Thursday, April 16, 2015

Sold NTPM and bought YFG

I have just sold NTPM and bought YFG (what a stock to buy???).

I have no particular strong (fundamental) reason to buy YFG except for the recent announcement which causes some quarters grow weary of the company. The par value reduction should not cause drop in share price as there is no negative impact towards the counter.

Don't think there will be a RTO (of course I can be wrong) but I felt that the reason there was a par value reduction is to strengthen the position of the company. I felt that because of the accumulated losses that the company had experienced as well as the discount on shares, it is susceptible to PN17. (Read in what situation it can be in PN17 here)

The one area under PN17 which the company is very susceptible is the less than 25% of the issued and paid up capital of the company. Hence, by them reducing the paid-up capital, the chances of it getting to PN17 should be lower.

The other reason is that it now can raise private placement at below 10 cents as previously with par value of RM0.10 it may need to raise their funds at the minimum par value. Issuing at a discount would be much troublesome. Now the new proposal is for par value reduced to RM0.02.

In any case, there should be no reason for me to buy as there are no fundamentals except that the company has a very low market cap and being a penny stock (hence high volatility).

The other thing is that it does seem to progress with a new Chairman and some Directorship change. Am just wondering what takes them so long??? In any case, the new guy in charge of corporate seems to be better. Now for the real business!!!

I still think it will need to raise funds to strengthen its financials and then move forward.


Big Sea said...

Can you explain more why you go for YFG ?
Market is about 50 million. Cash at 4 million and debt of 35 million. Enterprise value would be around 80 million. Profit is well below 4 million a year and there is nothing interesting in the cash flow statement, depreciation is normal.

At 80 million, I would say YFG is expensive.

felicity said...

Frankly, I have no particular reason to explain.

If one is to purchase a stock several come into mind:

1 business tenets - not strong, into a space that has potential for a small company
2 management tenets - so so, getting better
3 financial tenets - weak
4 economic tenets - low price stock

In this case, I really can't explain.

Multi said...

This is so unusual from all your previous stock pick, you hardly based on gut feel...only rationale is you know something more abt this company.

felicity said...

True, that's why it is a bet and the bet is not too much.I am thinking with the movement that have been made, the company will not stay to be as such at this moment. No one will take over a counter from a politically linked owner and leave it to be just a so so run company. See that movement in Board representation. But it is still a bet.

For a contract based company, one will need to have people whom are serious and financially strong enough to move the company unless it is IJM where they are already proven.

I am just hoping they will do much more than to remain at current slate. Hence, I am positive on the corporate movement rather than the company.

klsekaki said...

YOCB is better

Bn911 said...

Hi Felicity, mind to get your comment on YFG latest quarter result, profit and revenue is dropping? Thanks.