Resilient Support – Something Big Must Be Brewing!

For seasoned investors or traders, “consolidation period” is definitely not a stranger to them. But for new investors, consolidation means the movement of share price being consistent in trading in a tight range, for example:

As you can see, the share price for AGESON BERHAD (“AGES”) is trading in a very tight range of 12.0 cents to 14.0 cents. What exactly is brewing behind the share price of the company?

Our observation on the recent announcement by the company had only resulted in an interesting finding, which would be the potential rights issue of ICULS for the company.

Irredeemable Convertible Unsecured Loan Stocks (“ICULS”) is an interesting convertible derivative used by corporate figures to raise fund. Based on my personal experience, ICULS is MUCH BETTER than conventional method of fund-raising activities, such as bank borrowings, rights issue of common share, bond issuance or even sukuk issuance. The reason being that is because of the seniority of ICULS. Technically, ICULS would ultimately rank the last when it comes to the liquidation of a company – but of course for AGES, it seems like we had no chance to even talk about potential liquidation, given the stellar performance by the company.

Before the proceed further, these are some of the benefits of ICULS fund raising:

• No interest bearings.
• No repayment commitment.
• No fixed dividend payment.
• No ranking seniority which erodes shareholder’s right.
• No immediate dilution in share price.
• Increased interest in company.
• Increased liquidity upon conversion.
• Raised fund before any dilution.

My personal experience on any potential ICPS, RCPS or ICULS issuance is that would result in a driving interest in share price. Company such as NOVA, NIHSIN, SUNWAY, ARBB or even the recent BIOHLDG had shown a upward in share price once the issuance date has been fixed.

Therefore, it is very suspicious to me as to where AGES’s share price has been consolidating since August last year. This looks like a common consolidation phase, in which any breakout in price would immediately form a new powerful uptrend. Is there a risk for AGES’s consolidation phase to break downwards? Yes – but even after the announcement of MCO 3.0 and the latest quarterly result (Great results usually triggers sell on news), the share price of the company remains strong and steady, and well supported above 12.0 cents.

I believe some banker (庄家) is collecting the share, and once the ICULS had a fixed date, AGES’s share price would thrive. Several technical indicators such as OBV, MACD or even RSI is showing a neutral to slight positive signal despite the consolidation. Hence, something big might happen soon on AGES!