Thursday, August 3, 2017

101 - Not So Titanic After All

101 - Not So Titanic
After All



According to orddictionaries.com, there were several definitions of the meaning of TITAN. But one of them is being described as noun A person or thing of very great strength, intellect, or importance.

Most of us would have been impressed if we come across any person or company with the name of Titan being part of it. A scroll over the thousands of companies listed on Bursa Malaysia could only yield one company with such name with the word Titan.

By now if you still have no clue which "Titan" I am referring to, then let me refresh you again. Yes, I am referring to this most popular Titanic stock, Lotte Chemical Titan Holding Berhad (LCT) that is currently sending shivers down the spin of those investors who thought anything below its IPO price of RM6.50 is a bargain buy!

There has been hardly such dramatic actions of such comeback-re listing mega giant stock such as LCT. Right from its pre-IPO exercises that were under-subscribed and instant immediate working round the clock co ordinations between the promoters, corner stone investors and others to ensure a much reduced price IPO of RM6.50 (from RM8 initially) and also at a reduced numbers of shares.

Further hints of how bad things to come was when it traded below its IPO price at its debutant day (although it touched as high as RM6.53 at one stage). and from there the selling pressure was absorbed by Maybank Investment Bank (Maybank IB) buying the LCT shares as part of its exercise to stabilise the share price of the integrated petrochemical firm. (Maybank IB is allowed to buy up to 27.77m shares, equivalent to a 4.8% of the total number of shares offered under the IPO).

But once Maybank IB announced it has ceased its stabilising exercise because it has bought the numbers of shares required, LCT saw its price trending near its RM6 base.

I am quiet convinced many investors were waiting to see how its share price perform by itself (without the Maybank IB's support) and should it stabilised at that RM6 range for sometimes, it seemed quiet a safe entry point to enter.

I admit I was amongst those waiting to look for a safe entry point to enter too.   But then when LCT announced its quarterly results on July 31, 2017, its poor earnings of just 6.58 sen (Quarter on Quarter / Year on Year - 71.88% down), there was only one way the share price would head and i.e. south all the way.

LCT dropped as much as RM1.40 (opened at RM6.10 and closed at RM4.70 on that historical titanic day!) Since then, its share price has been hovering around the RM4 plus range (as low as RM4.14).

Now the whole fiasco of this crumbling LCT stock raised a lot of many questions  of how the episode has been scripted out right from the start. Some pointed out that the promoters were very anxiously to list its shares at whatever cost while the opportunities are there.

And its initially over-priced IPO price of RM8 was indeed very luckily under
-subscribed  for those initial eager investors. But if they thought they had a good bargain at a reduced price of RM6.50, they or anyone else (perhaps other than the promoters themselves who should have privy informations of the progress of LCT of the last few months) didn't expect the coming scripts to be that way.

Few days after its IPO debut, LCT coincided the occasion with its very poor April to June 2017 quarterly results and the rest is history! Since then, LCT has been struggling to stay just above the RM4 mark.

The whole titanic saga has once again raised many doubtful questions of the level of transparency of public listed companies. 

Now if this set of poor results had come out just before its pre-IPO exercise of RM8, do you think the subscription rate would receive any response from anyone especially the corner stone investors? By then, it is a foregone conclusion that LCT will have to reprice its IPO to most probably as low as RM4 per share (to justify this kind of just 6.58 eps).

Or similarly shouldn't LCT practices good governance at least by issuing a pre-statement of how its operation has been affected by a water disruption that caused its plant to shut down for a total of 13 days in April 2017 and caused a decline in production volume of 75,000 tonnes and also higher consumptions costs.

All this has a very serious effect on its share price. Now those retailers or any fund managers who bought from the open market must have felt disgusted and realised why the IPO was urgently listed at RM6.50 once the take up rate for its  earlier initial IPO price of RM8 flopped.

What about the corner stone investors? The fund managers or their investment experts or their research teams must have done a poor job not knowing about this too. If the fund managers themselves didn't know or have any access to this disruption water issue, then the only one who knows is the company themselves. And when you are armed with informations other don't, the advantages are there for those who have.

It is even worse for those retailers who won't even know anything other than what is being written about the prospects of the company. And I am always cautious about these kind of  promoters of any going to be public listed company.

If the promoters don't paint a nice rosy picture ahead, the take up rate will be under-subscribed  and they might lose a client and future business. It is either my survival than your interest.

So beware again of future mega listed public listed companies. Sometimes it is better to invest in those smaller ones that are managed by the founders themselves, companies such as Hup Seng Industrial Berhad where not only the founders are helming the key positions, their immediate relatives are in too and their interests at stake is much more than our meagre numbers of shares invested.

Selling Apollo Food Holdings Berhad shares at RM5.37 on July 18, 2017.

Yours truly decided to sell snack confectionary maker Apollo Food Holdings Berhad at RM5.37 on July 18, 2017.

A regular good dividends stock bought at RM 2.45 on May 24, 2006, the dividends received since that day amounted to RM2,500.00 which is more than my original capital invested.

Normally I do not like to sell such regular paying dividend stock, but the last few quarters of results looked not promising for Apollo. Hence I am worried if such trend continues, it will report lower profits and future dividends will be less. Already it has earned less than for Financial Year 2017 than 2016 which is reflected also in its dividends payout from 30 sen to 25 sen respectively.

But this is my decision and if you are holding Apollo shares, please make your own judgements. Apollo could just prove me wrong later with improving results. At the time of posting, Apollo share price is traded at RM5.18 on August 3, 2017.


2 comments:

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  2. Dear Mr Kassim, please enlighten if there is any other food/ consumer counters worth investing at the moment. Appreciate your comment. Thank you.

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