As you know, the announcement for the right issues and share placement is very long and difficult to understand. As a result, many shareholders are selling their holdings without finding out the true effect of the announcement.
You don’t have to read the whole announcement. You just have to read page 30 and 31 and you can see that Dayang’s financial performance has been improving and it has many maintenance contracts to keep the company busy for a long time.
The company has very good profit growth prospect which is the most powerful catalyst to move share price. That is why there are more buyers than sellers. As a result, the share price continues to go higher and higher as shown on the price chart. It has made a new high of Rm 1.58.
According to the announcement, if you have 10 shares you are entitled to buy 1 new share. According the Securities Commission, the company can give up to 50% discount from the average price of 5 days preceding the price fixing date. In this case, the price is most likely to be 80 sen each.
Some investors are worried about the share placement which they think will dilute their interest. The share placement will be carried out after the right issues. The total share placement will be about 10 percent of the total issued shares which will be more than 100 million shares. At this stage, the company has not mentioned the name of the buyer who is willing to pay more than Rm 100 million to buy all the placement shares. I am sure the buyer of the placement shares must have confidence of the company.
Shareholders should appreciate that Dayang can find a really rich buyers who has faith in the company. Common sense will tell you that unless the company has very good profit growth prospect, no one will pay more than Rm 100 million to own 10% of the company. They should not worry because the company can use the additional money to do more business and reduced its debts to benefit all the shareholders.
From my long experience as a co-founder of IJM Corporation Bhd. I know that right issues and share placement will enable the company to expand to benefit all the shareholders eventually. This was one of the methods we used to expand the company. As a result, IJM Corporation Bhd market capitalization was more than 12 billion Ringgit at one time.
You must remember, the management and controlling shareholders have already declared their willingness to buy their right issues entitlement and they also have to pay the same price as any ordinary shareholder.
I will support all the proposed resolutions and I strongly recommend you support all the resolutions to be passed at the EGM on 1 Oct 2019.
Our famous Mr Ooi Teik Bee has circulated his recommendation to all his subscribers to buy Dayang. He has named Dayang as Miss Universe because TA and FA are so good.
Only foolish investors will sell their holdings when price is on an up trend and supported by very good financial analysis.