Penny stock fever subsides

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KUALA LUMPUR (Oct 1): There was a selldown in penny stocks yesterday — a number of which are companies that have either proposed or completed rights issues, private placements or employee share option schemes (ESOS) recently — with Bursa Malaysia seeing a total 216 counters priced below 50 sen apiece recording declines against 65 gainers.

About 15% of these decliners recorded drops of more than 10% as the trading hours come to an end, with the Dolphin International Bhd registering the steepest fall of 23.8% from 10.5 sen to close at eight sen, followed by Nexgram Holdings Bhd (down 22.2%), TFP Solutions Bhd (down 21.9%), Key Alliance Bhd (down 20%) and SC Estate Builder Bhd (down 20%).

Among counters priced below 30 sen per share, there were 150 decliners — of which 29 fell more than 10% — versus only 33 gainers.

The declines in the penny stocks were in line with the drop in the FBM Small Cap Index, which sank 96.75 points or 0.75% to close at 12,835.21 points. In contrast, the FBM KLCI gained 0.92 points or 0.06% to settle at 1,504.82.

Some of the decliners have recently announced rights issues, which likely affected their share prices.

Dolphin International, for example, will see the listing of some 305.25 million rights shares today (Oct 1), which exceeds its current share base of 244.2 million shares, with 198.1 million warrants.

The company announced the rights issue with warrants on Feb 27 this year to raise up to RM24.7 million, of which RM9.8 million would go towards the purchase of six million shares in Asia Poly Food and Beverage Sdn Bhd (AP F&B). The stake buy is part of Dolphin International’s move to diversify its operations into the F&B segment. The company is presently involved in the sale and design of pneumatic, hydraulic and software systems for the palm oil milling sector.

Over the past two weeks, Dolphin International has dropped 42.9% from its close of 14 sen on Sept 15. Year-to-date, it has fallen 13.5%.

TFP Solutions, which is down 37% since mid-September, has just completed its rights issue, with 227.41 million rights shares and 227.41 million warrants listed on the bourse yesterday. Prior to the issuance, its share base stood at 227.41 million shares. TFP Solutions made the cash call to raise money for working capital for its fintech mobile product business, as well as for other opportunities in ICT and fintech.

Key Alliance, which has fallen 37% since its close of 9.5 sen on Sept 15, proposed a rights issue almost three weeks ago on Sept 11. The exercise that was unanimously approved by its shareholders on Monday (Sept 28) aims to raise between RM5 million and RM58.9 million, with the bulk of proceeds to go towards the IT company’s proposed diversification into medical equipment trading.

Meanwhile, Lambo Group Bhd, which declined 16.7% yesterday to 2.5 sen, has just completed the final tranche of its 30% private placement on Sept 18, while Priceworth International Bhd, also down 16.7% to 2.5 sen, has recently fixed the issue price for its 10% private placement.

Other penny stocks that were among the top 20 decliners which have rights issues, private placements or ESOS schemes in the works, or have had warrants exercised, are DGB Asia Bhd (down 16.7%), Ho Wah Genting Bhd (down 16.2%), Fintec Global Bhd (down 15%) and Inix Technologies Bhd (down 14.9%).

Tan Choe Choe