PERAK CORPORATION BHD Simple Research Report

Shares Outstanding	100,000,000
Market Capitalisation (at RM3.30)	330,000,000
Total Assets	827,975,444
Total Liabilities	176,551,875
Net Asset Value	651,423,569
NAV per share	6.51
NAV (discounted ~30%)	4.56
Gross Margin - 5 YR. Avg.  Source - Reuters	63,090,000
Net Profit Margin - 5 YR. Avg. Source - Reuters	33,640,000

Value per Share Today

Total Cash (subject to >RM12m reserves/trust/pledge/etc): approx. RM158,618,895

The above does NOT include sale of Integrax Bhd shares recently completed at approx. RM150,310,000 completed on 17 April 2015.

Hence, Total Cash, after disposal of Integrax (which should be booked in the next quarterly report) should increase to approx. RM308,928,895 sufficient to settle all debts leaving each share with an estimated minimum worth per share of RM4.56. Duly note that Total Assets already encompasses mentioned Integrax stake, which upon sale, the proceeds is merely transformed into liquid cash plus additional profit earned from sale minus cost of investment.

[Perak Corp. shares NAV is discounted at 30%, taking into account probable value adjustments, suitable in calculating possible underpriced take over value]

In addition, 5 year income averages can be considered stable and high relative to servicing debt expenses and dividend payouts.

Business Nature

Perak Corp. Bhd (henceforth the company) is a property and investment holding company, which engages in real property development and provision of management services. It operates through the following segments: Infrastructure, Township Development, Hotel and Tourism, and Management Services and Others. The Infrastructure segment provides maritime services in respect of the development of an integrated privatized project and encompassing operations of multipurpose port facilities, operation and maintenance of a bulk terminal, sales and rental of port related land and other ancillary activities. The Township Development segment deals with the development of real property and ancillary services. The Hotel and Tourism segment focuses on hotelier and restaurateur activities. The Management Services and Others segment includes property investment and distribution, and provision of management services. The company was founded on January 11, 1991 and is headquartered in Ipoh, Malaysia. (Source: WSJ.com)

Note: The company has almost fully utilised its land banks (>94%) for Bandar Maju Jaya development and land banks from its port land. 

More land (1002.939 acres) is in the process (since 28/02/2012) of being acquired in exchange of debt owed to company. More info can be found in the company’s Annual Audited Accounts 2014 part 2, page 115-124; 
[http://www.bursamalaysia.com/market/listed-companies/company-announcements/4725485].

Future

In line with Perak Corp’s Township Development & Hotel and Tourism segments, a joint venture with Sanderson Group worth more than the entire Market Capitalisation(at RM3.30 per share) of Perak Corp is the RM450,000,000 project, estimated to be completed in 2016. This humongous project is known as MAPS or The Movie Animation Park Studios will include a Dreamworks-dedicated zone, featuring characters from animated movies such as Mr Peabody and Sherman, The Croods, Megamind and Casper the Friendly Ghost as reported by theStar on 30/3/2014 and subsequent articles.

Conclusion

This state linked company for years has been run with consistent income performance (and debt management) with number of shares outstanding unchanged and a steady trend of increasing NAV among the points bearing shareholder centricity. With the price paid per share, the value you receive far exceeds cost. Looking ahead, income stream from upcoming and ongoing operations should translate into the continuity in NAV growth (asset value) and sufficient cash for future dividend payouts which may increase with business prosperity to benefit shareholders, state and country.

As always, investment (a longer time frame) is recommended, trading is NOT recommended. There are much more elements to scrutinise in company valuation prior investing. All aspects analysed and mentioned is from more detailed analysis, simplified. It is opined Perak Corporation Bhd to be undervalued currently and a good long term investment should management maintain their rigour, past trends are followed, more land is strategically acquired and sold & MAPS is successfully launched. 

Until next time, happy investing.

[DISCLOSURE: 

The writer has interest in the company analysed.

[DISCLAIMER: Everything stated in this blog is purely the opinion of the writer and any decision taken should be based on sound judgement with risks fully born by the decision maker. The writer shall bear no responsibility for any losses due to adherence of advices blogged by the writer or any commenters.  Informational discrepancies are possible and will be corrected if any.]

JR Capital PLT / LLP

JR Capital is a limited liability partnership that was recently formed in Malaysia by the writer to enhance private partners' wealth. 

The formation is due to the believe that there is presently lack of transparent & focused investment funds. We’ve also come across many individual stories regarding funds that have; 

• high management fees + performance fees + other fees (that eats away investor returns), 
• lack of disclosure as to the true nature of capital markets and business (educating clients adequately), 
• short term focused funds (historically, long term funds outperform), 
• low disclosure of manager turnover rates (how often the person managing your money changes), 

among others. 

To overcome mentioned obstacles, the partnership was formed based on knowledge stemming from one Benjamin Graham who is also commonly known as the father of value investing and notably his famous student Warren Buffett. Additional input was acquired from Columbia Business School (publicly available materials), that still propagates Graham’s approach to investing (contrasted from speculation) with added lines of thought from Yale and IESE Business School via online courses. All of these were then assimilated with principles and philosophies from the likes of Phillip A. Fisher, Kenneth Fisher, Jack Bogle, Peter Lynch and other notable pragmatic investors. Ongoing self conducted research (bottoms up approach) is our key in decision making.

The basic principles and philosophies that are practised within the partnership is what we share in this blog. The reason is to encourage new investors to invest their money wisely into any channel that they understand and trust to enhance wealth, in particular investment in securities/stocks/capital markets. Hence, do spend some time reading our past articles to get a more firm grasp of the ideas and the way we look at investments. 

Hopefully with each write up, someone manages to learn more about finance and gain in their financial well being.

[DISCLOSURE: JR Capital is NOT a mutual fund/unit trust/publicly accessible fund. Under NO circumstance are we promoting/recruiting new partners via this blog for we only accept partners whom we know personally and that share similar investment principles among others.]

Why Invest Your Money

Why invest your money?

Everyone works to make money to buy our daily necessities and to fulfil our wants.

Investing your money that your have earned may be difficult for those whom are constantly worrying about rising costs of living. Hence, if you are in this category, you should first manage your finance. Budgeting is necessary to reach a better investment standing. For example;

Table 1 : Monthly income of RM3000

Monthly Expenditures	Rough Amount Spent	Percentage of Expenditures
Food	600	20%
Lodging/Rent	600	20%
Travel/Fuel	510	17%
Loans	780	26%
Miscellaneous	510	17%
Total	3000	100%

If you were earning RM3000 monthly and had expenditures as in Table 1, assuming you could save RM300 out of your RM510 allocated for your miscellaneous expenditures, that would come up to a savings of RM300 x 12months = RM3600 each year.

After 5 years, your total savings would be RM19,774.15.

However, calculating RM3600 x 5 = RM18,000.00. So, where did the additional RM1774.15 come from? Well, that is the 3.15% interest you got if you had kept your monthly savings in an FD account. This 3.15% is added to your yearly savings which compounds over time. Compounding just means your actual savings of RM3600 does not merely add RM3600 yearly but it adds 3.15% yearly on your collective savings for the year.

CORRECT

1st year RM3600 + 3.15% = RM3713.40

2nd year (RM3713.40 + RM3600) + 3.15% = RM7543.77

versus

WRONG

1st year RM3600 + 3.15% = RM3713.40

2nd year RM3713.40 + RM3600 = RM7313.40

[All calculations uses a 1 month FD rate of 3.15% and 2014 inflation rate from Bank Negara Malaysia's website]

Well, if you aren't a maths junky, all you have to know is that your savings if kept at a certain rate (%) over time multiplies into a nice big sum. Hence, if your savings is small, the best way to compensate is to get a higher rate (%). This is called investment.

Anything that you put money into that gives a return is investment. Investments are vital as money if kept at 3.15% in a 1month FD account in Malaysia last year,2014, would have given you a real return of -0.05%. Yes, negative 0.05%!

What is a real return? That is how much your savings can buy you today. Real return is also known as your purchasing power. For example, your returns for 2014 if you kept your RM3600 in a 1 month FD account would have come to RM3713.40 no doubt.

BUT, your actual purchasing power is only RM3420.

The calculation is simple;

Inflation for 2014 was 3.2%, your FD was giving 3.15%,

 Inflation - FD Interest  

  3.20%   -    3.15%         = -0.05% (your real return / purchasing power)

If you feel that things are more expensive today with a similar pay from last year, the above is the explanation why. Inflation has eaten off your returns at 3.2% in 2014.

Back to your savings. The more you save the more you will have IF inflation doesn't undercut your returns. Keeping your savings by investing them is an effort to grow your money. The higher the return (%) the more your savings will be after many years.

Below is a Compound Table. Assuming you have saved RM100,000, the below table indicates the compounded value of RM100,000 invested at 5%, 10% and 15% for 10, 20 and 30 years.

Table 2 - Compound table

	5%	10%	15%
10 Years	RM162,889	RM259,374	RM404,553
20 Years	RM265,382	RM672,748	RM1,636,640
30 Years	RM432,191	RM1,744,930	RM6,621,140

Notice, the difference of every 5% makes a whole lot of difference when kept over longer periods of 10, 20 and 30 years.

Thus, we conclude that investing is the best way to go forward when it comes to savings and managing your money AFTER you have gotten your BUDGET right.

The better you budget your expenses, the more you will have in the future with the help of compounding interest.

Finally, WHERE TO INVEST?  Well, that is basically explained in every other post in this blog. Browse through should you be interested in growing your wealth.

In brief, this blog recommends investing in stocks/shares/business/public companies as when you buy a stock of a company, you become a part owner of that company. Should that company be a company like Nestle, you can be rest assured it'll continue to do well over the next many years & so will your shares that would be worth a lot more than what you paid for.

I hope this post simplifies the First post of this blog entitled;

"Why Invest?" - http://iliveidreamitranscend.blogspot.com/2014/03/investment-malaysia-shares-why-invest.html

This current post "Why Invest Your Money" was at the request of someone who wanted a more simple explanation on investments. As an effort to better upcoming posts, everything will be explained in a more lay and informal manner.

As for the month of April, the stocks in view are,

Oldtown Bhd
- for the longer term,

Bank of Greece (Athens:TELL)
- for the longer term,

Sime Darby Bhd & Air Asia Bhd
- should new listing plans come true.

Until next time, happy budgeting, saving and investing.


[DISCLOSURE: The writer currently owns minority stake in Parkson Holdings Bhd and Oldtown Bhd among the mentioned stocks as of 18/05/2015 under his personal account. JR Capital LLP does NOT own any interest in mentioned stocks as of mentioned date.] 

Behavioral Finance

January to March of 2014 had almost similar trends to that of 2015. Are trends predictable?

As a matter of fact, if you asked Mr Paul Tudor Jones (with over 2 decades of successful trading history & conceivably one of the best traders in the world),
he would say his partner/chart technician and himself managed to "predict" future market trend time and time again using historical market charts (i.e. comparing the Dow Jones index of a previous decade to the current decade).

Paul Tudor Jones, a biography of what it takes to be one of the only supertrader.
[ http://www.tradinganalysis.com/public/The-Lost-Paul-Tudor-Jones-Video.cfm ]

The point to be made is; Are predictions possible?
If yes, then that person should be the richest man in the world.

Why then would the 3rd richest man in the world (W.Buffett as of 03/2015) amongst others abstain from such an activity?
[ http://www.forbes.com/billionaires/list/#version:static ]

Dr Richard L. Peterson, a psychologist turned hedge fund manager suggests that it is our innate nature to want to predict the future despite knowing the fact that such a thing is (for now) impossible.

Dr Peterson explains in one of his interviews that our brains gets more excited than the brains of a drug addict just prior drugging himself with cocaine equivalents when we anticipate a monetary gain.

In other words, gambling when described as an act of participating to predict the future for a monetary gain, is addictive whether you like it or not.

That being said, it is opined Mr Tudor participated in behavioral finance in that the stock market prices as he saw them were presumed to be the representative of human behaviors that converged into a single representative predictable manic depressive state that is seen as the Dow Jones index, KLCI index, Hang Seng index etc.

In short, it is predictable how market participants will react because in aggregate they represent people behaving as people. When things are good, prices of stocks generally goes up and when things are bad prices tend to go down.

We are thus suggesting in the long run, predictions are possible. Just because people are manic depressive in that we tend to overreact and lose sight of objectives.

[Note: Behavioral Finance is a study core to value investing that is regarded as the polar opposite of Efficient Market Hypothesis]

The mere fact that the term value investing exist and that most successful fund managers accept this line of thought and their above average results when applied accordingly, it is of course the recommended way for all.

However, it is only natural for the stock market to have participants that are divergent in nature for if not there would not exist a market place i.e. if everyone buys and not sell a single stock, there would not be a stock market per say.

All this leads to a fact that in investments, there will be many paths to high returns. However, a research on a particular group of investors that have constantly beaten the averages over the years would inevitably lead to a conclusive method of investing that will probably never find its permanent place in investing. Be glad as aforementioned, only then would you be able to participate in over average returns.

All said and done, the stocks in view are similar from previous months i.e.;

Guiness Anchor Berhad
- good dividend yield, inelastic demand products, high counterfeit products having government enforcement backing
Berjaya Sports Toto Berhad
- good dividend yield, inelastic demand products,
Oldtown Berhad
- overall good business, high competition industry
Parkson Holdings Berhad
- a high probability turnaround story

[Side note]
Interest rates, one of the major factors that affect financial assets, should be given more attention as of late complimenting a bottoms up approach to investment (value investing). Many countries have revised their interest rates lower which usually inflates financial assets (suggested to be good i.e. previously cheaper Japan and UK stocks).
However, with currency fluctuations factored in and the U.S. rate hike speculations, investing in businesses with higher regard to country specifics is recommended.

In conclusion, happy investing in lieu of speculation.

Parkson Bhd

Disregarding emotion based investment ideas, Parkson Bhd seems to be one of the better stock since March 2014.

Some may disagree but continue reading.

(Note: Everything below is investment in Parkson Bhd starting early 2014)

Parkson Bhd has been one of the highest dividend yielding (stock dividend valued at NTA) stock. It would have paid out 17.978% of stock dividends by 26/03/2015.
In other words, your holdings would have increased in that percentage based on the number of shares owned.

E.g. in monetary value;

Previosly,
1200 shares purchased at RM2.50 = total RM3000.00
Now (after 3 stock dividend give outs)
1415 shares valued at RM2.50 = total RM3537.50

Hence, RM537.50/RM3000.00 x 100%
= a gain of 17.91% in Ringgit Malaysia.

[Calculations are absent costs. Additionally, all odd shares should additionally earn future cash dividends]

Parkson Bhd is selling less than Net Tangible Assets (NTA), which increased further (above RM2.50) due to the RM300,000,000 plus total cash raised from property disposal & latest reinvestments in properties i.e. Melaka project. Companies that sell lower than their assets while still running a profitable business tend to usually reward investors in the longer run with inevitable asset sales trickling into investors pockets.

Parkson Bhd is diversified in retail and do not hold any manufacturing risks, just profit/loss risk from selling other brand's merchandise via their extensive (China >60%, Malaysia >20%, Indonesia, Vietnam, Myanmar) distribution channels.
[Getting brands and promoting brands is Parkson's core model]

Parkson Bhd is the controlling holder of operations in all of its operating countries. Parkson Retail Asia and Parkson Retail Group to a large extend bear all risks of future operations.

In other word, Parkson Bhd just owns a lot of cash, assets and rights to lots of dividends.

Should somehow Parkson become redundant, they can sell off their assets (maybe to Aeon) and perhaps venture into property development (previously ran) or buy a few Oldtown Bhds (Currently, Parkson Bhd has enough cash to buy Oldtown Bhd and still be left with a couple of hundred million ringgit to spare).

If you noticed, there has been an indicator to Parkson Bhd's share price for the past 6 years which has not gone wrong up to date. The latest last indicator would suggest a price of RM2.90 and above by 2nd half of 2015.
[This is a self conducted research based on 6yr past statistics. The price above is post-adjusted for the latest 20:1 share dividend]

Parkson Bhd's price have plummeted largely as due their 5 year revaluation plan (now turning into a lifestyle mall operator), PRC's austerity drive, increased new loss making stores, temporarily closed stores, being biased in sympathy to Lion Group that is separately owned & listed, higher competition from brick and mortar competitors and online, not having any self produced brands, dull customer reward system, all in all maintaining an old established brand in a new retailing scene.

However, reading Mr. Cheng Heng Jem's review should enlighten those whom are too busy speculating as to Parkson's future found in Parkson Retail Group Ltd's latest report under title; (scroll to page 13)

MANAGEMENT DISCUSSION AND ANALYSIS
BRAVING THE CHALLENGE
[ http://www.parksongroup.com.cn/upload/201502/142373042954029200.pdf ]

Consider changes that have been made in the past 1 year found in Parkson Bhd's latest interim report page 8.

BANKS RESEARCH REPORTS
Please be cautioned, banks that provide reports on companies have conflicting fiduciary duties inherent to them trying to sell their investment products as such unit trust instruments whilst trying to provide unbiased reports for successful individual retail investing.

[More on Research Reports, Parkson & others];
Part 1 http://iliveidreamitranscend.blogspot.com/2014/08/research-report-rr-it-is-recommended-as.html
Part 2 http://iliveidreamitranscend.blogspot.com/2014/08/research-report-parkson.html

Further consider the valuations worldwide in 2015 i.e. Twitter/Tesla. They are valued rather substantially considering their little or no profits nor sufficient asset backing.

Should anyone be able to find a better value company (qualitative & quantitative), please generously share your findings.

Thank you & happy investing.

2015 Outlook and Growth Stocks

Looking back, 2014 was a volatile year filled with both pessimism and optimism. Historically, when the consensus is either one, the opposite takes place in general prices of stocks. That being said, 2015 is starting off the same as 2014 with much pessimism due to all current happenings; Greek debt, ISIS terror, global slowdown, currency shocks and others.

Peering further back, market prices, even during world war periods did not crash the Dow Jones. Looking at World War 1(WW1), American business and industrial stock prices rose from 1914 - 1918. This is a simple scenario of the strength of a nation, people's believe in its business and freedom stature and profits that ensued from economics benefits WW1 brought about.

Bull markets or periods where prices move upwards as a trend tend to end on euphoria (mentioned in previous blog posts) which today doesn't seem too apparent if compared to the dot.com bubble era in the 90s.

That being said, recently the KLSE has had a correction (post head and shoulders trend for technical trendies) hence providing some opportunities.

However, this site continues to firmly suggest to disregard economic factors be it macro or micro and continue looking for bargains. If you can't find any, keep cash/liquid assets so when they come you will be ready to gobble them up.

There are some stocks that have had declines of above 20% as such Titijaya Land Bhd and Guiness Anchor Bhd however this post will suggest another type of strategy moving forward.

Growth stocks.

As famously propounded by Philip A. Fisher, an accomplished investor, in all of his writings, investing in companies that can continuously grow earnings should bring about the best returns in estimates of 100% and above 1000% if kept for periods of 5-10 years and above. Interestingly, he notes that selling out on such growth companies before it is ripe with the idea of getting back in when the prices come down has been done with almost no success by anyone in all his time in the investment world(>50yrs). Short term attempts were made to despond his wisdom with results reaffirming his conclusions.

Such returns, 100-1000% would then suggest buying prices as long as not overpriced (preferably undervalued) should not be frowned upon for small differences i.e. buying/bidding price of RM1.50 is not grabbed awaiting for prices such as RM1.49, RM1.48. One may miss out on a terrific investment over such an issue.

That being said, in identifying growth companies, some companies grow with more success with strategic reinvestment of non distributed dividends and eventually most companies experience stalled growth upon reaching a mature size. At this point, they tend to return dividends to shareholders.

Other benefits of growth stocks is the cost typically incurred over long periods of time are significantly lower than trading activities which may build up to a large sum.

Hence, a prospective growth stock investor would have many benefits using a growth strategy with necessary diligence to find proper growth stock candidates and to recognize when growth is slowing to exit such a stock. As always, management of such companies is key to driving successful growth.

There are numerous strategies to building a portfolio hence the above is one of them.

Another strategy for achieving yearly performance will be posted in the future as the writer plans to initiate a larger portfolio with new clients/partners.

Looking ahead into 2015, the preferred portfolio should be one consisting of about 10-25% cash/liquid assets with at least 30% of undervalued stocks.

As mentioned above, when everyone is panicky, typically stock prices tend to soar higher towards year end which could be a scenario this year but by no means can be foreseen or predicted.

Additional info - A short sale definition:
"In a short sale, traders borrow shares and sell them, hoping to repurchase those securities later at a lower price and return them to the original owner, pocketing the difference." - Bloomberg & printed in Starbiz newspaper section

As always, happy investing until next time.

December Down - Oil stocks (PETDAG etc) and Peter Lynch

This month has been relatively bad for Malaysia. The Ringgit has dropped in strength in relation to the greenback (US Dollar) and the FBMKLCI has dropped more than 6.5% Year To Date (YTD).
[FBMKLCI : capitalisation-weighted stock market index made up of Malaysia's big 30 companies]

The implications:
1) For ringgit holders expect a higher expense when dealing in dollars. And due to the high currency fluctuations worldwide (the ruble/yen etc), the impact is limited to your dealings, in your transacted currency.
2) Malaysian stock market still presents bargains, ever more now that valuations are getting cheaper

According to Peter Lynch, if one could predict interest rates (or macroeconomic conditions for that matter) there would be many billionaires out there which is numerically impossible.

[Peter Lynch is an American businessman and stock investor. As part of his role at Fidelity Investments, he managed the Magellan Fund between 1977 and 1990 averaging a 29% return, making it the best 20-year return of any mutual fund over the period. Wikipedia]

In other words, there are bargains out there currently but no one knows or will know how low prices may go. For instance, one would regard these stocks as cheap; Oldtown, small-medium housing stocks i.e. Titijaya, GAB and others.

Oil stocks are definitely down i.e. Petronas Dagangan bhd, SapuraKencana Petroleum Bhd, Barakah Offshore Petroleum Bhd and due to our institutional inspectors fondness of the sector, I would regard the cheapness an opportunity. HOWEVER, one should consider evaluating historical performance of oil companies in low oil prices environment. A look back at companies when oil tanked in price would be a good start.

Only after considering essential points and the sector's fundamentals i.e. nature of an oil company (upstream or downstream/new or old oil fields available/cost of production/long term fixed or variable contract etc) then investing is recommended.

In deciding to invest more in Malaysian stocks, consider watching this great find, a video explaining a simple approach to investment by Mr Lynch (whom also reminds one of Philip A Fisher's theories and principles i.e. the scuttlebutt approach).

Making Money in the Stock Market:
Peter Lynch on Investing in the U.S. Economy (1994)
http://youtu.be/Lxypq_qIw7M

In brief, his ideology is similar to Warren Buffett's principle of : you only need to make 20 good investment decisions in 1 lifetime from his famous line that basically states;
“Your financial wealth would be much greater if you could only make 20 investments in your lifetime. You would make sure they were great if you had only 20 chances.”

Happy investing.