Wednesday, January 29, 2014

KNM- a reversal may be on the card!

On January 27, KNM announced a Par Value Reduction for its ordinary shares (here). The rationale given for the proposed exercise is that "the closing price of KNM Share was RM0.565, which is at a discount of 43.5% to the existing par value of RM1.00 each in KNM share. The current market price of KNM shares is therefore not conducive for KNM to embark on any fund raising exercise and/or corporate exercises involving issuance of new shares. Accordingly, the Proposed Par Value Reduction will provide the Company with greater flexibility to raise funds and to implement future corporate proposals which entail the issuance of new shares."

Thus, the proposal could be a prelude to a share Rights Issue. This may have excited the market as any potential acquisition in the Oil & Gas sector has led to sharp rise in the share price. Alternatively, the market expects the share price to rise to a level that would facilitate the issuance of the new shares.

Looking at the weekly chart, it looks like KNM is poised for a rally. The trigger for the rally would be an upside breakout above the RM0.58. [Note: KNM is now trading at RM0.61 as at 10:00am.]

Chart 1: KNM's weekly chart as at Jan 26, 2014 (Source: Tradesignum)

An angle would be given by the daily chart below.

Chart 2: KNM's daily chart as at Jan 26, 2014 (Source: Tradesignum)

Based on technical consideration only, KNM could be a possible trading BUY. Possible target for the immediate rally is RM0.80. Given the current market uncertainty, you have to exercise careful discretion in all your trading.

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, KNM.


Ethan Lee said...

Hi Alex. Please conment CVIEW . Its EPS is 77.79 and DY is 9%. Thank you.

OS said...

Alex what u think about perstima ? it's seems pretty good fundamentally

Alex Lu said...

Hi Ethan Lee

CVIEW has been reporting pretty good profit. Its FY2013 net profit was RM78 million- an increase of RM40 million from last year. This came form its two projects, Taman Nusa Sentral and Residence at The Peak.

Its valuation is not demanding with trailing PER at 4.3x.

Chartwise, it is in an uptrend, with support at RM2.75 (from the 50-day SMA line). It recently broke above the RM3.30 resistance but that rally couldn't sustain.

If you have the stock, you may want to hold onto it for now.

Alex Lu said...


Perstima's profits had recovered substantially in 2013. With EPS of 43.3 sen, Perstima is now trading at a PE of 9.1x. Thus it is fairly valued.

It broke above its 2 years downtrend line in May 2013 at RM3.20. Its gradual upleg may have run its course for now as it came up against a strong resistance at the horizontal line at RM4.00. It may ease back to find support at RM3.80 or even RM3.50. I think the stock should have good support between the RM3.50-3.80 level.