Monday, February 20, 2012

Harvest- The Time Has Come...

Since the recent announcement that Naim Indah Corp Bhd ('Nicorp') will be acquiring a controlling 60%-stake in Sagajuta for RM240 million (here), Harvest's days in the sun are numbered. When Harvest first came into the limelight, it was supposed to be Raymond Chan's vehicle for the listing of his group of companies or assets. If it is not THE listed vehicle, it should at least be the MAIN listed vehicle. Instead, Raymond Chan chose to inject his stake in Sagajuta into Nicorp because he could get a better value in exchange. He achieved this by announcing the sale of Sagajuta to Nicorp early (before the share price went sky high) & by securing an agreement form the major shareholders of Nicorp that Nicorp shall have a capital reduction. These two things probably did not happen in Harvest.

If my reading is correct, Harvest may not even figure in Raymond Chan's plan in the future. What's the point of having two listed vehicles- one for parking your assets or properties & the other for carrying out the construction works? If the second company is an established contractor, it may make sense. Unfortunately, Harvest has no experience at all in construction business. To keep Harvest going & constantly fed with construction jobs, would only add to the total cost of constructing any property that Raymond Chan wish to build. My bet is that he would walk away from Harvest in the same way that the Naza brothers walked away from Jetson. If that were to happen, the price of Harvest can only go down.

In fact, the "smart money" is already clearing their position in Harvest. From Chart 1 below, we can see the followings:
1. Harvest's MACD has crossed down at point X- giving the SELL signal.
2. MACD has gone into the negative territory at point Y- the downtrend could accelerate.
3. Harvest had broken its uptrend line (SS) at point A.
4. Harvest failed to climb back above its uptrend line (SS) at point B.
5. The 20-day SMA line is poised to cut below the 50-day SMA line at point C.

Chart 1: Harvest's daily chart as at Feb 20, 2012 (Source: Quickcharts)

Of course, you can easily cross-check Harvest's chart with Iris's chart from July to August 2006. All the above negative points were checked out.

Chart 2: Iris's daily chart from Dec 2005 to Sept 2006 (Source: Quickcharts)

Based on the above technical analysis and scenario analysis, I think it is advisable to avoid Harvest or to close your position in that stock.


Malaysia Stock Talk said...

Did not see Jerneh surge like this when Sagajuta initially planned back door listing via Jerneh

JY said...

I think Raymond use Harvest as a vehicle to promote his name in the corporate world. His real business may be on Nicorp.

Alex, if you got the time would you mind to share your accounting knowledge on the implication of Sagajuta injecting into Nicorp at RM0.10 per share? Is it permissible as the market price is so much higher than the issuing price? Could they have pushed the price to sky limit and issue share based on market price instead of NAPS or par value?

This also lead me to think if companies like Digi or Kencana wanted to issue new share via rights issue, how would it be done? Digi has par value of RM0.01, NAPS of RM0.18, market price is RM4.00. If they can't issue new share based on market value, then Digi would crash if a right issue is proposed at or near par or NAPS? Digi may be a cash cow, but Kencana is not.