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Showing posts from April, 2012

Financial Report - Cash Flow

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I noticed tend to forget the important points when reading the financial report. Hence, decided to write down important points to take note when reading the financial report. This is for my own good and at the same time can help and share with those who are interested. The last part of financial report is Cash Flow statement. No matter how good the asset, if the company cannot service its debt, the company will fall in default. From the cash flow statement, we can know if the cash is flow in or out of the company. Cash Flow statement divided into 3 sections, namely, Cash Flows from Operating, Investing and Financing. 1. Cash Flow from Operating shows the net income and any depreciation or amortization add back. 2. Cash Flow from Investing usually show negative, as the money spend to buy equipment or spend to maintain those equipment, we call them Capex or Capital Expenditures. 3. Cash Flow from Financing activities record down all the dividend payments or the company buy back

Financial Report: Balance Sheet

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Next, we would like to know how much asset  in the company. In this case, we need to study the second report, Balance Sheet . The name "Balance" because the report is prepared in such a way that, Asset is equal to Liability. When investor bring in $100k, from the company point of view, it's similar to borrow the money from the bank, hence record under the liability side. If the company use the fund to buy goods or equipment, the figure will record under "Asset" side as well. So the formula now become,  Asset = Liability. The left side is Asset (borrower) which represent where the money go to and the right side is Liability (Lender) which represent where the source of fund come from. That's why, when the investor bring money to invest in a company, it's similar to company borrow the money from investor and the company do not have the obligation to return you the money. (unless they do a capital repayment) Taking the total Asset minus total Liability

Financial Report - Income Statement

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Since invest in stock is similar to taking the ownership, the first thing we need to ask is, "Is the company making any profit?" Then the second question is, "How much?" In order to get the answer, the very first document we need to check is  Income Statement. Sometime, it's also know as Profit and Loss Statement.  It tell if the company is making money or not for that financial year. REVENUE - COST = PROFIT Just take the Revenue minus Cost, this is profit we want. If nothing left after minus the Cost, it mean the company is not making any money. The below example shows the company's profit is $63,887k. We can also use this report to find out the Gross Profit,  by divide Gross Profit over Revenue. From here, we take 262/ 710 = 36.95%. Warren Buffet prefer the company with Gross Profit above 20%.  If you can find a company with > 40% Gross Profit, then it could be a good one. However, still need to review the Balance Sheet and Cash Flow Statem

Invest in AirLine company?

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Do you buy Airline stock? Or I should ask, if you have a spare fund, would you set up an airline company? For certain reason, I will NOT involve in the airline business or buy the stock, however, below preferred share (Mas-PA) is an exception. Recently, one of my client told me, MAS-PA is going to expiry on Oct 2012. He gave me big thanks as I told him to buy MAS-PA two years ago when the news of Japan Airline break up, all the airlines' stock price around the world drop like no tomorrow. I still remember, that time, MAS-PA record lowest of 65 cents. With the price of 90 cents today, is it worth to invest for short term till October to get back RM1.00? This report take from Philips Capital on 17 Apr 2012 If you are looking for very short term of 6 to 7 months of investment and satisfy with 11% for 7 months, or 18% per year, then, it's a good idea to invest in MAS-PA. I would think this is better than directly invest into MAS's mother share which currently cost yo

Don't lost your hard earn money!

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There are so many types of investment, share, option, bond, currency, bank's cert, gold and ... The most common one, perhaps is gold. As a result, many of the so call "investment company" like to create this type of "product" to attract the "victim". Usually they promise very good return. Few days ago, I meet with one client, who claimed he had joint the "venture" (Gold Mine) company which pay him dividend every month. In less than one year's time, he already took back all his principals and now he do nothing but the dividend keep on coming. To him this is passive income and he tried to convince me to invest into this company too. Wait, where's the money to pay the dividend  come from? They promise pay dividend of more than 10% in the form of "paper gold" each month. The "paper gold" can be converted into credit which equal to USD. Sound great, ya! But I reject it. The reason is, basically, if the company can ge

Single Stock or Diversify better?

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Nine months ago, i had a discussion with a friend, who own an inherited asset. The asset is actually in form of JobStreet's share which trade at Bursa with market value of RM240,000 at that time. We discussed the way how to maintain wealth in long term, I did suggest to him, instead of holding on a single stock, the other better option is switch to 3 different stocks. The reason is to have the better return (dividend rate of 7.51% to 8.25%) and at the same time diversify the holding into 3 Investment Grade Stock. However, he insisted that Jobstreet was inherited asset with intention to pass on to his next generation. Since he disagreed with my suggestion, I could not do anything. I went home and draft 2 different portfolio. My plan is to keep on monitor from time to time. Below is the summary of his holding at that time (Jun 2011):  "BC" portfolio, was the alternative portfolio which I suggested. If he agreed, he will need to sell "Jobst" and buy Maybank,