Tuesday, August 28, 2018

REACH: Good News is not Enough

Yesterday, REACH announced its result  for QE30/6/2018 when it chalked up its first quarterly pre-tax profit of RM12.6 million thanks to higher crude oil prices. 

Table 1: REACH's last 6 quarterly result

Since its share price was in the dumpster, you would expect the stock to rally. As at 9.45am, REACH is up only 2 sen to 27 sen.

Chart: REACH's weekly chart as at Aug 27, 2018 (Source: Shareinvestor.com)

The underwhelming price movement is due mainly to REACH's poor financial position.

Table 2: REACH's current & gearing ratios

REACH has indicated that it will be approaching its shareholders to raise its capital in order to finance its expansion into new oil field. If you look at the price performance of another O&G stock that has announced a Rights Issue lately, i.e. Sapnrg, you will understand why REACH shareholders are less than keen on a Rights Issue now even though the money will be used for a very good purpose. That's the sad state of our stock market today, which makes one wonders: What's so good about having a stock market when you can't raise fund to finance productive investment?!

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