Thursday, August 30, 2012

Fajar- hit by a double whammy!

Fajar- a company with an annual revenue of RM181 million for FYE30/6/2011- reported a revenue for QE30/6/2012 of only RM8 million!! The company explained that the sharp drop in turnover was due to delay in hangover of full work areas for 4 awarded project & slower progress at site for construction contracts undertaken by the Group. On top of that, it booked in the cost of some variation orders of which recovery are pending the approval of the clients (meaning the revenue wasn't booked in but the cost has been taken into the books). [Note: This unbalanced treatment is a sign that the probability of the revenue being booked in later is not very high.] The net results of this double whammy is a pre-tax loss of RM27 million & a net loss after tax of RM20 million.

Fajar is a stock that is well-covered by many research houses. I have only one post on this stock, where I noted the 'strange' discount in its warrant vis-a-vis the share price in June this year. To me, a discount of this nature is always a red flag. We can see from teh weekly chart below that the stock has since dropped back & has now broken below the strong horizontal line at RM0.80.

 Chart: Fajar's weekly chart as at Aug 30, 2012_3.00pm (Source: Quickcharts)

Incidentally, there is another stock - with a related warrant- that is currently exhibiting a similar inconsistent pricing. That stock is Ingens (closed at RM0.395 yesterday) & its warrant is Ingens-WA (closed at RM0.12). As the exercise price of the warrant is RM0.10, it is now trading at a discount of RM0.175 or 45%. A discount of this magnitude is unthinkable and one question that begs an answer is simply this: Why aren't the insiders buying more of the warrants? Arbitraging- the selling of the shares & buying of the warrants- should take place  and the price would then converge. Since this isn't happening, we must be very careful with this stock & the warrant.

In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, Fajar & Ingens.


Little Mickey said...

Hi Alex, Could you review on MAS airline's current negative outlook vs future and its effect on the share price?

Unknown said...

what's FAJAR-WA exercise price and expire date?

Anonymous said...

hi alex-this is charles leong.i have been traceing the movement of fajar since i sold at 106 some weeks ago when u highlight it in your blog.wanted to go in at 80!when it broke below 78.5 i chicken out.what level do u think is ok? save at 60?i still have some free share.

Kok-Siang said...


From your analysis, you always use quarterly results in your tables. Why accumulated results are not used? Does it mean quarterly results has more insight than accumulated results?

Alex Lu said...

Hi Little Mickey

I have not looked into the financials of MAS. Based on chart, I feel that this stock has found a strong support at RM1.00-1.05.

I feel that MAS may stage a rebound to RM1.20 or even RM1.30 in the next few weeks.

Alex Lu said...

Hi Unknown

FAJAR-WA exercise price and expire date are RM0.50 & Oct 18, 2013, respectively.

Alex Lu said...

Hi charles leong

Congratulation! You have finally made to post your comment on the blog.

On Fajar, I believe that the RM0.60 is the first stop for the current downtrend. Its next stop is the unthinkable RM0.35 mark!

However, the financials of this company is very worrying. If you choose to get in, do exercise careful discretion.

Alex Lu said...

Hi Kok-Siang

I prefer quarterly result because it gives me a better feel of what is going on a quarter-on-quarter basis. However, we should be careful that this comparison can be distorted by seasonal factors.

Cumulative results can be obtained simply by casting the last x periods & comparing that with the previous x periods last year. I do not always comment on that because we would lose some information that are more pertinent to the quarter under review.

Mat Cendana said...

I have Fajar in my KiV list and have actually been thinking about buying it in the belief that it "had corrected sufficiently and should be on the upswing again". After reading this post, I'm glad I haven't committed the capital yet.

I've also just seen this in The Edge weekly: One of its major shareholders, Datuk Ir. Low Keng Kok had sold 1 million units on 17 Aug. He still has 7 million but the question is, why did he sell those shares? This doesn't help boost confidence in the company at all.

Kok-Siang said...


you have a good point.
From your blog, you have been collected quarterly results for many years across different companies.
Just wonder how much time you spend on this? It requires strong discipline..