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Monday, December 14, 2015

POS: Poor timing!!

Recently, I posted on POS as a potential stock for long-term investment. Shortly after that post, POS announced that it has entered into a Related Party Transaction ('RPT') involving the purchase of two assets from its related companies, DRBHcom. The assets are:
1) 100%-stake in KL Airposrt Services Sdn Bhd ('KLAS') for RM766.16 million; and
2) a piece of land measuring 9.9 acres in Pekan HICOM, Section 28, 40400 Shah Alam for RM69.0 million.[This information was accidentally left out earlier.]
Any RPT is viewed suspiciously and these two acquisitions will be no exception. The main concern is the bigger transaction involving the acquisition of KLAS.

Firstly, the purchase price of RM766.16 million is very high relative to KLAS's most recent profits. For FY2015, KLAS made a pre-tax profit of RM7.2 million. This means POS is buying KLAS at a PER of more than 100x. Going forward, we can expect POS's PER to above the 20x.

Secondly, we do not have any idea about the financial position and financial commitment of KLAS. This missing information caused analysts to worry about the impact on POS's dividend payout. As such, the acquisition of KLAS is deemed a negative development for POS. 

Chartwise, we can see that the stock has broken below its long-term uptrend line, SS. Its immedaite support will be the horizontal line at RM2.50. If that support is violated, the stock may test the next horizontal line at RM2.00. For now, I would re-rate POS as a HOLD if you have bought into it. If you have not bought into it, you should wait until the stock has found its support - be that at RM2.50 or RM2.00- before getting in.


Chart: POS's monthly chart as at Dec 14, 2015_9.30am (Source: ShareInvestor.com)

Note:
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, POS.

3 comments:

Balvinder Singh said...
This comment has been removed by the author.
Balvinder Singh said...

I find this transaction to be very fishy, hope the board of directors of POS will reject and not proceed with this deal. It looks to me, they care trying to window dress DRB books by putting these assets in POS books. Why not sell it at open market prices via open tender? Not use their controlling interest (32+%) in POS to place these assets in POS books at inflated prices. Additionally, DRB will own more shares in POS and have a higher % of ownership in POS. All the the expense of minority share holders of POS.

Alex Lu said...

Hi Balvinder Singh

I agree with you. This transaction is unfair to the minority shareholders of POS. Let's see whether they can gather enough support to reject it.