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SCOMI-WA implied value at 2 sen

Scomi Group’s renounceable rights of its issue of up to RM164,863,605 Nominal Value Of Three (3)-Year 4% Irredeemable Convertible Secured Loan Stocks (“ICSLS”) At 100% Of Its Nominal Value (of 10 sen) together with up to 219,818,140 free detachable warrants starts trading today under the symbol SCOMI-LR.

 

The holder of 15 units of SCOMI-LR who subscribed for the ICSLS at RM0.10 will receive 2 free warrants.  At its mid-morning price of 3 sen, investors who purchase 15 units of SCOMI-LR will cough up 45 sen and they have to come up with RM1.50 to subscribe for the 15 units of ICSLS in order to get the two free warrants.  The total outlay will be RM1.95 and investors end up with 15 ICSLS (most likely will be traded under SCOMI-LA when it starts trading) and 2 warrants (likely under SCOMI-WA).

 

 

 

 

SCOMI-LA will have a conversion price of RM0.40 or 4 units of RM0.10 nominal value SCOMI-LA can be converted to 1 Scomi share.  The 15 units of SCOMI-LA can be converted at a ratio of 4 to 1 into 3.75 shares.  At Scomi’s mid-morning price of  51 sen, the 3.75 share is worth RM1.91.  If we deduct RM1.91 with the total cost of RM1.95 in getting 15 SCOMI-LA and 2 SCOMI-WA, the implied value of the 2 warrants is 4 sen or 2 sen per warrant.  

 

The exercise price of Scomi-WA has been fixed at 40 sen.  The warrant will therefore has an intrinsic value of 11 sen if the mother share stays at 51 sen.  Assuming the mother share remains stable, it is unlikely SCOMI-WA will trade anywhere near 2 sen implied value.  It is more than likely to trade at some premium over its intrinsic value of 11 sen.

 

 

 

Alan Voon

Warrants Specialist

alan@warrantscapital.com

 

November 17 2009

 

This article is for information and education only.  It is not a recommendation to buy or sell any securities mentioned in the article. Please exercise your own judgment or seek professional advice for your specific investment needs. We are not responsible for your investment decisions. Our shareholders, directors and employees may have positions in any of the stocks mentioned.

 

 

 

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