Yesterday’s trading volume in the stock was a 311.31% spike from Tuesday’s volume.
PJI’s share price ended the day two sen or 19.04% higher at 12.5 sen. Together with Monday’s one sen or 10.53% jump in share price, the counter has had an almost 30% price gain over two trading days.
The surge in both volume and price of PJI shares follows the announcement by the company on Monday that it has entered into sale and purchase agreements to dispose of Wisma PJI to one Pan Pacific Enterprise Sdn Bhd for RM8.8 million cash.
Wisma PJI consists of two adjoining three-storey semi-detached factories in Bukit Jelutong, Shah Alam, measuring 2,215 sq ft and 1,575 sq ft.
A senior chartist at a local broking house said that PJI shares looked overbought.
“It’s quite a sharp rally. I would say it is overbought and the counter could now be prone to profit taking,” he said.
The counter’s Relative Strength Index (RSI), a trading momentum indicator, was at 84.36, he said adding that an RSI above 80 signals “the tail end of a rally”.
The company said in the Monday announcement that the Wisma PJI properties were acquired for RM5.98 million in 1999, while their audited net book values as at June 30, 2009 were RM9.4 million. The proposed sale was expected to give a net gain on disposal of RM3.51 million.
The disposal price is about RM600,000 below a recent market valuation of RM9.4 million by Henry Butcher Malaysia Sdn Bhd.
The RM3.51 million net gain from the sale of the properties covers about 92% of the RM3.8 million net loss posted over PJI’s first three fiscal quarters of financial year 2010. The company’s financial year-end is June 30.
PJI has recently been engaged in asset disposals and capital restructuring. The latest proposed sale is expected to put total funds raised since March to RM73 million.
The company had on March 29 proposed a capital reduction scheme that would reduce PJI’s paid-up capital by half. It is also raising additional funds through a rights issue with free detachable warrants as part of the proposal.
The estimated timeframe for completion of the proposal is within the third quarter of this year. Proceeds of the rights issue are estimated to be RM22.3 million with RM17.4 million allocated for working capital in the group, RM4.47 million to repay borrowings and RM500,000 for expenses of the exercise.
The company turned around in FY09 with a net profit of RM2.86 million against a net loss of RM3.67 million in FY08. However, the improved result was mainly attributed to the sale of a wholly owned subsidiary company that contributed a net gain of about RM18 million to the group.
For its nine months ended March 31, 2010, PJI recorded a net loss of RM3.8 million on revenue of RM59.7 million compared to a net profit of RM846,000 in the same period a year earlier on revenue of RM72.9 million.
This article appeared in The Edge Financial Daily, July 8, 2010.
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