Jerneh
Jerneh has risen from a low of RM0.80 to the RM3.00 over the past one year. The big jump happened after the company announced that it was negotiating to dispose off its insurance subsidiary. The stock is now trading at the high recorded in 2000. I have commented before that if Jerneh managed to dispose of its 80%-stake in Jerneh Insurance Bhd (JIB) for 1.5 times net asset, it would book in an extraordinary gain of RM94 million. In addition, it would have converted a Non-current Assets to cash, which amount to RM283 million. Does an extraordinary gain of about RM0.52 per share (arrived at by dividing the extraordinary gain of RM94 million by outstanding shares of 180.7 million) justify a rise in share price of about RM1.50-1.80 since October 2009? If the traders & investors' enthusiasm for the stock were to slacken, what do you think of the chances of the stock breaking above the strong resistance of RM3.00? Conversely, would you think it is more likely that they would choose to play it safe & cash in their chips? For my initial post & follow-up post, go here & here.
Chart 1: Jerneh's monthly chart as at April 30, 2010 (Source: Tradesignum)
KSeng
We have noted that the Edge newsletter had published an article entitled "Time for Keck Seng's value to emerge" in March this year. This article highlighted KSeng's revised NAV per share of RM17.10 provided the company revalued its entire landbank, properties & equity investment. Despite being a rehashed of an old story, the market took to this piece of 'analysis' with gusto. The share price rose RM2.00 to RM6.00- an all-time high. Unless the shareholders/management intend to quickly realize the hidden value of the company's assets, either by an attractive privatization offer or to dispose or develop the land on a fast track basis, investors' enthusiasm for the stock would slowly wane & with it, the high price commanded by the stock. Maybe something similar happened in 1996, the last time this stock made its then all-time high. Who knows!
For my earlier posts on this stock, go here, here & here.
Chart 2: KSeng's monthly chart as at April 30, 2010 (Source: Tradesignum)
Conclusion
Based on the above, it may be advisable to take some profit on these two stocks.
12 comments:
Dear Alex,
I bought Talam at 0.16 and Melewar at 0.785 after the post. Will I have the chance to sell on little profit?
Thank you.
Hi kit,
Sorry about your stocks, Talam and Melewar. It looks like a nasty correction has descended upon the market. We have seen it before. Would it be different this time? With US market swinging wildly; Europe in turmoil; and Chinese market running around like a chicken without a head- who knows! Maybe the anticipated bearish reversal have finally arrived. I hope not...
Glove stocks is about time for profit taking?
If Jerneh sells JIB at 1.5 times of book value, it will get RM 1.96 per Jerneh share.
I am of the opinion that looking at sales proceeds better reflect the true picture why they stock is trading near RM 3 now than looking at the gain per share.
Besides, the is possibility that JIB could be sold at 1.8-2.0 times of its book value.
Moreover, after selling JIB, Jerneh will still have net asset per share of RM 1.94
I don't think Jerneh is a 'goreng' stock. There could be valid reason why the share price is at current level...
Dear Alex,
how about SCOMI? the price keep on correction lately. will it drop back below 0.3x? buy low sell high for next coming Quater?
Hi cheer,
I think some taking profit on rubber glove stocks is a good idea. The technical outlook for many has not turned bearish yet, with uptrend still intact. However, if we were to use the 50-day SMA (DMA) line as a threshold, then Latex & Topglov have crossed that line. We have to wait & see whether a recovery would come quickly for these 2 stocks.
Stock...50 DMA...[Closing Price]
-Kossan..RM7.67...(RM7.90)
-Supermx.RM6.56...(RM6.68)
-Harta...RM7.76...(RM7.77)
-Topglov.RM12.72..(RM12.42)*
-Latexx..RM3.92...(RM3.74)*
Hi,
Running like chicken without head hahaha...very funny. Anyway thanks!
Hi Ooi Beng Hooi,
Your statement "If Jerneh sells JIB at 1.5 times of book value, it will get RM 1.96 per Jerneh share" is not clear. Take a simpler example of someone offering to buy your house at RM700k, which you initially purchased at RM500k. Your profit is RM200k, while your cash receipt is RM700k (assuming no outstanding loan). In the case of Jerneh, the profit is about RM94 million even though the cash proceed is about RM283 million. How much has the value of Jerneh increased? To me, it should be RM94 million or RM0.52 per share.
I agree that Jerneh is unlikely to be a manipulated stock. However, a stock need not be manipulated to go to be overvalued. I think Jerneh is in overvalued territory.
Hi Mr.Ling,
SCOMI failed to break above the long-term downtrend line at RM0.55. That downtrend line stretches back to July 2007. It will slide back to the psychological RM0.40 level & possibly to the support at RM0.36-37 of the medium-term downtrend line that stretches back to October 2008.
Jerneh will get about RM2 per share after selling JIB at 1.5 times of JIB's book value.
Some investors are buying Jerneh with expectation that Jerneh will distribute the (entire) sales proceeds to shareholders.
When I post a blog on this, Jerneh share price was at RM 1.79. If the disposal goes through and entire sales proceeds is distributed to shareholders, investors basically get the remaining assets in Jerneh, about RM 2, for FREE!
So my humble opinion is that investors are looking at the RM 2 repayment rather than RM 0.52 gain.
Dear Alex,
One of the major Scomi Share holder from France is disposing theirs in the open market.
So it may drift down to the low support @ RM0.360 aggrevated by the recent poor market situation.
Thanks for your feedback
Dear Alex,
On Jerneh, I fully agree with your view to pocket the profit immediately before it crashes back to its 'real' and 'fair' value??
The market is not too kind to investors like us, be cautious on trading!!
Thanks.
Post a Comment