Besides serious investing, I also try to have some fun to read i3investor which gives us a lot of entertainment recently. I just read a “Open Letter” by a new kid in town, Jerry Koh, on this hot topic on hot stock Lion Industry in the link dated 1 September 2018 below,
Kudos to Jerry, please continue writing. It helps us in our thinking process and hopefully improve our investment process. That is why I have been in here for more than 7 years already. After sowing some goodwill in i3investor in the initial years, I have to admit, I also benefit from many forms.
Hence, I would like to continue to contribute to i3investor, as long as I am welcomed. I always like to have feedback from my posts, whether it is positive or negative. That is how we share and learn in return. So, please welcome any comments, whether it is good or bad comments. This is in the internet space, and we can’t and shouldn’t discourage comments. Otherwise it doesn’t sound good, or even doggy; why do you write this particular post in the first place? Only I talk and you no talk?
With that, here are my sincere comments on your open letter to your highly respected person.
Jerry started with this statement,
“I am currently having 23% temporary loss in LionInd but I never blame Mr. Koon.”
Well done Jerry. That is the right attitude. If you lose money following anybody, you are the one who should take responsibility. It is your own fault to blindly follow anyone. For this, I would like to read the post below so that you can learn from your mistake of blindly following recommendation of buying any stock, “Never buy any stock touted by anyone”,
If you don’t learn from your mistake, and blinded somehow, you may continue doing the same thing, and losing money over and over again. It won’t be good for your financial wellbeing.
Jerry shared “several calls” made by someone famous "which are still correct until now". They were mostly made 3 to 4 years ago, the usual “pieces of old shits” in V.S., Latitude Tree and Lii Hen, which I believe those old timers here would have gotten too used to. But I particular like his most recent “sell call” on Masteel at RM1.14 which was made exactly half a year ago in the link shared by Jerry in his post here, “Why Malaysia Steel Share Price is Plunging?”
Masteel post on 2nd March 2018
The reason for the sell call was stated as,
“As everyone can see there is an oversupply of buildings in every town and city in Malaysia, investors should know how this situation will affect all the steel manufacturers.
Malaysia Steel makes steel bars for the concrete construction. If developers and contractors cannot sell their properties, they will not buy steel bars. That is why Masteel’s 4th quarter EPS was only 4 sen, very much lower than all the other 3 quarters of the year 2017. Masteel’s future profit will continue to reduce.”
From the above post, I was greatly surprised by how the poor guy who recommended Masteel then got whacked by the author like nobody’s business! Furthermore, this person is closed to him and as far as I can see, has been saying all the good words about him. In fact, I was shocked, to say the least.
Was the earnings of Masteel continue to reduce after the post? Not really. In the following quarter, Masteel made RM17.7m as opposed to RM12.1m previously. So, was the "prediction" correct?
But true to the prediction, but only later when the lastest quarterly results was announced that its profit dropped again to RM8.0m. Masteel share price continues to drop and has dropped by closed to 50% to just 60 sen now in just half a year.
But the pertinent question is, what was the difference between Masteel and Lion Steel that the former got whacked so badly by the author, whereas the latter got praised to sky high as both companies’ main business is to provide long steel bars for buildings and houses, and infra-structure works. The question is even more relevant with the recent cancellation of some major infra-structure works.
Lion Industry Post on 17th August 2018
In Jerry’s post, and with the link provided below, “Why Lion Industry Share Price is Continuously Going Higher?” which the post was posted in i3investor on 17 August 2018,
Jerry mentioned in his open letter dated 1st September 2018 that, “The research of LionInd is comprehensive and correct:”
This was what was written in the above original blog, “Why Lion Industry Share Price is Continuously Going Higher?”
[“That is why Lion Industry has been making increasing profit in last few quarters. Its 1st Q EPS 4.08 sen, 2nd Q EPS 8.20 sen and 3rd Q ending March 2018 EPS 8.91 sen. The total EPS for 3 quarters is 21.19 sen. Assuming its 4h Q is the same as its 3rd Q, its total EPS for the full year will be about 30 sen.
Based on the last traded share price of Rm 1.25, its P/E ratio is about 4. It should be considered very cheap especially it has very good profit growth prospect which is following my share selection golden rule. I expect its 4th Q will be better than its 3rd Q.”
The expectation for the 4th quarter result was as good as the third quarter, i.e. 8.91 sen (with two decimals places some more), and that the total full year EPS would be 30 sen.
In view of its good increasing profit growth, if you have sold, you should buy back.]
Was that prediction correct? How was that correct?
Was the “advice” on “if you have sold, you should buy back”, at RM1.26 then, a great advice?
Lion Industry announced its 4th quarter result on 30th August 2018, two days before Jerry’s open letter as shown in the link below,
Net profit for the quarter was RM27.65m, or an EPS of 4.17 sen. How is this compared with the prediction of 8.91 sen? Was the “Research” on Lion Industry "comprehensive" and “correct”?
Actually, if you look into more details of the results, RM16.7m was tax credit, something a company can claim for tax deduction only in the future if there is profit. You should look at its profit before tax, which is only RM10.95m.
If you know about how to read financial statement well, you will notice that there is an “exceptional item” on “Gain on disposal of an associate company” of RM10.3m. This item is an “exception” for this quarter and it is meaningless, unless of course Lion industry can have associate company to dispose off with a gain every quarter.
So, what does it leave us with the core profit of Lion Industry in this quarter? Almost zero for this quarter? So, was the prediction correct?
Lion Industry’s share price has retreated from RM1.26 from 2 weeks ago when the rosy earnings was made, and when the "You should buy back" advice was given to RM1.00 now. Was the advice to buy back (after it has gone up from 60 sen to RM1.26), a great advice?
In less than 2 weeks from the above post, another post on Lion Industry surfaced on 29th August 2018 as shown in the link below, “How Human Behaviour Affects Investment Decisions”,
This post was not mentioned in Jerry’s open letter.
Lion Industry post on 29th August 2018
There was a paragraph on “why I am selling Lion Industries when I know that it has a very good profit growth prospect?”
“Within a few weeks, we have bought about 30 million Lion Industries shares. When I know that it will announce a reduced profit for the next quarter which will be announced before then end of the month, we sold some shares to raise funds so that we can buy it back at cheaper prices. Currently, it looks like the worst is over and the price is going higher.”
Two weeks ago, the prediction was profit for the 4th quarter would be as good as the third. Now, also before the result was announced, he knew that there would be “reduced profit”, and he had sold shares in Lion Industry, and is waiting to buy back latter, knowing that “it looks like the worst is over and the price is going higher.”
What? Some kind of so-called Business Sense? Pivotal Moment? Dynamite investing?
But I have to admit that the part on "reduced profit" prediction was "brialliant" and it turned out true. And I love the prediction on,
“it looks like the worst is over and the price is going higher.”
Is that how you teach people how to become super investor?
Food for thought.
I think that is why people like Jerry who has lost 23%. But good boy, you don’t blame anyone, and you shouldn’t. In fact the great thing is that you praised him instead of just be silent. Hard to find good people like Jerry. Well done.
Wow, how I love to read articles in i3investor. It keeps our mind working, wondering and pondering all the time. Good to prevent azeilmer!
Appendix: Share price movement of Lion Industry