- 700,000 shares on October 12; and
- 1,871,400 shares on October 14.
In the process, Dato' Teh Eong Liang has ceased to be a substantial shareholder of ENG. His shareholdings stood at 4.528 million shares as at October 21 (here). For details of the selling, go here & here.
Dato' Teh Eong Liang is the brother to ENG's CEO Dato' Teh Yong Khoon and the son of ENG's Chairperson, Datin Low Yeow Siang. There is a proposal to privatize ENG at a price of RM2.50 a share from TYK Capital, a company controlled by Datuk Teh Yong Khoon and Datin Low Yeow Siang (combined 95% interest), with the remaining shares held by Advance Capital (go here). While Dato' Teh Eong Liang is closely related to the Chairperson & the CEO, he is not a party to TYK Capital. This may be a significant point- he is not a party to the privatization exercise. Why?
Nevertheless, Dato' Teh Eong Liang's action of selling off his shares in ENG prior to October 15 - when the share was trading between RM1.80-2.10 - suggests that he believed the deal was likely to be either aborted or substantially adjusted. If he was willing to sell his shares at RM1.80, then he must feel that the deal, even if it is not aborted, would entail an adjustment in price. Assuming that he is willing to accept a price for immediate sale of 10% lower than the final privatization price, then the final price in Dato' Teh Eong Liang's estimation could be RM2.00. On the other hand, if Dato' Teh Eong Liang felt that the deal could be aborted, he must have felt that RM1.80 was a good price since ENG share price did not drop much in the recent selldown because of the backstop presented by the privatization proposal. Dato' Teh Eong Liang has also notified the company of his intention to deal with the share during close period. Could he be selling more shares? Or, is he intending to buy back his shares at lower prices? Only time will tell.
Chart 1: ENG's daily chart as at Oct 24, 2011_11.00am (Source: Quickcharts)
No matter how one looks at this news, the implication is negative. However, if you look at the longer term chart for ENG, I believe you would agree that the share price has probably priced in all the negative development, including the possibility of the privatization deal being aborted & the losses & damages from the flood. When a stock has priced in all the negatives, then the only way forward is likely to be up (after a long spill). I believe the appropriate rating for ENG is HOLD.
Chart 2: ENG's daily chart as at Oct 20, 2011 (Source: Tradesignum)
9 comments:
hi alex,
thanks for your sharing. bought eng at 2.15, what is your opinion? buy to average down and hold or sell?
thanks
maxwealth88
Hi alex,
Is Eng has a good FA from ur point of view?
I am thinking to sell GENM, what price u think is the best ?
TQ
Hi Alex
Although management guided that Thailand operation contribute about 40% of its revenue, follow by Msia 32%; HK 19% and Philippine 9%, but its Principal market for the product are mainly for customer based in Thailand 75.2%, follow by USA; 14.2%, Philippine 4% and Singapore 5.6%. This imply that flood in Thailand could adversely impact not only for its Thailand plant but also others as most of these semi-finish product have to export back to Thailand for its major customer (WD. Seagate etc) that themselves also have to shutdown operation.
Hi hng
Yes, it is quite serious. That's reflected in its announcement dated Oct 18 where the management said that they were unable to say whether the company would make a profit for FY2011. When you have chalked up a net profit of RM10 million for first half & we made a statement like that, we should know it is serious.
We must bear in mind that the privatization offer was made in July when the stock market has peaked. When you made an offer at 15-20% above the market price after the market has peaked, that says something about the company's prospect [which must have been fairly good]. It means that the company was doing quite well in early July and I think the results for QE30/9/2011 would still be quite respectable too. The problem happened only in October & it would only impact teh results for QE31/12/2011.
We can only guess how bad it is or will be and in the absence of information, we normally fear the worst. As such, we tend to price in everything & overfactor the downside too. I won't be surprised if it is not as bad as what everyone thinks.
Hi Andy Lau
Based on the Balance Sheet as at 30/6/2011, the company has a current ratio stood at 2 times; a gearing ratio at 0.2 times; and net cash per share of 20 sen.
Based on its low gearing, the company can easily gear up to restart its operation while waiting for the insurance claim to come in.
Overall, it is financially strong.
Hi MaxWealth88
No one can be sure how bad the situation on the ground. As I said in another comment, we normally fear the worst in such situation. As such, we tend to price in everything & overfactor the downside too. I won't be surprised if it is not as bad as what everyone thinks.
hi alex..may i know when will we know the exact decision by the management to take private or abort..waiting like this to me is not a good idea since market is so volatile nowadays..thanks for your comment!
Hi Ong
I expect the decision of whether the shareholders will go ahead with the privatization or otherwise within the next 2-3 weeks. It is possible that the decision may take as long as 1 month because the major shareholders are waiting for the bankers' decision on the funding of the buyout but as things stand today, the deal looks dead in the water. Sorry for the pun.
Just bought at RM1.60
If privatise at RM2.00 quick gain is 24% within next few months, not a bad deal.
If not, since the balance sheet and business model are good. Just to keep longer a bit.
Post a Comment