Invest ment mental model;
Cold eye:
1) Growth
2）ROE
3) Div Yield
4) PE
5) Cash Flow
Philip:
1) Terminal Growth, Revenue
2) Management competence and integrity
3) Competitive advange
4) ROE, margin
5) Earnings reinvestment, delayed gratifications
Operational Manuals;
1) Consistent Div yield more than FDs (>3.5%)
2) Dividend payout ratio consistently below or around 50%
3) Net cash level 25% and above (5% div yield achieveable for at least 5 years even out of business)
4) Earning visibility; example: GKENT 5bil order book from LRT3, stable 20m profit yearly for at least 5 years from water meter, recent award from water authority in HK and SG, PCHEM from its RAPID, production mt by 30%
5) Growth visibility >7% p.a for the next 5-10 years (market size, room to raise price, competitive advantage, market leader); exmaple: GKENT from SEA water meter, msia non-Revenue water project, potential HSR/ECRL bid; PCHEM from SEA chemicals demand, market leader in SEA, PETRONAS supported facilities
6) Management track record; mainly in 3: past ROE to estimate capital allocation efficiency, historical success story of vertical integration/diversification, balance between conservative prudent and push for growth; exmaple QL from poultry to frozen sea food to palm oil to retail chains; SCIENTEX from plastic packaging to property development;
7) Management integrity and shareholder alignment; dividend policy, major shareholder running business
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