Sumatec - The classic pump & dump

Chart : Sumatec daily chart as of Oct 15 2014 (Source: ChartNexus)

Chart : FBMKLCI daily chart as of Oct 15 2014 (Source: ChartNexus)

The selling down of the past 2 weeks has caused the KLCI broke its 3 years uptrend line. The market has been running for last 3 years without any correction so I believe the Bull is tired and current weakness could just be a healthy correction which is in line with the world market. 1700 will be a critical support if it breaks then Bear may start to creep in. 

But the same can't be said for certain penny stocks. Sumatec, the darling of the market, has seen breaking every level of support and almost reach the level before it spike. It is quite a classic pump and dump example. During the run up of the share price, there were a lot of 'good news', exciting corporate exercises, rumours and 'great prospect' flying around. These days forums, blogs, twitters and facebooks are all good platform for the promoter to spread the good news and how good is the prospect of the stock. With 'target price' of RM1, RM 10 and RM 20 couple with well known public figure as well as asset injection, it is quite enticing to retail investors. One might not believed it at first but when the share price keep going up,it is very hard to see yourself missing the boat.

The Aug 20 plunge of the stock price from over 60 sen to 40 sen was the end of the run for the counter. But the promoter was more careful when distributing their shares on the following weeks till today. The counter only closed one or two sen down most of the days with occasional rebound so there will be no panic from retail investors and they can keep distributing their shares orderly. At 40+ sen, there were a lot of investors that stuck with the high price went to average down and a lot of investors that miss the first run went into the stock as it deems 'cheap' at the time. I believe the promoter distributed most of their shares in this range as selling at the top is never their intention but distributing shares at the price that people are willing to support is what they are hoping for. 

So what now? Some may still want to believe that it is just weak market sentiment and the share price will rebound to 60 sen or more. But deep down we know that when a stock doubled its share price in 2 months time and back to square one in the following 2 months then it most likely a classic pump and dump case just like the what happen to INGENCO, MTRONIC, NICORP, AGLOBAL (now rename as NEXTNAT) and PATIMAS (if you still remember this now delisted stock). For those who think that TSHS won't let his share just die like that, just like I mentioned in my previous post : Sumatec - What is the end game of TSHS? , I think the share price is nothing of his concern as he already cash out with the injection of his oil field. As for the RI, I believe we all know that the odd of it going through is pretty slim now.

Will the share price rebound to 60 sen or higher? Ya, everything is possible in this world but I think even 40 sen is quite a distance let alone 60 sen and above. Why? Because a lot of investors that get stuck with high price are looking to cut their losses at the first chance they have so there will be quite a selling pressure when the stock rebound. So God bless those still holding the baby!

GBH - Getting no where!

Chart : GBH daily chart as of Aug 2 2014 (source: ChartNexus)

Goh Ban Huat (GBH) on July 2 announced 3 corporate proposals that includes Share Sale Agreement (SSA), Reverse Take Over (RTO) and disposal of prime land asset. 

Under the SSA, its wholly owned subsidiary, EKSPRESI TEPAT SDN BHD (ETSB) would acquire 35% equity or 3.5 Million shares of GLOBALMARINER OFFSHORE SERVICES SDN BHD (GMOS) for RM 38 Million. GMOS is an O&G company that specialize in floating production storage offload (FPSO) thus the acquisition would path the way for GBH to venture into O&G industry.

Besides the SSA, the company also entered into a Memorandum of Agreement (MOA) with DATO’ ABDUL RAHMAN BIN MOHAMED SHARIFF and  NORMALA MOHD SHARIF (Vendors) for the acquisition of the entire issued and paid up share capital of Dynac Sdn Bhd (Dynac is one of the vendor under the SSA). The MOA is basically a RTO exercise where GBH would acquire Dynac for the sum of RM 632 Million which would be satisfied by RM 210 Million cash and issuance of new GBH shares and then the Vendors would made an MGO for the rest of GBH shares for no less than RM 2 per share.

The 3rd proposal is for the disposal of the company most valuable asset, 13.93 acres of prime land, to Keladi Maju Bhd for RM 192.37 Million.

The share price of the company spiked from around RM 1.90 to RM 2.20 and peaked at RM 2.50 after the announcement. This could be due to the arbitrage opportunity that investors saw since the MGO will be made above RM 2 a share. Even some of the initial shareholders might not sold their shares after the run of the share price to wait for better offer.

But on Sep 30 the company suddenly announced that both SSA and RTO were terminated at the request of the vendors without any reason given by the vendors. It is quite surprising as personally I do think that the RTO is more 'creditable' than other diversification proposals such as PDZ and CNASIA. It again shows that MOU, MOA or any framework agreement is just a proposal and nothing  is concrete until the deal is done. Whoever jump into the counter for the arbitrage opportunity is certainly trap by now. The share price has seen falloff the cliff to trade close to RM 1.70 .   

So what is left for GBH now? Basically the company fail to venture into O&G and in the process lost their most precious land to Keladi. The only thing left is the unattractive ceramic and toiletries business and a bunch of cash.  After the disposal of the land, GBH will have some RM 237 Million cash or RM 1.275 per share without any borrowing. Of course, Tan Sri Robert Tan still here to stay and he did mentioned that the company will keep looking for new assets to be injected into the company. With a clean balance sheet, the company is indeed a good candidate for any RTO deal. Until then, the current price of the counter seems quite expensive even with the potential of capital distribution. 

PDZ - No more O&G! More like OMG!

Chart : PDZ daily chart as of Sep 26 2014 (source: ChartNexus)

PDZ, the sizzling hot stock for the last 3 months which saw the entry of MARA as their major shareholder as well as proposed venturing into attractive 'O&G' industry had drew a lot of 'investors' into it in the hope of riding the O&G wave. The initial announcement was made on May 14 that the company will acquire 20% of Efogen Sdn Bhd from Johany Bin Jaafar for RM 18 Million. The details of the announcement can refer to the link below:

http://www.bursamalaysia.com/market/listed-companies/company-announcements/1621981

Efogen is principally involved in the chartering of vessels for oil and gas offshore support services, providing geophysical services to the oil and gas industry, trading in related information technology software and hardware apparatus as well as providing consultancy and maintenance services in related fields. 

The conditional share acquisition agreement (SAA) was for a period of 60 days and further extension of 30 days has been agreed by both parties on July 14 then again another extension of 30 days on Aug 13. It is nothing unusual about extension for significant corporate proposal like this one but after 2 extensions the company again on Sep 15 announced another extension for 10 days. So as of this point, is quite reasonable for one to think that the deal should be closed in matter of days. 

Then yesterday the company suddenly announced that the deal is off without any reason given. Just like that!!! Poopsss!!! So what happen to it? Why can't it went through? Don't you think the shareholders have the rights to know about it?

From the chart above, one can notice that the share price of the counter spiked after the 1st extension and peaked immediately after the 2nd extension. Looking at it, one can't help to think that whether the SAA is ever serious or just another hot air to inflate the price of the counter. All those extensions is it really for both parties to iron out the deal or just time given to the operator to distribute their shares to innocent investors. Since no more extension for the deal, I guess they must have offload most of their shares already. With all the rumours flying around linking the counter to Tan Sri Halim Saad (TSHS) and enormous potential of O&G during the run of the share price, it really looks like a classic pump and dump trick.  

So what now? At least MARA still here right! Oh ya, they have sold big chunk of their shares at a good profit. But Megalink Industries Sdn Bhd still here and they are believe to be link to TSHS, so may be there is still O&G potential right? May be! who knows! But one thing I know is that the share price certainly can't be justified by the company current state. 

Refer to my previous post : CNASIA : The Deal Is Off , what is interesting is that both CNASIA and PDZ had subsequently announced the end of their respective O&G deal and are both linked to TSHS by rumours during the run of their share price. Since CNASIA share price has since fall off the cliff after the announcement, I guess PDZ share price will face some serious selling pressure on coming week. How about another company that actually link to the tycoon, Sumatec. Will the Rights Issue and the acquisition of Buzachi Neft oilfield go through? I certainly hope so for the sake of the shareholders. But if, just if, the deal falls through, then how will it affect the valuation of Sumatec. This is something the shareholders need to think about. 

CNASIA - The Deal Is Off

Chart : CNASIA daily chart as of Sep 22 2014 (source: ChartNexus)

CNASIA on June 24 announced that the company enter into a framework agreement with KenMakmur Holding Sdn Bhd for the proposed production of liquified petroleum gas (“LPG”) and condensate from the natural gas supplied by the Rakushechnoye Oil/Gas Field* (“Proposed LPG Production”). The details of the agreement can refer to the link below:

http://www.bursamalaysia.com/market/listed-companies/company-announcements/1665105

Under the agreement, CNASIA Capital or its nominee/subsidiary/principal shall at its own cost, design/procure/construct and commission a 600 MT/day LPG/condensate production plant using the natural gas supplied from the Rakushechnoye Oil/Gas Field (“LPG Production Plant”). In return, there was a profit guaranteed from KenMakmur with conditions. I'm not going to go further into the details of the agreement since it is not the point of this article. 

As we can see from the chart above, share price of CNASIA spiked from around 75 sen on April 4 to closed at RM 1.29 on June 23, the day before the announcement. After the announcement came on June 24, the counter rose even higher and peaked around RM 1.56 two weeks after the announcement. Since then, the share price started to fall and consolidate around RM 1.26 . 

Today the company just announced that both parties have decided to let the MOU lapse without explaining why. So what now? Whoever purchase the stock after the announcement hoping to tap into the potential of the MOU will be quite disappointed with the announcement. With the weak financial condition of the company to begin with, one can't stop thinking that whether the MOU was ever serious in the first place. Anyway, for those who bought near the peak may need to review their investment in the company. 

 

Greenyb - Breaking new high!

Chart : Greenyb daily chart as of Sep 15 2014 (source: ChartNexus)

Refer to my previous post on the counter : Greenyb - Still got leg , apparently there is still more upside to come. Greenyb is a profitable company with consistent dividen of 1 sen for the last 3 years which workout to be 2.4% yield based on last closing price of 41 sen. It broke its multi-years high again last Friday and keep marching on. The upcoming quarter results announcement will be somewhere end of this month. Judging on the run of the share price, there could be more positive surprise for the shareholders. Stay tune!!!

KNM - Bearish breakout!

Chart : KNM daily chart as of Sep 15 2014 (source: ChartNexus)

KNM's share price has soared from around 40 sen to peak around RM 1.14 for the past one year backed by the improved financial performance of the company. But the uptrend may be come to an end. The counter fell by 5.5 sen or 5.79% with heavy volume to closed at 89.5 sen on Monday. The fall caused the share price to broke its uptrend line as well as its immediate horizontal support line at 91.5 sen.

The timing of the decline of the share price is rather interesting. The share price peaked and started decline somewhere around early August which is when the company made an announcement regarding material contract that involved its subsidiary regarding the Pengerang Integrated Complex Project. The details of the announcement is here :

http://www.bursamalaysia.com/market/listed-companies/company-announcements/1703909

The supposed good news not only didn't pushed the counter higher instead the share price started decline after that. The potential contract value for KNM for this RAPID job is estimated to be around USD 300 Million. The latest 'relatively' healthy quarter earning  announced on Aug 27 also can't stop the share price from further declined. 

The selling could be due to temporary profit taking since the stock has more than doubled in 1 year time but the bearish breakout is just something that the investors can't ignore. It could be just a false signal but if the share price do not stabilize or rebound in the next few days then it could be the end of its run for the last 1 year. 

IFCAMSC - God's trade by Brahmal Vasudevan!

Chart : IFCAMSC daily chart as of Sep 8 2014 (source: ChartNexus)

Mr. Brahmal Vasudevan (BV), the founder of Creador, a private equity firm that focus on Southeast Asia region and India. From the main page of the website, it is stated there : Creador is a private equity firm focused on long-term investments in growth-oriented businesses in Indonesia, Malaysia, Singapore and India. 

BV emerged as IFCAMSC substantial shareholders on Aug 26 2014 with direct holding of 10 Million shares and indirect holding of 15 Million shares. On that day, the highest price and lowest price traded was 37 sen and 33 sen and it closed at 35 sen. But mere 4 trading days later, he disposed 11.5 Million shares or close to half of his holding on Sep 2 2014. On that day, the counter traded the highest at 52 sen and the lowest at 47.5 sen and closed at 49.5 sen. Since he didn't disclosed his average entry price and exit price so I'm just going for the average price of the day to estimate his entry and exit price. On Aug 26, highest was 37 sen and lowest was 33 sen so average 35 sen which will be his entry price. On Sep 2, highest was 52 sen and lowest was 47.5 sen so average is 49.75 sen which will be his exit price. So in just four trading days, he made roughly RM 1,659,375 (0.4975 - 0.35 * 11.25 Million shares). With some 13.75 Million shares left, his paper gain on his current holding based on today closing price of 45.5 sen is another RM 1.44 Million. 

In just  4 trading days , he closed his position of 11.25 Million shares with some 42 % gain. This is one hell of a contra trade. Apparently fund manager doesn't necessary aim for long term after all. But with 42% return in just 4 trading days, can anyone blame him for taking his profit? Certainly not. But for those that bought the shares after the star fund manager emerged and thought that he is here for the long term, it could be an unpleasant surprise. 

This is one godly trade that his clients will certainly hope for. It will be great for his clients if the trade is for the company's fund instead of his personal capacity. Anyway, job well done for BV!!!