KUALA LUMPUR: With newly imposed trading curbs, investors will be closely watching the price performance of Harvest Court Industries Bhd today, the high flying former penny stock which has surged nearly 30 times in under two months.
Harvest Court shares and warrants have been declared “designated securities” from 9am this morning, which requires buyers to make upfront payments for purchases and have a free balance of securities before selling.
Announcing the decision in a statement late Monday night, Bursa Malaysia ordered a one-day trading suspension yesterday for the news to sink in, and again advised investors to assess the company’s fundamentals.
Harvest Court joins a very small group of companies, including Iris Corp Bhd in 2006 and Union Paper Holdings Bhd in 1993, that have earned the designation.
Iris is the most recent high-profile case. Trading curbs on the company, which manufactures electronic security cards and passports, were imposed in mid-2006 after the stock jumped 3.5 times over two months and charted a gain of over 580% for the year at one point.
When trading curbs were imposed, the stock tumbled as much as 52% to 65.5 sen from RM1.36 when trading resumed on May 16, 2006, before ending the day with a 26.5% loss to close at RM1.
Iris asked the exchange to lift the trading curbs and its stock price climbed in the run-up to the lifting of the restrictions on June 22, 2006. Its shares continued to stay high for at least one more month before tumbling to where they were before the action began.
At the time, fears that trading restrictions would be imposed on more companies nudged the then Mesdaq Index lower.
Today, Iris shares are trading at 16.5 sen, a fraction of what they were more than five years ago. Its shares have fluctuated within a range of 13 sen to 26 sen over the past year.
In Harvest Court’s case, the rare move by the front-line regulator followed two unusual market activity (UMA) queries in three weeks (Oct 17 and Nov 4), and comes one market day after investors were told to exercise caution when trading the company’s shares and warrants.
Still, the stock continued its spectacular price ascent. Harvest Court, which last traded at RM2.13 on Monday, was still a penny stock fetching 7.5 sen apiece on Sept 27 but had seen its value skyrocket 28 times over seven weeks.
That translates to a whopping RM371.2 million gain in market capitalisation from a company whose market capitalisation stood at little over RM13.5 million seven weeks ago.
Similarly, its warrants, Harvest-WA, which have a 25 sen strike price, went from three sen to RM1.81 over the same seven-week period.
Trading interest in Harvest Court stocks spiked a month ago on Oct 14. Soon after, news got out that managing director Ng Swee Kiat had pared his holdings in the company, and had entered into a put option to buy a block of shares from Affin Bank Bhd. Stoking more interest was the emergence of a new shareholder and director, Datuk Raymond Chan, the controlling shareholder of property developer Sagajuta (Sabah) Sdn Bhd, which has since awarded contracts to the company.
Chan was appointed to Harvest’s board on Oct 28, the same day as 28-year-old Mohd Nazifuddin Najib, the prime minister’s second son.
At Monday’s closing price of RM2.13 and with a 180.65 million share base, Harvest Court would have to deliver RM11 million to RM26 million in net profit for this year or next year, if one were to assume the current average price-earnings ratio of between 15 and 35 times for the FBM Emas Index and the ACE Market (formerly Mesdaq), respectively.
That may be a tall order, considering the company posted net losses of RM678,000 for 1HFY11, and RM2.82 million for FY10.
That said, in a statement yesterday evening, Harvest Court said it intends to accept a job worth about RM70 million to build a pulp and paper plant to process oil palm fibre in Negri Sembilan. On Nov 14, its unit accepted a non-binding letter of intent to enter into a related party transaction (RPT) with 1Green Enviro Sdn Bhd, a company linked to Mohd Nazifuddin and Chan. It needs RM6 million capital for the three-year project, to be funded from proceeds of a proposed new rights issue, placement exercise and borrowings.
Whether or not Harvest Court’s share price tumbles today, as in the case of Iris then, what is certain is that the entire market will be watching.
This article appeared in The Edge Financial Daily, November 16, 2011.
Harvest Court shares and warrants have been declared “designated securities” from 9am this morning, which requires buyers to make upfront payments for purchases and have a free balance of securities before selling.
Announcing the decision in a statement late Monday night, Bursa Malaysia ordered a one-day trading suspension yesterday for the news to sink in, and again advised investors to assess the company’s fundamentals.
Harvest Court joins a very small group of companies, including Iris Corp Bhd in 2006 and Union Paper Holdings Bhd in 1993, that have earned the designation.
Iris is the most recent high-profile case. Trading curbs on the company, which manufactures electronic security cards and passports, were imposed in mid-2006 after the stock jumped 3.5 times over two months and charted a gain of over 580% for the year at one point.
When trading curbs were imposed, the stock tumbled as much as 52% to 65.5 sen from RM1.36 when trading resumed on May 16, 2006, before ending the day with a 26.5% loss to close at RM1.
Iris asked the exchange to lift the trading curbs and its stock price climbed in the run-up to the lifting of the restrictions on June 22, 2006. Its shares continued to stay high for at least one more month before tumbling to where they were before the action began.
At the time, fears that trading restrictions would be imposed on more companies nudged the then Mesdaq Index lower.
Today, Iris shares are trading at 16.5 sen, a fraction of what they were more than five years ago. Its shares have fluctuated within a range of 13 sen to 26 sen over the past year.
In Harvest Court’s case, the rare move by the front-line regulator followed two unusual market activity (UMA) queries in three weeks (Oct 17 and Nov 4), and comes one market day after investors were told to exercise caution when trading the company’s shares and warrants.
Still, the stock continued its spectacular price ascent. Harvest Court, which last traded at RM2.13 on Monday, was still a penny stock fetching 7.5 sen apiece on Sept 27 but had seen its value skyrocket 28 times over seven weeks.
That translates to a whopping RM371.2 million gain in market capitalisation from a company whose market capitalisation stood at little over RM13.5 million seven weeks ago.
Similarly, its warrants, Harvest-WA, which have a 25 sen strike price, went from three sen to RM1.81 over the same seven-week period.
Trading interest in Harvest Court stocks spiked a month ago on Oct 14. Soon after, news got out that managing director Ng Swee Kiat had pared his holdings in the company, and had entered into a put option to buy a block of shares from Affin Bank Bhd. Stoking more interest was the emergence of a new shareholder and director, Datuk Raymond Chan, the controlling shareholder of property developer Sagajuta (Sabah) Sdn Bhd, which has since awarded contracts to the company.
Chan was appointed to Harvest’s board on Oct 28, the same day as 28-year-old Mohd Nazifuddin Najib, the prime minister’s second son.
At Monday’s closing price of RM2.13 and with a 180.65 million share base, Harvest Court would have to deliver RM11 million to RM26 million in net profit for this year or next year, if one were to assume the current average price-earnings ratio of between 15 and 35 times for the FBM Emas Index and the ACE Market (formerly Mesdaq), respectively.
That may be a tall order, considering the company posted net losses of RM678,000 for 1HFY11, and RM2.82 million for FY10.
That said, in a statement yesterday evening, Harvest Court said it intends to accept a job worth about RM70 million to build a pulp and paper plant to process oil palm fibre in Negri Sembilan. On Nov 14, its unit accepted a non-binding letter of intent to enter into a related party transaction (RPT) with 1Green Enviro Sdn Bhd, a company linked to Mohd Nazifuddin and Chan. It needs RM6 million capital for the three-year project, to be funded from proceeds of a proposed new rights issue, placement exercise and borrowings.
Whether or not Harvest Court’s share price tumbles today, as in the case of Iris then, what is certain is that the entire market will be watching.
This article appeared in The Edge Financial Daily, November 16, 2011.
