Investing

Should you sell JAKS to take profit?

Due to the frequent company announcements of my continuous buying of JAKS, many people have followed me to buy. Since the price has gone up so rapidly within such a short period of time, many people have asked me if they should sell to take profit.

As you can see from the company announcement that my wife and I have been buying JAKS continuously which is part of the cause for it to go up so rapidly.

As no share can go up continuously for whatever reason, many weak holders would sell to take profit. Price correction is usually mild and short for good shares.

What will you do if you have sold and you see the price continues to go up?

Most investors would not buy back at a higher price than the price they sold because of shame. Their track record would likely show that they are not successful investors because they do not understand JAKS’ IPP (Independent Power Producer) business.

Only investors who have some business sense can overcome their fear of shame to buy back at a higher price.

The reason why we bought so much of JAKS is because we believe JAKS has exceptionally good profit growth prospect although it reported losses for last year. It has about Rm 400 million profit during the next 3 years during the construction of the 1,200 MW coal fired power plant in Vietnam and 40% of the profit every year, in the next 25 years in selling electricity to the Vietnamese Government.

After careful study of the viability of the concession, a consortium of three banks, namely Industrial and Commercial Bank of China, China Construction Bank Corporation and Export-Import Bank of China are prepared to finance US$1.4 bil (RM5.81 bil) for the entire scheme.

The three Chinese banks accepted the power purchase agreement (PPA) duly signed by the Vietnamese Government as collateral to finance the project.

To illustrate the reason for not selling during price correction, you must closely examine the price chart of Lii Hen below:

You can see that the price of Lii Hen has gone up 850 % from 40 sen to Rm 3.40. It did not go up continuously without corrections. I can imagine many people would have sold it when the price has gone 100% or 200 % or 300% and did not buy back.

Lii Hen is the most efficient furniture manufacturer and all its products are sold to USA. It has more than Rm 100 million cash in fixed deposit.

I am obliged to tell you that I am one of the 5 largest shareholders of Lii Hen. I am not encouraging you to buy Lii Hen.

The only reason why we bought so much of JAKS is because we believe its share price can go a lot higher. We are also obliged to tell you that we are substantial shareholders of JAKS and we are not asking you to buy it. But if you decide to buy it, you are doing it at your own risk.

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