PERMAJU (7080) PERMAJU INDUSTRIES BERHAD: A Warning!
The euphoric rally among 3rd liner stocks experienced in the past 1-2
months has generated much excitement in the market. Some of these stocks
have doubled up in a matter of days, with no regards to fundamental.
This may come to an end soon.
As the harsh economic reality starts to bite, weaker companies would
have to raise funds to tie over the dry months and years ahead. An
example is PERMAJU which is now implementing a Rights issue of
Irredeemable Convertible Preference Shares (RCPS) at an issue price of
RM0.05 each (which comes with free warrant) on the basis of 10 RCPS
together with 1 free warrant for every 2 shares owned. The ex-date for
this Rights issue is on July 13. You can see the announcement of the
ex-date on Bursa Malaysia on June 19 (here) triggered the sell-down of the stock.
Chart: PERMAJU's daily chart as at June 24, 2020 (Source: Malaysiastock.biz)
On the other hand, there are a few stocks that tried to avoid calling
for Rights issues. Instead they chose to raise fund by way of private
placement. Their share prices rallied in the past few days. Examples are
CNASIA and IRIS. The logic, if you accept it as logical, is that the
major shareholders have to push up the share price in order to induce
investors to buy into the private placement. Sometimes this effort of
logic works. Oftentimes, it doesn't. As Abraham Lincoln once said; “You
can fool some of the people all of the time, and all of the people some
of the time, but you can not fool all of the people all of the time.”
Be careful out there.
http://nexttrade.blogspot.com/2020/06/permaju-warning.html
http://nexttrade.blogspot.com/2020/06/permaju-warning.html
