Spotlight on penny stocks, several firms told to explain price hikes

  • Business
  • Wednesday, 09 Nov 2011

PETALING JAYA: A handful of penny stocks on the ACE Market stole the limelight, with their shares seeing active trading and steep price hikes and regulators issuing a series of queries to these companies.

Harvest Court Industries Bhd, for one, hit limit-up yesterday, rising 34.9% or 30.5 sen in just one day to a record high of RM1.18 on volume of 23.6 million shares.

The stock has been shooting up since Oct 13 from 8.5 sen. It started the year at 13 sen.

Meanwhile, trading in the shares of Karambunai Corp Bhd, Envair Holdings Bhd and Focus Dynamics Technologies Bhd was halted between 9am and 10am yesterday, but the counters continued to have significant movements after they resumed trading.

Another ACE Market company, Sanichi Technologies Bhd, a plastic injection mould fabricator, saw trading in its shares suspended from 3.12pm, after gaining 0.5 sen to nine sen on volume of 81.3 million shares. It will resume trading today.

In its reply to Bursa Malaysia's query on unusual market activity (UMA), Sanichi confirmed that a German company had completed the first phase of its due diligence on Sanichi and is expected to conclude the second phase early next year.

Meanwhile, Harvest Court had denied reports that it was close to acquiring a new business, which was involved in converting agricultural waste into paper. It also refuted claims of an asset being injected into Harvest Court, believed to be a company called 1Green Enviro Sdn Bhd, which was linked to its substantial shareholder Datuk Raymond Chan.

According to filings with Bursa Malaysia, Chan had recently raised his stake in the company to 16.1%.

Harvest Court told Bursa that the company was subject to rumours and reports that were misleading, and reminded the public to trade cautiously in its shares and warrants based on fundamentals and formal announcements.

The company was already queried by Bursa last Friday for UMA, but it said there was no major event happening to the best of its knowledge that could have contributed to the significant movement in its share price.

As for Karambunai, it had explained that the movement in its shares price was due to pure speculative activity, and that there was no major event happening in the company that could have triggered the UMA of its share price.

Focus Dynamics, on the other hand, was likely to be a subject of a boardroom tussle after some shareholders called for the removal of the company's chairman. (See Page 4)

As for Envair, its share price fell 1.5 sen to 37.5 sen after some relatively strong gains and heavy volume recently. To recap, the company had last week announced an ambitious venture into the oil and gas sector.

But the loss-making manufacturer of air and water filters clarified to Bursa that its proposed supply of light crude oil was still at a preliminary stage.

It also clarified that the letter of intent for the proposed project was not related to the joint marketing agreement it had with Resscom Petroleum Sdn Bhd as reported earlier.

In relation to the supply of light crude oil, Envair said its board had yet to conduct any due diligence on the letter of intent from the customers it had mentioned, adding that it had also yet to secure the necessary supplies of light crude oil for the supposed sale as it was still negotiating with several potential suppliers from Iran, Saudi Arabia and the local market.

Envair also said there was no certainty the renewal for two of its licences both of which were issued by the Domestic Trade, Co-operatives and Consumerism Ministry would be granted.

The third licence under the joint marketing agreement, which was issued by Petroliam National Bhd (Petronas), did not have an expiry date.

Although the three licences held by Resscom did not permit it to trade light crude oil with Petronas, Resscom had presented to Envair that it endeavoured to register with Petronas Trading Sdn Bhd in order to trade with Petronas. However, it said there was no assurance that the registration would be successful, adding that the proposed joint marketing agreement was also at preliminary stage.

In general, Envair, Sanichi and Harvest Court were all viewed to be somewhat politically linked after some influential personalities joined their companies.

“The movement of these ACE Market shares was obviously due to speculative trades, driven by some major announcements they made pertaining to their business developments recently,” Kaladher Govindan, TA's head of research, said.

“Historical performance and the track records of some of those companies have not been impressive ... I suppose the prices of these shares, going forward, will remain quite volatile until investors see a clearer direction,” he added.

Another analyst said: “Most ACE Market shares have little, or no, institutional following at all. So they are usually played up by retail investors or the man in the street.”

Meanwhile, another analyst from a local research firm noted that the recent trend of the ACE Market shares was similar to past trends that indicated the near end of a bear-market rally, and warned investors to trade cautiously.

“Usually this kind of trend signifies that the bear market rally is ending ... I think there's going to be further downturn of the market ahead, particularly with the eurozone problem being far from over,” he said.

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