Tuesday, 2 December 2014

Good articles (2)

When a prospectus becomes a doorstop (KiniBiz)

Recently, an 800-page prospectus found its way to tiger as well. Yes, 800 pages! Let that sink in for a moment. Do you feel the weight of 800 pages on your investing shoulders yet? Yes? Moving on.

In the spirit that the prospectus is similar to a scientific report, Tiger proposes a form of abstract, something short that covers everything the prospectus would cover, but without going into too much detail.

Maybe the prospectus could include an executive summary, maybe about 10 pages, 15 at most? Why not add forecasts in the executive summary, like the old times? With forecasts alongside the plan the company has in place for the proceeds raised from the listing, prospective investors can get a clearer view of what the company is offering, and in turn may be a better sell for the company.

Transparency, a plan, and recommendations from a few trusted local banks? That sounds like a recipe for a successful fund-raising to Tiger.

At the same time, the shorter (and lighter!) document would definitely be more palatable and more easily digested than 800 pages. By simplifying the document, companies are given the opportunity to present themselves to a barely tapped market of investors, due to the ease of reading of the summary.

Tycoons see their O&G investment value cut by almost half

With the oil and gas (O&G) sector being the hardest hit in the current market rout, tycoons who own significant stakes in these companies have seen a huge loss in their net worth.

These tycoons had collectively had their shareholding in these companies valued at some RM15.89bil when O&G stocks were trading at their highest prices. The fall in global crude oil prices and the plunge in the value of O&G stocks on Bursa Malaysia saw the value of their shareholding cut by almost half to some RM7.86bil yesterday.

What the article doesn't mention is that most of these tycoons have bought the companies at a much cheaper price and are thus still sitting on a handsome profit.

Quite different from the minority investors who bought these stocks recently (or at overpriced IPO prices) and are feeling the losses.

Bumi Armada is especially painful since the stock is not only trading way below its IPO price, but also below the price of its recent rights issue. Also, there seems to be persistent insider selling, even recently at these lower prices.

Somewhere in the (may be not so distant) future there must be a moment where it makes sense to start dabbling in these stocks. For the time being, catching a falling knife is not always the best thing to do.

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