我的過去

我略述下我個人故事。

在2011年期間，因機緣巧合接觸了股市。之前，父母告訴我不好碰股票——會傾家蕩產的。那時的我，還在就讀著我最後一年的本科專業，資本不多但卻嘗試跟朋友學習短線炒了幾個股。最終發現這樣的方式不符合我的性格和個人原則，所以決定再找較有經驗的人或高手請教。結果發現股市的專家大多數都是不大行才賣課程“賺外快”，不然早就賺翻了還累垮自己來教笨蛋啊呵呵！

事後，我就開始看書自學並尋找個人投資方向和方式。幾個月後，正式畢業並慶幸地被中國公司錄用了，將會在北京工作。出國後，打算在中國這個地方尋找投資啟蒙老師，不過事情不是自己想得那麼妙。所以，決定暫時抽離股市再找機會尋找正確的方向。在北京期間，我就沒有再接觸股市了，便開始去嘗試了解中國文化和本土習俗。

在華將近兩年，我決定辭職離開回國迎接大選並打算回國發展。2013年5月1日，抵達大馬後開始想要做什麼。在那段期間，我設下了自己的最新計劃並開始慢慢實踐。第一計劃是重新進入股市再專注價值投資（因為較符合我個人的性格和原則）。經過幾個月的琢磨，理清了自己的投資思路，接著全靠的都是實踐經驗了。

故事就在此開始……

The Brotherhood between London Biscuits and Khee San

Let's briefly introduce the two listed Malaysian companies in the following:

London Biscuits Berhad

London Biscuits is engaged in manufacturing and trading of confectionery and other related foodstuffs. The Company offers packed and ready-to-eat products, which can be categorised into corn-based snacks and cake products, such as Swiss rolls, pie cakes and layer cakes. 

Khee San Berhad

Khee San is engaged in manufacturing of confectionery products. The Company offers a variety of products, such as candies, sweets and wafers, which include household brands, such as Fruitplus, Torrone and Bento.

The above two listed companies have their similarities like the nature of business and the management style/pattern.

The purpose of this article is to share about my points of view on the brotherhood's management style/pattern.

Figure 1: London Biscuits and Khee San

London Biscuits' revenue growth compounded 15.77% (RM117 million in FY2007 to RM437 million in FY2016) annually in the past 10 years. Meanwhile, Khee San's revenue growth compounded 9.39% annually (RM70 million to RM157 million). Both companies showed an impressive growth in the past 10 years but particularly, in the past 5 years (FY2012 - 2016) both companies' revenue had grown significantly —— this triggers my curiosity: why was the revenue mushrooming? How so?

Highlight 1:

Both revenues were mushrooming, how about the trade receivables? In past 5 years (FY2012 - 2016), it indicated that its days sales outstanding (see the Figure 1) was rising drastically. The question here is: Do you like a business making a lot of sales but being highly receivable?

Highlight 2:

Since both companies are the manufacturer, the fixed asset turnover would be a great fundamental indicator to see whether they effectively utilise the investment in fixed assets to generate revenue. 

To dissect the fixed asset turnover, from the net fixed assets we can see the plant and machinery was accounting for the largest portion of its overall. For example, London Biscuits' net fixed assets in FY2016 was totalled RM524.9 million, in which the plant and machinery accounted for RM419.9 million, approx. 80%. London Biscuits heavily invested a lot of plant and machinery to just generate the FY2016 revenue of RM437 million. What's cookin'?

As for Khee San, its FY2016 net book value of plant and machinery accounted for approx. 74%, amounted to RM122.9 million. Against FY2016 revenue of RM157 million, did the Company effectively utilise the investment in plant and machinery to generate revenue?

Before ending this post, ask yourself a question: are those above two companies fundamentally sound and are both managements' interest aligned with the interest of shareholders? —— why loosening the credit terms and how come keep buying the plant and machinery?

"Financial ratios can tell you about the management attitude/behaviours."