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New Warrant: HWGB-WB heavily traded

Two new company warrants debuted on 13th April 2010 in Bursa Malaysia.  One of them is HWGB-WB, which was actively traded.  The warrant came free for those who subscribed Ho Wah Genting  Berhad (HWGB) rights issue of share at RM0.20.  Subscribers would have lost 5 sen from the mother share based on the closing price of 15 sen.  However, since the warrant was traded at 6.5 sen to 7 sen, those who subscribed for the rights came out ahead marginally.


MEDIA-WB: Low Premium Punt on Government Controlled Media

Media stocks listed on Bursa Malaysia have been enjoying a strong run led by Media Chinese International (MEDIAC) whose share price is up almost 60% YTD.  Another media company,  Media Prima (MEDIA) is also up about 35% although Berjaya Media (BJMEDIA) is down YTD but that stock is thinly traded.

 

 

Expiring Company Warrants Top % Gainers

Following the recent spectacular run of AFFIN-WC, many company warrants also put up strong gains today led by LBALUM-WA which gained 133% or 2 sen from 1.5 sen to 3.5 sen on heavy volume. The following table displays the top 10 percentage gainers amongst company warrants listed on Bursa Malaysia on Friday 9 April 2010.

 

 

The Mithril-LA Discount Trap!

The share price of Mithril Berhad staged a substantial rally from below 20 sen at the end of January 2010 to a high of 32 sen on 19th March.  However, the share price virtually collapsed starting on 25th March and it is now back to where the price was in January.

 

What can be the possible cause of the price collapse?

 

 

Punting Expiring Company Warrants – Speculating why AFFIC-WC surged 50% while Underlying only rise slightly

The company warrant of Affin Holdings (AFFIN-WC) staged an over 50% rally yesterday with the mother share only up 4 sen or 1.5%.

 

AFFIN-WC is one of the company warrants expiring this year which is out-of-money.  Nevertheless, the exercise price of this warrant is only about 11% more than the current share price.  There is much more liquidity at AFFIN-WC than Affin mother shares.  Given the speculation on Affin Holdings being one of the merger candidates in the consolidation of Malaysia’s banking landscape.  It is not unreasonable to assume a potential acquirer or a “vulture” fund can be collecting the warrant.  The “acquirer” or “vulture” fund should be able to collect much more warrants and exercise it into shares later on than buying mother shares directly from the market.  Even though they may be paying some premium, the possibility of being able to accumulate a much larger stake than collecting the underlying share alone can make the exercise feasible.

 

Nevertheless, the theory of a party accumulating out-of-money warrants at very cheap absolute price and converting it into ordinary shares to build a meaningful stake in the company may not be applicable in the case of AFFIN-WC as the total number of AFFIC-WC outstanding is only 153.77 million vs. Affin mother share total number of shares of some 1.5 billion.  Full exercise of all warrants only represents slightly over 9% of enlarged share capital.

 

However, if the total warrants outstanding is about 50% of number of shares outstanding, the story may be different.  There may be some warrants in the list of expiring warrants below that may fit into the above description.  Assuming the underlying company is in good financial health and may be under appreciated by the investment community, a “vulture” fund can come in via buying and exercising the warrants and “threaten” the existing major shareholders if they are not careful.

 

 

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Analysis

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