What Koon Yew Yin should have done

This article is written in respond to the Star paper article here.

I have been in the investing game for a long time, but of course not as long as Koon Yew Yin due to the age factor.

But I figure out very early that anything that got to do with lots of money is a sensitive topic. That means investing in the share market, which can require a substantial amount of cash, is a sensitive topic to many people. Talk the wrong thing ...and you hit a lot of raw nerves and all hell will break loose.

With this in mind, I set-up Ongmali Blogspot to share some of my knowledge on what is important to look for in share market investing to newbies but mostly on general topics. I hardly ever talk or promote a stock because in the share market nothing is 100% guaranteed. I know if a share I promote goes south, I will get cursed and brick bats despite the advice being FOC. More so a person like Koon Yew Yin who can influence the share price with his enormous buying and selling.

What Koon Yew Yin should have done is ....just give general advice on the share market like me. In fact, to Koon Yew Yin, if you are reading this ....I admire you and normally read your general advice but never took up on your tips. Maybe I was always too late because I like to buy when the share has not moved much yet, but the other thing that bugged me ...was the selling part. If you could influence the share to rally up ..would NOT the same thing but in opposite direction happen when you ultimately sell ??

So the moral of the story is : just give general advice on the share market. If you want to quote examples to make the point, talk on shares that you already sold off as a case study. In this way there is no conflict of interests and this is not price sensitive.

An Important Investment lesson - Koon Yew Yin

Practically all my wealth is from share investment and I have been trying to teach people how to invest by giving investment talks and publishing articles. My method of selecting shares is based on my entrepreneurship and not purely on accounting principles as I am not an accountant. That is how I bought so much of VS Industry and Latitude Tree. As a result, I become a substantial shareholder of these two companies.

The price chart shows that Latitude has gone up from Rm 1.00 to above Rm 6.00 in less than 24 months and VS has gone up from Rm 2.50 in January 2015 to the current price level of Rm 4.20 in less than 6 months. Basing on my business instinct, I believe the prices of these two stocks should go higher when the next quarter results are announced.

What is the most important lesson?

You must frequently look at company announcements and when you see any company showing a sudden jump in profit, find out more about the company. Look at their website and its profit growth prospect. That is how I discovered Latitude and VS. I also bought Lii Hen and Poh Huat when I saw their sudden jump in profit.

Similarly I bought into Supermax a few years ago. When I saw there was a sudden jump in profit for Supermax in February 2009, I started my buying. When I saw X ray detectors installed at the airport to prevent the spread of the deadly HINI virus, I bought more aggressively.

The chart below shows the price of Supermax shooting up from Rm 1.00 to above Rm 6.00 within a period of 15 months. People were then fearful of the deadly HINI virus. The demand of gloves far exceeded the supply. As a result, all glove manufacturers were reporting increasing profit every quarter.

Supermax annual report as announced on 8th April 2010 showed that my wife and I together with my nephew and my sister in law held a total of 19, 550, 000 shares. We bought Supermax instead of Top Glove because it was trading at a lower P/E ratio. Similarly VS is now trading at a lower P/E ratio than MPI and Globetronics.

How did I make a kill?

We bought so much Supermax shares within such a short period that its Executive Chairman and CEO, Dato Seri Stanley Thai invited me to visit their factory in Sg Bulou, Selangor to reassure me of my investment. He also wanted to know how and why I bought so mush of Supermax shares within such a short time.

I told him that as soon as I saw the annual report as announced in February 2009 that there was a sudden jump in profit, I started my buying and when I saw X ray detectors at the airport, I bought even more aggressively.

In July 2010 when the HINI fever was under control, I sold just as aggressively. That is how I made such a huge profit.

When to sell?

Statistics show that almost all short term traders lose money. I have told you how and when to buy and now I will tell you when to sell to make profit.

After you have bought, you must hold and sell only when you see the company reporting reduced profit over 2 consecutive quarters.

You must also sell when the criteria for you to buy is no longer valid. For example, although Coastal Contracts and Favco are still showing good quarterly profit, the demand for offshore vessels and cranes is severely affected due to the slump in the oil prices as shown on the oil price chart below.

I sold all my Favco shares a few months ago when I saw oil prices started falling.

I hope this lesson is useful to all investors. Now what you need is some luck and wait patiently to see your profit grow.

I trust this article is an important and useful lesson to all the readers.

Source: http://klse.i3investor.com/blogs/koonyewyinblog/77571.jsp

How to interpret company announcements - Koon Yew Yin

According to Malaysian Securities Commission’ rules all listed companies have to make announcements of their quarterly results and other business activities that are unusual to their daily business operations.

I would like to share with you my experience on how to interpret and take advantage of the various announcements as follows:

Announcement of quarterly result: this is often a catalyst to move share price. If the profit is good, the share price will go up but if the profit is not good the price will likely come down.

Announcement of purchasing a large piece of land for development eg MRCB’s recent announcement of signing the S&P agreement to buy the German Embassy land in KL for a few hundred million Ringgit. Many investors would think that it is a wonderful deal to be able to own and develop the property right in the heart of KL. But smart investors with some imagination must consider this purchase very risky in view of the oversupply of properties in KL. Moreover, it will take about 7 years to complete the project from planning approval to construction and sale of all the properties before you can see the financial result. At the mean time, investors are exposed to 7 years of risk.

Announcement of company share buyback is tricky to interpret. It can mean that the management wants to buy back its own shares because it is undervalued. But sometimes the management wants to prop up the price to stop the price from falling because of poor quarterly result. Investors must look at the profit growth first before buying the share. You may be tempted to buy because the chart says so. Share prices can be manipulated if the daily trading volume is small. 

 
Announcement of right issues with free convertible warrants can be tempting to many investors. You must be careful to examine the true reason for calling the right issues. Do not subscribe blindly. Quite often due to poor management, the company has poor cash flow and the business has too many challenges. As a result, the company needs more cash. Moreover, this kind of announcement will push up the share price, offering you a chance to sell at a better price. You must remember that good profitable companies do not need to get money from calling for right issues.

Announcement of bonus issues is usually a good sign that the company is able to accumulate sufficient profit to issue more shares to benefit shareholders. This announcement will push up the share price. Of course the price will be adjusted soon after the bonus issue and the price will go up again if the company continues to show good result.

Announcement of share placement of not more than 10% of the total issued shares is a good sign that there is demand by fund managers to own these shares. If they buy them from the open market, it will cost more. This is reassuring to all existing shareholders because the big buyers would have studied the operation of the company in great detail before making such a big financial commitment. They should not think that their interest is being diluted. They must bear in mind that the company will have more cash for expansion which will benefit all the shareholders.

Announcement of a new substantial shareholder who bought all his shares from the open market is a good sign. According to S.C. rules, any investor who owns more than 5% of the total issued shares has to declare his interest. He has also to announce if he subsequently buys or sell the shares because his action will affect the decision making process of other investors.

Announcement of Company Directors’ buying or selling shares is a good indicator of the true value of the shares. All company directors have to make announcement when they buy or sell their shares. If they continue to buy more shares, it is a healthy sign, provided you know that the company is really doing well and that they are not buying them to simply push up the share price.

Announcement by a contractor of securing a large multi million Ringgit contract for the construction of a big project through the open competitive tender system will often encourage investors to rush in to buy the shares in anticipation of the company’s profit growth prospect. Many would think that the contractor with additional work would naturally make more profit. You must remember contracting is a very risky business because of the open tender system. The contractor has to take a lot of risk to submit the cheapest price to win the tender. That is why there are so few really successful listed contracting companies. Very often building contractors are also property developers.

Announcement of dividend is a good indicator of the company’s performance. The company that declares increasing dividend is definitely a good company. This shows that it has positive cash flow and can afford to benefit all its shareholders. This sort of company will not need to call for right issues to raise cash for expansion.

Announcement of privatization of the listed company is rare but when you see this type of announcement, you can make money if you know how to position yourself. The controlling shareholders offer to buy up all the outstanding shares that they do not already own, usually at a higher price than the current market price. As soon as you see the announcement, you can buy it before the price go up to the offered price. If you consider the offer is unreasonable, you can wait until they offer a better price. You must bear in mind that the better offer may not come and it may be more advantage to accept the cash offer and use the cash proceeds to buy other shares.

Conclusion: There are about 1200 listed companies and many of the companies are making announcements every day. It is impossible to read all the announcements. After you have read the above guidelines, you can select the useful announcements to read to save time.

Under the current condition, I will not read announcements by building contractors and property developers. I am not interested to know about huge land transactions.

I will also not read companies that have poor profit growth prospect.

As you know, our Ringgit is the lowest in the last 5 years and readers should look at announcements by companies exporting their products in US$.

Source: http://klse.i3investor.com/blogs/koonyewyinblog/