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Malaysia Warrants News

Scomi Group convertible securities attract interest on Special Dividend from subsidiary's disposal of Machine Shop Business

The shares, loan stocks and warrants of Scomi Group was up modestly today ahead of announcements of the company’s subsidiary Scomi Engineering Berhad (SCOMIEN) entering into a conditional share sale agreement with OMS Holdings Pte Ltd, a wholly-owned subsidiary of Sumitomo Corporation Asia Pte Ltd for the disposal of the Machine Shop Business for a total cash consideration of approximately USD101.45 million (RM327.68 million based on the exchange rate of USD1:RM3.23).

Of significant importance is the announcement of SCOMIEN of its intention to distribute RM90 million as special dividends.  Scomi Group owns about 70% of SCOMIEN share capital and close to 90% of SCOMIEN ICULS (SCOMIEN-LA).  It would receive the bulk of the special dividend by SCOMIEN.

Spike in MBFHLDG-WA Price caused by Major Shareholder’s Trading?

The performance of MBFHLDG-WA after the company’s minority shareholders rejected its major shareholder’s plan to privatize the company has been spectacular.  The warrant had rallied from 7 sen before the privatization plan was shot down to about 15 sen at the time of writing.

 

While the cases of warrants shooting up post failure of takeover or privatization has been featured here before, the case of MBFHLDG-WA could the first time where the major shareholder had a hand in leading the price action of the warrant.

MBFHLDG-WA soars on Failed Privatization Bid

Warrant’s price action once again proved to be a predictor of the likelihood of a privatization success.  In January shortly after the proposed privatization of MBF Holdings Bhd, the price of MBFHLDG-WA continued to trade above the offer price of 5 sen.  Please refer to thearticle " MBFHLDG-WA Price Reaction Suggests Potential Hiccup in Privatization Bid".

On 27th April 2010, MBf Holdings Bhd announced that its group chief executive officer Tan Sri Ninian Mogan Lourdenadin’s bid to take the company private fell through, after two-thirds of its minority shareholders rejected his buyout offer at the EGM yesterday.

The failed privatization sent MBFHLDG-WA soaring to above 10 sen from 7 sen this morning, repeating the performance of warrants prices surging of previous failed general offers like Zecon and E & O Properties (the first attempt).

 

So the next time a warrant trades above its offer price after a takeover offer, history suggests that the offer will face strong resistance and usually does not go through at least in the first attempt.

 

KNM-HA – Not Tracking Underlying Share Decline

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Put warrants quietly made its debut in Bursa Malaysia towards the end of last year.  As the market was on an uptrend over the last few months, few people pay attention to put warrants which are supposed to go up when the underlying share decline.  However, after the stock market suffered significant decline over the last few days, investors naturally try to look for ways to make money with bear instruments like put warrants.  

 

KNM Group Berhad, a very actively traded stock on Bursa Malaysia, saw its share price plunged recently when the company announced the proposed acquisition by its managing director and his partners failed.  They have earlier proposed to takeover the business and undertaking of the company for 90 sen per share.

 

Investors who bought into KNM-HA, a put warrant on KNM Group share issued by OSK Investment Bank, in anticipation of the failed bid have not benefited from the share price decline at all.  KNM-HA is not traded on most days even though there are bid and ask prices provided by the market maker.  Since the warrants issuance last November, there was only six days when the warrant has been traded.  The following table is the dates and prices where KNM-HA has been traded:

 

Warrant Focus – TALIWRK-WA : Discount Trap?

The warrant of Taliworks Corp Berhad (TALIWRK) is currently trading at a discount of more than 7%.  This warrant, for some reason, traded at discount for a long period as displayed in the chart attached.  Is it a discount trap like some previous examples highlighted here?

Maybe not!


 

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