3 Ways to Value Stocks

By Ooi Kok Hwa
TheStar

MOST stocks sell at a certain price level influenced by the companies’ future income, the overall market conditions as well as the assets owned.

Three factors – income, market and asset approach – can be individually used to value a company.

Income approach: Under this approach, a company’s value is dependent on the present value of its future cash flows, which can be in the form of dividends, profits or cash movements. In Malaysia, we can use this approach on companies that are paying good and consistent dividends or companies showing strong future revenue and profits. In most times, these will show stable stock prices regardless of market conditions.

The overall condition may be weak, but these companies will be selling at high value due to the potential of their future businesses as well as the certainty of future dividend payments. Investors will hold them for the long term and will be quite reluctant to sell these stocks as they always reward them with handsome dividend payments. In Malaysia, these companies normally have repetitive consumer needs with products that wear out fast, are used up quickly as well as have strong brand appeal.

Examples include powdered milk, instant noodles, condensed milk, infant formula, soft drinks, canned milk, dairy products, toiletries or healthcare products. Most of these products are consumed fast and have strong brands. Given the present weak economic environment, despite higher operating costs, especially high raw material prices, these companies still enjoy good turnover and sales, as they are able to pass the higher costs to consumers.

Even though retailers need to fork out more money to pay for their products, it is necessary, as the products have already formed part of the essential items in most households. As a result, their financial results may not be much affected by the weak economic environment. In fact, they will still be able to reward their shareholders with good dividends. Hence, such stocks can be purchased any time, depending on the future outlook of their businesses rather than the overall market conditions.

If these stocks’ outlook is promising and able to generate high turnover, profits and cash flows, retailers may buy them now even though the future remains bleak. Market approach: Under this approach, the companies’ value depends on the market prices of similar types of companies. In most instances, the fluctuation of the overall market sentiment can affect their stock prices.

For example, the stock prices for companies like Telekom Malaysia Bhd, Tenaga Nasional Bhd and Malayan Banking Bhd will fluctuate based on the overall market risks and returns. Even though these stocks do pay dividends, their price movements tend to follow the overall market fluctuation. We use price-earnings ratio or price-to-book to value these stocks, which will depend on how many times the current market price is above their earnings or book value. Then we compare these ratios with companies in the same industry. The timing to purchase this type of stocks is important, as we need to catch them when the market touches the bottom.

Unfortunately, predicting the market bottom is a very difficult task in view of the uncertainties of the market outlook.Asset approach: We use asset approach on companies that own a lot of assets, like land banks, buildings or other fixed assets. Under this approach, the companies’ value will depend on the types of assets owned by the companies. Among the three approaches, this is the least important in evaluating any ongoing concern companies because they will not liquidate their assets.

When we buy into these operating companies, we are more interested in how much future cash flow that can be generated rather than to expect any cash proceeds from the disposal of their assets.

Ooi Kok Hwa is an investment adviser and managing partner of MRR Consulting.

Received Dividend from Panamy, MNRB & Maybulk

Just received dividend from Panamy of 100sen, MNRB of 15sen and Maybulk of 10sen respectively. Hope in the downtrend market we get more on this, as this provide some cushion to our share price and in the long run may generate some steady income stream that giving better rate than bank's interest rate.

Married Too Long

3 women: one engaged, one married and one a mistress, are chatting over
lunch and conversation turns to their relationships. They decided that night to surprise their men. All three would wear a black leather bra and thong, stiletto heels and a mask over their eyes.

A few days later they meet up for lunch.

The engaged woman: The other night when my boyfriend came over he found me
with a black leather bodice, tall stilettos and a mask. He saw me and said,
'You are the woman of my dreams. I love you.' Then we made love all night long.

The mistress: Me too! The other night I met my lover at his office and I was wearing the leather outfit, heels, mask over my eyes and a raincoat.
When I opened the raincoat he didn't say a word, but we had wild sex for hours.

The married woman: I sent the kids to stay at my mother's house for the night. When my husband came home I was wearing the leather bra, black stockings, stilettos and a mask over my eyes. He walked in the door, looked at me and said,
'What's for dinner, Batman?'

More Info from Huaan

Dear WK,

Good day.

Sorry to reply you late.

The decision to discontinue with Deloitte & Touche was primarily due to the fact that their fees was deemed to be on the high side. For the audit on the FY2007, we were charged approximately RM1 million, notwithstanding the fact that we have only 1 active company (ie Linyi Yehua Coking Co. Ltd) and the number of transactions are not voluminous. One of the shareholders, during the AGM, even spoke out highlighting that the audit fee that we paid was exceptionally high.



The reason for deciding on Anuarul Azizan Chew & Co. as the new replacement auditor is due to the fact that they are the member firm

of an international accounting firm called Morison International. Morison International was the firm that was involved in the re-audit of Linyi Yehua Coking Co. Ltd (our only active company in China) to ensure that the audit then was IFRS compliant for the purposes of submission to the Securities Commission for the IPO of Sino Hua-An. Premised on that rationale, we feel that the team from Morison International (Hong Kong office) are already familiar and well-versed with the Company (Linyi Yehua Coking Co Ltd and PIPO Overseas Ltd), the Coking business, our operating environment, etc and should be able to very quickly pick up where Deloitte has left off, rather than a totally new audit firm who will then need to take time to first try to understand our company, the business, the industry, etc. We take cognizance of your “concern” that Anuarul Azizan Chew & Co. is not one of the renown Big 4 Accounting firm, a similar point was also highlighted and deliberated at length by our audit committee. However, it was felt that since our active company, namely Linyi Yehua Coking Co. Ltd is the only company that our entire business operations are located at and that it is the only company that generates business revenue and profit for the Sino Hua-An Group, if we need to change auditors, we should choose one that has the competencies to perform audit on China companies and familiar with our business operations whilst meeting our objective of a lower fee structure.



Morison International (Hong Kong)’s PLC clienteles are as follows:



中國B股客戶

PRC Shenzhen B shares

- 深圳市飛亞達(集團)股份有限公司Shenzhen Fiyta Holdings Limited

- 合肥美菱股份有限公司 Hefei Meiling Company Limited

- 深圳本魯克斯股份有限公司Shenzhen Benelux Enterprise Company Limited

- 深圳方大集团股份有限公司 China Fangda Group Company Limited



中國B股客戶

PRC Shanghai B shares

- 上海華源凱馬股份有限公司 Kama Company Limited

- 上海華源股份有限公司 Shanghai Worldbest Company Limited



香港上市公司審計師

Hong Kong listed company

- 哈爾濱動力設備股份有限公司 Harbin Power Equipment Company Limited

- 普鈉集團有限公司 Plus Holdings Company Limited

- 艾克國際控股有限公司 Akup International Company Limited

- 百威國際控股有限公司 Bestway International Holdings Limited

- 新怡環球控股有限公司Sunny Global Holdings Limited

- 老虎科技(控股)有限公司Tiger Tech Holdings Limited



重大交易事項的申報會計師

Substantial transaction reporting to HKSE

- 南京熊猫电子股份有限公司 Nanjing Panda Electronics Company Limited

- 榮盛科技國際控股有限公司 Solartech International Holdings Limited

- 和記電訊國際有限公司 Hutchison Telecom International Company Limited

(上市招股書印度業務的申報會計師)



內部監控評核

Internal control review

宇陽控股(集團)有限公司 Eyang Holding (Group) Company Limited

利君國際醫藥(控股)有限公司 Lijun International Pharmaceutical (Holding) Company Limited



OTCBB US

- Home System Group Inc

- Gulf Resources Inc



馬來西亞主板上市公司

Malaysian listed company

- Sino Hua-An International Berhad



上市公司秘書

Company Secretary Services

- 中國人壽保險股份有限公司 China Life Insurance Company Limited

- 吉之島(香港)有限公司 Aeon Stores (HK) Company Limited





As for Anuarul Azizan Chew & Co. (which you are “concerned” of for their seemingly lack of public visibility), they will only be doing the audit on Sino Hua-An (company level) and consolidate the audited figures that generated out from Morison International, their member firm. We are dealing with Mr Patrick Chew (the managing partner of Anuarul Azizan Chew) directly and he will be assisted by Mr Declan Yong (a Principal in the firm, whom I believe is slated for partnership soon). Anuarul Azizan Chew’s list of PLC clientele are as follows:



· Tradewinds (M) Berhad (audit)

· Magna Prima Berhad (audit, tax)

· Prinsiptek Corporation Berhad (audit)

· GHL Systems Berhad (audit, tax)

· N2N Connect Berhad (audit, tax)

· LBI Capital Berhad (audit)

· Weng Zheng Resources Berhad (audit, tax)

· Nepline (M) Berhad (audit, tax)

· LBS Bina Group Berhad (audit, tax)

· Aturmaju Resources Berhad (audit, tax)

· Paragon Union Berhad (tax)

· My E.G. Services Berhad (tax)

· TSR Capital Berhad (internal audit)

· Komarkcorp Berhad (internal audit).



Thks & rgds,

Bernard Tan















Th



T





----- Original Message -----
From: y wk
To: Bernard Tan
Sent: Sunday, September 21, 2008 12:11 PM
Subject: Re: Sino Hua-An International Berhad: Aseambankers & Kenanga Research report dated 25 August 2008 (2Q08)


Dear Bernard,

With reference to your announcement to Bursa dated 20/05/08, what are the reasons in regards the change of the previous auditors from Deloitte & Touche to a smaller & unknown auditor named Anuaral Azizan Chew & Co.? Which listed company are they (Anuaral Azizan Chew) engaged as an auditors for their firm? Will the new appointment be as reliable as the previous?

Thank you

Regards

WK

More Info from IR manager about HUAAN

Dear WK,

Good day.

I have spoken to my Chinese MD, Mr Liu on yesterday evening. He acknowledged that the rullings is purely in Shanxi (50% cut in production). So far in Shandong Province there is no such rullings. However, Mr Liu said the steel industry in China is slowing down since June 08 (as witnessed by the dropped of steel price). Although the growth drivers (Sichuan rebuilding, Shanghai-Beijing express rail, Western part /non coastal city developments)are still there, the demand of steel is slower due to year 2006 , 2007 & 1H08 the growth were too fast.

The poor demand of steel is mainly because steel manufacturers are currently facing with increasing raw materials issue(iron ore increased 96% since June 2008 from BHP and Rio Tinto). The end users (developers, contractors, shipbuilders, automobile manuf) could not fully absorb the high steel price in the Chinese market. Moreover, during the 1H08, many contractors stock pile their steel input (that time steel price was moving up very fast). Therefore, they are still having the enough reserve and temporarily their demand of steel is expected to be lower.

OSK Research reported in the Nanyang Business dated 12 Sept 2008 that short term the demand of steel in China is slower but they are positive that in the medium to long term, the steel industry would continue to grow. In the report, it mentioned that during summer season (On-going Beijing Olympic & Paralympic) and Puasa Month in Middle East, the demand of steel is generally cyclicaly slower.

As for Hua-An, our 1st phrase (1.2 millions tons of coke) is running at 110% capacity, 2nd phrase (new 600,000 tons coke, commissioned since June 2008), running at 70% capacity. In 4Q08 (after Paralympic), barring any unforseen circumstances (eg natural disasters to happen)if the demand & supply of steel in China come back to normal, we are hopeful that we would gradually increase our 2nd phrase capacity.

Thank you for your valuable inputs.

Best regards,
Bernard Tan

----- Original Message -----
From: y wk
To: Bernard Tan
Sent: Tuesday, September 16, 2008 9:48 AM
Subject: Re: Sino Hua-An International Berhad: Aseambankers & Kenanga Research report dated 25 August 2008 (2Q08)


Dear Bernard,

Thanks for your update. I read from the news that the coking association has urge their members to slash output by 50% due to poor demand.

Is Huaan following suit and what is Huaan's management take in tackling this issue.

(Refer attachment)

Thanks

WK

Received 2nd interim single tier dividend 3sen from ZHULIAN

Just received 2nd interim single tier dividend 3sen from ZHULIAN.....wonder when will be the next dividend ??

Sold PBBANK (1295) at RM9.85

Sold off my PBBANK at RM9.85 in which i bought yesterday at RM9.60. Making some small contra gain. I am still very pessimistic with the current market, not that i am gloomy about our local bourses but is the entire globe that having the crisis altogether. Somehow our local bourse which i felt have more negetive prospect than others beside US. Don't think it gonna spike up any surprise in the short term in which it will move up the index......

Sold IOICORP at RM3.88 for a quick contra gain

Sold my IOICORP at RM3.88 which i bought this morning at RM3.78 for a quick intra-day gain...

Bought IOICORP at RM3.78 & PBBANK at RM9.60

Bought back my PBBANK at RM9.60 in which i sold at RM10.20 couple of months back and averaging down IOICORP at RM3.78. Market is still drifting downward, don't think it stable for now, KLCI might go down further to the level of 850 to 900. Would start my level buy now and accumulate some solid stocks but as for now nothing sound safe, even Bank like Lehmen Brothers and big company like AIG also get into trouble. So no sure bet in any stocks you pick eventhough you think there are blue chips of the blue chips.

Sold TENAGA @ RM6.50

Sold my Tenaga at RM6.50 within the same day and make some tiny gain for lunch money....market sentiment not good, CI expected to go < 1000.....

Bought Tenaga (5347) at RM6.40

Just got in Tenaga at RM6.40 this morning....selling pressure is still there, may pick more in RM5.00+ region....

What had HUAAN's IR Manager got to say ??

taddaaa.....

huaan.. dropping like flies... but their IR manager still very optimistic.... hmm.... i think should wait till volume subside before going in again....

trading at below 40c.... tat is unbelievable la...

totoNote: forwarded message attached.
Get your preferred Email name! Now you can @ymail.com and @rocketmail.com.
-----Inline Message Follows-----
Dear Y WK,

Good day.

Attached herewith is the coke and coal prices of Linyi Yehua Coking Co Ltd, a wholly-owned subsidiary of Sino Hua-An for your kind perusal. We have till July08 only. Aug08, our Chinese accountant is still compiling them. Usually by middle of
Sept we would receive the email from him. The moment i receive i will update you.

Fundamental we are intact, just that recently the steel industry in China has slowed down (usually June , July & August-summer season slower & also Beijing Olympic & on- going paralympic). Steel players are facing increasing raw material prices (especially iron ore), bcos they need to import about 50% from Brazil & Australia. Growth drivers are still there, 西部大开发(western part of China development), Sichuan reconstruction, Beijing-Shanghai hi-speed rail, Shanghai Expo 2010, shipbuilding, automobile & construction... Hope the steel players in China could negotiatiate better iron ore price after the govenment recently increased coke export duty from 25% to 40% ( China export more than 50% of global coke supply).

Red chips in Singapore are also badly hurt / poor performance. In fact ,most of them are not performing (in tandem with Shanghai index drop from 6000 + to 2400 points). Many are trading PE below 5. Feedback from a few fund managers, their appetite are on blue chip with high liquidity and they are not considering 2nd liners or 3rd liners for the time being even though their PE are highy attractive.

Thank you very much.

Best regards,
Bernard Tan
----- Original Message -----
From: y wk
To: Bernard Tan
Sent: Tuesday, September 09, 2008 1:36 PM
Subject: Re: Sino Hua-An International Berhad: Aseambankers & Kenanga Research report dated 25 August 2008 (2Q08)
Dear Mr Bernard,

Any updates on the company's coke selling prices & coal purchase prices lately?

Thank you

Regards

Bought more Genting at RM5.25

Bought more Genting at RM5.25. Applying downward averaging.......

5 ThingsYou Need to Know to Ride Out a Volatile Stock Market

1 Watching from the Sidelines May Cost You
When markets become volatile, a lot of people try to guess when stocks will bottom out.
In the meantime, they often park their investments in cash. But just as many investors are slow to recognize a retreating stock market, many also fail to see an upward trend in the market until after they have missed opportunities for gains. Missing out on these opportunities can take a big bite out of your returns. Consider that in the 12 months following the end of a bear market, a fully invested stock portfolio had an average total return of 36.8%. However, if an investor missed the first six months of the recovery by holding cash, their return would have been only 7.6%.
The table below is a hypothetical illustration showing the risk of trying to time the market.
By missing just a few of the stock market’s best single-day advances, you could put a real crimp in your potential returns.
"The market seems to be up one day and down the next. I’d rather wait before investing.”

Jumping In and Out of the Market May Cost You 10 Years Ended December 31, 2007. Period of Investment Average Annual Total Return of S&P 500 Index2

Stayed Fully Invested 5.91%
Missed the 10 Best Days 1.13%
Missed the 20 Best Days -2.55%
Missed the 30 Best Days -5.72%
Missed the 40 Best Days -8.40%

2 Dollar-Cost Averaging Makes It Easier to Cope with Volatility
Most people are quick to agree that volatile markets present buying opportunities for investors with a long-term horizon. But mustering the discipline to make purchases during a volatile market can be difficult.
You can’t help wondering, “Is this really the right time to buy?”
Dollar-cost averaging can help reduce anxiety about the investment process. Simply put, dollar-cost averaging is committing a fixed amount of money at regular intervals to an investment. You buy more shares when prices are low and fewer shares when prices are high, and over time,
your average cost per share may be less than the average price per share.
Dollar-cost averaging involves a continuous, disciplined investment in fund shares, regardless of fluctuating price levels. Investors should consider their financial ability to continue purchases through periods of low price levels or changing economic conditions. Such a plan does not
assure a profit and does not protect against loss in a declining market.

Dollar-Cost Averaging at Work
Monthly Investment Shares Purchased
Month Amount Share Price Each Month
January $500 $9.00 55.6
February $500 $10.00 50.0
March $500 $8.00 62.5
April $500 $11.75 42.6
May $500 $12.25 40.8
June $500 $9.00 55.6
Total $3,000 $60.00 307.1
AVERAGE SHARE PRICE: $10.00 ($60.00/6 purchases)
AVERAGE SHARE COST: $9.77 ($3,000/307.1)
The average cost of your shares would be $0.23 less than the average price of your shares over that period.

3 Now May Be a Great Time for a Portfolio Checkup
Is your portfolio as diversified as you think it is? Meet with your financial advisor to find out. Your portfolio’s weightings in different asset classes may shift over time as one investment performs better or worse than another.
Together with your advisor, you can re-examine your portfolio to see if you are properly diversified. You can also determine whether your current portfolio mix is still a suitable matchwith your goals and risk tolerance.

4 Tune Out the Noise and Gain a Longer-Term Perspective
Numerous television stations and websites are dedicated to reporting investment news 24 hours a day, seven days a week. What’s more, there are almost too many financial publications and websites to count. While the media provide a valuable service, they typically offer a very short-term outlook. To put your own investment plan in a longer-term perspective and bolster your confidence, you may want to look at how different types of portfolios have performed over time. As you can see below, while stocks may be more volatile, they’ve still outperformed income-oriented investments (such as bonds) over longer time periods.

Hypothetical Performance of Asset Allocation Portfolios (12/31/87–12/31/07)

100% Stocks $75,110 10.61% 38.36% -19.41%
80% Stocks 20% Bonds $69,752 10.20% 31.51% -13.48%
60% Stocks 40% Bonds $63,562 9.69% 24.66% -7.54%
40% Stocks 40% Bonds 20% Cash $54,945 8.50% 19.51% -3.31%
20% Stocks 60% Bonds 20% Cash $44,949 7.80% 17.44% -0.48%
The hypothetical asset allocation portfolios shown above are for illustrative purposes only. They do not represent the past or future portfolio composition or performance of any Franklin Templeton fund and are not intended as investment advice. We suggest working with a financial advisor to see which allocation opportunities may be right for you.

5 Believe Your Beliefs and Doubt Your Doubts
There are no real secrets to managing volatility. Most investors already know that the best way to navigate a choppy market is to have a good long-term plan and a well-diversified portfolio. But sticking to these fundamental beliefs is sometimes easier said than done. When put to the test, you sometimes begin doubting your beliefs and believing your doubts, which can lead to short-term moves that divert you from your long-term goals. To keep from falling into this trap, call your financial advisor before making any changes to your portfolio.

Cancer Update from Johns Hopkins

1. Every person has cancer cells in the body. These cancer cells do not show up in the standard tests until they have multiplied to a few billion. When doctors tell cancer patients that there are no more cancer cells in their bodies after treatment, it just means the tests are unable to detect the cancer cells because they have not reached the detectable size.

2. Cancer cells occur between 6 to more than 10 times in a person's lifetime.

3. When the person's immune system is strong the cancer cells will be destroyed and prevented from multiplying and forming tumours.

4. When a person has cancer it indicates the person has multiple nutritional deficiencies. These could be due to genetic, environmental, food and lifestyle factors.

5. To overcome the multiple nutritional deficiencies, changing diet and including supplements will strengthen the immune system.

6. Chemotherapy involves poisoning the rapidly-growing cancer cells and also destroys rapidly-growing healthy cells in the bone marrow, gastro-intestinal tract etc, and can cause organ damage, like liver, kidneys, heart, lungs etc.

7. Radiation while destroying cancer cells also burns, scars and damages healthy cells, tissues and organs.

8. Initial treatment with chemotherapy and radiation will often reduce tumor size. However prolonged use of chemotherapy and radiation do not result in more tumor destruction.

9. When the body has too much toxic burden from chemotherapy and radiation the immune system is either compromised or destroyed, hence the person can succumb to various kinds of infections and complications.

10. Chemotherapy and radiation can cause cancer cells to mutate and become resistant and difficult to destroy. Surgery can also cause cancer cells to spread to other sites.

11. An effective way to battle cancer is to starve the cancer cells by not feeding it with the foods it needs to multiply.

WHAT CANCER CELLS FEED ON:

a. Sugar is a cancer-feeder. By cutting off sugar it cuts off one important food supply to the cancer cells. Sugar substitutes like NutraSweet, Equal,Spoonful, etc are made with Aspartame and it is harmful. A better natural substitute would be Manuka honey or molasses but only in very sma ll amounts. Table salt has a chemical added to make it w h i te in colour. Better alternative is Bragg's aminos or sea salt.

b. Milk causes the body to produce mucus, especially in the gastro-intestinal tract. Cancer feeds on mucus. By cutting off milk and substituting with unsweetened soy milk, cancer cells are being starved.

c. Cancer cells thrive in an acid environment. A meat-based diet is acidic and it is best to eat fish, and a little chicken rather than beef or pork. Meat also contains livestock antibiotics, growth hormones and parasites, which are all harmful, especially to people with cancer.

d. A diet made of 80% fresh vegetables and juice, whole grains, seeds, nuts and a little fruits help put the body into an alkaline environment. About 20% can be from cooked food including beans. Fresh vegetable juices provide live enzymes that are easily absorbed and reach down to cellular levels within 15 minutes t o no urish and enhance growth of healthy cells. To obtain live enzymes for building healthy cells try and drink fresh vegetable juice (most vegetables including bean sprouts) and eat some raw vegetables 2 or 3 times a day. Enzymes are destroyed at temperatures of 104 degrees F (40 degrees C).

e. Avoid coffee, tea, and chocolate, which have high caffeine. Green tea is a better alternative and has cancer-fighting properties. Water-best to drink purified water, or filtered, to avoid known toxins and heavy metals in tap water. Distilled water is acidic, avoid it.

12. Meat protein is difficult to digest and requires a lot of digestive enzymes. Undigested meat remaining in the intestines become putrified and leads to more toxic buildup.

13. Cancer cell walls have a tough protein covering. By refraining from or eating less meat it frees more e nzymes to attack the protein walls of cancer cells and allows the body's killer ce lls to destroy the cancer cells.

14. Some supplements build up the immune system (IP6, Flor-ssence, Essiac, anti-oxidants, vitamins, minerals, EFAs etc.) to enable the body's own killer cells to destroy cancer cells. Other supplements like vitamin E are known to cause apoptosis, or programmed cell death, the body's normal method of disposing of damaged, unwanted, or unneeded cells.

15. Cancer is a disease of the mind, body, and spirit. A proactive and positive spirit will help the cancer warrior be a survivor. Anger, unforgiveness and bitterness put the body into a stressful and acidic environment. Learn to have a loving and forgiving spirit. Learn to relax and enjoy life.

16. Cancer cells cannot thrive in an oxygenated environment. Exercising daily, and deep breathing help to get more oxygen down to the cellular level. Oxygen therapy is another means employed to destroy cancer cells.