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Old Chang Kee recorded a big loss in Q4.

Tuesday, May 30, 2017

I received a small handful of messages regarding Old Chang Kee's latest results and this is a quick blog about the matter.

Old Chang Kee is a fantastic cash flow generating machine and it remains one of my better although smaller investments. I have no intention to let go of my investment because nothing has changed.

Of course, when I saw the article in The Business Times declaring a huge loss for Old Chang Kee in Q4, I took notice. I spent one minute looking at the financial statement and decided that all is well.

One minute? Yes, only one minute.

I just looked at the income statement to see what has changed. Noticing a spike in expenses, especially other expenses, I scrolled down to find the reasons for the spike.

What I was looking for was whether the spike was going to be material and whether it was going to be enduring in nature. Some of the increase in expenses will continue to be challenging. Labour cost. Rental cost. You get the idea.

However, most of the increase in expenses comes from a revaluation loss which is a non cash item. Non cash item does not affect cash flow. So, unruffled, I went back to gaming.

To be investors, we should pick up some basic knowledge about accounting. Leave the more complicated stuff to the professionals but we should have some basic knowledge.

Financial statement:

Related posts:
1. Income Statement.

2. Recommended books.


Kevin said...

Hi AK,

EPS,EBITA margin and current ratio have been on the decline since FY2014.

AK71 said...

Hi Kevin,

All investments are good at the right price and I wonder why I have not added to my investment in Old Chang Kee in recent years. ;p

Freedom said...

Hi, AK.

I was quite shocked that Old Chang Kee has a P.E. of 58.

A late guru who passed away several years back uses the P.E. as one of the factors to determine whether is it a bargain.

What is on your view on Old Chang Kee now?

AK71 said...

Hi Freedom,

And people wonder why I am not adding to my position in Old Chang Kee. ;)

csky said...

Hmm.. then why do you not sell it?

AK71 said...

Hi csky,

You will find clues in my older blogs on Old Chang Kee. ;p

csky said...

Hi AK,

I went through your older old chang kee posts, so is it correct that you are not selling because of the following:

1. What you have is basically free when you sold half at 57c.
2. OCK is still a consistent cash generating machine.
3. Every year you are still getting free dividends.

So it seems you would only sell if the business fundamental get significantly worse. So my question is what kind of tell-tale signs would you be looking for to decide that the business fundamentals have gotten significantly worse?

Another question, do you have any posts that share how to screen or narrow down your stock picks? Thanks!

AK71 said...

Hi csky,

Wow! You get top marks for doing this! I didn't expect you to do it. Not many would. ;)

Yes, I am mostly an investor for income. If I am able to get in a position where I get free money for life, that is perfect. At least, it is enough to make me quite happy. :)

Tell tale signs of worsening fundamentals? I don't think I can list all possible signs. I suppose we would know if we see them. You might be interested in my more recent blogs on SPH, for example.

Being an investor for income, I am interested in stocks which have the ability and will to pay meaningful and consistent dividends. That slant is probably quite obvious in almost all my blogs on investing in stocks. You could comb my blog for examples, if you like. A relatively recent example that comes to mind is Centurion.

Finally, please don't take what I say as the holy grail. I am just another retail investor.

csky said...

Thanks AK!

Ya, I understand, everyone has to find their own investing style. As for me, I am still searching for mine and it's helpful to see what other ppl's investing styles are, so I can try to learn and adapt for myself. :-)

AK71 said...

Hi csky,

Many want to find the style that makes the most money but I think it is more important to find a style we are better with. :)

Charles Liu said...

Hi AK,

Could share how you determine the NAV? I'm finding out what's a good entry price.


AK71 said...

Hi Charles,

You will find this in the company's financial reports.

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