There is a widespread rumour that the Bank has been pressuring Dayang to reduce the debt of Dayang’s subsidiary Perdana. Many people expected the company to announce the right issues on last Friday 12 April. That is why the price has been dropping quite severely as you can see from the chart below.
Now the rumour is that the company will announce the right issues at the end of the month. But the price has not been dropping. In fact, it has been going higher in the last few days. This means that most clever investors are fully aware and are prepared for the right issue announcement.
However, in most cases, when a company calls for right issues to raise funds to reduce its debt, its share price will drop because investors will know that the company has too much debt and some shareholders have to sell to raise money to buy the right issues.
But, Dayang is different from the other cases. It has been reporting very good profit in the last few quarters and it has very good cash flow. From my experience good cash flow do magic for the company. With good cash flow, the company can easily pare down debt and can expand its business operation.
If I were an executive director of Dayang, I could convince the Bank not to insist the company to call for right issues because of the company has very good cash flow. The Bank must know that good cash flow can easily pare down debt and sooner or later the problem will be resolved.
Based on what I mentioned above, the Bank should not insist Dayang to call for right issues.
It looks like all the clever investors have discounted this rumour of the right issues. That is why the price has been going higher.
The following is an excerpt from Mr Ooi Teik Bee’s circular letter to all his subscribers.
Good prospect of Dayang
Remember readers should know that I wrote this for your benefit and whether you buy or sell will not affect the share price because the daily volume is tens of million shares.
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