QAF LTD-FAIR VALUE ESTIMATION

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QAF LTD-FAIR VALUE ESTIMATION

Post by Admin on Sat May 06, 2017 6:56 am


The above captioned subject was previously shared by our peer and i had also shared with everyone on its past operating history. Just in case for those investors who joined later and have not heard of this company before, it is the manufacturer of Gardenia bread. Its financials are sound, those who are interested can read up more by yourself.

Again, i have calculated its intrinsic value as shown in the table before. Early this year February, its price hit the highest level at SGD1.585 which surpassed its intrinsic value, thereafter it went into correction. Valuation is a very interesting subject, a company can't trade below or above its intrinsic value forever because once it reaches its fair value value investors like fund managers, institution investors and etc will start selling its shares. As volume transacted by these people are huge, demand from retailers will not be able to absorb it, thus as supply exceeded demand prices will naturally fall vice versa when a stock trade below its intrinsic value. Retailers will always at disadvantage as they have no idea of its value and will have to resort to guessing game via chart reading and etc. If they are lucky and guess it right they will profit however if they are not as lucky their capital will be at risk. Besides knowing the fair value, it is important to buy with a safety margin and for small companies like QAF i will always provision 50% because once market crash these stocks are going to be very volatile. Nevertheless a 50% margin doesn't mean it will definitely drop to that entry price. What it mean is if it does, an investor can buy at no hesitation and if it does not then just buy another stock that drop to its entry price. Hence by researching a pool of potential companies it will give an investor a higher probabilities of buying cheap stock. It is also not necessary for individual to follow my safety margin, if you think that you are more risk tolerant and can afford for a lower safety margin, you can do so at your own discretion. Thank you...




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