Hot Stock Alam Maritim falls 5.45% on low price subscription and profit taking

by **Cals** Fri 25 Apr 2014, 02:10

Hot Stock Alam Maritim falls 5.45% on low price subscription and profit taking

Business & Markets 2014

Written by Jonathan Gan of theedgemalaysia.com

Thursday, 24 April 2014 14:53

KUALA LUMPUR (Apr 24): Alam Maritim Resources Bhd fell today following profit taking activities and low price subscription of new shares by tycoon investor Tan Sri Quek Leng Chan and his associate, Paul Poh.

At mid-day market break today, Alam shares fell 9 sen or 5.45% to RM1.56 per share, after falling to a low of RM1.52 earlier. The stock had surged ahead of the news on the entry of new investors.

A dealer with a major stock broking firm told theedgemalaysia.com that this could be a near term drop due to speculative trading activities.

“There’s a huge discount between the prices paid for the acquisition and its market price currently so the market is following a cliché to buy on rumor and sell on news,” he said.

He added that "fundamentally nothing is wrong" with the stock.

Yesterday, Alam announced that Quek and Poh were taking up new shares in the company, which accounted for 15.53% of Alam's existing shares, at RM1.35 per share.

The subscription price was a huge discount from Alam's last traded price of RM1.65 on Monday.

The company said the rationale for the proposed share issuance was to enable the group to raise additional funds without incurring interest expenses. The company also saw this as a move to strengthen its equity base and increase liquidity and marketability.

Despite the fall in stock price, analysts remain bullish on Alam with 3 major stock broking firms maintaining their “buy” calls on the stock today.

Kenanga Research has placed a target price (TP) of RM2.10 on the stock and maintained its “buy” call on the stock.

Analyst Cezzane See of Kenanga Research said : “Proceeds of RM166.1 million from share subscription will be channelled to the acquisition support of an offshore vessel (RM39.7 million), working capital(RM25.7million), repayment of bank borrowings (RM95.1 million) and expenses related to share issuance (RM3.8 million).

RHB Research similarly has maintained its “buy” rating on the stock with a fair value of RM1.96 per share.

The research team is positive on the recent transaction, stating that it will cut Alam’s gross gearings significantly.

“We view the transaction favourably as we expect it to cut Alam’s gross gearing to 0.67 times from 1.07 times as per its audited FY12 financial statement. We believe this opens up the possibility of Alam gearing up for more future earnings accretive acquisitions”

Similarly, Maybank IB stated that while the acquisition is a “short term dilution” to the company’s earnings per share, the proceeds will be timely to fund a new diving support vessel.

Maybank reiterates its unchanged “buy” call with a TP of RM1.90 per share.

“Our earnings forecasts and TP are unchanged pending clarity on its fleet expansion program,” said analyst Liaw Thong Jung of Maybank IB.