After the capital reduction and share consolidation exercise in August, Narra's issued and paid-up capital became 31,093,800 shares. They are issuing 348M new shares to HLI so their total paid-up became 349M. This info can be obtained from their Bursa announcement.

erico, the writer's assumption on the paid up is erroneous as it is 379M and not 479M and as such the computation on value that followed from that is flawed.

After the divestment of the concrete and cement business to Narra, HLI will still have Yamaha, guocera tiles, fibre board and newsprint which contribute an eps of more than 0.50.

Price shooting up as expected. My preference is to hold Narra as it's projected eps is 0.23 and it's peers are currently trading at 20x PER. Furthermore they are currently embarking on their expansion project which will double their production capacity. So barring a collapse in cement price, it should have more potential.

You will get 864-units of Narra. It's my understanding that the formula for the CA calculation of entitlement and exercise price is as follows: Assuming RM7.21 is the closing price before the ex-date, RM7.21-RM1.08/RM7.21 = 0.8502 which is the adjustment factor. The adjusted conversion price will be 0.8502 x RM7.20 = RM6.12. The adjusted conversion ratio will be 6-lots x 0.8502 = 5.10-lots. Verify with your remisier.

If you notice, they will not allow Narra to drift too low. For the past few days they have pushed the counter back up towards the close. Yesterday they bought 50-lots from the seller and today it was 40-lots from the seller.

And when, like you rightly pointed out, Narra is undertaking expansion to double their production capacity.

Difficult to gauge whether it will drop further. But like I said, I believe the worst is over as it's difficult for me to accept that a counter with a combined eps of 0.77 can be trading at below 10x PER especially when Narra is a cement play.

Am still optimistic on this counter. Have a feeling that the worse is over. Just sit tight and wait till the ex-date.

If I were him I would probably let it drop until the last day before the ex-date. Then I would collect at the lower price as I know my company real value.

Yes, that's a big contributing factor. However I still have trust in the fundamentals though it might drop further tomorrow.

A lot of folks are not prepared to hold till the ex-date as they are unsure about the price after that. When there is uncertainty there is fear.

Narra will probably weaken due to the new shares issued but I don't think it will go below RM3 bearing in mind that it's peers are trading at 20x PER. If it really dips to as low as RM2.30, grab as much as you can.

HLI will definitely drop on the ex-date as the reference price only adjust for the par and not market value of Narra. It depends on how much it will drop. If it can stay above RM5 and assuming that you can dispose of your Narra at above RM4 when it's credited into your account, the margin is still substantial.

HLI FY2014 eps is 0.54 and dividend is 0.25. Narra's projected eps for 2015 is 0.23. Tasek and Lafarge PER is above 20. Did the maths and am still collecting.

I will need to take stock of my financial position when the time comes before making a decision. May do two or more years until my youngest child completes her overseas education. Furthermore my job is generally stress free and the work load is quite light.

Yes, feel the same. Sometimes things doesn't make sense.

Beware of those who constantly brag about their stock pick and try to entice you to follow them. They have an agenda. Normal investor would not keep revealing their buy and sell prices especially if they claim their trade are huge.

Stay with the fundamentals, you won't go wrong. Due to the bearish sentiment it will need a bit longer to realise its value though. Am still collecting.

Novice, the 0.23 is the projected eps with the increased share base. If you divide the earnings of 90M with the 379M shares, you will get that figure.

Novice, the projected earnings for Narra for FY2015 is 90M. The eps of 0.23 is computed from the paid up of 379M shares.

No, cowboy, it's already been confirmed that par value will be used, thereby RM1.00 x 1.08 = RM1.08

I think it was trading around the RM5+ level when the exercise was first proposed which is around the PE 10 region. So that should be a good reference point. Anything above that after the ex-date would be a bonus.

That's why we should stay with the fundamentals and ignore the noises. Again everyone's strategy may be different, depending on whether they're investors or speculators.

It is to be expected as 348M new shares will be listed soon. Expect it to go lower. If you currently own HLI and Narra shares, you would opt to sell your Narra now as your new Narra shares are theoretically at RM1.00 cost.

Thanks for the wishes. Am still steadily collecting. Expect it to move up towards the ex-date.

There's no necessity to worry if you trust in it's fundamentals. HLI's eps is 0.54 and that of Narra is projected to be 0.23. Let's give a conservative PER of 10 to 15 for HLI but what ratio would you assign to Narra bearing in mind that the PER of Tasek and Lafarge is now above 20.

8wpw, the ex-date indicates that the seller will get the distribution and not the buyer. The entitlement date is for the company to identify and confirm the rightful holder THAT EXIST IN THEIR RECORD on the said date and time. After the verification they will then credit the Narra shares into your CDS a/c WITHIN 8 market days from that date. In a nut shell, you can't sell your Narra shres until it's credited into your a/c but you can sell your HLI shares immediately on the ex-date. It's similar to dividend payout.

8wpw, No, you should be able to sell your shares on the ex-date and still receive the share distribution. The ex-date is the date that the seller, not the buyer, will be entitled to the distribution. The entitlement date which is usually 2 days after the ex-date is the cut-off date to identify the final shareholders to ensure they receive the entitlement. So you can sell it on the ex-date which would have factored in the RM1.08 reduction and still receive your Narra. You can verify with your remisier.

8wpw, in your scenario you are assuming that HLI price can be maintained at that level after the Narra share has been distributed. Realistically HLI price will drop after the ex-date as the deduction is based on Narra's par value and not market value which somewhat distort the price. The price of Narra has already been factored in by most investors. Having said that, there is still a lot of room for HLI to move up from it's current level.

Cowboy, the paid up capital of Narra as at 1st July 2014 (before the capital reduction) is 62.188M shares which was halved after the exercise. This info can be obtained from their 2014 annual report. Combined with the new shares of 348M, it's only 379M.

Cowboy, after the recent Narra's capital reduction and the 348M new shares issued to HLI, the paid up is 379M, not 480M, so the eps is 0.23.

The FY2014 nett profit from Hume Cement is 71M and 10M from Hume Concrete. According to UOB KayHian this is despite Hume Cement commencing commercial operations only in April 2013 with low utilisation rates of 73-75% (vs the current level of more than 80%). Assuming a 85% utilisation rate they have projected a 90M profit for Narra in FY2015 which works out to an eps of 0.23.

Novice, the projected eps of Narra after the excercise is slightly above 0.20.

I have read somewhere in an investment write-up that the 10M contribution will be compensated by savings from their redemption of high interest MTN with disposal of lower yield unit trust. So there's negligible effect on their bottom line.

HLI's eps for FY2014 is 0.54 and does not include the cement business so it will not lose an income stream though there will be a slight reduction of RM10M from Hume Concrete. Narra's eps will be above 0.20 with the completion of the exercise. If one will to assign a PER of between 12 to 15 times, there's no cause for concern. So just sit tight.

There's a risk that the issuer will also use 1.08 and not the market price to deduct from the exercise price for the CA. That's probably the reason that the CA is not moving proportionally.

Yes, I remember. He was bad-mouthing this counter but towards the end he claims that he held some. Not much credibility.

It's from thier tiles, motorcycles, fibre board and newsprint business.

HLI's profit for 2014 does NOT include the cement business.

Narra's principal activity after the exercise will be cement manufacturing though there will be some contribution from the concrete business. The furniture business is neglible. So it will be known as a cement counter.

The EPS for HLI alone is 0.54 and if you will to assign a PER of 12 to 15 times the price would be 6.48 to 8.10. Now the EPS for Narra is about 0.20 plus and growing. Let's assume a PER of 15 times which would value it at more than 3. Bear in mind that the PER ratio for Tasek Cement and Lafarge is 17-18 times and 21-23 times respectively, if I am not mistaken. So if rational assumptions can be applied, the price still has much room to move up from the current level.

FY2014 not RY. Sorry.

Just received the HLI 2014 annual report today. The EPS for RY2014 is 0.54 and not 0.52 as mentioned earlier by me. Apologies.

Word of caution. The above is merely an assumption and not anything definitive.

After the exercise, the eps of Narra would be around 0.20 with the injection of the cement and concrete business and 0.52 for HLI. If one will to assign a conservative PER of 15 times without factoring in any holding company discount on the SOTP valuation, the price may exceed RM10.

Let's put things in the proper perspective. Sona is a SPAC which has just committed on their QA and is now going through all the necessary procedures to obtain the mandatory approvals. It's a step by step process which cannot be rushed. Meanwhile it's not operating any businesses or generating any income (other than interest/dividend from their cash holding)and as such the price should not spike up or plunge down sharply in the short term. If the market views the Salamander acquisition as positive for Sona than the approval will serve as a catalsyt for the price to move up. On the other hand investing in Reach will require blind faith as you are basically hoping that the management will be able to obtain a great QA for the company in the coming days.

It gives me confidence that someone who claimed to have disposed off this counter at a high price and making a tidy sum keeps coming back to dampen sentiment in this counter. Will collect a bit more.

It expires in December 2020. Long way to go.

UOB KayHian has given it a target price of RM7.95 in it's latest report dated 5th September with potential to rise to RM8.34. RHB has previously rated it at RM8.57. I reckoned it can go to RM9.00.