MIECO above $0.53 by 31-Dec-2012

  • target price: $0.53 ( 11.58 % in 177 days)
  • price when predicted: $0.48
  • current price: $1.18
  • 2091 days pass target date.
Once upon the time, Mieco was owned by the Multi-Purpose group. The company was the market leader in chipboard production. Mieco then was flushed with a pile of cash of more than RM150 million, paid dividend regularly and the share price hovered in the region of RM2+.

Somewhere along the timeline, Mieco came under the control of a Pakistani through the parent company, Bandaraya. The new owner emptied Mieco's coffer of RM150 million and borrowed another RM150 million to build a new plant.

Before the new plant could generate a cent of profit, the whole chipboard market went into storm with product prices falling and operating cost shooting through the roof.

That spells the downfall of Mieco. The company has been struggling for the last 7 or 8 years and it remains a penny stock.

Judging from yesterday's volume and price movement, Looks like there is light at the end of the tunnel.
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I Think So

Not Likely


A turn-around story could be in the making. The company restarted the operation of the second new plant last year, which was shut down for two years because of falling market. However, the profit margin of chipboard is thin due to the rising costs of two main input components- resin and rubber wood. To be prudent, monitor the quarterly results before any trading action is taken.
Everyone playing MIECO has to be patient. When the rally comes, it will come in quite a big way. Mieco is a big brand name for Malaysian chipboard. Its two factories are worth something like RM700 million. After deducting debts of around RM200 million, net asset is still worth about RM500 million or RM2.40 per share. Currently, the share is selling for only 45 sen!
When we analyse MIECO, we must look beyond the current business model. Basically, the Pakistani substantial shareholder is not really interested in this chipboard business; that could be part of the reason the company is not progressing well. Some years ago, they tried to distribute MIECO shares among Bandaraya shreholders because MIECO is a subsidiary of Bandaraya. However, the exercise was blocked by the rest of Bandaraya shareholders including EPF and a few foreign institutional fund managers, who held substantial stakes. Subsequent to that, they tried to sell the the controlling stake to others; the deal did not materialise, probably the price did not meet their expectation. Bandaraya is always on the look out for potential buyers to take over MIECO at the right price, including investors from China. From the perspective of outright sale of MIECO, one must consider the net asset backing of MIECO, which is way above the current share price of 45 sen.
Fundamentals aside, share price of MIECO is inching up and volume is picking up quite nicely. If the momentum can be sustained, the next target price as well as the next resistance level is 53 sen.
The Pakistani substantial shareholder of Bandaraya is offering to buy up all the remaining shares and warrants at RM2.90 and RM1.80 respectively. Bandaraya is the controlling shareholder of MIECO. When the corporate exercise of Bandaraya is completed, the Pakistani shareholder will have complete control over MIECO. Very likely, the Pakistani would sell MIECO stake (56%) at market price, which is much higher than the current price of 44.5 sen. However, the time frame for this to take place could be as long as 1 year due to the involvement of various approvals. If one can hold, there might be significant gain in buying MIECO now.
Nothing much will happen to MIECO until after the important date of 26 September 2012. This is the date BRDB warrants expires. The Pakistani major shareholder will not do anything to BRDB too until that date. The reason is this: he is obliged to buy up BRDB warrants at RM1.80 per share. When the warrants expires, he pays nothing. After that date, probably things will begin to move especially when the Pakistani is in control of BRDB. BRDB controls MIECO by its 56% stake in MIECO. As mentioned before, BRDB is keen to hive off MIECO but at the right price.
Last Thursday BRDB announced that it had received an unconditional takeover from substantial shareholder Ambang Sehati, a company controlled by the Pakistani. The latter, which holds an 18.49% stake in BRDB, offered to acquire all BRDB shares for RM2.90 each, and all outstanding warrants for RM1.80 each. However, no specific date was given.

It would still take quite sometime before BRDB General Offer (GO) can be completed. Hence, those who hold MIECO shares would have to wait until the completion of GO before they can see any activity in MIECO.
The price of MIECO remains in the doldrums and the volume in the pathetic state. But as soon as you see price spiking and volume ballooning, get ready for some excitement.
The ultimate controlling shareholder of MIECO is busy consolidating his prized acquisition of BRDB, which has property assets worth a couple of billions. As soon as he puts the big house in order, he would think about what to do with the smaller house. Hence, playing MIECO is a game patience. But the early birds will catch the worm.
MIECO is showing some signs of life today, kicking up 3 sen and a transacted volume of 281,000 units. Not too bad for a sleepy counter. There is nothing to be excited about MIECO for now, unless, unless the price and volume continue its incremental trend.

For a MIECO rally to be confirmed, the share price needs to breach the 50 sen barrier with accompanying high volumes, say more than a few million shares a day.
MIECO continues to show signs life today, moving up 3 sen to closed at 44.5 sen. Volume has picked up quite a bit too, hitting 978,800 units traded. The parent company BRDB will be delisted in a few days time, on 29 Oct 2012.

With the privatization of BRDB wrapped up, it might be time for MIECO to show some actions. Keep MIECO on your radar. If price continues to inch up and volume continues to expand, be ready for some interesting moves.
BRDB, the parent company of MIECO is delisted as of today. More attention will now be directed at MIECO which is the only listed vehicle of the ultimate controlling shareholder, Moiz and family. There are several options he can do with MIECO as mentioned previously.

One of the options is to sell the assets and retain the listing status of MIECO. As soon as they have revamped and consolidate all the operations of BRDB, MIECO could be the flagship comapany to house new assets.

These are passing thoughts only. Please, readers are advised to do your own thinking and projection. By the way, MIECO has gone up as much as 30% since it bottomed out at 36.5 sen to hit 47.5 sen today. It is time for the counter take a breather
As expected, MIECO took a breather and corrected itself 10% down from 47.5 sen to as low as 42.5 sen. Those who are brave might want to re-position themselves for the next leg of movement. Of course, nothing is certain in the stock market; every investor or punter makes intelligent guesses and takes calculated risks.
MIECO has bounced back from 42.5 sen to hit intra-day high of 46.5 sen but closed at 45.5 sen today. Investors must take note that the volume is expanding steadily to 700,000 shares today and buyer's rate is at 80%. This simply means people are snapping up whatever shares available but they are not chasing the price. Another words, a group of investors are accumulating MIECO shares!

If this scenario continues for one or two more months, with price holding well and volume keeps rising, all the shares of weak, uncertain or uninformed shareholders will be taken up. I think by then, MIECO is going take off in quite an interesting way.
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