Monday, October 19, 2009

Suncity- uptrend to continue

Suncity will continue with its medium-term uptrend since breaking above its short-term downtrend line resistance at RM3.26 last week (see Chart 1 below). Its overhead resistance will come from its recent high of RM3.50 as well as the horizontal resistance of RM4.00 (see Chart 2 below).

Chart 1: Suncity's daily chart as at Oct 19, 2009_12.30noon(source: Quickcharts)

Chart 2: Suncity's weekly chart as at Oct 19, 2009_12.30noon(source: Quickcharts)


MaxWealth88 said...

hi alex,

can you pls comment on IJM Plant-OR? is it worth buying to convert?

and what do you think of media/nstp? notice big fall in nstp.


Alex Lu said...

Hi Maxwealth88,

I think IJMPlant is still in an uptrend, which makes it a good stock to buy & hold. (Note: I am not 100% sure that it is in an uptrend because Tradesignum & Quickcharts have yet to present an accurate chart for the stock.)

Is the adjustment in price reasonable? We can calculate the theoretical ex-rights value as follows: [(2.95 x 8) + (2.10 x 2)]/10 = 2.78. (Note: I have ignored the value of the 1 unit of warrant). So, the share is now trading below the theoretical ex-rights value of RM2.78, which is fairly normal. Why? Firstly, the share price may have ran too high ahead the ex-date. Secondly, the process of arbitrage has kicked in where the shareholders may swap the share for the Rights due pricing differential & a vicious cycle has taken hold. For outsiders hoping to buy into the stock, this is a good time to do so.

What's the best option? Go for the IJMPlant-OR. You get the shares at 10 sen higher but in return you will get 1 warrant for 2 shares applied for. Is the warrant valuable? The warrant for IJM group of companies normally command a good price.

On the Media's offer to acquire NSTP, I think it is a very unfair to the shareholders of NSTP. Can they get enough shareholders to accept? Probably yes. They need only 7% acceptance to gain majority control. It is dicey to take a chance on a sweetening of the deal. If you have bought NSTP early, just take profit & move on.

Zac Lim said...

Alex,what do you think about Maxbiz? Volume starts to pick up and seems like forming an uptrend soon

Alex Lu said...

Hi Trader,

Maxbiz is still in a long-term downtrend. Its immediate horizontal support is at RM0.025-0.035. Yesterday, it broke above the short-term downtrend line at RM0.055. It may revisit its recent high at RM0.12.

Butcher said...

hi alex, i'm thinking to buy suncity-wa but the premium is so high currently. can u explain why it's premium is so high?

is it worth to buy at price below RM 0.50?

Alex Lu said...

Hi Butcher,

Suncity-WA was issued in October 2007, after the stock had peaked at RM5.85. It has a 10-year tenor & an exercise price of RM4.87.

Suncity-WA was listed at a price of RM1.70 & dropped to a bottom at RM0.17-18 in October 2008. The underlying security traded at a low of RM1.41 in October 2008- giving Suncity-WA a premium of 260%.

Why would anyone buy a warrant at a premium of 260%? It could be due to the small initial outlay; the long tenor of the warrant; the prospect of recovery of the underlying security which is a decent company; and the existing warrant-holders' reluctance to sell at low prices. Even today, the same factors will also apply but of course the premium is not as high. If you take a long-term view, you can buy the warrant at lower prices (say, RM0.30-35). However, the high premium is an unpleasant fact that you will have to live with because of the high exercise price.