LPI-Not Even a Trading Buy These Days

London Pacific Insurance Berhad

This is a great counter or what?

Apart from attractive dividend payouts, there is a  capital gain of close to almost 31 % since the bonus and rights issue in 2010.

At about the peak price of more than RM 15.00, it asked for a cash-call of RM 7.00, a haircut of almost more than 50%.

Today, assuming you had bought one lot of LPI in 2010 at RM 15.00, it would mean that after the ex-bonus and rights, you would have 1,600 units of LPI.

Total outlay would be RM 15,000 ( for the purchase) +RM 700 paid for the rights of 100 units. As such the total investment is  RM 15,700.

At today's price of close to RM 15.00, it would mean you have created value of up to RM 24,000 (1600 units x RM 15.00).

As such, the value, without calculating the payout of yearly dividends of 75% in 2011 and 65% for 2012, the return is RM 8,300. If you add RM 1,400 dividends, that will a grand total of RM 9,700.

Taking a 24 months investment period and annualising it, we would have a gross of RM 4,850 or 31% return to capital.

Today, at a peak of RM 14.70, how much will it go?

There is a dividend of RM 50.00 to be paid soon before January 2013 is out. At today's price, it
should to RM14.20.

But would it?

Let's assume it did.

But how long will it stay at this newly adjusted price?

Remember-it is hardly traded and a technical price rebound is always possible given its tight supply.

Unless it is a continuous bad season of sorts, LPI will likely be left unscathed.

Only weak holders will throw out their stocks only to regret it when it bounced upwards again.

I do not expect any corporate restructuring anytime soon in LPI.

If at all there is, it would be Teh Hong Piow taking it private as LPI does not need to raise any market capital  currently.

So, as a stock caught in a narrow price rut , will it go up?

Your guess is as good as mind