Prominent investor sets online forums abuzz
Koon Yew Yin questions the downgrade of Dayang
OIL and gas counters have been in the spotlight of late, as many of them recorded dramatic increases in their share prices, and then fell as investors took profit.
At the forefront of all the attention, however, was O&G support services provider Dayang Enterprise Holdings Bhd.
Since the beginning of the year, Dayang skyrocketed by a spectacular 216% until mid-March, after which it fell some 23% over the past week.
As would be expected, social media and online forums were abuzz with heated discussions on whether or not to hold on to the stock.
The discussions took a sensational turn, however, following a series of blog posts by prominent investor Koon Yew Yin.
Koon, who is known for making big bets on certain listed companies and then promoting them through his blog or during road shows, was seemingly irked by three research houses turning cautious on Dayang and downgrading the stock – leading to a plunge in the share price.
The investor, in a recent blog posting on March 19, even suggested that the downgrade of the stock was an “underhand trick to buy Dayang at cheaper prices”.
Koon, 86, a retired civil engineer and prominent figure in the corporate scene, was among the founders of Gamuda Bhd, Mudajaya Bhd and IJM Bhd, and has gathered a large following among retail investors.
He began buying Dayang shares last month, on February 28, after the O&G player reported its fourth quarter results - at 60 sen per share.
Dayang’s performance, he says, complied with his “golden rule”, which is that it must report profit growth for two consecutive quarters, and has a price to earnings ratio of below 10 - before he decides to buy it.
Since then, Koon has written several bullish posts about Dayang’s future prospects, and even has a RM3 target price on Dayang, which he stresses is “easily achievable”.
On Friday, the counter stood at RM1.33 after falling from a high of RM1.71 on March 15.
Back to the blog post in question, Koon claims that the three financial institutions downgraded Dayang “because the price has shot up too rapidly”.
“As a result, the price dropped 24 sen with only 36 million shares changing hands which indicates relatively few people wanted to sell,” he writes.
Koon says many of his followers have also bought Dayang shares and sought his opinion on the recent downgrading of the stock.
Challenge from Koon
“In fact, I would like all these three financial institutions to openly declare if they have Dayang shares and whether they are using this devious trick to buy some more shares at cheaper prices,” the post reads.
In another post on March 19, he adds more fuel to the fire, saying that unless “one particular investment bank could confirm that they did not hold Dayang share(s), I will not believe the published article is not another skilful use of underhanded tricks to buy Dayang at cheaper prices”.
While the posts have created a lot of buzz among his large following, realistically, it is unlikely that research houses would promote stocks that their investment side is buying, because of the Chinese walls present.
Also, the regulators can easily monitor the trading activity by these investment banks and match it with the research material being produced by their research houses.
If there is any cause for suspicion, the regulators can haul them up for questioning and further action.
Also, it is quite natural for analysts to turn cautious on a stock that has seen a steep price surge, if they feel it has run ahead of its fundamentals.
Three research houses had downgraded the stock over the last two weeks, causing Dayang’s share price to fall.
In its March 14 report, PublicInvest Research notes that Dayang’s share price had more than doubled from 80 sen following the announcement of its strong fourth quarter.
“We err on the side of conservatism however, though we keep forecasts unchanged,” it says, lowering its call to “neutral given the lack of upside” for the stock.
On March 18, Kenanga Research downgraded the stock.
The research house says that while Dayang had posted strong Q4’18 results, lifted by lump-sum work orders, it believes “such outperformance is unlikely to be repeated.”
HLIB Research was the third to downgrade the stock, on March 19, dropping the stock to “sell” from “buy.”
It said while Dayang’s outlook remained solid, it expects the share price to “take a breather” in view of weaker quarter-on-quarter earnings and slower contract flow.
Noting a peak return of 200% achieved since October last year, the research house justified the downgrade, saying it believes the market was currently pricing in “much stronger earnings expectations which may not be sustainable.”
Looking at all three reports, it is also interesting to note that their target prices on Dayang range between RM1.15 and RM1.25, a far cry from the RM3 target price Koon has set his eyes on.
In the past, Koon has placed his bets on several other stocks, including oil and gas company Carimin Petroleum Bhd and construction company JAKS Resources Bhd, of which he just became the single largest shareholder.
Koon’s presence in these stocks is impactful although the resulting performance of those shares can be both positive or negative. Moving forward, regardless of the opposing views held by investors and analysts, how Dayang shares perform in the near future will depend on the company’s financial performance.