TONG HERR RESOURCES BERHAD (5010) (Part 1)

2 years ago I first invested into Tong Herr Resources Berhad (“Tongher”) by acquiring 600 shares at a price of RM5.30 (at 12-June-2007). Subsequently, the company had come through a corporate exercise by issuing bonus shares at basis of 1 bonus share for every 2 existing shares. So the adjusted cost price was then reduced to RM3.53 (=RM5.30 * 2/3).

After the bonus issue, the share price of Tongher (“Tongher’s Price”) was then peak at RM4.165 (at 11-Oct-2007) before crashing to the lowest price at RM1.55 (at 2-Dec-2008) during the ‘Lehman Panic’ period. Now the Tongher’s Price resume a little to RM2.15 as per today market price. In spite of the recession and ‘Lehman Panic’ sending the share price to so low, what is the other factor that greatly affected the Tongher Price?

I noticed that indeed the Tongher Price is some what correlated to the raw material of its product. The raw material of Tongher’s product is nickel. If we seriously want to find out the Tongher’s Price movement, maybe we could do some statistical calculation by using a regression model to exploit the correlationship in between the Tongher’s Price and the price of nickel.

Below is the regression model that showing the Tongher’s Price in relation to the price of nickel:-
Y = a + b(X)
Where Y = actual Tongher’s Price (Dependent Variable)
a = the least value of Tongher’s Price when the nickel price is zero (Intercept)
b = the correlationship in between Tongher’s Price and the nickel price (Slope Efficient)
X = the nickel price (Independent Variable)

Of course, the abovementioned regression model is seriously flawed because it might not be able to pass through several statistical test. Nevertheless, what I would like to emphasise by using the regression model is that the Tongher’s Price is positively correlated to the nickel price. (Positively correlationship (‘b’) means that whenever the independent variable (‘X’) is increasing, the dependent variable (‘Y’) will increase as well.)

(to be continued)