GPacket broke above its medium-term downtrend line at RM0.80 in October (see Chart 1 below). This breakout completed the bottoming phase that began in December 2008 after GPacket broke above its long-term downtrend line at RM0.65 (see Chart 2 below). After the December 2008 breakout, GPacket's share price did not rally- probably due to poor market sentiment & expected losses as it rolled out its WIMAX wireless broadband network.
Chart 1: GPacket's daily chart as at Nov 5, 2009 (Source: Quickcharts)
Chart 2: GPacket's weekly chart as at Nov 5, 2009 (Source: Quickcharts)
Financial Results
From Table 1 below, we can see that GPacket has incurred significant losses for the past 6 quarters as it rolled out its WIMAX network. To continue to finance its capex requirement, GPacket has just completed a Rights Issue of 208 million shares at RM0.20 each (with 208 million free warrants)- raising RM42 million. From Table 2 below, we can see that the revenue generated from the WIMAX broadband services & solution is about RM38.3 million for QE30/6/2009. Assuming that each subscriber pays a monthly fee of RM80 (see the various packages offered), then GPacket may have built up a base of 160k from only 11k at the beginning of the year. If GPacket can maintain this rate of customers acquisition (averaging 25k per month), it might have a customer base of 310k at the end of the year. At a monthly fee of RM80, a base of 310k subscribers would generate a revenue of about RM300 million per annum (see this interesting announcement in Bursa). Can GPacket do it? Looking at the slowdown in TM's Streamyx customer acquisition of 19k per month [its base stood at 1.333 million in May this year as compared to 1.067 million as at end-March 2008 (here)] & the case for mobile broadband, I believe GPacket stands a good shot at achieving its target revenue of RM300 million next year.
Table 1: GPacket's 8 quarterly results
Table 2: GPacket's 8 quarterly segmental results
Comment/Conclusion
While GPacket's financial performance is bad, it may be able to turnaround next year. GPacket has the advantage being the first mover in this new technology. With a bullish technical outlook, GPacket may still have more upside. Nevertheless, one must be careful since the stock has risen very substantially. Let it pullback a bit before going in. A good level to consider is RM1.20-30. Bear in mind that this is a high risk trade no matter how we cut & dice it.
7 comments:
Hi Alex,
Can you coment about Ramunia n MRCB? is that good to buy it now or what is good price to go in?
TX.
Will speculators end up like the advert "Cut already"?
I am still puzzle how the Bursa issues UMA. Stock like this goes up more than 100% then the UMA comes out. Some stock one day quick rise also kena queried. Need some transparency here. From your experience, what do you think Alex?
BTW, what is your thought on Sime?
Hi Teh,
MRCB is being sold down because of the proposed Rights Issue of about RM566 million (announced today). Technically speaking, MRCB is now at its medium-term uptrend line support at RM1.30-32. I expect this support to hold & MRCB to rebound. It could be a trading BUY.
I have no comment on Ramunia as I did not follow the stock for a quite while.
Hi Solomon,
I have nothing against UMA. The authority has the duty & responsibility to protect the players in the market. I do not think a UMA request can cause a rally to stop. I do not know how the authority carry out this function.
On Sime, I think there may be some positive development in the pipeline for the stock. If a sale of a 10%-stake to a Chinese party (or, Chinese SWF) can take place, the stock may be viewed as a Wilmar in the making. I think it is safe buy at the present level. In addition, you can also try Sime-CF and Sime-CG which are trading at either no premium or a premium of 1.8%, respectively.
hi Alex,
Pls comment & advice on Talam-PB?
It's a RCPS at $0.2 par value. What is the cons to buy this PS instead of the mother share?
If talam force redemption & convert it into mother share, as there is gap, we still win? There is also 6% dividen for the RCPS if they don't. So why not?
Hi Teh,
I have not gone through the Talam restructuring scheme. It is applying for upliftment from PN17, which means that it should have completed the scheme.
Talam-PB is convertible to Talam on a 1-to-1 basis. As proposed, Talam-PB is a zero dividend 5-year redeemable convertible preference share. I think there is no difference between Talam-PB and the ordinary Talam share.
Hello Alex, pls share your view on Gpacket latest position as i recently invested heavily in this counter @ RM1-22. Shall I buy further @ lower price say @ RM1-00 to average down the price? What will happen on this forthcoming black Monday stock mart (Dubai World havoc)? Pls advise. TQ.
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