There is a widespread rumour that the Bank has been pressuring Dayang to reduce the debt of Dayang’s subsidiary Perdana. Many people expected the company to announce the right issues on last Friday 12 April. That is why the price has been dropping quite severely as you can see from the chart below.
Now the rumour is that the company will announce the right issues at the end of the month. But the price has not been dropping. In fact, it has been going higher in the last few days. This means that most clever investors are fully aware and are prepared for the right issue announcement.
However, in most cases, when a company calls for right issues to raise funds to reduce its debt, its share price will drop because investors will know that the company has too much debt and some shareholders have to sell to raise money to buy the right issues.
But, Dayang is different from the other cases. It has been reporting very good profit in the last few quarters and it has very good cash flow. From my experience good cash flow do magic for the company. With good cash flow, the company can easily pare down debt and can expand its business operation.
If I were an executive director of Dayang, I could convince the Bank not to insist the company to call for right issues because of the company has very good cash flow. The Bank must know that good cash flow can easily pare down debt and sooner or later the problem will be resolved.
Based on what I mentioned above, the Bank should not insist Dayang to call for right issues.
It looks like all the clever investors have discounted this rumour of the right issues. That is why the price has been going higher.
The following is an excerpt from Mr Ooi Teik Bee’s circular letter to all his subscribers.
Good prospect of Dayang
- I believe 2019 result will be better than 2018 result
- The present order book is 3 billion, I believe Dayang will secure at least another 1 billion job in 2019.
- Dayang will do very well for next 3 years until 2021.
- The share price of Dayang was peak in 2013/4 at 4.30. In 2013/4, Brent crude oil price was around USD 100.
- I also believe the share price of Dayang will go up north from 2019 to 2021. I do not know how high will be the share price of Dayang.
- The Brent crude oil price will stay around USD 65 to 75 in 2019.