Green Packet Stock Pattern Behaving Like Google Stock

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May 18 2007
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When one looks at the stock price of Green Packet Berhad (KLSE: GPACKET, stock-code 0082) since about 3-weeks ago, one cannot help but wonders just what’s wrong with this potential technology company of Malaysia. Considering the stock price has been rising to almost 7-folds since its’ public listing about two years ago on the back of good tearly earnings with profits tripled since then, the stock price should not behave in such a way. Green Packet is one of FinanceTwitter favorite (though I’m still waiting for the right time to open positions on this guy) and FinanceTwitter has blogged about it here at Investing Technology Stock – Turn Green Packet to Greenbacks.

Although I would like to see DIGI.com Berhad (DIGI: stock-code 6947) buy over or at least partner with Green Packet because it will give Green Packet instant access to DIGI.com’s 6 million subscribers, market reaction has been that should it happened, it’ll be a no-event. The stock price was acting dumb after Green Packet indicated that it is open to the possibility of working with other companies, including DiGi.Com Bhd to roll out its wireless broadband network recently.

However some argues that a “close” partnership might cause a dilution to Green Packet’s broadband earnings, which might make sense if Green Packet does not have a smart partnership plan to tap and leverage on DIGI.com’s strong subscribers. Strategically, DIGI would prefer to buy over Green Packet with its’ huge war-chest to monopolise the lucrative WIMAX market given the fact that most of Telekom Malaysia Berhad (KLSE: TM, stock-code 4863) TMNET’s Streamyx unhappy subscribers are waiting for another reliable player to switch-side.

Looking at Green Packet’s 2006 annual report, it registered a very healthy growth either in revenue, profit after tax or ROE (return on equity). In terms of revenue composition, Malaysia and China contributed 35% and 60% respectively to the group’s revenue with U.S. yielding another 2%. The light would be the potential business revenue with China Telecom which has over 18 million internet users over five provinces on the East Coasts of China including Guangdong. Local stockbroker TA said it has a target price of RM 6.40 on Green Packet based on a discounted cash flow valuation yielding a total return of 31 pct. forecasting net profit of 70.2 mln rgt and 97 mln for fiscal 2007 and 2008, respectively

Enough of fundamental analysis, let’s look at the stock price technically. Looking at the chart, you can see how the stock price broke the uptrend line and subsequently out of the $ 4.80 support level on 8-May-2007. Thereafter it was a falling knife. The high volume on 11-May only confirmed there’re huge sellers selling off with no clear news or reason behind it. The next support level will be $ 4.00 per share and today will be the most important day to see if this level is strong enough to prevent further price-drop. Should this level be breached, then it’ll be a free-fall and all hell breaks loose. However sometime it’ll take a couple of days to determine this, just like what happen to Google.

Talk about Google, the more I look at the Green Packet’s chart pattern the more I think of Google Inc. (Nasdaq: GOOG, stock). Both are young technology stocks which have young entrepreneurs as the captain on board driving the company to unchartered water. While Google’s stock pattern has been confirmed when I made some pocket money out of it (you can read it at An Experiment With 265 Percent Trading Profit) yesterday, the same cannot be said with Green Packet. The difference between both stocks is Google’s stock price (about USD 500 per share) was 100 times more expensive than Green Packet (about RM 5 per share) – forget about the conversion rate. Both charts somehow demonstrate some similarities; you can see the Google’s chart at Yahoo’s portal.

But we haven’t answer the question why the sudden drastic in Green Packet’s stock price. The general and most-used reason is the sell-off by foreign investors to lock-in profit after the recent uptrend (consider the Kuala Lumpur Composite Index and you’ll understand why foreign investors never hold long-term) Just how much are the foreign investors’s shareholding in Green Packet? A quick summary from 2006 annual report will give you an estimated 87,442,620 shares or 22.75% from the top-30 largest shareholders are foreigners. So, you shouldn’t be surprise if some of these foreigners were indeed disposing their holding to take profit. You don’t expect them to hold on the way it was before the 1997 Crisis, do you? The top five shareholders of Green Packet are:

  1. Green Packet Holdings Ltd – 158,262,500 shares (35.61%)
  2. OSK Technology Ventures Sdn Bhd – 69,443,330 shares (15.63%)
  3. Mayban Securities Nominees (Asing) Sdn Bhd Pledged Securities Account for Paci.cQuest – 36,725,000 shares (8.26%)
  4. Lembaga Tabung Haji – 18,820,400 shares (4.24%)
  5. HSBC Nominees (Asing) Sdn Bhd BNY Brussels For Queensland Investment Corporation – 10,212,800 shares (2.30%)

Green Packet could be in the process of establishing a trading-range w
ithin $ 4.80 and $ 4.00
the same way Google did. And if this is true, then you can simply make money trading out of it. But most importantly is what should you do now? I would wait for today’s closing price and a couple of days more to see the support level of $ 4.00 per share. The problem with Malaysia stock market is the co-relation between the stock and the technical indicators is never in place.

Seldom can you find stocks which behaves like Google or other U.S. stock whereby the simple support and resistance rule should apply to most stocks. It could be due to liquidity or the inefficiency of market which is bias towards a single market-maker who can manipulate the way a single stock. Of course there’re external factors which can wipe out any technical indicators reading such as accounting irregularities which happened to Transmile recently. I hope the same will not happen to Green Packet but you’ll never know.

If you’ve other tips or news pertaining to Green Packet, feel free to drop a comment or two.

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what do u think about its Q1 result? obviously, its a disappointed one ..
one more Q, will wimax become successful in a short time?
how is their GMO doing?
thx …

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