On 2nd November AYS placed out 38 million shares at 76 sen to big investors who are familiar with the company operation and its profit growth potential. No investor would buy 38 million AYS shares unless he knows the company’s business and its profit growth prospect. AYS Venture received Rm 28.9 million cash.
On the first day of the Budget 2022 announcement Rm 33 billion was wiped from the market capitalisation. Almost all the listed shares plunged. AYS plunged to 68 sen per share. As a result, there are many forced selling to meet margin calls.
AYS is a steel trader:
Steel price does not affect AYS because AYS is a steel trader. It will only buy steel from the cheapest steel manufacturer to sell the get better profit.
AYS latest quarter EPS 8.5 sen and its previous quarter EPS was 4.45 sen, an increase of about 100%. Even during the Covid 19 MCO lockdown, AYS could make so much of profit. Currently there is no more MCO lockdown, AYS should be able to make more profit in the next quarter ending Sept. which should be announced before the end of this month.
Assuming its profit remains unchanged, its annual profit should be 4 X 8.5 sen = 34 sen. Currently it is selling at 72 sen. The PE is 72 sen divided by 34 sen = 2. Ridiculously cheap.
How is the share placement price fixed? According to Security Commission rule, the placement price should not be less than the average price in the last 5 trading days with a maximum discount of not more than 10%.
AYS Venture should buy back its own shares.
Since the company has Rm 28.9 million cash from the share placement, it should buy back its own shares at cheaper prices to make more profit. These bought back shares can be sold at higher prices when there is no more forced selling to make additional profit or kept for distribution as dividend to shareholders.
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