Wednesday, December 18, 2013

RHB's analyst report on Instacom Group Berhad

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!

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