This is serious!
Should we buy into the YTL-Warrants? RM 64,000 question.
It's exchange for mother YTL Power share-RM 1.21 per unit.
Let us look at the price of YTL Power yesterday (5 October).
It was RM 1.61-a great 8 sen fall from RM1.69, the last trading day of September.
And its warrants : RM0.42.
What about those YTL Corp shareholders being offered to buy the YTL-Power Warrant units at 20 sen per? Slim gain?
Let us peruse and scrutinize the numbers and put in sensitivity testing.
At yesterday's prices, YTL Power mother share was RM 1.61 and the YTL Power Warrants 08/18 was at RM 0.42 sen.
If you add RM 1.21 to RM 0.42, you would get RM 1.63, for a loss of 2 sen.
So expect warrants to be sold down the river if the YTL Power mother share cannot sustain itself and keep going down.
What about the YTL Corp shareholders? Dump the ROS or buy into it?
At yesterday's price, they will stand to make RM 150.00 per 1000 units. So it's up to them to get out from a tricky situation with hard cash.
If they buy in, as I have said in an earlier posting, they need to pay RM 200 for subscription.
Then there is the RM 10-revenue stamp and RM 5 for bank draft charges and go to Tricor Share Registrars themselves at Mid-Valley.
Overheads work out to RM 15.00 easily.
That would mean that you have to pay RM 215 for per 1000 units subscription.
If the warrant price stays at RM 0.42, then you will get 420-[RM 215 + RM 31 (brokerage)] = RM 174.00.
They must as well sell the ROS and get RM 150.00 gratis!
Now, let us do some sensitivity test.
If the warrant price falls to RM 0.35, your returns will be RM 104.
If it fell to RM 0.30, you will still be in the money of RM 74.00
If it fell to RM 0.25, you will get RM 24.00.
If it fells to RM 0.20, you will get RM 4.00
If it goes below 20 sen per warrant, you take a direct hit loss of RM 6.00 and more.....
My guide: Get out as soon as it hovers around the RM 0.30 to RM 0.35 sen per warrant price. That is must-go cut-off price point unless you want to invest long-term up to 2018.
By getting out ,at least you will get 34% or more return to investment for the money expended in the subscription of RM 215.00
Okay, to better your chances for the effort to subscribe, buy excess shares. Remember, you have the same risks!!
Two things that I believe in as logical.
1) At the current price of RM 0.42 for its warrants YTL Power at RM 1.61 is below its viable exchange price of RM 1.63. The warrant place must adjust itself downwards for long term buyers to come in. If YTL Power goes down to RM 1.55, then its warrants will only fetch RM 0.34 sen. Similarly if YTL Power goes down yet to RM 1.50, then its warrants will only be at RM 0.29 sen.
Pretty dangerous situation here. Always remember-most people will throw at this psychological price point of RM 0.30.
2) I do not believe there will be many odd lot holders who will subscribe for their warrant units. A shareholder with 1000 YTL Corp shares will get only 66 units. Assume that he subscribes. He pays
RM 13.20; and his overheads will be RM 10 for revenue stamp and RM 5.00 for bank draft charges. This will total up to RM 28.20.
What will be the value when the shares are traded? Let us say, the warrant price is RM 0.40. If he sells, he will get RM 26.40. After deducting for brokerage of RM 31.00, he will lose RM 4.60.
By my reckoning ,a person with RM 1500 YTL Corp shares may take up his allocation and come away with a profit of RM 5.00. Big risk,though! Best for him to dump it all in the add lot market before 10 October.
As such, small odd lot YTL Corp shareholders will not generally take up their share of the allocated units.
So, my believe is you can try for excess and pray that the share price of the warrants do not go below when you are ready to sell.
 |
| A Risk Taker in Agony |
So, you buy those units and top up with excess subscription by paying a mere RM 5.00 bank draft charge.
If they give you say 5000 units, then you should breeze in with RM1,500 gross takings.
As usual, caveat emptor!!
For me, I have faith in all YTL counters. You should pick them up when they fell over-board on a bad trading day!
Remember, YTL Corp has a cash horde of more than RM 16 billion. They can do wonders!
Did you see Sime Darby did David Copperfield by gaining back all its losses on 4th October on the next 2 trading days?
Wunderkind!
No comments:
Post a Comment