Friday, 16 June 2017

Special Cash Dividend Never Fail

For some, investing is an art; for some, investing is a game of luck; for some, investing is just a gamble. As for me, investing is about hard work - putting away leisure time, screening charts manually, reading through all the newspaper from local, global, social, sports to business news.

Of course, there are many more component to form a decision to invest, and emotion is one of them. Human are very vulnerable to emotional swings, and that is why stock prices have to swing up and down, so that human emotions will follow along the swinging of going up and down as well. It is very easy to say to buy at low, and sell at high. But at practical, it is not as easy as you think.

Today I am not going to talk on the effects of emotion towards a decision on share trading. But I would like to show you how a normal individual can trade the stock market without having any super natural intelligence, or being a super investor, or super logical thinking.

If you are hardworking enough to look for company that is going to pay special dividend (usually after some asset sale, or after capital reduction, or some special one off big dividend), you will notice that upon the approval of such dividend, the company share price will definitely go up.

Take for example, last year Sapura Resources had disposed off it's entire 49% stake of APIIT education group. The deal was announced in March 2016, and the dividend is approved in September 2016. Prior to the announcement of the dividend, the share gap up accordingly to reflect the cash payment back to the share holder.

So in this case, you can see that buying in at a period of time where the dividend is going to approve might be advantage for you because you the price had probably found it's balance, hence lesser fluctuation.

The second case I am going to present to you is the case of MAA. If you are aware, MAA had sold it's takaful arm to Zurich Insurance in 30 November 2015. Approximate 6 months later, MAA announce a 35 cents special dividend to be paid back to shareholder prior to the sale. As you can see from the chart, from the sale to the approval of dividend, the share price had been trending up strongly.

The third case is about Alcom. This stock had been suffering for the past 2 - 3 years, but the company had gone back into the black as aluminium demand shifted upwards. Despite that, the company restructure capital and pay back shareholder a hefty 20.5 cents. Upon this announcement, the share price continue to rocket upwards.

As you can see, if you are hardworking and looking at chart manually, you will know what is happening and most importantly why it is happening this way. You will not get this if you are too reliant on robotic screener.

Of the 3 example, 2 of them are related to asset disposal, while 1 is capital restructure and pay back to shareholder. All of them carry the same trait - a big fat dividend in the kind of special dividend, and subsequently, the share price gap up upon the confirmation of the special dividend payment.

So, as historical result prove this concept to be right working, it is back to an individual hard work in order to get the company which such event happening, and most importantly, is to board in before the confirmation of such special dividend being declared official.

Now, your problem is, you are too tied up, no time to scan manually, not to say search up and down the internet for such news. If I will to give you this news, of course, you have to decide on your own again.

So this company is nothing than a bleeding company, but had concluded the sale of it's infrastructure arm, netting in RM 380 million cash. This company is - Silk Holdings Berhad.

As you can see, the onus here is that the company will be using RM 70 million from the sale proceed to declare a 10 cents dividend for each shareholder. For a share trading at the range of 50 cents, that will means a 20% return. Or to put it in other words, this special dividend is akin to the company giving you 5% return a year for 4 year in a very instant manner. Sekali gus kaw tim 20% for you.


According to the technical chart, Silk had also broken away from the short term down trend line after consolidating at the range of RM 0.48. This is amidst the coming EGM that will be happening on 21st June which will determining the  approval of the special dividend amounting to 10 cents per share. Should the EGM approved the special dividend of 10 cents per share, where will Silk be at that time? 55 cents ? 60 cents ? I don't know, but all I know is that if you buy in before any solid announcement of the dividend, you will stand a better chance among all the others who bought it after the announcement.

In conclusion, I am educating you on how to look at opportunity in the share market using some solid examples and case studies. In the future, if such case arouse again, be very sure that you are the first one to notify it and get your position ready.

Cheers.

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