How Retailers can Perform Analysis: Plastic Packaging and Commodity (Steel & Aluminium)

Even though we are merely retailers, we should be a knowledgable one. 

Who says that retailers are destined to lose money in the share market? Well, for me, i never believe in those myths... The more people agrees to the fact, the more eager i want to prove them wrong. In fact, i think that there are no right or wrong in the market, only INVESTMENT DECISIONS matter... And along the time, our investment decisions will be proven.

How do we make our investment decisions? Based on guts feeling? Based on rumours and speculations? Based on facts and figures? Based on research? Even though i m a retailer, but i am myself's fund manager. I manage my own fund and i invest based on facts and figures. Pareto Law says that, 20% are winning money while the 80% are losing money to those 20%. If we want to win in the stock market, we should stop becoming the 80% and turn into 20%. 

We often see the stock analysts' reports. Their reports are very detailed and some even have chances to visit the CEO or the chairman of the listed companies. They have all the sophisticated software or tool to calculate and compare the financial information. Their news are always the most up to date. But for us, as retailers, we only have the chances to meet the bosses in the AGM and pose them our burning questions. Whenever a news was released, the retailers are the always the last one to know, the stock had been speculated before and that is the only time retailers went in. Ended up, retailers lose money.

Here i would like to stress that retailers can also perform the stock analysis, as professional as those stock analysts. Do not be discouraged even though we are retailers. This should not stop our passion towards investing. Whatever the stock analysts can do, we can do it like them too, we can emulate their analysis method, thus reduce our investment risks. Now let me share my experience and analysis method on how retailers can perform analysis.

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ARANK - Post Q3 2017 Result

ARANK first appeared in my blog on 30 March 2017. You can also click HERE to view my first post about ARANK. ARANK's A-RANKed Mission Impossible??? Well, i think its possible, because I M POSSIBLE~

1. Fundamental Analysis

Revenue and Net Profit for ARANK from malaysia stock biz [2]

ARANK announced the Q3 2017 result on 15 June 2017. Both revenue and net profit shown positive improvement in both qoq and yoy. Revenue increased  +4% qoq and +4% yoy respectively while net profit increased +4% qoq and +18% yoy respectively.

The increase in revenue is due to higher average selling price as a result of the increase in the raw material costs although the business volume was lower[3]. From this statement, i can see that the management is transferring the cost to the end user. The worrying factor will be the lower business volume, which might signifies flat growth or declining growth. However, the management highlighted 3 points in the prospects. First is the recovery in the commodity prices as external demand improves. Second is their business is affected by the weakening RM but our RM is getting stronger if compared to last quarter. Third is the volatility of aluminium has added uncertainties to their business. The point 1 and 2 are on ARANK's side. While for bullet point number 3, i will share my views based on data i collected in my Projection Analysis sector.

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ARANK's A-RANKed Mission

ARANK company in Selangor

ARANK through his 100% owned subsidiary, Formosa Shyen Horng Metal SB, is principally involved in the manufacturing and marketing of aluminium billets which is the core business of the group. In 1998, Formosa had an installed capacity of 12,000 metric tonnes per annum of aluminium, now, as written in the latest Annual Report 2016, currently, the installed capacity had grown to 120,000 metric tonnes per annum. Being the largest manufacturer and supplier of aluminium billets, and one of the leading of suppliers of aluminium extrusion billets in Asia, the growth for ARANK in  19 years is 900%. From here, we can see that the demand of aluminium had skyrocketed in the past 20 years, and ARANK had been there, feeding and supplying the skyrocketing demand of aluminium in the industry.

But first, we need to understand how aluminium is produced. We can take a look at this youtube video[2]. To make it short, the raw material of aluminium is bauxite. Bayer process is a process to refine bauxite to produce alumina (aluminium oxide). There are only 30% - 54% of alumina in the bauxite[3]. And aluminium is extracted from the alumina by electrolysis, separating aluminium metal in the negative electrode and sink to the bottom of the tank, while oxygen at the positive electrode[4]. All of these processes involved massive machineries and facilities.

The center bottom, aluminium extrusions; the right is the aluminium billets. (Diameter ranging from 3 inches to 11 inches and longest length up to 6 meters)

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