Are more highly leveraged counters soon to become members of Bursa Malaysia’s “limit down club”?

AS two socks associated with businessman Datuk Dr Yu Kuan Chon continued to endure selling pressure with both Rapid Synergy Bhd and YNH Property Bhd hitting limit down again today, an avid investor has appealed to fund managers “to consider picking up fundamentally strong small-cap stocks that may have been impacted by this sell-down”.

“Considering the current market dynamics, this strategic move positions the fund to enjoy potential upside gains when these stocks revert to their mean values,” penned the investor who called himself analyst2024 in the i3 Investor platform.

“I hope this message finds you well. I am reaching out to provide you with a comprehensive update on recent market movements that have affected key stocks within our portfolio.”

Over the past few weeks, analyst2024 said stock market investors and traders have observed a significant decline in the share prices of Rapid and YNH Property (in addition to Hong Leong Capital Bhd and Imaspro Corp Bhd) which are linked to Yu.

“According to reliable sources, the sell-off of Dr YYY’s stocks was primarily initiated by investors who lend money to company owners in return for monthly interest,” revealed analyst2024.

“Representatives from Dr YYY reportedly failed to meet interest payments, prompting warehousers to initiate the sell-off, particularly after Christmas last year. Subsequently, other investors who had invested with the warehousers or acted on rumours were compelled to sell their shares due to margin calls.

“Notable brokers involved in providing margins to investors include AmBank, CGS-CIMB, Maybank, Mercury, RHB and UOB. Additionally, there are indications that banks offering collateralised loans to Dr YYY are seeking to increase their collateral size, signalling concerns about his ability to service his loans.”

Specifically, Rapid Synergy which was traded at RM29.50 before the market closed for Christmas break (Dec 22) started to head south from Boxing Day onwards with its maiden limit down having occurred on Jan 10 when its share price plunged RM7.02 or 30% to close at RM16.38.

Thereafter, Rapid Synergy has endured a further four limit down sessions (including today) with nasty falls on other sessions which brought its share price to RM2.78 (down RM1.18 or 29.8%) at the time of writing (or a steep 90.5% discount from its pre-Christmas close).

Similarly, YNH Property which closed at RM4.51 prior to the Christmas break (Dec 22) faced a similar downtrend with its share price closely mirroring Rapid to plummet with four limit down sessions (including today) to trade at 85.5 sen (down 29.92% or 36.5 sen) at the time of writing.

On Wed (Jan 17), The Edge reported that Dr Yu who holds a significant 32.58% stake in YNH Property incurred a paper loss of RM358.49 mil due to persistent forced selling that wiped off RM1.1 bil in market capitalisation since Jan 9.

As for Rapid Synergy where Dr Yu holds a 22.8% stake, the loss amounted to RM473.76 mil as the industrial mould manufacturer posted a decline of RM2.08 bil in market cap.

Aside from Rapid Synergy and YNH Property, other stocks which are facing similar predicament include Leform Bhd which has been bashed down by 66% from 49 sen on Jan 15 to 16.5 sen at the time of writing (Jan 19); Sarawak Consolidated Industries Bhd from RM1.19 sen on Jan 15 to 30 sen currently (down 75%) and Widad Group Bhd from 49.5 sen on Jan 15 to 19 sen at the time of writing (down 62%).

According to The Edge, persistent sell-off among small-cap stocks sweeping across Bthe local bourse has resulted in RM7.1 bil in market cap lost among 13 of the worst-hit companies since the start of the year.

These 13 companies were the ones whose shares plunge either hit limit-downs, drew unusual market activity (UMA) queries from the bourse regulator or triggered the freezing of their intra-day short-selling (IDSS).

Of the 13, 10 hit limit-downs at least once this week while 11 received UMA queries and five had their IDSS halted at least once. – Jan 19, 2024

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