tag:blogger.com,1999:blog-5250592099846123314.post5848350382383399432..comments2024-02-14T16:08:35.337+08:00Comments on Wealth Buch -- Journey towards Financial Freedom: Aztech Group -- Reasons for purchaseJWhttp://www.blogger.com/profile/04633191740991225888noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-5250592099846123314.post-40281105482764398622010-12-13T08:49:53.883+08:002010-12-13T08:49:53.883+08:00Hi Heather,
it does not include how much I gave m...Hi Heather,<br /><br />it does not include how much I gave my parents each month. But at the moment, but my parents are still young (early fifties), so there's no hefty medical bills or etc to worry about. They had been prudent in expenditures too, so there's no debt to worry about too.JWhttps://www.blogger.com/profile/04633191740991225888noreply@blogger.comtag:blogger.com,1999:blog-5250592099846123314.post-71417014108533684612010-12-12T21:39:53.879+08:002010-12-12T21:39:53.879+08:00Hi owner of this blog.
I'm very impressed by ...Hi owner of this blog.<br /><br />I'm very impressed by how much you save up every month. Just curious, does that include how much you give ur parents every month?<br /><br />HeatherAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-5250592099846123314.post-33269591475703953972010-03-03T08:34:08.325+08:002010-03-03T08:34:08.325+08:00Hi MW,
you are right I might be a little too opti...Hi MW,<br /><br />you are right I might be a little too optimistic. :)<br />But I have to say I'm amazed at their aggressiveness after 5 years of profit, and not doing any diversification until 2008, where everything is much cheaper!<br /><br />1) I used DCF as mentioned. The assumptions were mentioned as well, in that the revenue growth is at worst equal to the inflation value.<br /><br />2) To me, there's good debt and bad debt. Good debt is debt used for expansions, etc. Bad debt is debt used for purchases that will not lead to expansions... i.e. cover losses...<br /><br />Certain debt is necessary for a business to grow and expand at a sufficiently good rate. In addition, having some debt reduces the amount of tax to be paid right? Need you to confirm this...<br /><br /><br />3) For LED business, it's still very new, hence no reports are out yet. However, being in the semicon industry myself, I can safely say that net margins for semi-con are generally very high. Something that costs perhaps 30 cents to make overall can sell for over 30 bucks... After all, sand, where silicon is extracted from, is cheap.<br /><br />Their recent moves are more for diversification. I'm a fan of diversification and multi-industries now, i.e. Keppel Corp and Sembcorp. In this sense, they will be less affected by the cyclical nature of the electronics market. The fact that they are profitable for the new subsidiaries shows to me that they are on the right path, and they mentioned that they are committed to make every business profitable.<br /><br />4) Agreed. Will check that up<br /><br />5) To me, the debt is used primarily for expanding. I will have to go into Part 2 for points 4 and 5. In summary, the debt is as follows:<br /><br />2006: 20 mil<br />2007: 28 mil<br />2008: 69 mil<br />2009: 49 mil<br /><br />Aztech started it's expansion program in 2008, and the marine fleet they have is paid by both cash and debts. With their profits, they will be able to reduce this debt back to 20 mil soon.<br /><br />6) Again agreed. Thanks for the guidance.JWhttps://www.blogger.com/profile/04633191740991225888noreply@blogger.comtag:blogger.com,1999:blog-5250592099846123314.post-41221665468386130032010-03-03T07:47:47.399+08:002010-03-03T07:47:47.399+08:00Hi JW,
Don't worry I am never afraid of long ...Hi JW,<br /><br />Don't worry I am never afraid of long posts, in fact I love to digest information and to make inferences haha.<br /><br />1) How did you compute the intrinsic value of Aztech? Did you use a DCF analysis? What were your assumptions for the DCF?<br /><br />2) I note you said that Az's debt was "good debt" as it allows them to expand. What I want to say is that debt is debt, I won't classify it as "good" or "bad". It's how you use the debt and whether it can eventually generate high ROE.<br /><br />3) What are the net margins for LED and Construction business? I am quite confused over Az's recent moves. Why are they choosing to do something which is so different from electronics? Chartering vessels now? Hmm....<br /><br />4) You did mention the EPS can sustain the dividend payout in your post. But note that Earnings Per Share has nothing to do with dividends; thus it is Free Cash Flow which you should be lokking at. I note there was FCF for FY 2009 but it is better to plot a 5-year breakdown of this to assure yourself.<br /><br />5) Their borrowings seem very high in relation to their Cash Balance. Why does Az need so much debt, and why did they have a rights issue as well? Maybe it's better to analyze the cash burn rate instead of earnings increase? I personally think the 28 consecutive quarters of profitability is a marketing line. UTAC (now delisted) used to report XX consecutive years of revenue and profits too but ultimately still struggled to generate decent cash flows. I used to own UTAC back in 2006 before switching to value investing.<br /><br />6) NAV is not always a strong cushion to fall back on, so I suggest basing your purchase decision on PER instead, and also having an eye on the cash flow generation ability of the Company.<br /><br />Overall, I can sense your tone is one of optimism and also a little awe, from the words you use within your write-up (e.g. brilliant, shrewd, amazing). I always adopt a stance of being realistic rather than optimistic; even for my recent purchases like Kingsmen where I always tend to look for the downside rateher than assume good upside.<br /><br />Regards,<br />MusicwhizMusicwhizhttps://www.blogger.com/profile/10950754156386935254noreply@blogger.com