Investing For Value

Case Study 05-1:  Fundamental analysis and valuation of Petron Malaysia. This post focuses on its current situation, how it got to where it is today, and its future prospects Petron Malaysia Refining and Marketing Berhad (Petron Malaysia) is a downstream oil and gas company.With its current price of RM 3.26 (1 Oct 2020) compared to its NTA of RM 5.93 (as of 30 June 2020), you may wonder why is the market giving you such a bargain.No doubt the oil and gas industry is going through a challenging period due to the Covid-19 pandemic as well as the global excess supply. Is the share price at such a level because the company has poor prospects?  Are its assets going to be impaired?If these answers are yes, then it is a value trap.  But if it is not, then it is a bargainJoin me in a 2-parts series as I present my rationale why Petron Malaysia is not a value trap.I will show that it still has a good future and that its assets are not going to be impaired.  Its intrinsic value is still intact. …

Case Notes 04: This is a post about how I compared the risk of investing in two companies from a permanent loss of capital perspective using a risk management framework. In investing, there are 2 schools of thoughts about riskThe volatility school that view risk as varianceThe permanent loss of capital school that view risk as a permanent reduction of the amount invested
The volatility school has strong academic credentials.  This branch of finance theory has developed to a stage where you can numerically bring risk into the valuation process.  But all the discussions on risk as permanent loss of capital are qualitative.If you are a beginner in investing following the permanent loss of capital school, how can you manage risk? SpecificallyHow to compare risks between two companies?How to methodically bring the permanent loss of capital into the investment process?
This can be achieved through a risk management approach comprising:Identifying the possible causes that can lead to a permanen…

Case Study 04-2:  This post focuses on the intrinsic valuation of CSC Steel. It is a continuation of the fundamental analysis carried out in Part 1. 
Steel is a commodity.
As a commodity company, CSC Steel sells its products at the prevailing international market prices. CSC Steel’s profitability will be affected by the prices for its raw materials (hot roll coils) and its finished cold roll coils. 
When commodity prices are on the upswing, all companies that produce that commodity benefit. 
During a downturn, even the best companies in the business will see the effects on operations.
In Part 1, I have shown that despite being in the down cycle and with minimum trade protection policies, CSC Steel has managed to be profitable. 
With a price that is below its Graham Net Net (a proxy for its liquidation value), is the market suggesting that there is no upturn in sight? 
In Part 2, I will argue that the CSC Steel has the financial resources, track record, and technology to meet the challenges o…