The stock that I've marked a red flag in 2021 has finally reflected its value, but I believe many investors included those institutional investors  burnt their hands in this stock.

A few notes I would like to mention here regarding to this stock. 

1. The rating of the stock issued by the investment bank sell side equity analyst was irrational

Since the initiate coverage, the investment bank was rating the stock in a very high valuation regardless of the company size and earning quality. Although their argument is tie to the business with one of the largest US company, there is no evidence to affirm who is the true customer, rather than it is just a conjecture. 

Until recently, the investment bank rerated the stock from "buy" to "hold" with almost 50% price target cut. It seems absurd to me as if the price target or valuation of the company to be cut by 50%, the rating should be a "sell" rather than "hold". The result is if the investor follow their advice and continue to hold, then the investor will loss half of their money in this stock today. 

2. The market efficiency and corporate governance for Malaysia stock market is weak

As an emerging market, I don't expect local stock market can be the same efficient as foreign developed market. For certain smaller group of investors, an inefficiency market gives them more advantages, such as insider information to gain higher returns. 

We all know insiders are easier to obtain the sensitive information in the company. When the insider disposed shares before the financial report announcement, it would be signal that its corporate governance is weak. In most of the developed country, it could be easily considered as a crime of insider trading. 

Over these 2.5 years, I observed the stock changed its accounting policy from high receivable to high contract assets, acquired new fixed assets, capital expansion, and many institutional investors became the shareholders. However, I never think about to buy any single share of the stock. 

The total return (rebase on RM 1) since Oct 2021 of the stock is shown in the following. (Source: Yahoo Finance) The stock has loss 70% since its peak. 

SC and Bursa Malaysia wanted to encourage more retail investors to join the stock investing in local market. However, if our local market culture does not improve, it is hard to convince the retail investors to invest. At the same time, with many new platform arise, foreign markets such as US is now became more accessible for retail investors. So how we choose?