Frankly Speaking: Fitters’ investment in CFM raises eyebrows

This article first appeared in The Edge Malaysia Weekly, on March 13, 2023 - March 19, 2023.
Frankly Speaking: Fitters’ investment in CFM raises eyebrows
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Fitters Diversified Bhd has announced that it bought 12.14 million shares, or a 4.54% stake, in Computer Forms (M) Bhd (CFM) for RM26.44 million. It also picked up 6.18 million, or 4.78%, warrants A for RM8.33 million on March 7 and 8.

Fitters spent a total of RM34.77 million for the purchase of shares and warrants on the two trading days, at RM2.18 per share and RM1.34 per warrant. This would be a rather significant investment considering that the amount is more than half of Fitters’ cash balance of RM61.15 million at end-2022.

The rationale for the investment is that loss-making CFM is venturing into the electrical vehicle (EV) industry — a bandwagon that a growing number of companies are jumping onto. As for whether the EV venture will steer the company to a fast growth track, it is still too early to tell.

But what is certain is that Fitters’ investment has already suffered a steep paper loss. The timing of its acquisitions was not good.

CFM’s share price plunged to RM1.42 and its warrants dived to 70.5 sen apiece last Friday (March 10). Fitters had bought the securities when their prices were falling. The downward trend accelerated on the second day of its purchases when the company was mopping up even more of the securities.

The stock slid nearly 30% on March 8, resulting in Bursa Malaysia issuing an unusual market activity query to CFM. The company told the stock exchange that apart from the joint-venture agreement it had signed with EA Mobility Holding Co Ltd for its EV venture, it was not aware of any other factors that could have caused the price meltdown.

The ill-timed share purchases of Fitters have raised eyebrows, to say the least.

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