In the last few days, many people including experts bought Gadang before the ex date for the free bonus shares, warrants and share split despite its unpromising outlook. Basically the company cannot make more money in the current year than last financial year. According to my share selection golden rule, if you buy Gadang, you will lose money because at the end of the year when it announces reduced profit the price will surely fall.
Basing on the open information that Gadang has completed a large part of their contract works and it has Rm 604 million worth of contract works remained in its order book. Moreover, its profit from its property development is uncertain in view of the oversupply of properties in every town and city in Malaysia.
It announced 5 sen EPS for its 1st quarter ending August 2016 which is most disappointing and most smart investors will know that it cannot make more money in this year than last financial year.
Now the price of Gadang has fallen 3 sen per share this morning and it is still falling as I am writing this article.
The moral of the story: there is no free lunch. Basic fundamentals in share selection is still most important.
If investors know that Gadang can make more money this year than last financial year its share price should be going up.
People got short memories. I trust investors will remember this lesson.