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Koon Yew Yin's Blog

Author: Koon Yew Yin   |   Latest post: Sun, 19 Sep 2021, 5:56 PM

 

Why the share price drops when a company reports reduced profit - Koon Yew Yin

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As you know, our Prime Minister has issued MCO lockdown in the last 3 months due to the increase of Covid 19 cases and recently extended the MCO lockdown period until the daily Covid 19 cases are less than 4,000. Currently we have a 7-day average of 16,697 daily new Covid 19 cases as shown on the chart below. We have a total of 1.11 million Covid 19 cases, 915,000 recovered cases and 9,024 deaths. Unfortunately, all these figures are still surging.  

Based on the rapid increase of Covid 19 cases, Malaysia will soon have more than 2 million Covid 19 cases and 2 million recovered cases. When the 2 million Covid 19 cases recovered, we will have 4 million recovered patients. Our population is about 32 million. That means we will soon have 1 Covid 19 recovered patient for every 8 persons in Malaysia.    

Studies have shown that those recovered patients will continue to have ill health though out their lives. To provide adequate medical treatment for 2 million ill health patients will be an enormous burden for the families and the government. 

All investors must know which criteria pushes the share price up or down.

Among all the share selection criteria such as NTA, cashflow, debt, healthy balance sheet, dividend yield etc, the most powerful catalyst to move share price is profit growth prospect.

When an investor buys a share, he expects to gain from dividend yield and share price increase. Almost all Malaysian listed companies do not give out more than 5% dividend yield. So, investors should only buy shares that have good profit growth prospect; they can continue to report increasing profit. 

When a company reports good profit growth, many investors would chase to buy it. As a result, the share price would go up higher and higher until it is overvalued.

On the contrary, when a company reports reduced profit or losses, many shareholders would rush to sell off their holdings as quickly as possible. There would be many more sellers than buyers. As a result, its share price would continue to drop.

As I mentioned earlier, our PM has already issued MCO lockdown for the last 3 months and has extended the MCO lockdown until the daily new cases is less than 4,000.

All companies except essential industries have been   closed in the last 3 months and will remain closed in the months to come. Since steel companies are not classified as essential industry, their workers cannot work to produce anything. They will soon report reduced profit or losses for the quarter ending June 2021.

The rising steel price:

The rising steel price cannot help steel companies to make more profit because their workers cannot go to work to produce steel products. Even if they can make steel products, all the construction workers cannot go to work and they do not need to buy steel products. 

Don’t be tempted to buy steel stocks now!!!   

All the steel stocks have been depressed in the last few months. They look very much undervalued based on their good profit result in the last quarter ending March and many investors are tempted to buy them.

But when they report reduced profit or losses, their share price will surely drop lower. Only foolish investors want to buy steel stocks now.

All long-term serious investors should know that the overall stock market has been depressed in the last 6 months. KLCI chart below shows that most of the listed stocks have been dropping in the last 6 months due to MCO lockdown and our political uncertainty.

 

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SincereInv Be a long term investor... don't get stress by short term events..
02/08/2021 5:04 PM
Integrity. Intelligent. Industrious. 3iii (iiinvestsmart)$€£¥ Sterling HK share dropped 90% in recent days. A man shared he bought this share a few days ago and sold at 10% of his buying price 2 days ago. He bought on the recommendation of a super investor. :-(
02/08/2021 5:11 PM
brian3381 Helo uncle. Ppl oredi talked tech stocks
Now u stil talk steel as example ka? Pls wake up la... hahahah
02/08/2021 5:19 PM
OTB D&O
Share price = 5.45
EPS = 6.10
PER = 86.72
Q1 2021, EPS = 2.28
Q4 2020, EPS = 2.43
EPS dropped 13%
The share price of D & O continued to break new highs.

UWC
Share price = 5.97
EPS = 8.23
PER = 70.47
Q1 2021, EPS = 2.09
Q4 2020, EPS = 4.95
EPS dropped 15%
The share price of UWC continued to perform well and on an uptrend.

Note :
The theory of the share price drops when a company reports reduced profit is not true anymore.

The theory of the share price drops when a company reports reduced profit is not true anymore ... I repeat ...

I have shown very good examples on D&O and UWC.
The share price continue to break new high despite reduced profit reported.

This writer has no skill to invest in KLSE, no wonder lost a few hundred million in the last few years.

The investment scenario had changed, please open up, do not be stubborn and refused to change.

Thank you.
02/08/2021 5:53 PM
KINGCOBRA kyy you better keep your super duper big mouth SHUT ...u don't want to invest just step aside!
02/08/2021 9:31 PM
henry888 profit reduced share price dropped is normal, but there are some cases profit increased, share price dropped ?
03/08/2021 6:30 AM
Bgt 9963 Post removed. Why?
03/08/2021 8:39 AM
HonestInvestor33 I write to express my life experiences about the share market as a young 5 years old inexperienced market pundit. Kyy was my kindergarten teacher while OTB was my secondary school teacher.i have since embraced the learnings of financial analyst who visualise the river of money a company is going to make. Kyy thank you , while your wise words are just layman observations , it is not good enough in a world of fund managers and digital algo trading. A bigger thank you to OTB for giving me a HELICOPTER view of things via TA n FA analysis. Both are good teachers but spending more time and learning more from OTB , I tend to share his view.
03/08/2021 10:46 AM
ahbah Be gridi when others are fearful ?
03/08/2021 12:43 PM
TOP WIN 我一直在买钢铁股 ,再过 2 个星期 ,会有很多好消息 。你们不要错过呀 。哈哈哈
03/08/2021 5:23 PM
trum Kyy please write life articles lah. So boring reading your stocks theory.
03/08/2021 11:54 PM
Ang Li Li (IG: Liliang_64) Thanks for sharing
04/08/2021 8:53 AM
qqq3333 whether it is steel or D&O both also waiting to die but surely subscription is last to leave the party......normal.

covid cases rising in China , buy JD make money...make money so easy.
04/08/2021 9:21 PM


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