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Malaysia Warrants News

BJCORP-JA very close to being CALLED

 

BJCORP-JA could become the first Callable Bull Certificate (CBLC) to be called once the mother share price touches the call price of RM1.06. BJCORP share hit a low of RM1.08 today and any further weakness in the share price tomorrow can easily mark the end of trading of BJCORP-JA.

 

For CBLC, if the price of underlying instrument reaches the Call Price/Call Level at any time prior to the expiry date, the issuer will call the CBBC and trading of the CBBC will be suspended. This event is referred to as a Mandatory Call Event ("MCE"). The CBBC will expiry early and will be delisted on the 4th market day after the MCE.

 

GAMUDA-JA Finance Charge higher than Credit Card Rate

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Callable Bull and Bear Contract (CBBC) made its debut on Bursa Malaysia 16th July 2010 with CIMB issuing four Callable Bull Contract (CBLC) on Air Asia, Berjaya Corporation, Gamuda and Genting. 

 

As with many new products in the past, these CBLCs were heavily traded on the first day of trading.  With very limited introduction of the products to the investing public and lack of up-to-date data and calculators in the issuer’s website, it is rather strange to see these CBLCs being so heavily traded.  Either investors do not understand the products (and treat it like normal warrants) or the market maker is not doing a good job in ensuring CBLCs prices tracking the underlying shares’ performance.

 

Unlike call warrants, CBLCs are always in-the-money by design. It also has another feature known as a mandatory call event.  Essentially, buying CBLCs is like buying shares on margin with an automatic cut loss process once the mother share hit the call price.  To understand CBBC more, please read my previous article on CBBC written in 2008.

 

The price of a CBLC comprises of an intrinsic value and finance charge (as opposed to time value for warrants).  Let’s use GAMUDA-JA, the most heavily traded CBLC on 16th July to illustrate some concepts of this instrument.

 

At the close of 16th July trading, the price of GAMUDA and GAMUDA-JA were RM3.36 and RM0.24 respectively.  GAMUDA-JA has an exercise price of RM2.55 and exercise ratio of 5.  Based on the closing price of GAMUDA-JA of RM0.24, the intrinsic value and finance charge are RM0.162 and RM0.078 respectively (refer to table below).  According to CIMB term sheet on GAMUDA-JA, the initial funding cost (represented in %) was 6.32% per annum.  CIMB had used this funding rate to determine the issue price of RM0.15 for GAMUDA-JA based on the mother share price of RM3.18 on price fixing date.

 

Warrant in Focus : LBS-WA

LBS-WA is showing some signs of life again after laying low for a while.  This warrant surged from a low of 3.5 sen in October 2008 to a high of 55 sen in January this year possibly on the prospects of its property development project in Zhuhai, China following the commencement of building of the Hong Kong-Macao-Zhuhai Bridge.

 

Nevertheless, the stock and warrant prices fell substantially since as the market corrected. But news report recently on LBS going to launch the Zhuhai project had lent support to the share.  LBS managing director Datuk Lim Hock San was quoted by the press a few days ago that the project's gross development value (GDV) will exceed RM5 billion. LBS also recently signed an agreement with MIMB Investment Bank Bhd, a unit of EON Bank Bhd, to act as the principal adviser and lead arranger for a RM135 million sukuk (Islamic bond) programme to finance LBS' projects.

 

Scomi Engineering Berhad ICULS Holders Have to Convert Super Fast to Entitle Special Dividend

Scomi Engineering Berhad (SCOMIEN) announced a special dividend on Thursday night 15th July 2010.  This special interim dividend amounts to 29.5 sen per share, representing a dividend yield of 25.6% based on 15th July closing price of RM1.15 for SCOMIEN.

 

The ex-date for the special interim dividend has been fixed on 28th July and the entitlement date on 30th July.  This normally would not have been any issue as shareholders are naturally very happy to have the ex-date fixed so soon after the announcement date.

 

FITTERS-WA Surged on Major Shareholder's Purchase

The price of FITTERS-WA has been surging lately and hitting all time high of 32.5 sen on June 29 and July 1 ,2010.  Guess who has been buying the warrants?

 

According to Bursa Malaysia announcement, the Managing Director and major shareholder of Fitters Diversified Berhad (Fitters) , Dato’ Wong Swee Yee was the one responsible for the bulk of the warrants purchase.  The following is the table extracted from Bursa Malaysia website on Wong’s acquisitions:

 

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