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Author: Koon Yew Yin   |   Latest post: Sat, 4 Jul 2020, 10:50 AM

 

Dayang: The worst is over - Koon Yew Yin

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Due to force selling and panic selling the price plunged from Rm 2.95 to close at 88 sen within 4 weeks. On 20th February the price was Rm 2.95 as shown on the price chart. Unless your average purchase price is less than 88 sen, you would have lost money. That is why I am writing this useful article to help you make back some money.

The above chart shows the price movement for the whole day. Yesterday’s closing price was 88sen. It has not dropped below 88 sen again for the whole day. It indicates the worst is over. There might be still some force selling and panic selling but there were more buyers than sellers. As a result, the price has been going up and eventually gained 4.5 sen closed at 92.5 sen. At one stage it went up 11 sen.   

Since it did not drop below 88 sen, it indicates that the worst is over.

The price chart below shows that on 20 February it was Rm 2.95, about 4 weeks ago. You must remember the Coronavirus which started about 4 months ago in Wuhan, did not depress Dayang’s share price. In fact, while thousands of Chinese were dying, Dayang continued to shoot up to peak at Rm 2.95 about 4 weeks ago.

What caused the price plunge?  

It was our own political upheaval which started about a month or so ago caused the panic selling. As a result, the price dropped so rapidly which caused margin call. The more they sold the more the price dropped which created more force selling. Force selling is a vicious cycle.  

How does the oil price slump affect Dayang?

Many investors are worried that the current oil price slump will badly affect Dayang’s business and reduce Dayang’s profit. No! it will not! In fact, the oil price slump is good for Dayang’s business. Unlike Hibiscus, Dayang is not involved in the oil extraction. It is only oil rig maintenance contractor.

In fact, when the oil price slumps, Petronas will have to pump more oil to support Malaysia’s economy and award more oil rig maintenance contracts to Dayang which is largest and most efficient contractor in the field. In this region where Petronas has about 100 Offshore oil rigs, it looks like Dayang has the monopoly in this business.

Dayang has very good profit growth.

2018 revenue Rm 937 million and EPS 17.2 sen

2019 revenue Rm 1,046 million and EPS 24.3 sen

The current price 92.5 sen divided by 24.3 = 3.8 P/E ratio.

Can you find another share with similar good profit growth prospect as Dayang, selling at P/E below 4?  

Generally, most investors have cashed out from the stock market due to the Coronavirus pandemic which is affecting the economy of every country in the world. However, smart investors should take advantage of this rare buying opportunity to make money. It is safe to buy Dayang because it will not drop below 88 sen again.

 

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Labels: DAYANG

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