Hard-disk drive (HDD) component supplier JCY International Bhd’s share price rebounded yesterday, jumping a whopping 15.5 sen or 17.31% to close at RM1.05 following eight consecutive days of decline.
Its rally also triggered a rebound in other HDD-related stocks, which chalked up gains of 4.4% to 8.4%.
A senior chartist contacted by The Edge Financial Daily said: “A broker has issued a buy call on JCY today (yesterday) and people are picking it up.”
The rebound also follows The Edge Financial Daily’s front page report yesterday that JCY had assured investors that its operations were back to normal after a major worker protest at its plant in Johor in mid-August.
CIMB Research, in a report issued yesterday morning, maintained an “outperform” call on the counter at 90 sen per share, with an unchanged target price of RM1.88.
Another reason for JCY’s rebound yesterday could also be that “the selling was overdone” with the counter hitting an all-time intra-day low of 87.5 sen on Wednesday, said the chartist.
At its lows, JCY had fallen some 40% in two months. The counter was only listed in February, closing at RM1.46 on its first day of trade.
The stock had earlier sunk 11.4% this trading week alone, over Monday and Wednesday.
A dealer contacted by The Edge Financial Daily on Wednesday speculated that investors were turning away from the stock due to labour protests faced by the company on Aug 15.
The protests at the company’s factory in Tebrau industrial area in Johor had required the deployment of 200 policemen and was reportedly sparked by the death of a Nepali factory staff, allegedly due to a delay in being sent to hospital.
JCY had said that the issues had been resolved with production resuming on Aug 17. Among the “remedial measures” taken by JCY and the sub-contractor of the workers’ hostel is the provision of a 24-hour ambulance service for the factory staff.
“JCY’s share price has plunged more than 22% over the past 1½ weeks, which The Edge Financial Daily attributed to a delayed market response to labour protests in mid-August. This was discussed during the results briefing on Aug 20.
“We understand that the issue was quickly addressed and there was minimal disruption to production. We do not think the share price plunge is justified and that with the big decline in share price, the upside now is very significant at 109%,” CIMB Research said.
The research house sees the selldown as an opportunity to accumulate the stock.
Potential catalysts for the stock include turnaround of the HDD sector, more meaningful contributions from JCY’s new customers Hitachi and Samsung, and positive news on its successful commencement of supplying components to Toshiba.
At the same time, other HDD-related stocks also rebounded yesterday, which market players see as recovering from oversold positions following their recent steep sell-off.
Notion VTec Bhd ended 13 sen or 8.4% higher at RM1.67, after eight consecutive days of decline, Dufu Technology Corp Bhd added three sen or 7.4% to 43.5 sen following three days of losses, while Eng Teknologi Holdings Bhd gained eight sen or 4.4% to RM1.88, coming out of four consecutive days of a price slump.
These gains also follow an overnight rally for shares of US-listed HDD makers Western Digital Corp and Seagate Technology, which rose about 6% each on Wednesday.
Written by Loong Tse Min
This article appeared in The Edge Financial Daily, September 3 2010.
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