BACKGROUND

Paragon Union Berhad (Paragon) was listed on the KLSE in 1994 with its business involved in the manufacturing and distribution of carpets for commercial and automotive industries. Loss making for many years and deemed as a non-happening counter, Paragon finally came to life in  2021, with the emergence of a new shareholder, Mr Koon Hoi Chun. His purchase of 60.41% stake via his private vehicle AKK Capital Sdn Bhd, triggered a General Offer (GO) of RM0.55 and the whole exercise was completed by March 2021. On the last day of the offer, the trading price of Paragon was at RM1.77, a hefty premium of RM1.22 over the offered price, suggesting a lot of new potential for Paragon under the new owner. Price has gradually appreciated since then and more business clarity came in December 2022, where the company announced diversification plans into the Recycling Businesses, primarily focusing on aluminium and copper recycling. 

PRICE CHART

Based on the daily chart, Paragon shows a very strong uptrend since breaking out of the 4 month consolidation band between RM2.60 to RM2.80. It has had a stellar start to 2024, trading at a new year closing high of RM3.32 at the time of writing. Having broken the psychological resistance of RM3.00 on 3 Jan 2024, the price did not even retest the consolidation band during the recent mini selldown in mid January, touching only a low of RM2.91, again demonstrating the strength of the buying momentum. The all time high price of RM3.45 looks likely to be tested and broken in the near future.

Elliott Wave Interpretation

Since the price of Paragon is still making new year highs at time of writing, we shall look into Elliott Wave analysis for possible price targets.

Breaking down the daily chart, we can see Wave 1 impulse wave started at RM1.22 on 20 July 2022 and ended at RM3.45 on 2 May 2023. It then played out the Wave 2 corrective wave from RM3.45 to RM2.50 (17 Sept 2023). We are currently in a up motive impulse wave 3 with a minimum target of RM7.08, based on Elliot Wave theory projections.

WHY THIS COULD BE A POTENTIAL MULTI BAGGER

From my previous posts, my readers will know that I am a big believer in identifying thematic and pattern trade setups. Hence, a case study which I will share is Complete Logistics (now known as Hextech), which had the similar trade setup as Paragon.

The chart tells the whole story! This is what we call the “new owner and new business” playbook. (credit to blogger: PureBULL for coining the term) 

Datuk Eddie Ong triggered a general offer (GO) after he bought 29.11% of Complete Logistics on 7 Dec 2021. Price offered was RM2.50 per share, valuing the company at RM321 million. After the GO closed on 11 Jan 2022, the price started its parabolic ascend topping out at RM30.60! That is an astounding gain of 1200% in just 1 year! It has since declined to the equivalent of RM22.60  after a bonus issue of 15 to 1), which is still a ten bagger! Complete Logistics has since changed its business from logistics to technology and has been renamed Hextech Bhd.

CONCLUSION

Paragon is showing great price structure with the “new owner and new business”playbook in full swing. Given the small number of shares issued (only 84 million) and small market capitalisation at RM270 million, could Paragon be the next Complete Logistic/Hextech which saw its market capitalisation go from RM320 million to a high of RM3.5 billion? 

Disclaimer: This blog is created for sharing of trading ideas only. It is not in any way or form meant to be an inducement or recommendation to buy or sell any stocks. Consult your financial consultant before making any financial investments