High risk may not always lead to high returns – that would be the answer if you asked anyone who has invested in cash stocks over the past 15 months or so. Like any stock market bubble in the past, the rally wasn’t sustainable without sound fundamentals.
2021 could be a disappointing year for bettors hoping that a strong cash-equity rally, similar to last year’s – where stock price spikes were common – would offer them a chance to recoup some of their losses.
After peaking, many cash stocks have slipped back to pre-pandemic levels this year, leaving mistimed investors with fingers burned.
The cash stock craze in 2021 was cooled by a combination of factors. First, the company’s announcement of diversification into rubber glove production will not give its stock price a boost because existing glove stocks are in sharp decline due to shrinking earnings. The downturn in profits does not bode well for the prospects of those who have jumped on the glove bandwagon.
Second, the Malaysian government launched its national program for immunization against the Covid-19 virus and at least 78% of the population received two doses. As a result, adventures in sourcing vaccines don’t look so profitable as to fuel rising stock prices.
Large number of companies – Bintai Kinden Corp Bhd, Ho Wah Genting Bhd (HWGB), Inix Technologies Holdings Bhd, Kanger International Bhd, Sinaran Advance Group Bhd (formerly K-Star Sports Ltd), Solution Group Bhd, UCrest Bhd, Yong Tai Bhd – They announced their intention to participate in the distribution of vaccines.
In 2020, Solution’s share price has soared from less than 10 Sen in March to as high as RM2 in December. The stock continued to decline after receiving a short-term boost in June this year, closing at 53.3 C on December 23, despite the approval given by the Ministry of Health on November 17 for private sales of the CanSino vaccine in Malaysia.
Likewise, the availability of RTK antigen test kits is not a great growth story to talk about this year given the glut of supply and the sharp drop in selling price.
Among the new entrants to rubber gloves, AT Systematization Bhd, LKL International Bhd, Luster Industries Bhd, Notion VTec Bhd, Salcon Bhd and Vizione Holdings Bhd reported their first contribution from their glove manufacturing operations.
The glove division generated RM35.46 million in revenue and RM9 million in profit after tax for the AT system for the six months ended September 30. However, the profits were wiped out due to its share of losses of the associates amounting to RM15.54 million.
However, Hong Seng Consolidated Bhd, Iconic Worldwide Bhd and Mah Sing Group Bhd did not see a significant contribution from the healthcare project, despite the completion of construction of the glove factories and start of production.
After the craze for gloves and vaccines subsided, Focus Dynamics Group Bhd soon teamed up with Permaju Industries Bhd to venture into the field of electric vehicles (EV).
Focus Dynamic has a 29.7% stake in Green Ocean Bhd, which has started a business making gloves. Green Ocean’s stock price also took a roller coaster ride last year, rising to 32.6 tooth in August from Sen’s Nine. Its share price has fallen by two-thirds this year from nine to three on Dec. 23.
In a joint statement with Permaju, the food and beverage group said they are working together to create an electric vehicle showroom with car parking and electric vehicle charging facilities in Kuala Lumpur.
Permaju Industries Bhd CEO Tang Boon Koon said in a press release that the partnership follows in Tesla’s footsteps with the opening of a state-of-the-art digital retail concept EV showroom in Kuala Lumpur.
The news was not translated into the share prices of the two companies.
HWGB, the company that has always been a game to jump on the bandwagon of trendy themes, revealed its electric vehicle plan last March to introduce, assemble and distribute electric vehicles in Malaysia. This came after its diversification into the healthcare-related industry, from test kits to clinical trials of vaccines.
HWGB’s market capitalization has evaporated by two-thirds year-to-date. Its shares closed at 20.5 Sen on December 23 from 63 Sen at the beginning of 2021. The stock peaked at RM1.52 in August 2020.
Well diversified AE Multi Holdings Bhd has attracted market interest. Its business ranges from being an engineering, procurement, construction and commissioning contractor for dipping glove lines to building factories for many new entrants to glove, as well as its primary manufacture of printed circuit boards.
AE Multi’s stock price is down 89%. It closed at 2.5 Sens on December 23, down from its peak of 23.5 Sens a year earlier.
The loss-making Dataprep Holdings Bhd is worth a mention. From 16.5 age in mid-February this year, its share price has soared to RM3.79 in March within five weeks. This prompted Bursa Malaysia to warn investors to exercise caution and make informed decisions in trading Dataprep shares. The stock is up 356% year-to-date, but is down 78% from its peak, closing at 82 sen on Dec. 23.
The extraordinary rise in share prices came after the emergence of Tan Sri Muhammad Akmal Obat Abdullah – the controlling shareholder of Wedad Bhd Group – as the largest shareholder in the ICT solutions provider in October 2020. His stake has since been reduced to 32% from 54% Initially .
Let’s take a look at how some of the top-performing coin stocks of 2020 will perform in 2021.
GETS Global jumped 12 times to RM2.05 at the end of December 2020 from below 10 sen in March 2020, but since the start of the year, it has fallen 37.6% to close at RM1.28 on December 23.
Meanwhile, from a peak of 54.5 Sen in November 2020 after the stock merger, DGB Asia Bhd saw its share price drop by 94.5% to three Sen on December 23rd.
The share price of furniture maker Euro Holdings Bhd was barely 5.5 sen at the end of 2019. It rose to an all-time high of RM 5.76 in January of this year – the price was revised for a two-for-one bonus issue – from RM 2.90 at the end of the year. 2020. The stock lost steam, dropping to 47.5 CNN on December 23, down 89% year-to-date.
Saudi Bhd. was another example of a pump-and-discharge scheme. Shares of frozen food processor jumped to a record high of RM1.19 on March 23 this year in response to news that it will supply Greater China with frozen products. However, the counter only turned south to 5.5 SEN on December 23.
Focus Dynamics is the largest shareholder in Saudi Arabia with a 21.61% stake, while Fintec Global Bhd is no longer a major shareholder last August.
With the relaxation of fundraising rules, small stocks have been attracted to share fundraising appointments. Notably, the funds raised by companies such as XOX Networks Bhd (formerly Macpie Bhd) exceeded their market cap. (See also “Record A RM8.1 Billion Raised via Private Placements in 2021” on page 44.)
Some see trading in these stocks as playing musical chairs. Investors must be very alert at all times because they never know when the music will stop – as it is now.