I Sold Glomac to Make Way for Suncity-W

Sadly, I have to sell all my Glomac to free up all for my cash in exchange for Suncity-W. Recall, I purchase 17,000 units of Suncity-W at RM1.29 on the 15th of June. A big mistake as I expect warrants to shoot up in tandem with the mother share. A mistake but not a fatal one. Mother share keeps drifting down from RM5.52 to RM5.08. That is close to 10% down! Anyway, I further purchase 2,000 units of Suncity-W at RM1.25. Selling of Glomac, free up up to RM5,000 and my intention is to purchase Suncity-W at RM1.25 or better. Seem like the support level is at RM1.25 now. Since the offer price is at RM1.29, my total cost is either equal or slightly below, depending how much I paid for the remaining Suncity-W which I intend to purchase with RM5,000.

I still have very strong conviction that Sunway Berhad (Newco) share will price more than RM2.80. Because of that, I literally put all my eggs into one basket. As mentioned, with volatility in the market and FBMKLCI still being one of the best performer in Asia Pacific, I have reason to believe, the downside for FMBKLCI is high despite being classified as defensive market. No one will know what will happen at the end of this month, after U.S Government withdraw QE2. My gut feeling tells me, there will be QE3 but no one will know what will happen. I believe U.S Government will continue to support the economy with goodies (despite too much goodies is bad in the long time), to revive the economy. If that happens, all regional stock market will soar at least in the short term. By betting on Sunway Berhad (Newco), I basically cover myself in two parts:-

1. Assuming no goodies by end of June – This share is a new enlarged entity and every know this company is undervalued with trailing P/E of 11.7x only. Forward P/E could potentially looks better but I am not going to speculate here. With bigger market capitalization of over RM3.5 billion or over USD1.0 billion, Sunway Berhad (Newco) will start to show up in foreign fund managers’ rather. Many foreign fund managers will not touch stock with market capitalization of lower than USD1.0 billion. Imagine, what will happen when local and foreign institutional start buying this stock! So downside for this Newco is limited. Even if there is downside, it will be only for short-term. It takes time for the Newco to unleash it values.

2. Assuming with goodies by end of June – Needless to say anymore, everyone will rejoice including Sunway Berhad.

So accumulating on Sunway Holdings, Sunway-W, Suncity, and Suncity-W at or below the offer price is not too bad of a choice if you really feel market is too volatile for you now! Sunway Berhad will be listed on August and I believe by then, whether with goodies or no goodies from U.S, things will start to pick up. So is, Sunway Berhad. Alright enough of me promoting Sunway, you decide for yourself.

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Eventhough I have already sold my Glomac at minimal profit (actually just the RM0.045 dividend), I still like Glomac. It is so silly to see how people dump Glomac share all the way to RM1.68 after dividend ex-date then to recover to RM1.77 in a week or so. Those that purchase at RM1.68, I would advise them to keep for a long time. Glomac is a growth + dividend play stock. At current price, the gross dividend is at 5.50%, so that is quite attractive. Have a look at the daily chart, the share has already touch the upper band of Bollinger and if it breaks,  the next resistance level is at RM1.85. Not too much meat from current price, so hold if you have the stock and if you don’t, wait till the stock trade to RM1.70 and go in. Put a stop loss at RM1.65.

Interestingly, on the weekly chart, current share price has similar trend as at first week of April. See how it breaks the upper band of Bollinger and uptrend for the next 2 days? I believe the same situation will happen next week. I am 80% confident. Let me tell you why. Simply because, Glomac will announce their 4Q result this week, if I am not mistaken. If you are to look at longer term chart, you will notice that the share price will show strength during the result season. I am not sure whether the result, keeps beating analysts’ or not. But I am pretty sure, the result is applausible. TA just came out with latest report on Glomac on the 16th June. They are targeting net profit of RM60-65 million. Year on Year (YoY)  it will show impressive 47-60% growth, but if we are to take Kam Meng’s (TA property analyst) net profit RM60.39mil, Quarter on Quarter (QoQ) will only record RM13mil or so compare to RM16mil in the last quarter… not too impressive right?

I think Kam Meng is just being too conservative by assuming lower net profit. It is better to have close but lower net profit, because if the company is to report better net profit, then the share price will shoot up and close the gap between his target price and current share price. Why becoming a hero then being classified as over-bullish on the stock if the earnings is below analyst forecast? Then get screwed by investor and being classified as BAD ANALYST!

But I will stick my head out, I think Glomac will report RM64 million profit, representing EPS (diluted) of RM0.2025. At current share price of RM1.77, the share is trading at trailing P/E of 8.70x with dividend yield of 5.50%. So not attractive enough for you?! Good enough for me, but I have no choice but to sell off earlier to free up some cash for Suncity-W. That is the dilemma of not enough money…