What's wrong with the RHB analyst report of VS Industry?

On 7th December 2016 20:xx, my friend, KY texted me through Whatsapp to tell  that her broker (actually her friend, JO) asked her to buy the shares of V.S Industry and Gadang.

Hmmmm...these shares were being 'hot' (strongly recommended and promoted by KYY) and I did not have the knowledge of these two listed companies, therefore I did not comment on it but just felt curious about what's the so-called theme play on these two shares that the brokerage houses took advantage of promoting it.

After she forwarded to me those messages and a picture that she received from JO, I was not interested to read but clicking on the picture as to the research report provided by RHB analyst. After glancing through the RHB research report, I discovered an error on the published report. 

Extracted from: RHB Malaysia Company Update - VS Industry 26 July 2016

"Maintain BUY with a higher SOP-derived MYR1.72 TP (from MYR1.68, 24% upside) based on an unchanged 11x P/E."

Do you discover that error after glancing through my extracted statement?

The answer is: There's a potential upside of 24% to the target price of RM1.72 from RM1.68. RM1.68? Is it something wrong? 

I do not know what has been gone wrong with this published company update report but I strongly believe that every written report shall be critically reviewed by the authorised person, prior to leaking to the public.

Accounting Numbers and Financial Ratios

After reading an article from i3 forum, I'd like to share the article with all of you who are interested in value investing.

From the article, the author applies the accounting numbers and financial ratios (i.e. dupont ROE) to interpret the accounting datas from the annual reports of furniture-related companies, eg. Homeritz, Hevea, etc. so as to tell stories and analyse the business operations.

Bear in mind, the accounting is the language of business, so what are you still waiting for?

To those, who wanna learn it, you may refer to the link provided here: http://klse.i3investor.com/blogs/JTYeo/96888.jsp

Extract:

"These are the fixed assets extracted from the reports. When you look at plant, machineries & equipments (PPE), Hevea needs around RM170 mil of PPE to generate RM503 mil of revenue, or 2.95x. In contrast, Homeritz can generate RM146 mil of revenue with only RM4 mil worth of PPE. That's 32.95x.

Is that because Hevea is inferior? No, it is simply because they are in a different business. For a particleboard manufacturer like Hevea, the amount of machineries they need to chip, flake, dry, mat forming, hot pressing, sanding, sizing, laminating, to turn timber into particleboard are a lot. 

In comparison, the machineries you need to turn particleboard into an upholstered sofa is very little. Sanding, polishing and some cutting tools should do the work. In saying that, the workmanship needed to turn the sofa into a high-end quality product will translate into higher expenses too. Pohuat & Latitude would have more similiarities to Homeritz than Hevea, while Hevea's business is more similar to Mieco."