Reflections on Volume

Big volume without further upside equals distribution
Big volume without further downside equals accumulation

Volume tends to peak at turning points
Volume often precedes price movement
Volume is a relative study

Wednesday, November 24, 2010

3.65 and 2.30

Taken from Malaysia-Finance Blog
Blogger Buyer said...

Hi S.Dali,

IJMLand will resume trading tomorrow, and since the rm3.65 is fixed, what is the expectation under this condition?? will it be only trading around 3.6 range?
Pls advise
Thanx in advance

5:19 PM


thats a loaded question which plenty of ppl will pay good money to know ; )

if its a straight out G.O. ... then it should trade slightly below 3.65, maybe 3.60 because many ppl will give a bit discount so that they don't have to wait n go thru the exercise.. but in a G.O. there is an end buyer willing to pay at a fixed price

this is a swap exercise, and unlike the uemland sunrise deal, it will be swapped into a newco... one will notice that ijmland valuation has a higher premium than mrcb, which is fair considering mrcb's higher PB

does it mean that ijmland will go to 3.65??? well, maybe ... its not as straight forward .... as u can see, what if both parties just pull a figure from thin air and say ijmland swap at 5.00 and mrcb swap at 4.00, does that mean both will still go to those levels? its a swap, which means u will get something for the swap, in this case u get shares in the newco which will be listed as well

the key IS will everybody clamour to have shares in the newco ... if the swap was at 5.00 for ijmland, even krishnan tan won't want the shares in the newco, and will sell even at 4.80 or 4.50 or even 4.00 ... hence the key is whether ppl want to own shares in the newco

collectively, the newco will have a pb of around 2.1x, which is highly acceptable ... the merged entity will be a force to be reckoned with, and this merger basically confirms that the newco will get the mega Sg Buloh project, which will underpin strong interest, plus the newco will have very good liquidity, hence the controlling stakeholders and substantial shareholders will be silly to just offload shares at 2.30 and 3.65 for MRCB and IJMLAND respectively as that will mean they will get zero shares in the newco ... EPF won't sell, IJM Corp won't sell and definitely Krishnan Tan won't sell because they all know after the exercise, the newco will move even higher

if anything, the stakeholders will want to own more shares plus the merged entity is really a 1+1=3 just like uemland-sunrise

methinks both ijm land and mrcb will trade around 3.50 and 2.25 for the first hour to digests the traders and contra players .... before moving to 3.65 and 2.30, and then surge past those levels in a day or two ... because seriously, none of the stakeholders will be selling, they want shares in the newco .. you add in institutions and foreign funds into the fray who want to own a key property vehicle ... there are a lot more buyers out there than genuine sellers

PS. Dali, if you disagree this appears here for my record let me know - I'll then delete immediately.

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