Wednesday, May 18, 2011

Commentary On Selected Stocks

Hap Seng - The euphoria died a slow and painful death. Unfortunately normal investors only got wind of the poor placement when its all a bit late. After hitting a high of RM7.36, the promoters were all geared up to place out 124.5m shares, hopefully at RM6.10-6.20. To do that they probably had to make sure the mother share stayed above RM6.50. But there were apparently almost zilch takers above RM6.00 for the new shares.

Again, painfully, normal investors do not get wind of this information till its too late. The company could abandon the exercise or still push through, but the new shares will have to be priced a lot lower than RM6.00. Finally done at RM5.25 and even then only 43.8m out of 124.5m proposed amount.

Is there light at the end of all this? Well, yes, in that the indication was to have been 62m shares but only 43.8m was placed out in the end, an indication that the company was not willing to issue too many shares at the eventual pricing. There is a second phase whereby following the exercise, the company can prove to those who did not subscribe at higher levels that they missed a great opportunity.

In hindsight, the whole strategic exercise was very good, but the promoters were too greedy, I mean the shares were whacked all the way from below RM4.00 to RM7.36 - many institutional investors would immediately turn wary of such a jump prior to an exercise which they were being asked to pony up for new shares, when they could have bought new shares at RM4.00 or below if the promoters HAD NOT collected shares like nobody's business prior to that. Too greedy and not leaving enough on the table for others to make.

So how? It would take some time to work through the exercise, new shares floating, bonus issues and all. I guess if you have no positions, HapSeng at current levels of below RM5.30 is OK but be prepared to go through the exercise. If you have Hap seng at higher levels, I don't think its necessary to average, just go through the exercise and hopefully you should at least make back the difference on an ex-basis.

Mclean -The worst IPO in recent times, any reason, maybe because its Kenanga led? Either the promoters / owners were really naive or really smart. Its not a terribly high paid up, plus the shares DID NOT even went for any kind of goreng activity, there was like no one "taking care" of the counter. Judging from the stupid volume, everybody who got the private and public placements sold. There was no support from anyone.

Why I said naive ... the whole setup, if properly managed would have seen sustained demand and the shares could have held up well above 70 sen. Why I said they could be really smart ... they could be really smart if they anticipated sufficient buying for the first two days which would allow all shares to be out, by last Monday which was T+4, that should flush almost all traders and punters.

If they were really smart, they could keep buying all the way down from 50 sen to 41 sen but not in big lots as to push the share price up. You cannot sell all 100% of the shares (moratorium), the paid up is really pretty small and the free flot is not big at all.

Malaysian Public 2,700,000 (1)
Private Placement 8,600,000 (2)
Business Associates 4,100,000 (3)
Private Placement 11,050,000 (4)

We are talking of a free float of just below 26.5m shares swishing around. At 41 sen, thats not even RM11m in value. Which for me, is a ripe scenario for me to favour the "some very smart but severe buggers" working this counter. If you did not already lose money on this counter, for a pure trading play, I would favour a bullish bet by going long now.

The key is looking at the very assiduous accumulation in Maclean-W over the past 3 days. The mother was "allowed" to do a free fall but the warrant was well bought at every level. Its so easy to send this back to 60 sen with minimal effort. Judging from the fact that there is little baggage (old debts, stale bulls, etc.) and knowing the free float equation and assuming the business is not flawed (shouldn't be because it takes so many hurdles and due diligence and audits from the authorities to get to IPO stage) ... it may not be an exciting business but to assume that its a fake thing should be the last thing on our minds.

AirAsia - for those who do not already know. Super investor Koon Yew Yin, who has hit another home run in Coastal Contracts, has already accumulated a sizable stake in Air Asia. Take that information whatever way you want. Just FYI.

NOTE: The above opinion is not an invitation to buy or sell. It serves as a blogging activity of my investing thoughts and ideas, this does not represent an investment advisory service as I charge no subscription or management fees (donations are welcomed though). I may have a position in the counter already. The content on this site is provided as general information only and should not be taken as investment advice. All site content, shall not be construed as a recommendation to buy or sell any security or financial instrument. The ideas expressed are solely the opinions of the author. Any action that you take as a result of information, analysis, or commentary on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.



super invesror koon yew yin also had invested in GUH. he is in the top 30 lists.

brian.wong said...

I noticed that you like my babe Fiona Xie alot.

Kingsmen said...

the famous stunt by georgy sorros during the 97 financial crisis to the ringgit is "see u at 5!"....tony is shouting the same rhetoric ... see u at 5!

kine said...

Now Mr. Koon r our new poster boy
4 Bursa Malaysia value investor.

hng said...

Dear Dali

The is some positive development on its lukewarm private placement from 20% to just 7.8%, as it mean there is less dilution effect on subsequent corporate exercise namely bonus, right and warrant as well as dividend payout. With less capital rise, i think hapseng management should opt not to repay bank borrowing as it only carry interest charge of merely 3%, instead should refinance its borrowing. After all, its ROE is much higher than to bear these interest cost.

Lefteris Loh said...

I know this gentleman, Mr.Koon Yew Yin.. The first time I meet him was 3 years ago when I am in Secondary School for a scholarship interview in St Michael. Unfortunately, I does not qualified.

The most memorable moment was, the time he took out a stake of RM50 and splash it on the table for students who attended the interview. At that time I was wondering who is he?

DALI, do you know does he have a blog?

hijaudaun said...

Hi, nice blog. Just droppin by

Dwen Ihsan said...

mclean almost postponing its listing..until the last minute

Goreng Addict said...

Dear Dali,

Any update on KSSC Bhd? During the ipo in Jan'11, u mentioned u like it. The stk hv been oso quiet so far. Rpted a lower quarterly result last week.