Friday, October 24, 2008

KNM Comments About BTimes Article

Posted on Business Times: SC probes KNM's abnormal intra-day trading

  • SC probes KNM's abnormal intra-day trading
    By Francis Fernandez Published: 2008/10/24

    Dealers say the intra-day trading pattern of KNM shares in recent weeks mirrors that of Iris at its peak a few years ago, with massive swings to the downside followed by upward buying momentum

    THE Securities Commission (SC) has initiated a probe into the abnormal intra-day trading activities of KNM Group Bhd shares.

    "We are examining the announcements made by the company (KNM) on Bursa Malaysia. If there are any indications of wrongdoing or breaches of securities laws, then appropriate regulatory action will be taken," an SC spokesperson told Business Times.

    The company was queried on October 15, following a sharp decrease in price and high volume of its shares. In its reply then, KNM said it was unaware of the cause for the unusual market activity.

    On Bursa Malaysia yesterday, KNM was the second most active stock, with 45.79 million shares traded. It closed RM0.035 lower at RM0.595. Its intra-day high and low were RM0.605 and RM0.580 respectively.

    KNM, which controls three per cent of the world's process equipment market, was the hottest oil and gas stock last year, helped by a growth story and backed by a string of overseas acquisitions.

    That strategy helped KNM, which has an order book of RM4.7 billion, to grow its profit over the past five years to RM188.3 million for the year ended December 31 2007 from RM25.57 million in 2003, as well as raise more than a billion ringgit this year from script issues.

    Nonetheless, long term shareholders such as the Employees Provident Fund and Fidelity International Ltd have been net sellers in recent weeks.

    Dealers say the intra-day trading pattern of KNM shares in recent weeks mirrors the trading pattern of Iris Corp Bhd shares at its peak a few years ago, with massive swings to the downside, followed by upward buying momentum.

    From September 2005 to May 2006, Iris rose from an eight sen a share stock to RM1.36 per share, with an average 200 million shares being traded daily.

    The Iris gravy train eventually left investors teary-eyed after market regulators designated the stock, and filed civil suits against Datuk Tan Mong Sing, Low Thiam Hock and Aeneas Capital Management, a US hedge fund, for market manipulation.

    KNM, like Iris, has 10 sen shares, with huge paid up capital base of 3.95 billion and 1.36 billion respectively. However, unlike Iris, big ticker houses such as UBS and JP Morgan are bullish on KNM. Bloomberg records show all major research firms are recommending investors to buy KNM, with a price target of above RM1.

Today KNM posted a reply on Bursa Malaysia:

(click on the image for a much larger view)

Actually I am lost!

Perhaps its my eyes but there seems to be a disconnect between what BTimes published and KNM's reply, for I see no where did BTimes mentioned anything about PE multiples!

Perhaps KNM management was referring to this article:
15-10-2008: Major shareholders exit KNM

  1. Announcements to Bursa Malaysia indicate that the Employees Provident Fund (EPF) disposed of about eight million shares in the company on Oct 8, trimming its shareholding to 272.8 million shares or 6.9% of the share capital.

    EPF had come into KNM with a 5.3% shareholding in mid-June last year and had been trading the company’s shares heavily but had never disposed of such a big block.

    An analyst from a local broking house said that the major sell-down could also be due to KNM’s foreign shareholders dumping their shares in the open market. “They are getting out of emerging markets and pulling back funds to their original country in a bid to support their own economy,” he told The Edge Financial Daily.

    The analyst was referring to Boston-based FMR LLC and Bermuda-incorporated FIL Ltd (Fidelity).

(It would have been nice that the writer named who the analyst is! Yes quote the source!)

Or perhaps KNM was referring to this article: 16-10-2008: KNM comes under selling pressure

Or perhaps KNM was referring to this article: Is the sharp drop in KNM's share price justified?

I really do not know! I am simply so confused!

Anyway what was interesting for me was the following:

What was interesting for me personally was this announcement posted by KNM,
Changes in Sub. S-hldr's Int. (29B) - Inter Merger Sdn Bhd

This is a company in which Mr.Lee has interest in and if you see
Changes in Director's Interest (S135) - Lee Swee Eng

The following was most interesting:

  • Acquired 23/10/2008 11,376,000
    Disposed 16/10/2008 72,271,600

Disposal was massive!

And did you see the point 2? Disposal of 72,271,600 shares - sold down by financier which is now resolved

And more interestingly, the company DID a share buyback during this same period! Notice of Shares Buy Back by a Company pursuant to Form 28A

Look at the details.

Date of buy back from : 16/10/2008
Date of buy back to : 22/10/2008

Total number of shares purchased (units) : 22,190,200
Minimum price paid for each share purchased (RM) : 0.415
Maximum price paid for each share purchased (RM) : 0.690
Total amount paid for shares purchased (RM) : 13,544,216.13


busythinking said...

This is an interesting piece of analysis. I have been searching for reasons for the big flux in KNM's price but found nothing valid until I read your article. Thanks!

Naruto said...

THE SHARES WERE SOLD BY FINANCIER WHICH IS NOW RESOLVED. How was this resolved? By company Share Buybacks? By Mr Lee's own purchase? Or by Financier's repurchase? And the announcement did not disclose the actual problem of this financier, whether the disposal is purely margin call, financier liquidation due to credit crisis or actual share disposal by shareholder.