In some ways, as much as we do not condone such abhorrent practices, we can’t help but feel indebted to some of you here who have been spreading fear and doubt that ultimately led to the over-exaggerated selloff. Admittedly, this will always be a prevalent issue with small and mid-cap stocks that have limited liquidity and few institutional backers. We certainly don’t think that there would’ve been as many shares available to us below the key support levels had there not been some level of fear already imbedded within the mindset of the retailers who were quick to dispose at the first signs of trouble. While it is true that technicals may not be working in this stock's favour at this particular point in time, we firmly believe that it only tells one side of the story. Ultimately, like most of you here, we did not invest in Ideal due to its technical strength but rather because we realised that it was a fantastic business that is able to generate consistent earnings and has a growth trajectory unlike any other company that we have ever seen on the Malaysian stock exchange. And since we’re in this for the long run with an investment horizon of no less than one year, we did not hesitate to accumulate when the opportunity arose yesterday as we are fairly confident that over time, the stock will certainly appreciate to reflect it’s true intrinsic value. We’re not saying it’s going to happen tomorrow or the week after but it most certainly will given enough time. If it’s anything to go by, the very fact that the stock rallied nearly 100% from RM0.70 to RM1.40 in just under 2 months and then hit limit up on a single trading day is in itself sufficient evidence demonstrating that strong buy-side demand is indeed present, albeit not sustained. And not having sustained demand on a daily basis quite simply does not constitute a valid enough reason for us to even consider selling our position in such a fantastic business, especially when the stock more than compensates for a lack of daily activity with a sudden surge in demand when new information comes to light.

On a personal level, we are also of the conviction that technical analysis is not an exact science and does not apply very well in reality to stocks that are thinly traded such as Ideal whereby bid-ask spreads tend to be disproportionately large. For instance, a single broad lot order (100 shares) placed immediately prior to closing could create a completely different candlestick that is simply not reflective of the day's trading activities. Hence, swing traders looking for clues in the daily charts may be inadvertently misled into believing a bullish signal had formed when in reality, the day’s transactions had been very much dominated by the bears. The converse also applies to bearish candlesticks that form at the end of days with largely bullish daily transactions due to a single well-placed broad lot sell order right before closing. Thus, we believe that it would be more prudent to rely more on fundamental rather than technical analysis when when making investment decisions over such illiquid counters such as Ideal. All in all, we still remain very bullish on the company in the long-run and unless new material circumstances arise that dramatically alters our view of the company, we see absolutely no reason to abandon our investment even in light of the recent selldown which we firmly believe to be a one-off incident - most likely by a disgruntled and/or impatient early investor. 



As always, our post is merely a response to some of the queries we have received over the past 36 hours and we are in no position to give investment advice to the public at large. As such, you’re advised to trade and/or invest at your own risk and to bear the full consequences of your investment decisions. We wish you all the best and we hope that you will always be governed by reason and not emotions, especially when making your respective investment decisions.



Regards,

Alan.

Hi, my name is Alan and I'm one of the founding partners at Quantum Apex Investments. Some of you may have read the articles we wrote about this company a few weeks ago. Under ordinary circumstances, it is not usually our policy to post comments on public forums but in light of yesterday's extraordinary turn of events and the emails which we subsequently received seeking our counsel (presumably from some of you here), we thought we will make an exception - just this once.

Like many of you, we were also taken aback by the selldown that occurred between 11:32:33 and 11:42:32 yesterday. Excluding the minor transactions that occurred in-between the large sell orders, our in-house trading platform computed that a total of 1,677,500 shares were disposed by key player(s) in that relatively brief time period of 9 mins 59 secs.

We were unable to ascertain if the transactions originated from a single major player or multiple operators but what we are certain of is that the entire disposal exercise took place over 5 distinct tranches during the course of the above-mentioned timeframe of just under 10 minutes. You will find all 5 tranches along with their corresponding price ranges listed below for ease of reference :

(1) 11:32:33 - 500,000 (RM1.62 - RM1.50)
(2) 11:37:41 - 477,500 (RM1.55 - RM1.43)
(3) 11:38:02 - 90,000 (RM1.43 - RM1.39)
(4) 11:41:58 - 110,000 (RM1.50 - RM1.43)
(5) 11:42:32 - 500,000 (RM1.48 - RM1.40)

When our algorithms first picked up on the selldown, our first reaction was to enquire if any of the company's major shareholders were disposing and if such activities were set to continue. Our contact, who we can safely say has been relatively reliable in the past with regards to the comings and goings of the company, categorically confirmed that this was not the case to the best of his knowledge and that he was not aware of any immediate events in the horizon that could lead to such a selldown. Having established this, we immediately got to work accumulating the excess shares being offered for sale by the retailers in the aftermath of the flash crash.

As value investors, opportunities like this don't come by often and as one of you here has rightfully pointed out, we must admit that we were pleasantly surprised by the rapid acceleration in price the stock underwent after the release of the last quarterly report. We knew the company was deeply undervalued but we simply never expected the revaluation to happen almost overnight. Needless to say, our articles somewhat contributed to the limit up and to this day, we still regret having published them too soon as it only served to prevent us from increasing our stake in the company even further. Fortunately, all that changed yesterday.

Between 11:45 AM and 12:00 PM, we successfully doubled our stake in the company by aggressively purchasing as many shares as we could from panicking retailers who were kind enough to offer us their shares for under RM1.50 (which we considered to be a key support level and hence, our accumulation ceiling). We did this both systematically and discreetly so as not to give the appearance of an active mass buyer as we realised that this information, if made public via a single aggressive buy order, was very likely to halt the retail selling of shares at lower price levels. Thus, instead of utilising market orders that fill based on quantity rather than price, we purchased shares at individual price points as and when they appeared in the sell queue under our price target ceiling.

In the end, our strategy proved successful as we were able to rapidly mop up any excess without overpaying for any of the shares we were acquiring. Considering our initial investment was at an average cost of just over RM0.90, we were very pleased to be able to end the day not only having almost doubled it at a steep discount to intrinsic value but more importantly, to still come out with an average cost well below the prevailing market price. In the immortal words of Warren Buffet, it was like purchasing a dollar for 50 cents.