This is my first Case Study post.
I love to make comparisons of similar cases with different stocks to ensure that a "pattern" exists. How accurate is this? Really, I have no idea. I could only tell you that it works for me.
OK, today's case, what happens to share price when a company listed in a 2nd Board trensfers to the prestigious Main Board?
Case Sample: Tanjung Offshore Berhad
Main Board Listing Transfer Date: 8 Sep 2006 Label 6
Bonus Issue transfer Date: 29 Aug 2006 Label 5
Ex Date Bonus Issue Date: 17 Aug 2006 Label 4
Bonus Issue Announcement: 2 Aug 2006 Label 3
Bonus Issue Proposal: 24 Jul 2006 Label 2
Proposed Transfer & Bonus Issue: 27 Apr 2006 Label 1
Let's mark the dates on the chart.
Attached the chart with dates marked with horizontal blue line.
Chart is bonus issue adjusted.
Observations:
Label 1
Price movements upwards. This is most likely due to insider pushing up the stock and the public chasing after the stock when announcement was made.
Thereafter, share price weakens due to punters selling on news.
However, notice that there is a support on this stock.
This is probably due to longer term investors seeking bargains or punters seeking reentry levels.
Label 2
Bonus Issue is proposed.
Everyone jumps on the bandwagon now.
Label 3
Now we even have ex-date etc.
Price movements paused. Most likely reason is that there will be some who would rather not wait for such a long period and decides to cash in.
About 20% ROI in about 3 months? Not exciting but sufficient :)
Label 4
Ex Date. Perfect scenario for punters ;)
Why? Bonus issue have yet to be credited. Liquidity is low.
Assumption is that syndicates or any large beneficiaries of the bonus issue would want to distribute at a higher price when the bonus issue is credited.
Label 5
Bonus issue credited.
Would you have expected the share price movement to move otherwise? :P
Short term investors are all rushing to the exits now.
Not a bad return if you ask me. About 40% ROI in 4 months? :)
Label 6
Transfer completed.
Previous distribution took another 2 days to complete before fundamentalists bargain hunted. A stock in Main Board, generally, gets into the radar of institutionals and performs better than their 2nd Board counterparts.
If you managed to catch the near top thereafter, you would have obtain an ROI of about 70% in 5 months, assuming you have entered during the Label 1 period.
Now, do you believe that ROI 20% per annum is no big deal? :)
