Tuesday, December 18, 2007

YTL's current selldown is overdone?

YTL Corp ('YTL') share has recently 'ex' for a Restricted Offer for Sale ('ROS') of 1 YTLPower share for 15 YTL shares owned. The ex-date was on December 12th. Thereafter, the share price took a sharp plunge to a low of RM7.05 on December 14th & 17th. This drop had effectively wiped out all the price gain for YTL when it rallied off its low of RM7.20 on November 22nd to hit a high of RM8.70 on December 6th & 7th.

Was the sharp spike in the share price & the subsequent plunge attributable to the ROS of the YTLPower shares. I don't think so. If you were to value this entitlement, a YTL shareholder with 1000 YTL shares would receive only 67 YTLPower shares at RM0.50 each. Using the closing price of YTLPower as at December 12th of RM2.62, the gain from the ROS is about RM142.

The last time YTL made a similar ROS was in December 2006. That ROS was more generous at 1 YTLPower share for every 10 YTL shares owned, offered at a price of RM0.50 each. After the ex date, the price adjustment was milder, i.e. from RM6.95 to RM6.20. The gain from this ROS is about RM180 (based on YTLPower share price of RM2.30 for the weekended December 9th, 2006). Thereafter, YTL resumed its uptrend & hit a high of RM8.10 before the February & March selloff set in.

Based on yesterday's price of RM7.20, YTL has broken below its uptrend line support of RM7.40. A quick return to the RM7.40 level is important. We are seeing that rebound today. If successful, YTL could be a good Long-term Buy at RM7.40 (with a stoploss set at RM6.90, i.e. 10 sen below the psychological RM7.00 support).

Chart: YTL's weekly chart as at December 17 (courtesy of Quickcharts)

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