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No Need to Buy Loan Rights to Get Redtone-WA ?

The loan rights of Redtone International Berhad (Redtone-LR) was trading at about 2.5 sen today. Redtone-LR will cease trading on 12/2/2009 meaning tomorrow 11/2 is the last day of trading for Redtone-LR.

If investors buy Redtone-LR at 2.5 sen, what does he get?

This Redtone rights issue of loan stocks is done on the basis of 10 loan stocks (at nominal value of 10 sen) for 10 shares held.  The subscription price is at nominal value which is 10 sen.  Subscribers of 10 loan stocks will get 4 free warrants.  This means that investors who buy 10 Redtone-LR at 2.5 sen and subscribe for the loan stocks at 10 sen each will effectively pay RM1.25 to get 10 loan stocks (Redtone-LA).

The conversion price of the loan stock is at 25 sen and it can only be converted by tendering equivalent nominal value of loan stocks.  This means that investor needs 2.5 loan stocks to convert to 1 share.  To make the calculation simpler, investor will need 25 Redtone-LA to convert to 10 Redtone shares.  As Redtone last traded share price today is 26.5 sen, you pay RM2.65 to get 10 Redtone shares.

GFB-WB – High Gearing Vs High Premium

The shares and warrants of Golden Frontier Berhad attracted some interest recently as investors find value in this low profile company. The underlying share has been rising steadily over the past few weeks despite the general lackluster market. At the close of last Friday, Golden Frontier was trading at RM1.27 while its warrant, GFB-WB closed at 14 sen.

 

Golden Frontier’s operation is divided into two divisions: packaging and property development. However, its property division is not very active at the moment after it has completed its previous project. Packaging is the main business and principal profit contributor to the group. Golden Frontier’s corrugated cartons operations are conducted both in Malaysia and Vietnam. With the rapid expansion of the Vietnam economy, the packaging operation in Vietnam has surpassed that of Malaysia both in terms of revenue and profitability.


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).

 

 

Put Warrants via Private Placement; Call Warrants via Market Making

Under the revised warrants issuance guideline, issuers can expedite the listing of structured warrants by opting for market making.  This way, there will be no private placement and issuers will hold 100% of the warrants on the first day of listing.  This is praticed by most issuers in developed market as more sophisticated investors and traders will never want to have their money locked up for about one week as is the norm under the private placement practice.  Since the new guideline came into effect, some issuers have chosen the market making route to listing their warrants although it is quite likely that issuers can sell more warrants via private placements and make more money.  A recent issue by OSK Investment Bank attracts interest due to the fact that it chose to place out the put warrants but not the call warrants.  Why is that so?

 

 

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