Kenmark stock an easy buy after force-selling

Saturday June 5, 2010

Stock an easy buy after force-selling
By IZWAN IDRIS
izwan@thestar.com.my


MORE than half of Kenmark Industrial Co (M) Bhd’s entire paid up share capital were pledged as collateral at various financial institutions by the main shareholders of the company, based on information from the company’s latest annual report.

It is believed that large blocks of these shares were force-sold into the market in recent days, which had paved the way for a shrewd former shareholder to gain control of the troubled furniture maker.

The force-selling on Kenmark shares gained momentum on Monday after some clients failed to top up their margin accounts in the aftermath of the stock’s sudden price collapse the week before, according to several stockbrokers contacted by StarBizWeek.

Kenmark’s annual report 2009 showed that as at Aug 6 last year, about 55% of the company’s total 181.75 million shares were pledged as collateral for the margin financing facilities. That works out to about 100 million shares held in custody by several banks and stockbrokers.

A chunk of these shares belonged to managing director James Hwang, director Chen Wen-Ling @ Dolly Chen, as well as several privately held companies. Executives from two stockbroking firms confirmed that they no longer hold any Kenmark shares as they had dumped the shares in the market.

Another broker confirmed that his firm had to force sell shares in Kenmark earlier this week after a client failed to top up his margin account. An industry observer said that it is highly likely that these institutions would have to bear significant losses as the stock price had plunged considerably.

Kenmark made headlines last week after its key management went missing and bankers demanded the company pay back it loans. Its failure to submit its latest quarterly financial account fuelled speculation the company was deep in a financial quagmire.

Kenmark’s counter has been on a wild roller coaster ride since then. Shares in Kenmark were suspended from trading by the exchange on Monday after just over an hour of trade on extended sell-down to a paltry 10.5 sen which led to a massive surge in trading volume to 71.9 million shares.

Trading resumed on Tuesday and the stock closed at a record low of 6 sen on 191.1 million shares transacted. However, it rebounded on Wednesday to close at 11.5 sen with 138 million shares changing hands.

The stock was suspended for the second time this week on Thursday, and resumed trading yesterday; it shot up 14.5 sen to close at 26 sen on trading volume of 101 million shares.

On Thursday, the market was in for another shock when it was revealed that Datuk Ishak Ismail had acquired a huge block of shares in Kenmark, a company he had helped list back in 1997. He had mopped up some 57.7 million shares in the open market at near rock bottom prices.

Based on press statement issued on Thursday by managing director James Hwang, Ishak had bought the shares on Tuesday and Wednesday. Recent filings to Bursa Malaysia did not offer any indication about Ishak’s purchase cost, but the stock’s average price over the two-day period was well below 10 sen a piece.

The week before Ishak had resurfaced, Kenmark’s share price was trading at 83 sen on May 25 with a mere 55,000 shares transacted. The stock had kept within a tight trading range of RM1 and 80 sen for the past four years right, up until late May this year.

It is however unclear at this stage, whether Hwang’s stakes in Kenmark has been reduced following the recent sell-off.

Based on the latest availaible information on Kenmark’s shareholding structure, Hwang owned 49.48 million shares, or 27.61% stake in Kenmark as at Aug 6 last year.

It was estimated that Hwang had pledged about 13% of his interest in Kenmark as collateral to several financial institutions including Kenanga Investment Bank, Alliance Group, Maybank and SJ Securities. Company director Chen owned 33.5 million shares, or 18.7% stake in Kenmark, with about 10% of her total stake pledged as collateral.

The annual report showed stockbroker A.A. Anthony held 12 million Kenmark shares that was pledged by Paduan Gangsa Sdn Bhd, while TA Enterprise held 8.34 million shares put up by Rancak Bernas Sdn Bhd and 7.28 million shares pledged by a shareholder Mohd Noh Ibrahim.


http://biz.thestar.com.my/news/story.asp?file=/2010/6/5/business/6406163&sec=business