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Tuesday, April 26, 2016

SGB: Who's Looking After The Baby?

Spring Gallery Bhd ('SGB') is involved in manufacturing, sales & trading in pottery, porcelain, ceramic wares & ornaments. It has diversified into property development. Its first project will be a JV development in Kemaman, Terengganu named Southern City project. SGB recently completed a ICPS issue (with free warrants) to raise RM26.125 million for this purpose as well as to for working capital plus to service its bank loans.

I am writing on this stock because the trading of the shares & the newly-listed warrant, SGB-wa are showing unhealthy signs. Firstly, let's look at the monthly chart. The share price had rallied since April 14 from RM0.70 to the current price of RM1.30. Unless there is more exciting development in the pipeline, I doubt normal investors would go ga-ga over a company with a small project in Terengganu.


Chart 1: SGB's monthly chart as at April 26, 2016_9.30am (Source: ShareInvestor.com)
 
The unhealthy sign i referred to earlier is the divergence between SGB-wa price rally compared SGB price rally. Note the following:
1) SGB-wa seems to be moving downwards from April 19 to April 22 while SGB was moving on a upward bias.
2) SGB rallied on opening on April 25. For a good 1 hour, SGB-wa was unsure whether to follow suit.
3) In the afternoon of April 25, SGB moved sideways while SGB-wa traded downward.

To make it even more peculiar, SGB-wa has been trading deep within the money. With its exercise price of 60 sen, SGB-wa should trade at RM0.70 based on SGB price at RM1.30. Alas, SGB-wa is only trading at RM0.28-0.30.


Chart 2: SGB's 10-min chart as at April 26, 2016_9.30am (Source: ShareInvestor.com)


Chart 3: SGB-wa 10-min chart as at April 26, 2016_9.30am (Source: ShareInvestor.com)

As posted previously, if a warrant trades at a discount, it is a unhealthy sign. Given the sharp price rally in SGB, I would recommend that you avoid this stock and the warrant. If you are so lucky to have the stock and the warrant, you should take the opportunity to sell into strength.

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, SGB & SGB-wa.

4 comments:

JY said...

Note the volume yesterday for both SGB and its warrant vs the total share issue. Maybe retailers sitting on the drivers seat now.

Alex Lu said...

Hi JY


Check out my earlier call on VSolar-wa. The lick is given below.

http://nexttrade.blogspot.my/2015/04/vsolar-vsolar-wa-exercise.html

lai said...

hi alex,

may i have your latest view on parkson? tq

Alex Lu said...

Hi lai,

Let's wait for Parkson's results for QE31/3/2016. It should be a better quarter with CNY sales booked in. The question is how much better?!

Parkson's financial performance is driven substantially by Parkson Group, its China operation. Looking at the share price movement of that stock, it's not very encouraging. If the financial performance of Parkson Group is reflected its share price movement, then Parkson's result will not be very good. Let's wait & see.