Stock Pick - Pacific Century Regional Developments
By Staff Writer - StockHouse News Desk
newsdesk@stockhouse.com.sg
Wednesday, February 19, 2001
SINGAPORE -- Market players with a propensity for making aggressive trades, and who are adept at quick exits when a stop-loss is called for, may want to pay close attention to perenniel punters' favourite, Pacific Century Regional Developments [SI.PCEN], or PCRD. The telecommunications-cum-internet conglomerate, chaired by Richard Li, son of billionaire tycoon Li Ka-shing, has seen its share price plummeting from an all-time high of $4.21 to a low of $0.775 over the past year.
The counter is, however, showing some signs of price resilience of late, having held above a strong support of $1.04, on very heavy volume trades, over the past few weeks. Chartists point out that a clear breakout of the resistance band of $1.12 to $1.15 will propel the counter to its next resistance level of $1.50. One of the main reasons for the group's depressed share price can be attributed to its 58 per cent owned Hongkong-listed subsidiary, Pacific Century Cyberworks (PCCW) [8], which has itself seen an erosion of share price from a high of HK$28.57 to a recent low of HK$3.77.
The market has been wary, for a while, of a major overhang in PCCW's shares, as UK-based Cable & Wireless(C&W) [L.CW.] holds a 15 per cent stake in it. There are fears that C&W will begin dumping half its stake in PCCW on the open market once the moratorium on sale for this bloc of shares is lifted this Thursday(22/2/01).
From a prudent financial management standpoint, however, it is most unlikely that C&W would ever consider disposing of its PCCW shares in the open market as this would have resulted in substantial losses.
The market is also now coming around to this view and rumours have been surfacing of late that an extra-market deal would be struck instead with an as yet unnamed buyer for the critical bloc of shares. Should this transaction materialise, or should C&W show no urgency to off-load the block of shares in the near-term anyway, then the stock prices of both PCRD and PCCW is likely to receive a substantial boost.
Technical arguments and rumours aside, PCRD is worth a punt also because of its grossly undervalued share price. The group, for instance, has a net asset value of S$2.86 if we use the lowest price traded for PCCW this year of HK$3.77 for computation; and PCCW, which was traded to a high of HK$5.15 recently has a strong support at HK$4.50, indicating just how compelling a buy PCRD shares are from a fundamental perspective.
Nevertheless, market players should be mindful of present uncertain market conditions and the volatile nature of the stock before they jump in, and also that a disciplined approach with a cut-loss point in mind will certainly help.
© 2001 StockHouse Media Corp.
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