Friday, December 15, 2006


Culling The Covereds (Part 1)
Call Warrants Review

Air Asia-CA 10/2007
Warrant Px 0.225
Mother share 1.46
Conversion Px 1.96
Premium 49%
Gearing 6.5x
Verdict: Premium very high, not the best (B-)

BToto-CA 3/2007
Warrant Px 0.54
Mother share 4.66
Conversion Px 4.43
Premium 6.6%
Gearing 8.6x
Verdict: Great gearing and low premium. Even though time to maturity is near, but like I say, a market's best chance for a bull run is in the 1st and 4th quarters, so not much point holding onto a warrant expiring in the 2nd and 3rd quarters (A)

Bursa-CA 4/2007
Warrant Px 1.51
Mother share 7.80
Conversion Px 6.07
Premium -2.8%
Gearing 5.1x
Verdict: Discount, ok maturity into 1st quarter, ok gearing, but nobody believes me when I say Bursa shares can go to RM9.00, even though I always blast the Bursa (A+) please ignore this opinion as it was based on one for one conversion (which was wrong)

Well, ty Tangee888, see what i mean, the bloody Bursa covered is 2 to convert into one share, hence my calculations were wrong!!! So, I'm just gonna leave the original posting to reinforce my point. The proper calculation and verdict would be:
Premium: (2 x 1.51) + 6.07 / 7.80 = 16.5%
Gearing: 7.80 / 3.02 = 2.58x
Verdict: OMG, this warrant is quite expensive and the gearing is quite low too. I think its some kind of karma that the Bursa-Covered is the one to give me the problems - all the more ironic!! (C)

Commerz-CA 11/2007
Warrant Price 3.18
Mother share 7.85
Conversion Px 4.59
Premium -1%
Gearing 2.4x
Verdict: Good time to maturity left but gearing is pathetic, totally loses out on what makes a warrant. Even though no premium, not a good play (C)

2 comments:

Tangee88 said...

Your calculation of a discount for Bursa-Ca is inaccurate. There is actually a very big premium because you probably missed the fact the conversion/exercise ratio requires 2 (and NOT 1) CW. i.e 1.51 x 2 + 6.07 = 9.09 versus Bursa's current price of 7.70 !! Your angst against the lack of info and TRANSPARENCY is spot-on.

Enjoyed your column. keep up the excellent work.

Salvatore_Dali said...

tyty,

see what i mean