Bioalpha Holdings Berhad recently completed a rights issues of ordinary share and ICPS (Irredeemable Convertible Preference Share). The rights issue was a relatively small one as it was only offered to shareholders based on a ratio of 1 for 15 (for the mother share at 20 sen per share) and 1 for 6 (for the ICPS at 2 sen per share). Based on the company announcement last week, the rights issue was oversubscribed by 55% for the mother share and 208% for the ICPS.
BIOHLDG’s ICPS is a warrant-like instrument that also allows its holders to “exercise” the convertible preference share into the mother share by paying up in cash. The conversion price of the ICPS is 22 sen and its holders can either convert to mother share by tendering 11 units of ICPS or 1 unit of ICPS plus 20 sen in cash. The latter method of conversion turns ICPS into a warrant with an exercise price of 20 sen. Due to the low issue price of the ICPS, cash conversion is most likely adopted unless the ICPS falls below 2 sen after trading.
Due to the market weakness recently, the subscription rights of the mother share (BIOHLDG-OR) and ICPS (BIOHLDG-PR) did not attract too much interest. BIOHLDG-OR ended at a slight “exercise discount” to the mother share which is normally the case with subscription rights. However, BIOHLDG-PR ended its brief trading period on 3 May 2021 at 4 sen while the company’s warrant BIOHLDG-WA, which has a much shorter tenure and higher exercise price than the ICPS, closed at 10 sen on the same day.
The table below are the summary of the profile of the two securities with the price of the ICPS (BIOHLDG-PA) implied from the closing price of BIOHLDG-PR by adding 2 sen subscription price. It should be noted that the price of the mother share and warrant has retreated 6.7% and 15% from 3 May 2021.
|
: |
BIOHLDG-WA |
BIOHLDG-PA |
|
|
Warrant Price |
: |
RM0.085 |
RM0.060 |
|
Mother Share Price |
RM0.210 |
RM0.210 |
|
|
Exercise/Conversion Price |
: |
RM0.220 |
RM0.200 or 11 for 1 |
|
Expiry Date |
: |
5/1/2022 |
26/5/2026* |
|
Premium |
: |
45.2% |
23.8% |
|
Gearing |
: |
2.47x |
3.5x |
|
Historical Volatility |
57.4% |
57.4% |
|
|
Warrant’s Implied Volatility |
: |
137.4% |
21.0% |
|
Delta |
: |
0.70 |
0.76 |
|
Effective Gearing |
: |
1.72x |
2.67x |
*Estimated issue date
If the mother share price remains stable, BIOHLDG-PA should trade at a higher price than BIOHLDG-WA. We will know on 28 May when the ICPS starts trading to find out.
The Warrants Specialist
23/5/2021