RHB Investment Bank (“RHB”) initiated its first research
coverage on Instacom on 30 September 2013 and rated a buy call for Instacom at
RM0.51, taken into consideration that Instacom is a major beneficiary of the rollout of LTE networks and USP projects in
East Malaysia, backed by a decent orderbook of MYR300m. However, RHB
revised its target price for Instacom from RM0.51 to RM0.29 at 15 November
2013, a drastic downward revision of 43% after 49 days of its initial coverage
on Instacom. The reason for such a drastic revision was due to 2 major
shareholders of Instacom had pared down their interests in the company as well
as limited visibility on contract flows.
RHB's Analyst Report on 30 September 2013.
RHB's Analyst Report on 19 November 2013.
My Comments:
The revision on the research report done by RHB did catch my attention. Does the reason given by RHB justify its call to
drastically depress the target price of Instacom in such a short period without
any change over the fundamental of Instacom? Shouldn’t RHB have taken into
consider all aspect of risk, including the risk of changing in shareholding of
substantial shareholders and directors and also the uncertainty on contract
flows, before it came to conclude a fair valuation? I am concerned that investors
could have suffered financial losses by following such a confusing called made by
the analyst.
Who is the RHB analyst issued these reports? His name is Chan Jit Hoong who previously from OSK Investment's research house. So readers be aware!
