Wednesday, September 22, 2010

GMG Global Tops Active List

How long must an investor wait before the stock he buys,carries out what was promised? About a year if GMG Global is to be a case in point. Refer to my earlier post, where I had griped that GMG Global was mostly stagnant in terms of share price, despite promising M&A action after a cash call.

Well, the M&A has finally come, albeit still in the discussion phase and 11 months late. On a cosy Wednesday, GMG Global almost touched $0.30 after news that it was in preliminary talks of an Africa project as well as buying up a SEA rubber producer, seeped into the market. GMG Global also said in response to an SGX query, that the share price spike could have been due to a Bloomberg report that natural rubber prices may surge.

These are very positive developments for the company nonetheless. In my opinion, GMG Global has developed into an extension of the Chinese economy, having access to strategic rubber assets in the world. The move to place Sinochem-linked people at the top position was the writing on the wall.

However, rather than chase a hot stock, there is still a need to look long-term. I believe that while the Group has cautioned that the developments may not happen, it is just a statement placed to indemnify them. That said, it will still take time for GMG Global to materialize such talks and the impact on earnings will not be seen at least till FY11.

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