Posted by NOBY > 2015-06-11 17:25 | Report Abuse

I agree that a company with higher debts deserves a higher Ke due to the risk. In that case, if the private placements is used to par down debts, wouldnt the Ke at least stay the same as before the PP if not be better ?

Posted by kcchongnz > 2015-06-11 18:17 | Report Abuse

Posted by NOBY > Jun 10, 2015 09:39 PM | Report Abuse
KC, when a company needs cash. Is it better to go for private placements or take on new debt assumimg tht it doesnt yet hv the free cashflows to fund a capex etc.

Noby, lets get back to your original question above and not get loss in some theoretical argument. My answer is if your listed company can get good return say 15% in the future, why not borrow instead of issuing shares to other investors as the cost of borrowings is low in relation to what the return required by other investors? Moreover interest cost is tax deductible.

Unless of course your business is already highly levered and banks won’t want to lend you anymore, then go ahead and issue more shares to whoever willing to subscribe. People will subscribe at a certain price if they think the future is good and return more than what they require, otherwise, they also won’t subscribe.

Posted by NOBY > 2015-06-11 18:50 | Report Abuse

Yes. Agreed on that.

Posted by kcchongnz > 2015-06-11 19:19 | Report Abuse

Posted by ks55 > Jun 11, 2015 04:30 PM | Report Abuse
TQVM. I have mentioned before in Lonbis thread, I bought it mostly based on TA (FA provide the basis). It is definitely not an investment grade stock. I have since exited and made 35% within 3 months.


ks55, you see you happened to made 35% from London Biscuits. It could be because you were good in some other thing like human psychology, like when you know they are giving "free" warrants and you anticipated that others would chase this share because of something given free, of which in actual case it didn't add any value to the company, but maybe a chance for those big players getting those free warrants and unloaded into the market.

Or maybe you were lucky. You know for one success story in speculating, there are scores of failures. Why do I say that? In speculating, it is a zero sum game. Whom do you think will win? The syndicates, insiders, major shareholders, investment bankers, or you? No prize for the right answer.

I am an investor, and I don't hope to be the successful one in the speculation.

Posted by cola > 2015-06-12 11:40 | Report Abuse

besides paying down debts, private placement can be used to attract strategic partners for future business growths......

Posted by kcchongnz > 2015-06-12 16:24 | Report Abuse

Posted by vinext > Jun 11, 2015 03:01 PM | Report Abuse
FCF, remember these 3 words if u wanna get rich in the stock mkt- warren buffett

True true true. He also said:

“Most companies define “record” earnings as a new high in earnings per share. Since businesses customarily add from year to year to their equity base, we find nothing particularly noteworthy in a management performance combining, say, a 10% increase in equity capital and a 5% increase in earnings per share. After all, even a totally dormant savings account will produce steadily rising interest earnings each year because of compounding. Except for special cases (for example, companies with unusual debt-equity ratios or those with important assets carried at unrealistic balance sheet values), we believe a more appropriate measure of managerial economic performance to be return on equity capital.” – Warren Buffett 2007 letter to shareholders

Posted by necro > 2015-06-12 20:02 | Report Abuse

Kc i need your opinion on CCMDBIO...tq in advance

Posted by Ng Wen Qing > 2015-06-14 09:27 | Report Abuse

Is SHL a good stock?

Posted by kcchongnz > 2015-06-14 10:48 | Report Abuse

Posted by necro > Jun 12, 2015 08:02 PM | Report Abuse

Kc i need your opinion on CCMDBIO...tq in advance


Don't know much about this stock. By looking at its annual results, and at the present price of 3.70, or PE of 13.5, healthy balance sheet and good cash flow,I doubt you can lose big in this stock.

Posted by necro > 2015-06-14 14:53 | Report Abuse

There were right issue that quote ex date 18.6.15 where money raise to take over its pharmaceutical parents company...ratio 1:1 that will increase share pool by 100%...since 70% of share hold by its parents subsidary which is CCM MARKETING...
Can u calculate the FV,IV & PV post right issue...

Posted by kcchongnz > 2015-06-14 18:09 | Report Abuse

Posted by Ng Wen Qing > Jun 14, 2015 09:27 AM | Report Abuse
Is SHL a good stock?

Don't know much of SHL too, but a look at its recent financial results, I doubt you can lose big in this company. Healthy balance sheet. Making 43 sen per share last year, a big jump from 23 sen the previous year. At RM3.32, PE is low at 7.7. PE is just a quick and dirty check. Must look closely why this jump and make sure a swallow doesn't makes the summer.

Make sure its property development projects in good locations and sell well as it has a lot of money tied up there in inventories and property development cost.