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Malaysia Warrants News

Why You Need To Avoid Actively Traded New Structured Warrants

Investors who intend to punt in structured warrants should look at this latest example to decide whether it is worth playing with this kind of instrument.  As illustrated in some previous articles on newly listed structured warrants such as WYNN-CA, buying an actively traded new underlying warrants would likely end up as a frustrating experience.


Let’s take a look on the first structured call warrants on Hartalega Holdings Berhad (HARTA) issued by CIMB as an example.  The tables below are the historical prices table for both the underlying share and the call warrant (HARTA-CA) for the first three days of trading for the warrant.  HARTA-CA has an exercise ratio of 8 and exercise price of RM7.00.


What does KNM Structured Warants Pricing Suggests?

Despite the fact that KNM's founder and managing director Lee Swee Eng together with two foreign funds are proposing to acquire the entire business and undertakings of KNM at 90 sen, the 3 structured call warrants of KNM traded on Bursa Malaysia are still trading at significant premiums.  Based on the closing price of KNM on 9 Feb 2010 of 80.5 sen, the offer price of 90 sen represents a premium of 11.8% over current share price.

KNM structured warrants are trading at premium higher than the takeover premium.  KNM-CB trades at premium of 22.9%, KNM-CC at premium of 14.3% and KNM-CD at premium of 22.4% respectively based on their last traded prices.  Interestingly, the only put warrant on KNM, KNM-HA is still trading at bid/ask of 21/21.5 sen despite the offer.  KNM-HA has an exercise price of 80 sen and exercise ratio of 1.  If investor buy KNM-HA at 21.5 sen, he will be looking at a breakeven only when KNM falls to below 59.5 sen if he intends to hold.

Based on the pricing of the structured warrants offered by warrants issuers, the takeover offer at 90 sen is not a "sure thing".  Nevertheless, it should be noted that there is no mention of the listing status of KNM in the takeover bid.  The offerors are only buying the business and undertakings of KNM.  This leaves some uncertainty to the share of KNM post takeover.  What if the cash paid for the business is not distributed to shareholders but used for other purposes?  Although such scenario is not probable but it is not impossible.  But the cost of insuring for such eventuality via KNM-HA may be a bit high at premium of close to 27% .  On the other hand, the call warrants' higher premium suggests a higher offer price may be possible.  Nevertheless, punting on these KNM warrants may not be very useful based on such high premiums and on a pending takeover offer.

MAS-PA "Put Warrant" Exercise Price to Reduce to RM3.09

The ex-date of the rights issue of Malaysian Airline System Berhad (MAS) has been fixed on 8th February 2010.  This means that investors who buy into MAS before 8th February is entitled to subscribe for 1 right share of MAS for every 1 share held at a rights issue price of RM1.60.

The above exercise also has implication for MAS's Redeemable Convertible Preference Share (MAS-PA).  The conversion price for MAS-PA will be adjusted from RM4.05 to RM3.09 according to MAS circular to shareholder on the Rights Issue.  All other terms and conditions of MAS-PA remain unchanged.

Punting Warrants Rights - Century and Heveaboard

The new warrant of Century Logistics (CENTURY-WB) and the warrant right of Heveaboard Berhad (HEVEA-WR) made their debut this morning. CENTURY-WB opened at 90 sen this morning. This made all subscribers of CENTURY-WR, including those who bought it at the highest price of 82 sen a profitable lot. CENTURY-WR had risen steadily during its trading window last month from briefly below 70 sen to a high of 82 sen on the last day of trading. Its last traded price was 81.5 sen. Nevertheless, the price of CENTURY-WB has now weakened and is hovering around 82 sen, off from a high of 93 sen this morning.

HEVEA-WR meanwhile started the day at 22 sen and is now trading about 19 sen. Holders of HEVEA-WR need only top up 1 sen to subscribe for the new warrant of Heveaboard. The new Heveaboard warrant (HEVEA-WB) has a tenure of 10 years and an exercise price of RM1.00. Holders of expired HEVEA-WA were also entitled to subscribe for HEVEA-WB based on 1 new warrant for every 3 unexercised HEVEA-WA. The last traded price of HEVEA-WA was 7 sen. This implied a new warrant price of 22 sen [(7 sen x 3) + 1 sen].

If HEVEA-WR does a repeat of CENTURY-WR, HEVEA-WR should gradually rises towards the end of trading period. The warrant right will cease trading on 10 February.

PMIND-WA Exercise Price has been adjusted to 5 sen

The exercise price of Pan Malaysian Industries Berhad warrant (PMIND-WA) has been reduced to 5 sen from 10 sen following the announcement by PMIND today that the order granted by the High Court of Malaya ("Court") on 7 December 2009 confirming the Proposed Reduction in Par Value was lodged with the Companies Commission of Malaysia ("CCM") on 30 December 2009.

Click the following link for detail announcement.

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