Monday, October 16, 2006

Selamat Hari Raya, Puncak Niaga
Watch A Master At Work

Talk about "duit raya", my gosh ...

a) you get the government to approve a water tariff hike

b) the company is effectively giving back RM767.84 million to shareholders

c) you get a 1-for-1 bonus, which is a non event, but nonetheless good in the eyes of many

The timing is not accidental, I tell you. Must do this before Raya la. Plus more importantly, you have the warrants expiring on 20 November 2006, so the better to push share price to facilitate conversion to shares. Warrants that don't get converted means the company will have to pay off the bonds themselves. If the share price encouraged conversion, its the warrant holders who will pay the extra cash for new Puncak shares, and those proceeds will be used to pay off the bonds (a warrant is the detached portion from a convertible bond, after detaching the warrant, the bond becomes a straight bond).

So, how high can it go? Your guess is as good as mine. It would be treacherous to buy today. If you bought before today, you should be smiling. The convergence of all good factors with regards to the stock is a master stroke. Investors always worry, ... when is the company going to pay off, ... when will the company get a water tariff hike, ... what about the convoluted Syabas thingee ... The warrants would fly and make a lot of people very happy.

Would there be a sell on news? Well, the controlling shareholders would be holding onto their shares for the capital repayment, so too will the fund managers. The controlling shareholders would definitely be holding and converting the warrants (as it is still way in the money and at a discount). So, where got sellers. However, having said that, the warrants came in for a lot of speculation over the last 2 hours today, the people in the know (and those who could not buy as many mother shares) bought a lot of warrants. The share price stayed firmly at RM3.00 throughout the day, the warrant traded at an 10 sen discount in the morning session. Towards the end of the day, buying came in on the warrants while the mother share stood firm, narrowing the discount to 7 sen. The warrants will never trade at a premium with expiry just a month away. It will need to give a healthy discount for people with real money to buy and convert (e.g. fund managers). A 8-12 sen discount will give a lot of incentive for bargain hunters to buy and convert and hold for capital payment. If the warrant trade with little discount, time to sell.

The master stroke by Master Sifu Rozali cannot be over stated here. Here's to all CEOs and company owners, forget about playing up your shares every now and then, you try to rip off the public investors for your gain - plus you don't even succeed all the time. Learn from Sifu Rozali, build your business. Everyone has contacts and network, learn to use them but also parlay them to build a solid company. Treat minority shareholders well. Those who invested for the longest time with Puncak Niaga will gain enormously.

You may play your shares a couple of time a year, after a few years what will you have - name me 5 (if you could) Second Board owners who came out from the 95-97 super rally with cash intact!!?? In just one masterstroke, Rozali has doubled, even tripled his wealth. I tell you, we should really have an award, just call Rozali the "BURSA Man of The Year".

p/s latest research note update
RHB Securities - RHB Research has upgraded Puncak Niaga Holdings Bhd to an "outperform" from a "market perform" . In a note to clients, RHB Research said it has raised its net profitforecasts for Puncak by 16 pct for 2006 and 13.5 pct for 2007-08, based on an assumption that the new water tariff structure will take effect on Dec 1. As a result, its fair value for Puncak has also been raised to 4.73 rgt from 2.98 rgt. "With the 15 pct water tariff now in the bag, Puncak's valuations have become too compelling," RHB said in the note.
TA Securities - Target price RM3.35
CIMB - Target price RM3.50
OSK Scurities - Target price RM3.60
Affin Securities - Trading Sell, Target Price RM3.04
Kim Eng - Target Price RM3.60

3 comments:

TradeAnything said...

Hi,
I know it is a bit off topic.. :)
What is your view on BIMB?

cheers.

Salvatore_Dali said...

you r trying to get me into trouble here... i assume u meant Bank Islam. Well, don't know why DIG would buy??!! But what's more important is the bank just wrote off a couple of billion ringgit in bad loans. Hmmm.... I can understand if these mega bad loans were to be written off a couple of years after the 97 financial implosion, but not NOW... A couple of billion rinngit, can we have a thorough audit, who were the major borrowers and what were their projects .... how can so many things fail when the economy was recovering over the last 4 years??!! I smell a lot of dead rats.

TradeAnything said...

thanks for sharing.. i will never want to see u in trouble.. never, trust me :)
else.. i will lose a valuable information source.

when u mentioned the bank wrote off a couple of billion ringgit.. r u refering to the actual write-off exercise or the provision??

personally i like the involvement of mid-east guy in the bank, to my knowledge mid-east guys r good bankers (warning: i m not knowledgable :)

btw.. will u be buying icbc??!! hmm.. i m getting more and more off topic.. better stop here