Hi to all fellow investors and traders !

Today I would like to highlight the following counter:

DOLOMITE CORPORATION BERHAD or DOLMITE (Code 5835, Main Market, Industrial Products & Services)

DOLMITE - WORST IS OVER !!! THIS STOCK MAY POST A BETTER NOV 2019 RESULT !!!

Here are my thoughts :

1. Summary of Quarter Result, Disposal of Quarry Unit Has Not Been Fully Recorded in the Result

On 3rd June 2019, DOLMITE had announced disposal of its quarry unit to SUNWAY for RM 125 million. The price had then spiked from a low of 12c to a high of 28c on the following day.

https://www.thestar.com.my/business/business-news/2019/06/04/quick-take-dolomite-jumps-175pc-on-disposal-of-quarry-unit-to-sunway/

Based on the news article, it was mentioned that this unit is loss making therefore making it a very favourable disposal for DOLMITE. They also mentioned that the disposal would be estimated to be completed in 3rd quarter 2019 (currently we are already in the 4th quarter 2019).

Below the summary of latest 3 years QR. As we can see, the disposal was announced in June 2019, and the in the following QR AUGUST 2019, DOLMITE had recorded a bad quarter result. 

We have yet to see the value of the unit disposal in the result, therefore it might be appearing in the upcoming quarter result November 2019, or later in February 2020 results.

2. Balance Payment of the Unit Disposal (RM 112.63 million) to Be Made Very Soon Upon Completion of the SSA

Refer below terms between DOLMITE & SUNWAY in the SSA:

SUNWAY had paid the first payment of RM 12.369 million to DOLMITE upon signing of the SSA in June 2019. 

As the original plan was to complete the SSA by 3rd quarter 2019, now DOLMITE is a bit behind schedule. However, I believe they will do their best to expedite the completion of SSA very soon, and upon completion to receive the balance of RM 112.63 million payment from SUNWAY. This payment would really be a big relief for DOLMITE to pay dues outstanding and possible also declare a SPECIAL DIVIDEND to investors, if they deem necessary.

3. TA Analysis - OVERSOLD - With A Hammer Forming On The Lower BB Line - Indicating Limited Downside Potential, and Big Upside Potential

Refer below WEEKLY chart of DOLMITE from APRIL until NOVEMBER 2019 to date.

A few observations below:

i) Price had tested the EMA365 level at 26c upon the announcement of the news, and again in July 2019. Since then the price has trended downwards

ii) Recently, price had dropped to below the Lower BB level of 12c, to hit a low of 10c. However, we saw that buyers had rejected lower prices on the same week, so the HAMMER CANDLE had been formed at the lower BB end

iii) The above, together with the not-so-significant VOLUME selling, indicates to me that selling might be overdone, and buyers are now supporting this counter at this bargain price. Downside is quite limited at this time, whilst upside potential is huge depending on the developments of the latest corporate exercises

iv) Should momentum be able to enter this stock, I believe the price should first test EMA60 at 15.5 to confirm that a reversal of trend is happening. A further breakout above mid BB level of 17c, would indicate strong BULLISH MOMENTUM and the stock might test its higher BB levels again around 22c

CONCLUSION

Based on my opinion, I believe DOLMITE should be reporting better quarter results ahead, based on below:

i. Gain of Quarry Unit Disposal Yet to Be Fully Captured in the QR

ii. Balance Payment from the SSA with SUNWAY to Be Made Very Soon Upon Completion of the SSA Conditions

iii. Chart Shows Buyers Rejecting Lower Prices With Formation of HAMMER at Bottom of BB Range

Thanks for reading and see you in the next post.

THE ABOVE IS NOT A BUYCALL AND ONLY A PERSONAL OPINION ARTICLE AS A SHARING TO BSKL COMMUNITY MEMBERS.

Yours Truly,

INVESTHOR