IJM oh IJM

MANAGEMENT must be prudent on buying investment opportunity. The market will teach you a painful lesson.

IJM just paid about RM 150 million for SCOMI (sampah stock).

But market teach you a lesson by wiping RM 762.52 million from the market capitalization for two days. 

So what say you????



KUALA LUMPUR: About RM262mil was erased from IJM Corporation's market capitalisation on Wednesday, as investors were negative about its purchase of a 25.08% stake in Scomi Group for RM149.3mil cash.

At 4.01pm, its share price was down 19 sen to RM4.56 , the lowest in one year.

The FBM KLCI inched up 0.87 of a point to 1,619.45. Turnover was 692.84 million shares valued at RM992.21mil. There were 399 losers to 227 gainers.

Based on IJM's paid-up of 1,381.7 million shares, the 19 sen decline erased RM262.52mil from the market capitalisation.

This decline extended from the sharp 7% share price fall on Tuesday, which shaved its market capitalisation by RM500mil.

Affin Investment Research, which had described the 7% decline in share price as excessive, said it maintained its BUY call with an unchanged RNAV-based target price of RM6.52.

The research house said it was Neutral on IJM's acquisition to subscribe for 119.1mil new Scomi Group shares for RM39.3mil cash or 33 sen per share and redeemable convertible secured bonds of an aggregate nominal value of RM110mil in cash.

"With the subscription of the new ordinary shares, IJM Corp will hold 9.1% of the enlarged share capital of Scomi Group under the minimum scenario and 7.8% under the maximum scenario. In the event of conversion of the Scomi Group bonds, shareholding of IJM Corp may be as high as 25.1%," it said.

Affin Research said Scomi Group posted a massive loss after tax of RM296.5mil in FY11 (FY10: -RM192.9mil) due to unrealised forex losses, impairment losses as well as other one-off charges related to a corporate restructuring exercise.

In 1HFY12, Scomi Group recorded a lower net profit of RM19.5mil (1HFY11: RM25.0mil) as higher profits from oilfield services and energy logistics were more than offset by operating losses in transport solutions.

"While there are opportunities and complimentarity arising from the proposed subscriptions, there are risks and questions, including future profitability of Scomi Group group operations, valuation of Scomi Group shares and who will drive Scomi Group after the transactions," said the research house.