To say the least, 2024 has been a turbulent year for investors, with many stocks experiencing significant gains followed by notable retracements (such as Notion, Genetec, etc.), driven by shifts in investor sentiment.

Amidst this backdrop, CGB, one of the stocks that has always been on my watchlist, saw a spike of 30.86% in a single trading day today, resulting in a YTD return of 84.01%, outperforming a great deal of companies on Bursa Malaysia.

The big question is, why has CGB experienced such a substantial increase in its share price?

Recovering Financials and Venture into Construction

Looking at CGB’s recent financial performance, we notice that since the emergence of a new substantial shareholder (you may look this up on Bursa Malaysia’s website), the company’s financial results have been consistently improving.

The company, which originally focused on manufacturing high-temperature masking tapes, has expanded into construction through the acquisition of RYRT International S/B, thereby increasing its order book.

For those who are unaware, RYRT is a construction company with a significant foothold in Sabah. Recently, Sabah announced plans to roll out all RM6.6 billion in development projects approved under the Fourth Rolling Plan (RP4), including premises development, Tuaran river restoration, flood mitigation, new school construction, upgrading and maintenance of dilapidated schools, and the construction of new clinics.

With such strong exposure, CGB could benefit from the increasing demand for construction work in Sabah, given their extensive experience in infrastructure projects.

Could we see some positive news coming from CGB soon?

Investment Opportunities

I understand that many investors may be concerned about CGB’s recent price increase, but if the company secures any contracts, it could significantly change CGB’s prospects.

Moreover, CGB’s warrant A (CGB-WA) is currently trading at 72.5 sen with a strike price of 20.0 sen, compared to the 106.0 sen of CGB, which means that investors have a negative premium of 13.5 sen.

In short, if you buy CGB-WA tomorrow, convert it into CGB’s mother share, and sell it, you would be getting a risk-free return of 12.74%. This opportunity arises due to a general lack of understanding of how warrants work within the investment community.

Anyway, if you invested in CGB at the beginning of the year, despite market turbulence, you would be pocketing a handsome 80.0% and beyond.

Perhaps now is the time to seriously consider CGB, or CGB-WA?