One of the parties which had submitted a proposal to takeover PLUS is MMC. When the market got wind of the proposal, it chased the share to a high of RM3.38 on October 4. Today, MMC share price is positive but very subdued. There are growing concern that MMC or its main shareholder, Syed Mokhtar is controlling too many strategic assets due to his close connection with the ruling party, UMNO (go here). The subdued rally in MMC share price is a sign that the company is not favored to acquire PLUS.
Chart: MMC's 15-minute chart as at Oct 14, 2010_12.20pm (Source: Quickcharts)
12 comments:
Dear Alex,
Following recommendation from today's hong leong research house, timecome today surge very high with top volume. What do you think of it? Is it good time to buy?
Thank you!
hi alex,
recently you blogged on small cap, what do you think about Efficient?
thanks
maxwealth88
HI Alex,
I don't understand how does it corelated with the subdued rally in MMC share price is a sign that the company is not favored to acquire PLUS? Can u explain further on this.
How does we as a traders can benefit from, if MMC take over UEM to acquire PLUS and wat benefit in return UEM and PLUS gain after taking over by MMC ?
Just curious to know more and widen knowledge.
Thank you !
Hi ppfoo
In trading, one of the most crucial things to be aware of at all time is divergence. This can take many forms, such as a stock moving up/down on thin volume or price chart diverging from indicators' charts.
There is a common observation in the market called sell on news. To be precise, it's sell on good news (or buy on bad news). This little rule is a form of divergence-induced trading rule where the market has sufficiently factored in the good/bad news and on release of this news, market participants discover that the actual news is less significant that the preceding rumors. Under such a scenario, the stock would react accordingly for about 30-60 minutes & then slowly/swiftly recover its lost ground. You observed this on Oct 5 when MMC announced that it had submitted a bid to buyout UEM Group. The stock rose to intra-day high of RM3.35 (cf to preceding day high of RM3.32) & pulled back. It tells you that the market has fully anticipated the news & the value of the stock reflected this news. Then the stock became a trading SELL.
Another example: AWC plunged on Oct 4 to RM0.23. Next day, it announced a capital reduction scheme that is more a book-keeping exercise (go here) and the stock dropped only a bit more to an intra-day low of RM0.225 on Oct 5. It then slowly recovered. The market decided that the bad news was not so bad after all & bought up the stock.
Back to MMC market action yesterday. The price action tells me that those in the know are selling- thus tipping the balance of supply & demand. If the insiders are excited, how should the price action be? It should have gone up. But, it did not. It became a warning & a possible trading SELL.
With regard to your 2nd question, I would leave that to the full-time analysts who have more time & resources to sift through the fine details of any deal that may emerge.
Good luck.
Hi Steve,
I must confess that I am negative about Timecom. I cannot comment on the report by Hong Leong Capital which I have not read. From the persistent selling by Time Engineering, which hold 24-25% of Timecom's outstanding shares, one should be very weary of buying this stock at the current price. Timecom's strong resistance is at RM0.70-0.73. It may or may not break above that level. If it does, should one jump in? What if someone induced an upside breakout with big volume, should we trade it knowing that there is a big seller waiting to sell? This seller is not your average joe. He is a very deep insider who is tasked to get good value for a loss-making investment. Why is he selling at this price if Timecom is a good stock. How would it look to his bosses if he sold the stock too cheaply with all the knowledge at his disposal. I just don't buy the story. If it's convenient,you can email the report to me. I would appreciate it.
Hi MaxWealth88
Efficient is one of my favorite smallcap. I posted on it in 2009 ( here & here).
Efficient's financial performance has stagnant for the past few quarters. When you compared its performance for the past 4 quarters with the preceding 4 quarters, you will see that its net profit has dropped by 4.6% from RM16.6 million to RM15.8 million. However, its turnover has increased by 2.7% from RM63.1 million to RM64.8 million.
The stock is now trading at a PE of 7.5 times (based on yesterday's close of RM0.18 & last 4 quarters' EPS of 2.4 sen). At this multiple, Efficient- a smallcap- is deemed fully valued.
Chartwise, Efficient is trapped with a bullish wedge, with resistance & support at RM0.20 & RM0.16, respectively.
Dear Alex,
The paper on timecom emphasize on its business model, that has high potential growth after reconstruction by new management team. I've emailed the paper to you.
Hope to hear more comments from you.
Thank you very much!
Hi Alex,
Thank you for all the useful information & advices.
What do you think about the BinaPuri?
Does it have a potential to go up(long term & short term), as I notice it has benn awarded with quite alot of contracts recently.
Thank you.
Hi Alex,
Thanks for the sharing and it make me know more on this " uncertain " or potential trap in the divergance scenario . I will observe more and pay attention to it. Thanks for the advice.
You're really a great consultant, i am curious money investment in share long time ago and dono who to seek help.. Thanks so much for the great blog and prompt reply on all our enquiry.. Really appreciated.
Thank you.
Hi @h Tong
There have been a few reports calling a BUY on BinaPuri. This small-cap stock has managed to secure many contracts & built up a sizable order book.
Chartwise, it has been range-bound between RM0.60 & RM1.60 since 2000. Its immediate support & resistance are at RM1.30 & RM1.40, respectively.
Hi Alex,
Just wanted to let you know that i think you're awesome. I have 3 questions.
1) HSBC broke HK$83, hit HK$84 then back below 83 - how does one read the charts when that happens. Is it still a breakout in the making or false alarm?
2) PLUS is trading at rm4.34. If I bought it now and tendered, I stand to make 6%. what are the risks and when do you think the deal will close?
3) doo you take new clients? what are your commission rates?
Thanks so much!!!!
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