted to RM30 million at the same time, the firm is kind of over leveraged to me. With price of RM0.85 that is almost the double of previous year’s figure, my calculated intrinsic value shows a number of RM0.588 which is far from the market price. It will be on a very long upward trend although it is somehow overvalued. The fact that the possession of its economics nature superiority is undeniable which still makes the company one of my top watch list.
Stock: NTPM Code: 5066

MAGNI-TECH INDUSTRIES BERHAD VALUE EVALUATION

Magni-Tech is one of the counters that catches my heavy attention. Aside of playing its role as packaging business, the group further ventures into garment manufacturing industry as well. A combination of both decreases the risk of company from enduring too much risk. Looking in deeper, packaging business has accounted for 20% of the group’s revenue where most of the businesses’ clients are venturing in non-cyclical business such as food, healthcare and beverage. Thus, it ensures that the company will generate a portion of steady revenue. As for the garment manufacturer segment, most of its revenue is generated from export markets. Different from other garment manufacturer, Magni-Tech doesn’t emphasize on marketing and building the brand of its product. Instead, it fill up orders for garment trading companies who wish to outsource their production line. Thus, Magni-Tech itself is more on business to business transactions. With an average annual capital expenditure of RM5 million(it is barely about 1% of the total revenue), the amount is minimal enough as it is spent for increasing the company’s operation efficiency rather than continuous innovation for survival purpose which is a good thing.

As the company generates big amount of its revenue overseas, this exposes the company to a very high foreign exchange loss. ( I don’t do the Maths but based on news about Malaysia Ringgit’s depreciation in 2013& 2014 2^nd quarter, it is scary enough to estimate it.) Also, instead of the company’s ability to cushion its impact in case of global financial crises, its garments sectors are still depending on the international market on a large scale. Finally, its vulnerability is further defined by its holding of investment securities (not subsidiary and associate, just mere investment purpose) is worth a whopping RM22 million which is about 25% of its total fixed assets. I’m not saying the company is a speculator, but with such an amount of investment with the company’s nature (as garment& package manufacturer and trader), the risk is there.

With its 10 years operating cash flow, things are looking good as the company undergoes a healthy upward trend. Returns on asset and equities surpass the bench mark of 7 and 15% respectively. For 6 consecutive years, no drawdowns of loan have been made (This is remarkable as it includes 2008& 2009). Up to date, no short term and long term loans are recorded in the company’s balance sheet. What’s more is the company cash reserve is positioned at RM50 million (as at 2013 April 30). It is currently priced at RM2.70, compared to its intrinsic value of RM2.4( I set the margin of safety 25% for the risk I’ve mentioned). It is slightly overprice but still itis a counter full of potential.

Stock: MAGNI Code: 7087

LONDON BISCUITS BERHAD VALUE EVALUATION

London Biscuits Berhad is a confectionary conglomerate which hold its presence in Malaysia food industry. It is well known with its comprehensive cakes production line. Different from other snack manufacturers, London Biscuits focuses half of its resources towards the manufacturing and innovating of cake. This enable the company to operate with the advantage of very large economic scale as most of its plants and machineries are dedicated for single major type of product.  As the market is getting competitive than ever, existing conglomerate are fighting for their own pieces of pie, not to mention the entry of foreign products. Price war is often seen via promotions in different markets for this kind of products. In order to capture some market niche, the company has especially apply for the use of Disney characters trademark to distinguish their products from their competitors. This enables London Biscuits Berhad to leverage on Disney’s strong branding which is well established via media industry. Unfortunately, this kind of strategy cannot last long as consumer will eventually ignore the original brand with their mind positioning influenced by the package.

In my very own observation, consumers in Malaysia prefer crackers rather than cakes some of the time. As crackers consumption of the same price can last longer, it is more worthy than purchasing cake products. Thus, it eventually push down the sales of cake products. Also, cost of producing cakes are a lot higher as they need to undergo more procedures of manufacturing compared to other snacks which further heightened the cost. Tin box package is often used with crackers which ultimately makes it convenient for storage and also treated as a gift upon special occasions. This small difference leads to tremendous purchasing behavior in the end.

Based on its cash flow, recent figure incurred by the company is lower than it is 10 years ago. It is understood that this company undergo several acquisitions in the past. However, buying into companies that eventually suck up your cash, I don’t think it is worth it. Worse, return on both assets and equities are astonishingly low, which reflects the company poor deployment their resources. With its poor quantitative performance, I will filter this company out from my list. 
Stock: LONBISC Code: 7126

A Short Glimpse to "Essays from Warren Buffett"

1 month ago, a close relative of mine recommended me to this book of “Essays from Warren Buffett”. After “Intelligent Investor” and “Security Analysis”, it grants me a new perspective of evaluating stocks especially where they mentioned, figure on the balance is taken as a beginning, not at end. True enough, skepticism is a must for every investor if their decisions making are aimed for a very long time frame. Well, I will just highlight matters that will bring a lot of impacts (sometimes only for me but not you). I hope this can serve as your summary for the whole book. Better, if my writings can make you to pick up the book to authenticate my summary. (Talking about skepticism)

On diversification: Less diversification allow you to focus fully on your portfolios while making serious considerations upon buying stocks of your own choice. To me, this diversification must be spread to other class of assets such as commodities, real estate, paper assets and business. (Rather than MAS or AIRASIA, they are still paper assets) Venturing into different class of assets at different points of economy cycles grant you the biggest security of your investments against economic vulnerability.

Outstanding business determinants: Product itself, management, competitors and debt levels (cash flow management). These are also known as the moat of protecting a business from different kinds of threats.

Price Vs. Value: Price is what you pay, value is what you get. In the stock market, this two is often mixed up. Value is in term of book value( shown in the balance sheet as total assets minus liabilities) and intrinsic value (take in accounts of the company’s future prospect). Comparing these with the market price is a must.

On junk graded bond: Seemingly attractive with their high yields, it simply cannot cover the possibility of you losing your total principal invested in this kind of investments. Investing in paper assets (partial ownership of certain companies) takes a lot of common sense. Even loan sharks apply the theory better than corporate sometimes. ( If you know what I mean)

On retained earning: Company must consider about their ability to utilize every 1 dollar they retained to reproduce 1 extra dollar of profit. Failing to fit in this requirement, it is often better for the company to distribute their earnings rather than keeping it.

On stock splits: It is a movement that will attract short term speculators which bring more fluctuations to the market price. A true company will focus on increasing value for its existing shareholders.

On Goodwill: There are two kinds of goodwill which are accounting and economic. Accounting goodwill is calculated based on the purchase price minus net asset of its subsidiary. This kind of goodwill will undergo annual amortization for certain number of years which appear in income statement as expense. Secondly, it is the economic goodwill that represents the brand name and patent. This kind of amortization cost can be ignored because there is a very huge possibility that it will be reflected in a higher price if it is truly a splendid company. Well, that’s all for the first part.

KHEE SAN BERHAD Value Evaluation

Khee San is Malaysia’s largest manufacturer of sweets and candies. Its products undergo a very intensive marketing strategy where we can witness its existence in different level. From small retail markets to mobile retailers and giant markets, we are able to purchase its products for either small or large quantity where it shows that the firm possess an excellent distribution channel. In terms of the company’s size and its well-developed product mixes, they have far surpassed their competitors. Although it is not as dominant as Wrigley the famous chewing gum ever existed, its chewy candy possess the potential to compete with Wrigley’s (It’s just my personal taste and preference anyway). With the company’s momentum picking up, acquisitions of new plants and machineries were done in recent years to increase the production efficiency to replace the obsolete ones. This indicates that the business nature itself need not much capital expenditure for a long time. Furthermore, with such excellent product mixes, the company is able to retain the market’s preference for a long time until its cash flow is able to finance further product discoveries.

Unfortunately, the market is flooded with a huge variety of candies and gums that put Khee San in a situation where there is no regulated competition. In other words, ability to raise price is quiet low when it comes to such stiff competition. Also, as Khee San is now an associate of London Biscuits Berhad, its future intrinsic value will never be in a good position ( No offence, but figure indicates that London Biscuits’ track records is quite weak). If there is any magic combination for these confectionary that lead to a possible food industry evolution, my view might be changed.

According to the operating cash flow for the past ten years, it undergoes a mild fluctuations. The cash level was low until 2012 where it enjoys sudden boost. No consistent upward growth is shown. Also, both ratios are not showing satisfactory results where it is significantly below standard. In my opinion, this company fails to show values consistent to the growth of future earnings.

Stock: KHEESAN Code: 6203

KAWAN FOOD BERHAD Value Evaluation

Kawan Food Berhad produces mainly frozen food which is easily found in retail markets. As all of the company’s products are Halal, it is meant to target a large portion of market share worldwide. Compared to other frozen products, Kawan Food Berhad adopt continuous innovations to diversify its product line and creates more possibility to satisfy the consumer’s taste and preference. In terms of branding, names like Kawan and KG pastry dominate most of the refrigerator in the retail markets which reflect its popularity indirectly. With the fast pace life style nowadays, low fat frozen food like Paratha capture the taste of urban folks pushing the sales to next level. Throughout years of innovations, search of low cost production method and application of Halal license, barriers of entries are heighten which decrease the entry of potential competitors. However, recipes of these pastries are rather easily imitated by others.

As 60% of the company’s revenue is generated from overseas, this increases the company exposure to series of international events. Market shares in certain emerging region are also difficult to penetrate as local manufacturer possess cutting edge cost saving factors such as labor and raw ingredients. 

According to the cash flow in past ten years, factoring out 2005 and 2006, the annual growing compound rate is 7.89% which is above average but not resilient enough. With decreasing profit, return on both ratio has decreased as well with ROA on the sidelines while ROE is below standard expectations. Cash management is also deploying a conservative utilization which is beneficial at times of global uncertainties. My calculation of intrinsic value after 10% margin of safety is 1.82 which is basically not far from the RM1.8 level. It is an average and conservative company.

Stock: KAWAN Code: 7216 

JERASIA CAPITAL BHD Value Evaluation

Jerasia Berhad is an apparel conglomerate which consists of manufacturing and trading activities. Owning a series of highly branded product mixes, Jerasia distinguish itself among the competitors in terms of target market where they aim for the middle and upper society. This is in conjunction with the change in trend among the youngsters where product’s brands are being highly emphasized to reflect their status and ability. Despite of their luxurious price tag, from my point of view, their ability to set up unique display windows and the brand along is able to attract a lot of customers. (Not to mention the crowd which the company can attract if they hold any kind of sales. When there is ordinary brand with discount, consumer will see it as stock clearance while discount of luxury brands means that they can get something of higher value with lower price. [It’s logical nowadays]). Moving on, capital expenditure is not vital for survival purpose. Instead, large amount of the company’s gross profit goes to other expenses (which I think is mainly regarded with marketing cost). Barriers of  entry by government is quite high as establishment of manufacturing factory in the third world country like Bangladesh (due to their low cost advantage) has been quite a serious issues for the locals recently.

Manufacturing workers working condition which are long ignored by the industry player occurred to be a very serious threat to the business recently. Poor working condition and collapse of factory building lead the locals to protest against discriminating wages and human right issues. Indirectly, cost of goods sold in the future will be affected. Also, changes of trend is a very high cost as the company need to recalibrate with their suppliers, workforces and marketing departments after every certain period.

With an extreme trend shown by free cash flow after operating activities, we can see that the company is yet to recover its cash level before the world financial crises. It never incur negative cash flow in the eight years until 2012 and 2013. Looking into both ratios, the efficiency level in deploying its assets and equity is also quite low although there are improvements as compared to before. Overall, the company is yet up to expectation at the moment.
Stock: Jerasia Code: 8931

HWA TAI INDUSTRIES Berhad Value Evaluation

Hwa Tai Industries Berhad appears to be another company which specializes in biscuits and cakes manufacturing and trading field. Venturing into this industry for two decades, the company has obtain countless awards and international recognition. Also, the company is able to obtain shelves spaces as its product lines can be easily found in almost every market be it a small or large market. One of the features that enables Hwa Tai to outstand from its competitors is its popular assorted biscuits where it can be packaged as hampers, as gifts for visitations or just any regular snacking for people from all walks of life due to its flavor diversification. Another advantage reflected by the firm is its low capital expenditure where annual purchase of plant and equipment is not more than RM1 million in aggregate. In other words, its capital expenditure is not more than 1.5% of its total revenue which is EXTREMELY low. Again, reputations and recipes built up by Hwa Tai for decades have captured the demand of consumers which is able to fend off overseas competitors in a good way. Potential competitors will find it hard to penetrate the barriers as well.

Recently, Federal Government of Malaysia decided to pull back RM0.30 worth of subsidies per kg of sugar which makes up a big amount of biscuit manufacturing cost ( unless there is a no sugar biscuits recipes developed). At the same time, seasonal uptrend of palm oil prices drive up the cost even higher which is a disadvantage to the industry as a whole (although it is temporary and we can average out the trend), not to mention the minimum wages of RM900 set in Pennisular of Malaysia, all this rocks are set to be huge challenges for the company and it will be interesting to see how the management is able to manage it. Despite all these challenges, I find the profit margin is quite low in the past. There’s certainly a huge space for improvement here.

Based on the operating cash flows, extreme fluctuations were shown for the past ten years which does not fulfil our ‘consistency’ criteria. However, with its strong quantitative factors support, I believe the company will be back on the right track in the future to realize its high ‘potential’. In short, it is definitely not in my watch list for the moment.

Stock: Hwa Tai Code: 8478

HUP SENG INDUSTRIES BERHAD Value Evaluation

Ever tried HupSeng’s Ping Pong biscuit together with a hot chocolate drink? It’s truly a classic combination and this is how I get to know the brand which I believe is one of the Malaysia’s all-time favourite crackers! Hup Seng has been manufacturing all sorts of cookies, biscuits and crackers for decades. As a repetitive winner of numerous consumer products, it is obvious that HupSeng possess a strong foundation of branding and popular product mixes which ensures the position of HupSeng in the market. As recipes of most products are well produced, the firm spends not much on capital purchase or even research and development (averaging to RM6-8 million annually), thus the firm accumulates a lot of cash which is able to finance any further expansion and acquisition in the future. As 87% of the company’s total revenue is generated from Malaysia, we can see that there is still a lot of opportunities for HupSeng to grab in the future with such a strong cash flow position.

With the current market flooding with all sorts of products, the competition has become stiffer than ever. This also includes competition especially from China with low price advantage who wants pieces of the market pie. Also, raising of utility rates and fuel costs put a heavy burden on the industry as a whole.  Furthermore, taste and preference changes accordingly to regions. Although there are overseas opportunities, it is a difficult mission to satisfy all kind of consumers’ need.

Looking into the company operating cash flows, it manage to climb amid of fluctuation during the initial years. Both ratios are also performing splendidly as shown in the table. The company did not go for further leveraging for the past ten years which proves that the company is able to gradually sustain on its own without much gearing which reduce a lot of risk at the same time. With my calculation of RM4.13 intrinsic value after 10% margin of safety, the price now is well above its value.

HOVID BERHAD Value Evaluation

Hovid is involved in one of the Malaysia’s pharmaceutical manufacturer industry. One of the products that has earlier set up Hovid’s image is its herbal tea product line Ho Yan Hor where it is suitable for all kind of consumers. As an early producer of herbal tea pack, the company further diversifies into product lines which include supplements and all kind of agents. Barriers of entry are very high as there is tight government regulatory and millions worth of patents to be rented. Recently, confirmation of generic product’s patent expiry has allowed the firm to produce this new kind of drugs where it results in significantly lower cost. According to the company’s annual report, it has applied for the use of this kind of drugs in several countries where it gains an unfair competitive advantage ahead of other competitors to prepare themselves for the change of traditional drug to generic based products. In the chairman statement itself, we can gain full insights and detailed future directions of the company where it shows that the board and management has full knowledge and control of its plan. This is especially important when we expect future earnings growth for certain company where the management can develop highest value of skills to strive higher. 

Again, survival and outstanding in pharmaceutical industry is almost mission impossible. With Malaysia aiming to become country with high income before 2020, introduction of minimum wages policy has driven the company cost to climb and slash the margin. Also, capital expenditure is very high where the company spends a lot of capital on patented and non-patented drugs. Research and development is vital to stay on the competition’s track where large portion of funds will be utilized. Also, producing patented drugs also means that the competitors are also doing the same. Therefore, strong competition still awaits Hovid in the future.

Cash flow from operating activities faced extreme volatility during the past ten years. Even worse, the recent cash is at a lower level than ten years ago. Although both ratios are up to satisfactory level, it has not been consistent throughout the past ten years which is lack of stability. There is a moderate amount of money averaged RM3.5 million spent on capital expenditure which is minimal. In recent years, the company fulfilled its obligations by gradually paying off all the loans drawn few years back. Although there are no dividends for few consecutive years, I can see that the company is having a positive restructure based on its cash management.  Where intrinsic value is irretrievable, gauge of book value is ([223680-37807]/762080=RM0.244) where the market price is still higher at RM0.335.
Stock: Hovid Code: 7213

GUINNESS ANCHOR BERHAD Value Evaluation

Guinness is another well-established listed brewery manufacturing company which possesses lots of upside potential and expansion opportunities. In terms of its product mixed, one of the most favored and unique products that are offered is Shandy with least Alcohol content where it is suitable for the light drinker. In discovery of market expansion, targeting of light drinker is one of the most strategic ways to fight for additional market share. Also, the parent company itself is also well known with the sponsoring of “The Guinness World Record” record book which gains tremendous amount of popularity worldwide via television broadcasting and published annual record books, even non-drinker realize the “Guinness” brand of the “World Most”. As for capital expenditure, the company need not rely on research and development for survival purpose however in every beverage industry, the most common ways to expand is to acquire another company or brand in order to decrease the number of competitors and strengthen its front line where huge expenditure can be incurred sometimes. Brewery industry requires heavy capital investment as well as unique brewery recipes which makes it hard for others to enter.

Similar to Carlsberg, brewery industry find it hard to expand in a large scale in a Muslim-dominated environment due to religious and political pressures. As fierce competitions are going on and companies are fighting for shelves spaces in retails and restaurants, strong marketing campaigns are deployed to sustain and increase the company’s market shares where it consumes almost 40% of the gross profit portion from the company annually.

Operating cash level in the past ten years appears to be climbing steadily where the company is performing healthily. Both ratios are also far beyond the standardized level where the company is efficiently employing its fund and assets to produce profit. Management of cash in the past was fine except for 2013 and 2012 performance where RM350 million worth of additional funds are collected and the dividend distribution is increased to the range between 200% and 300%. It is especially unhealthy when company used borrowed fund to issue dividend. Hence, it is not a good pick at the moment. 

Stock: GAB Code: 3255

FRASER & NEAVE HOLDINGS BHD Value Evaluation

Fraser& Neaver originally found in Singapore is manufacturing beverage and dairy product. With a strong brand building in the past, F&N has established a lot of reputation in terms of its product lines such as isotonic drink 100 plus which is used to sponsor countless outdoor events and gain tremendous popularity. Aside of its own production, F&N go a step further by acquiring Nestle’s Dairy line in Thailand to own the right to produce all kind of canned milk to expand its possible market expansion via Indo-China route. In addition of strong branding and product line, F&N  has also decreased external pressures from strong competitor by adapting to its acquisition strategy. At the same time, the barriers of entries are high enough to stop potential competitors from emerging as high capital is needed for all the plants and machineries. In F&N case, the company owns almost RM1 billion worth of plants and equipment with an average annual investment of over RM200 million which is a gigantic amount.

In any industry that is related to dairy product especially canned milk, F&N company encounter the risk of defame due to milk scandals which might result corrections in short term. Also, with a huge export business, although F&N is able to leverage on its order size, dealing with different regions means more credit transaction and hence lack of smooth cash flow. Competing in an aggressive industry, marketing campaign is a much and must be held in the most innovative and extravagance ways which consumes almost 35% of the company’s gross profit annually.

With the company’s extreme cash fluctuations, we take EPS as our profitability reference this time. Taking out 2010 and 2011 where the company undergoes restructure and disposed its subsidiaries, the EPS is growing steadily throughout the 8 years with an annual compounded rate of 5.44%. Both ratios are also up to satisfactory level. With intrinsic value estimated at RM5.47 after 15% Margin of Safety, the company is seen to be overvalued by the market in a huge margin. It is a great company to purchase in with the matter of time. 
Stock: F&N Code: 3689

GUAN CHONG BERHAD Value Evaluation

Guan Chong Berhad is the Malaysia’s sole largest listed cocoa bean manufacturer. Venturing into industry which specializes in cocoa products, this company has a lot of potentials and untapped market due to its MONOPOLY position regionally. Being able to operate based on its economic of scales and ever increasing production, cost is easily spread among its large scale production. Also, being in the industries for decades, Guan Chong has been breeding and improvising its cocoa seeds with a lot of trials and errors. In terms of time and effort consumed to produce the best seeds, others will find it hard to cop up with Guan Chong.

Staying in this industry with commodity as major basis of raw material, the companies need to place a lot of capital to purchase contracts in order to secure the price of raw material in the future in a market which is full of fluctuations. At the end of the day, purchases of these contracts might result in speculative practices by the management which might deteriorate investors’ investment. Also, the industry is also extremely volatile to global crisis as shown in the drop of revenue during the 2009’s.

Cash flow result from operating activities faces an extreme fluctuation in the past ten years and even down to negative figure. Although we can get both ratios at a satisfactory level, cash flow in the company itself is very doubtful. Based on the CF adjustments on 2012 alone, write down of  inventories value loss in derivatives make up RM7.6 million. Instead of the reported earning, it can be seen that gain on derivative is also added into the company's income statement. Despite the company's business nature of trading cocoa, it turns out that its board is more of a speculation of the raw cocoa by using different derivatives. This under cover issue may result in great loss for the investor. Also, drawing of loans amounted to RM160 million indicates that cash flow in the company is rather poor. It is only worth investing if it is priced below RM0.7 which is its book value.

Stock: GCB Code: 5102

DUTCH LADY MILK INDUSTRIES BERHAD Value Evaluation

Dutch Lady, a company which major in manufacturing in dairy products since 1988 has been building its prestigious branding with outstanding products ranging from baby use to the consumption of regular family. With its deep blue packaging, its product lines are easily recognizable compared to others. As to the quality of products, the company obtains various recognitions from ISO, HALAL and trusted brand awards which reflect the Dutch Lady firm stand in the market. When I come across Dutch Lady’s products, I realize that it breaks its consumable milk line into fresh milk and ordinary milk with lower price. In order to obtain more market share, it provides options for consumer to choose. In terms of capital expenditure, the company doesn't incur any R&D costs which is probably being bear by its the parent company Frint Beheer IV BV who owns over 50 percent of Dutch Lady Berhad’s shares. Therefore, Dutch Lady is able to benefit from all the research facilities without using their own capital.

 Recent milk scandals from the China’s milk scandal which reports thousands and thousands of milk contamination has shaken the milk manufacturer industry. Moreover, the industry is burdened more with the Fonterra Milk Scandal which exports milk formulas to most of the dairy products manufacturers worldwide.

Based on the FCF for the past ten years, cash flow from operating activities for Dutch Lady has been increasing in a steady manner. More surprisingly, it is able to withstand the global financial crises and march upwards. As for the ratios, it is both up to standard which reflects and efficiently managed company. With good cash management, future earnings of Dutch Lady is no doubt going to climb in a steady pace. With its intrinsic value estimated at RM43.38 after 15% margin of safety, the current price has fully reflected its value.

Stock: DLADY Code: 3026

CYCLE & CARRIAGE BINTANG BERHAD Value Evaluation

Cycle Carriage is one of the Malaysia's largest dealers for Mercedes-Benz vehicles in which mass promotions and advertisements can be seen on newspaper daily. Although there are many dealers out there, we believe that Cycle Carriage is able to leverage on its purchasing ability and providing the best prices and services altogether and in turn generate increasing revenue. However, there are more emerging luxury vehicle brand which are competing for their respective market shares in Malaysia which threaten Cycle Carriage’s position.

In order to stand their way out, fierce marketing campaigns are held which increase their distribution cost in recent years. In a worse scenario, the company may need to hold more promotions in years of crises and push their margin further down. For luxury goods, the cost of sales alone is consuming high portion of the revenue already. Therefore, not much profitability can be expected. Also, recent announcement of government’s NAP policy has confirmed that prices of overseas automobile will gradually decrease for 30% in 5 years which will cause the consumers to adapt wait and see approach where in short term, revenues for the dealer may decrease.

According to the free cash flow, the company's performance has been deteriorating throughout these ten years. Furthermore, ROA and ROE has not appeared to be satisfactory which reflects the company low efficiency. Therefore, there is lack of potential for the company to generate stable growth in the future. Talking about dealership, will Cycle Carriage strive its way up in terms of cost management and less capital expenditure? I am looking forward to it.

Stock: CCK           Code: 7035

Talking about Federal Reserves Measures, how will it affect you?

Tapering of Fed’s quantitative easing measures has been a hit in worldwide news nowadays. Investors worldwide have mixed views about the tapering and some even see it as a threat while Japanese stimulus incentives show no sign of stoppage. This reminds me of a very famous economist with the name of Sir. Richard Duncan. Spending much of his early life in south east Asia particularly Thailand during his early age, he witnessed the Asian financial crises 1997 and after that dot com and housing bubble crashes. Based on his experience, he came out with his hit selling books titled “The New Depression”.

Well, his concept of New Depression starts where value of gold is no longer tied with the supply of dollars during the 1970’s. This allows the society to operate by leveraging on credits and loans almost unlimitedly as there are limitless dollar supply. As compared to era before 1970’s, the concept is very different from capitalism where entrepreneur earns a decent profit, save a portion of it and spend the rest on expansion which is quite conservative. However, nowadays, business finances its expansion in a very large scale that they rely much on third party aid which cause a gigantic bubble to expand whether the company is making profit or not which is also known as “Credidism”.

As there is no limit to the supply of money, US society spends a lot and lot of money on import goods particularly Japanese products. At the same time, Japan is generating an awful lot of revenue and climbs the way up to one of the world largest economy. Eventually, all the dollar flowing into Japan caused a bubble and that bubble has popped for more than 20 years where Japan has been facing deflation ever since. Of course, this is only one of the scenarios of bubble. My main point here is, the world is not operating like it used to be in the past. Our economy now is only stable provided we are being supported by some kind of forces. After each bubble burst, government needs to bail these companies that are too big to fail. Without these financial aid, the economy can no longer stand on its own. Imagine if US allows AIG to fall, it will affect thousands of constructions, borrowers, lenders, policy holders that drive the force behind the glamorous economy. The world simply cannot survive anymore without government aid.

Why am I posting this where it seems unrelated to value investing? Because evaluating individual companies are not enough anymore where the world is changing in a lightning pace. Therefore, tapering measures today might result in more stimulus tomorrow. Recognize the policies and take more advantage into your purchasing timing when you read another news about tapering next time! I wish you to strive in your investing journey folks!

CCM DUOPHARMA BIOTECH BERHAD Value Evaluation

Commencing its business as trading pharmaceutical products, CCM stage its game to manufacturing drugs by obtaining license from the government. As there are many patents involved in manufacturing drugs, the industry find less competitors. However, emergence of strong competitors recently in the market has made the competition tougher than ever. As most of the people purchasing decisions of pharmaceutical products depend largely on the effectiveness rather than pricing, it won’t be a problem for CCM to adjust their price. In terms of branding, the company has few well established products such as Thompson cough reliever and Chewes kids' vitamin which gain the loyalty of its customers’ base. Based on its cash flow statements for the past ten years, there are no acquisitions of any subsidiary nor associates where the company generates its growth mostly internally which are different from other pharmaceutical company’s expansion strategy.

As the company ventures itself into an industry that adapts automation process, recent rise of utility rate will hugely affect the company’s margin unless the company adjusts its price. 

Based on the graph, the company has been performing on a gradual upward trend for the past ten years. Although there is a sharp decrease during 2011, it quickly recovered to the level before 2010. Both ratios are up to expectations as the company has been performing efficiently. From what I see, the company is adapting a very conservative strategy where the growth is steady and minimal risks are bared. Overall, the company performs well and possesses the potential to grow steadily in the future.

Stock: CCMDBIO[S] Code: 7148

CARLSBERG BREWERY MALAYSIA BHD Value Evaluation

Carlsberg has been a well-established brewing company for a long time. Being able to penetrate into different markets, the green label Carlsberg has become a popular branding among consumers. However, faceoff from its powerful competitor such as Guinness Anchor Berhad, it is difficult for it to fight for beer market share in such an intense market. However, one thing good about brewery industry is that they need not much research and development expenditure to survive in the market. On the other hand, acquisitions of subsidiaries may exhaust much of the company’s cash reserve. With clubbing and pub industry on the grow in Malaysia, demand of alcoholic beverage is on the rise as well which in turn guarantee the future earnings of brewing manufacturer.

As alcoholic substance may be abused and misused, government monitors the distribution closely and imposes heavy duties at the same time to curb the demand of alcoholic beverage. This makes the industry having hard time in expanding their business in Malaysia. Also, recent import of cheap brewing products from Thailand and Indonesia has further slashed the market share of local established brewing company.

Based on the ten years cash flow from operating activities, although there are fluctuations in between, we can see that Carlsberg find its way up in slow but steady pace. Both ratios are up to satisfactory as not much capital expenditure is required to support the business manufacturing line. Judging from its cash flow statement, Carlsberg maintains a high cash level for several years which indicates a good cash management. However, price earning at 19 is considered high which means the company is overbought. The company potential has been realized.
Stock: CARLSBRG Code:2836