Thursday, June 10, 2010

Digiland -- Beware

Digiland is the pennies of all pennies to me. Over at Afralug forums, there is a warning by forumer dydx. His posts on this company are really great, and I see no need to rewrite everything myself into a warning.

Digiland is one penny I will avoid at all costs, be it from TA or FA. TA, it's easy to buy but hard to sell. FA, it's market cap is too big, share dilution too big, for a loss making company that's so small.

Below, I will compile some of the critical posts made by forumers at Afralug on this company. It's a buyers beware, punt at your own risks, kind of stock.

By dydx
Digiland International
Judging by the extremely high volume transacted on this counter in the last couple of days - again taking the No.1 position in today's "Top Volume Table"!! - it appears that many people are betting on Digiland International as another "get-rich-quick" investment.

And why not, since the market is 'hot' and will likely run up further. Especially so since the risk appears so small - buy at $0.005/share; after that, queue to sell at $0.01/share. If you are lucky, the trade would give you a 100% return! If you are luckier to contra it off at $0.01/share, the trade would give you a 100% return without even coming out any cash capital! And if you are unlucky, just contra it off at $0.005/share and lose your 2-way brokerages - small money anyway!. And at $0.005/share, a 1,000,000-share trade would only cost you $5,000, before brokerages. Anyway, since there is so much liquidity in this counter, what can really go wrong!

I think people better start taking a good close look into the company's 1H (ended 31ec08)-FY09 results announcement.....

The company continued to make losses, and had a NEGATIVE equity to the tune of $2.785m as at 31Dec08, and still owed banks some $3.8m. What is most amazing is that Digiland International had a mind-boggling 8,526.0m issued shares outstanding as at 31Dec08. So even at a share price of $0.005, the company still carries at a market cap. of $42.63m.

So many silly people are willing to pay $0.005 for a share that is technically worth nothing! Theoretically speaking, such people would stand to lose 100% of their investments, if suddenly others wake up and stop buying at $0.005/share, or if any creditor of the company decides to push for its liquidation.

It also pays to note substantial shareholder Tan Kim Yong has been selling his holdings - quite happy at $0.005/share, of course!



By dydx
I simply cannot believe this! Digiland is actually calling a 'massive' rights issue - a 1-for-1 renounceable non-underwritten rights issue of up to 8,526m new shares at $0.001 per share, to raise $8.25m!.....
Source: http://info.sgx.com/webcoranncatth.nsf/V...9Jun10.pdf

If this proposed capital raising is successfully carried out, Digiland will end up having 17,052m issued shares - likely becoming one of the biggest companies in the world, but only in terms of the number of issued shares!!

Bearing in mind that there is already hardly any buyers of this counter even at $0.005 - the lowest possible 'bid' price - in most days, I wonder how subscribers of the rights issue would trade out their new shares! Is this a plot by some interested parties to try to recreate short-term market interest in Digiland, so that they could unload their shares at $0.005 or $0.01?!

The latest Q3 (ended 31Mar10)-FY10 results continue to show a very difficult state in Digiland's IT trading business.....
Source: http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_EE07184767EEED8B4825771B0030BCFA/$file/3rdQuarter31Mar10.pdf?openelement

Based on the present 8,526m outstanding issued shares, at a share price of $0.005, Digiland would have a derived market cap of $42.63m - equivalent to 23.7x of Equity of $1.8m as at 31Mar10!!

Quite clearly, this is likely another case of putting good money after bad. IMHO, SGX should simply delist Digiland to save more ignorant investors from wasting/losing their money to some dubious companies....

By MrValue
Surprise that digiland shares are more widely distributed than many blue chip companies - close to 30,000 shareholders!! And yet not a single one of them is a substantial shareholders with more than 5% of it's shares.

It's then no surprise that mgt wld want to raise funds to keep the company alive such that CEO teo will continue to get his $250k to 500k annual remuneration, never mind the $280k cost to raise this money.

Hope SGX will do something.

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