Unfortunately, many shareholders including a famous chartist and fund manager believed that Dayang’s right issues would dampen its share price. That is why they sold earlier and expected to buy back at cheaper prices. But the price did not drop. Instead, it continues to go higher and higher. If they are not willing to admit their mistake and buy back Dayang at higher prices, they will miss this golden opportunity to make more money every year for many more years to come.
Dayang announced its right issues and share placement on 17 May when its share price was about 90 sen. Since then, the price has been going higher and higher to peak at Rm 2.13 as shown on the price chart above.
On 1stOct at the EGM, all the resolutions including the right issues and share placement were passed. After passing all the resolutions, the price continues to go higher and higher. Obviously, the right issues and share placement did not depress the share price.
Why right issues entice investors to buy more shares?
In fact, many smart investors are enticed to buy more shares so that they are entitled to buy more right issues at a special discount. According to the SC rule, the company can give up to 50% discount from the 5-day average price before the last day for the entitlement. The company will most likely sell the right issues at a discount of 50% to benefit all the shareholders including the controlling shareholders.
Petronas will not stop pumping oil
As a Dayang’s shareholder, I can imagine Petronas will continue to pump oil for a very long time. Even if the petroleum price dropped by another 50%, Petronas will still continue pumping oil because the cost for just pumping is very small. Petronas has already paid billions of Ringgit for the construction of oil rigs or oil platforms. It is still very profitable to just pay for pumping and selling the oil.
If you google you can see that the average cost for an off shore oil rig is US$ 600 million which is like a city and they all need maintenance and repair.
Dayang is the largest maintenance contractor in this region where Petronas has discovered a total of 163 oil fields and 216 gas fields.
Dayang’s competitors are Carimin, Uzma and Petra Energy which are relatively small. That is why Petronas always award more maintenance contracts to Dayang.
As long as Petronas continues to pump oil, Dayang will have more oil rigs maintenance contracts and its share price will continue to go up higher and higher.
When to sell Dayang?
Only foolish investors will sell Dayang or any stock if the company can continue to report increasing profit. I will start to sell Dayang when the company starts to report reduced profit. As I said earlier, as long as Petronas continues to pump oil, Dayang will continue to make more and more profit and its share price will continue to go higher and higher.
As the price goes higher my collateral value will continue to increase and I will be able to buy more and more Dayang shares for a long time.
My intention for writing this article is honourable and sincere. 90% of my holdings is Dayang. Whether you buy or not does not make any difference because the daily traded volume is more than 10 million shares.
Obviously, many rich fund managers are buying aggressively even at Rm 2.00 per share as they expect to see a higher profit growth in the 3rdquarter which will be announced before end of November.