http://mobile.bloomberg.com/news/2014-12-08/hedge-funds-betting-that-opec-led-oil-rout-is-near-end.html

Oil price drop 4% funnily for the good reason. It drops because hedge funds increase its bet the oil price has found its bottom. Now we have believers that oil price has bottomed yet market are concern. What a fickle world. You can read more on Bloomberg news.

If one sit down and think slightly longer term, then you'll realized that the weakness in share price is due to weak crude oil price. But has the fundamental of the company change? To me, it has not. They are basically not just an O&G contractor. Muhibbah is a diversified company with concession in Cambodia, shipyard, holdings company for Favelle Favco and of course experienced contractors which has exposure in marine engineering, O&G related project and infrastructure. So Muhibbah cannot be solely link to O&G. That said, if that is market perception, one fail to realized that the project they are confident securing are investment that has been approved by Petronas and classified as top priority because it brings values to the country like jobs and moving into higher chain. CAPEX which Petronas will reduce are like foreign investment like their Canadian's investment and etc. All local projects will continue because it's good for the country.

Just don't jump into bandwagon of selling. That's my 2 cent.

Muhibbah was awarded contract by Westport. Check Bursa's announcement.

The chart for Muhibbah is showing bullish Harami. It is a reversal sign and I'm not surprise the share price will re-rate back to RM2.25 easily in the immediate term. Of all the O&G counter only selected few like Muhibbah managed to regain back some losses. It's a clear sign of oversold.

That's my 2 cent.

I'm sure skybursa is a shareholders for Daya or someone who is very passionate about O&G based on his previous posting. I don't see how and why shareholders who will eventually subscribe/pay for the rights willing to dump the share all the way to RM0.10. You are paying for rights then you dump the share. What is the logic?

That said, any weakness in share price for Daya (if any) is not a surprise? Why? Because investors would cash out from mother share and buy the warrant to benefit from the leverage effect. Warrants are leveraging tools, so if investors believe in the fundamental of the company, especially in the long run should hold warrants. For Daya case, it is especially true because, to me, Daya fundamental is strong and share price at its trough. So imagine how much one can make if the mother's share price re-rate?

I'm curious what's skybursa's justification though.

Well crude oil just slide down even more because OPEC refuse to cut supply. But the beauty of Daya is it is not subject to oil price. The reason for it was because they have secured 7 years contract for SD1 and SD2 and the chartered rate are mainly agreed with inflation rate adjustment annually. That said sentiment for all the O&G maybe affected. But it's an opportunity to collect if you have extra cash.

I don't think Daya will be affected much cause it has not recover at all from the previous sell down. But who knows? Too tired for Part 2, I shall reserve it to tomorrow or Sunday. Happy trading.

I got a lot of PM after my write up yesterday so I am going to break them into two parts. Hopefully it will help.

1. winwinwin88 If you read the circular it was said it will be completed by 1Q2015. But I strongly believe it will be done early 1Q2015 because the vendor of the vessels would want to be paid ASAP.

2. There is minor errata on my earlier posting. I mentioned the saving which will flow down to net profit is RM20mil. But what I forgot to write down it is RM20mil per vessel. So total saving is RM40mil which will flow down as pure profit to the company every year. I didn't create the figure but that figure was given in the circular which is available on the Bursa website on 17 November 2014. Open the PDF file and refer to page 4 and you will see the calculation and basis.

--- I am thankful for the reader that reminded me of the errata because this "saving" itself already represent 2x ( double) the earnings of 2012 which is RM20mil and 2013 which is RM19mil (after added back the 15mil losses from subsea due to mismanagement). All these earnings are prior to the saving from acquiring the vessel. We are talking about saving of RM40mil after acquiring the vessel before talking about contribution from technical services and O&G. So if you are to assume normalised earnings of RM20mil for 2015, then the saving from acquiring the vessel will bump the earnings to RM60mil for 2015. That is a huge jump of earnings from previous year.

The risk however is Daya's execution in their subsea business segment. If they do well, then RM60mil is achievable in my opinion. But we all know the upside prospect is there...to believe or not is up to investors appetite. I like to believe market are not giving them the benefit of doubt judging from the share price. But that's the beauty of this... Buying a good company cheap when people hated them.

I will post the second part on why I think the share price will move up based on the structure of the corporate exercise. Since there are readers that request, I will try my best to answer. Again all these are available in the announcement via circular. All these numbers are not created by me.

The share price will go up as it gets closer to the completion of the proposed fund raising. It is just a matter of time. It is very unfortunate the share price is at current level just because MIS-management of the investors expectation 2 quarters ago. It just show market can be very unforgiving. But that said, it was the thing on the past and Daya has managed to recover from that unfortunate event. Moving forwards, things are looking brighter for Daya.

The reasons are simple:-
1. The company is moving into higher margin O&G business supported by its existing business. While the number has not shown yet (but improving) one can be sure the numbers will come in the future because the past quarters involved the setup cost of the subsea business. But this is one off expense. Contribution of O&G will definitely improved.

2. The proposed corporate exercise is to reduce the OPEX of the subsea business simply by acquiring the vessel rather than paying the lease. Therefore, the margin will definitely improved once they acquired the ship. The saving is around RM20mil/year.

3. If you read all the analysts reports one will come across the concern of dilution from the corporate exercise. It is sad to say the analysts didn't do their homework properly. Why? Simple. If you extrapolate current earnings and use it as a guide for future earnings, definitely there will be dilution on EPS. But that is a wrong method. The right way is omit/add back the one off setup cost for the subsea business and assume saving from the acquisition of the vessels. It will substantially normalised the earnings due to lack of one off expense and margin expansion from reducing OPEX. Then Daya will be trading at mid-high single digit PER valuation. And it's cheap!

4. If you look at 9M2014 result you will notice YTD, O&G and Technical Services managed to record RM236mil and RM230mil revenue respectively. However, profit contribution for O&G is only RM6.2mil whereas technical services is RM21mil. Now does it make sense why Daya wants to enter this business so much (doing corporate exercise and all) but profit contribution is so low,ie, low margin? No, it doesn't make sense. The culprit is because of the one off set up cost. The margin for O&G should be higher than technical services. So I'm not surprise normalised O&G profit contribution is more than RM25mil a year (before acquiring the vessels). So there is a lot of earnings surprises in the future in my opinion.

Lastly, if Daya needs to raise money from the market to acquire the vessels, do you think it make sense for Daya to raise money when the share price is at the trough? No way... Because it is silly. That's the reason why whenever there is a share placement or cash call from rights issue, you will see the "invisible hand" pushing the share price up before the corporate exercise. And it will go up for few days because the calculation of Theoretical ex-rights price is based 5 days VWAP. No company will wants to issue rights share at low price because that equals more shares issued=dilution.

So I'm not surprise in these few days Daya share price will moves up not because of the invisible hands but also because the prospect of the company has improved. The past 2 quarters have already shown and it is only at the tips of the iceberg of what are coming. Secondly, they will announce what's the subscription price of the rights share soon. In the short term, share price may go up to RM0.28-0.30. But in long term, in a year time it may doubled from current price of RM0.22.

That's my 2 cent.

yap1983 You'll notice a doji in the chart. Decisive moment is now, if it breaks the RM3.30 then it will continue its previous uptrend before GIC exit the company. As I mentioned before GIC exiting the company is actually a bliss and not curse. Once people digest the reason why, then the stock will resume its uptrend.

I heard upcoming result is going to be good. In fact, Sunway requested GIC to exit before the announcement of the result so that it won't affect the share price of the company after the announcement. Will add more..

Its worth to note that, while GIC has left Sunway... EPF and Amanahraya emerge as new substantial shareholders. IMHO, GIC left Sunway is a good thing. At least, there is no longer concern of when GIC was going to realized the value. To me, GIC's stake was an overhang concern since they started selling in 2013. Now GIC is gone, we have two long term shareholders i.e. EPF and Amanahraya. At least, I know they are going to stay for years and potentially add more by buying more from the market. So what have change to the fundamental of Sunway compare to when GIC was the substantial shareholder to EPF and Amanahraya as substantial shareholders? Nothing. The fundamental of the company has no changed. So any reason for the share price to drop more than 8% in 5 days? I think no... so I am not surprise the share price will re-rate to where it was one week ago.

With the listing of Sunway Construction and potentially raised up to USD200million for roughly 35% stake, we can roughly guess the Sunway Construction stocks will worth RM1.8-2.0billion and the market cap for Sunway now is approximately RM4.0billion. One can guess, Sunway is undervalued. Stripping out the construction from Sunway Bhd, they still have Property Division, Sunway REIT, Building Material and etc which remains under Sunway Bhd. All are extremely profitable with good earnings visibility. Is it possible for all these stables to worth only RM2.0bil after stripping of Sunway Construction? I don't think so... Don't forget... there will be "generous" dividend for the current Sunway Bhd shareholders coupled with Sunway Cons. shares + warrants. To me, this is an immediate catalyst. The listing of Sunway Construction not only will help Sunway Bhd to realized the value of Sunway Construction but also Sunway Bhd. Markets will soon see how deep undervalue is Sunway Bhd after the listing Sunway Construction.

Cheers.


KUALA LUMPUR (Nov 7): Two government-linked investment funds, Employee Provident Fund (EPF) and AmanahRaya Trustee Bhd, emerged as substantial shareholders in Sunway Bhd ( Financial Dashboard).

In the latest filings to Bursa Malaysia, AmanahRaya Trustee had bought 86.44 million shares or 5.02% equity stake in Sunway on Nov 5. Also, EPF had acquired additional 24.87 million shares or 1.39% equity stake. The latest share purchase has raised the provident fund’s equity interest to 5.65% in Sunway.

The two share purchases took place on the same day, when Singaporean government’s investment arm, GIC Pte Ltd, sold its 150.67 million shares on Nov 5, according to the filings to the stock exchange.

The disposal of shares by GIC was done through direct business transaction, according to Sunway.

Sunway share price closed at RM3.18, down 0.1 sen with 3.97 million shares done. It has a market capitalization of RM5.47 billion, based on today's closing price.

always_steady The announcement of suspension is not requested by the company. Probably by the exchange. Doesn't mean it's a bad thing but just beware. And don't expect material announcement, that's for sure.

Buyer beware. The announcement is not requested by the company.

Moxmerox. Not the stock didn't moves but rather it is a period of weeding out the weak players. Obviously those that sell didn't expect this announcement. And when the rumours was out, it went as high as 1.90. And my source tell me there will be another new coverage for this stock from a big brokerage house. This will be the third new coverage this 3 weeks after JPM and Maybank. Not to mention, it "may" comes with the highest TP. Have you ever wonder why?

Rumors only someone is already willing to pay up to RM1.90, and when the rumors became reality, what will be the price? I'm confident it will hit RM2.10 in the immediate term before charting new high. This new contract itself is already 50% of Icon's current orderbook of RM600mil... I.e. This is a sizeable new contract for a Icon!

Why is everyone focusing on the company's vessel acquisition? The biggest story is in the The Edge Weekly this week. It was said, Icon has secured RM270mil contract in Brunei. So where do you think this AWB that they acquire go to? The acquisition is the prelude to this RM270mil contract. This contract adds 50% to their existing order book which is around RM600mil.

Best of all, A research house is going to release report with a higher target price. I'm not surprise this counter will fly to RM2.10 and still below the house' target price.

Do you know about Sunway @cckpr?
1. When there is small free float, then it warrant more play. That said, I don't think Sunway has small free float.
2. Sunway is not a dividend play in the first place.

bigturtle2010,

Of course pricing of warrants include time value!

But that is not the only way to value warrant. You have to consider the implied volatility and the premium. Valuing a warrants just like valuing any asset. How you priced it, would be different from how I priced it. At premium of 50% and implied volatility of 60% is expensive for me but it may not for you.

Hope you understand.

I find it quite baffling why people are over concern on the directors selling the warrants. Think about it:-

1. Since listing the total warrants traded is already 880mil vs 351mil outstanding warrants. Which also means it has turnover close to 3x and people are holding at higher cost for the warrant. I did a calculation, the VWAP is RM0.13 for the 880mil.

2. Conversion price is RM0.33 and VWAP is RM0.13. It simply means for those new holders of warrants, their warrants will only be "at" the money if mother share traded at RM0.46.

3. At current warrants price, trading at over 50% premium, any directors or original shareholders who get the warrants for free will sell at the market. They can make money from the warrants which they get for free (0 cost) and no need to fork out RM0.33 to convert to mother share. Would you sell?

4. The irony is this, assuming all the directors dispose all the warrants they are holding. It simply means there are buyers who willing to pay for the warrants. And we eliminate one concern, i.e. conversion of warrants which will dilute the EPS. No one will convert, if their cost is higher, back to point 2's argument.

My conclusion is this:-

1. Directors selling warrants make sense since warrants is too expensive. Its their reward, remember?
2. If directors and original shareholders who inherit sold all warrants, current warrants holder are holding at higher cost. Then no risk to EPS dilution, which is good for mother share right?
3. No one should take directors selling as a weak sign to mother share's price. Would you want to fork out RM0.33 sen to convert to mother share when warrants are attractively price now? Just sell the warrants la....
4. The more warrants is sold, the better it is for the mother share. Again no risk of dilution to EPS until the mother share re-rate higher.. at current price it should trade at RM0.46, then only the warrant is "at" the money.

Taking into account since 28th October, already 75.5% of the free float are trading on average of 0.325. And it is pretty obvious today, people are locking in the profit because they don't want to take a chance of not able to sell at RM0.35.

However, on the brighter side, when there is a seller there would be a buyer. In another words, cost will be driven higher from 0.32 closer to 0.340/0.345. Let the bull and bear fight and if the bull prevail, chances are, we are going to see it touching RM0.40.

In my opinion, bull will prevail today...

The removal of the auditor is due to the earlier auditor is no longer register with Audit Oversight Board (AOB). Any auditor that wants to be auditor for public listed company has to be registered under AOB. Since they are no longer registered with AOB, they are not qualified to audit Instacom, a public listed company.

Directors may have the advantage of insider information. But they do not have the insight when the share price will move or where it will move? If you asked any of them they will say their company is undervalued. But, if they need cash, they need to cash out from their holding. That's my opinion.

Why? Imagine there are 4 directors. If there are irregularities do you think only one director will know and start disposing his holding? Even it is the case, do you think the other 3 other directors won't ask? And if they know there are irregularities from Mr.Ngu, don't you think they will start disposing too? So in my opinion, if the 4 directors are selling then we can suspect there are irregularities. It's a red flag.

skng:- Referring to your statement above, I wish to make some correction...

1. Intention to deal can mean both way, dispose or acquire.
2. And since your concern is such that Ms. Anne may sell based on public spread... Then I think the right way is to define what is "public spread". Referring to definition below...

"Public investors are defined as investors with less than 5% shareholding and not related to directors of the company. The 25% public spread must also meet the minimum requirement of 1,000 public shareholders holding no few than 100 shares."

If you read the 2012 annual report (page 77) even before the ED selling:-

1. The public spread is 34.64%. There are 4 directors that are holding around 65.36%.
2. There 4,572 that are holding no less than 100 shares.

The company has long met the listing requirement!

Oskfans: It means nothing with that announcement. If it is a disposal or acquire, it will be stated in the announcement.

Newbie Learning: TP also means nothing. TP is a moving target and it is not a fixed target. What I mean is, different people has different TP depending on how they value the company. If TP is reached then depending on the fundamental, it may revise down or up. That's why TP is not an end by itself.

zaki: Yeah, provided it stays above RM0.30. There are a lot of seller at RM0.33. Depending the bear (seller @ RM0.33) or the bull (buyer @ RM0.33) is stronger, it will steer the next direction for this counter. If RM0.33 bear is being taken up, then we can expect it to go all the way to RM0.35, before consolidation and moving to RM0.38-0.40. That's my view...

pputeh: There is no calculation for the warrant. But the logic is this:-

Conversion price is RM0.33. So if mother share is RM0.33, then there won't be leverage play for the warrant already. Meaning, the warrant will move in same % as the mother share. So, at RM0.33 I would rather buy mother share than the warrants.

Technically, this stock should close the gap, meaning the stock has the chance to go up to RM0.38 if RM0.33 is taken up. Fundamentally, Instacom has better quarters than OCK. Their margin is also double of OCK. But in term of P/E valuation, they are trading at 8.0x vs. 15.0x of OCK. I don't know why such a big gap, but the gap should narrow if not match.

If you are short term, take technical and aim for RM0.38-RM0.40.
If you are long term, take fundamental and the RHB's TP of RM0.51 is doable. At RM0.51, Instacom's valuation is 13.0x which is not too excessive compare to OCK's.

I hope it helps.

People are accumulating at RM0.32.... and very fast!

Let's do some math:-

Free float:35% x 700mil = 245mil
Volume (since 28 Oct) = 91.1 mil (excluding today)
Closing price range (28-31 Oct) = RM0.31 - RM0.315

This about it! Total free float is 245mil shares. Volume up to 31 Oct is 91.1mil. The closing price is range is between 0.31-0.315. What does it say?

It simply means, people are accumulating and after today 1/2 of the free float shares that people are holding is at higher cost (between 0.31-0.315). If you are those people that hold that share? Would you sell at 0.31/0.315? No... because we get into market to make profit, not to breakeven.

If volume from 28th October exceeded 245mil units (free float), then it is pretty telling, everyone is holding at higher cost and chances are new entrance has to pay higher than 0.31/0.315 to get the share.

My suggestion is accumulate. Once 0.32 is broken, then Instacom is already on the upward bias. Something is brewing and people are accumulating.