YTL Corp: Is it Magic?

The Malay word for it is lekat. Will the price hold? Will the stock price holds traction?

Today, 14 June 2012, YTL Corp went ex-all, to the chagrin of all its shareholders.

As the counter started trading there were lots done below the RM1.89 ex- theoretical price. Most were done at a loss of 2 sen at RM1.87. Slowly, buyers came out to square of the price at RM1.89 with some heavy volume trade of tranches of 1,000 and 2,000 lots. As the morning session drew to a close, buying were mostly done by retailers. The counter clinched 4 sen to RM1.93 at the 12.30 noon-day close. Will it stay at this price or will power buying in the next few days propel it to higher prices?

I do not believe that YTL Corp  is conducting Treasury buys as yet.

A person who buys a 1000 shares at RM1.96 just before it went ex-dividend of 2 sen per share (RM20.00), would have paid circa  RM1,990 for that transaction. With the proposed payment of the RM20.00 dividend, his share purchase price will be lowered now to RM1.97 per share.

Factoring in his gains of 66 dividend share at RM1.93, this will come to a profit of RM127.38.

Seen in another perspective,this profit of RM127 will help further reduced his purchase price by  another 12 sen or effectively at a lower purchase price of  RM1.84.

Then, there is the 66 YTL-Power warrants to be issued at only 20 sen. At the current price of 43 sen, that means he would have made a further gross profit of  RM15.18 after subscribing for it. After deducting  RM10.00 for government stamp duty, his net profit will be RM5.18 sen.

There is again, the opportunity for him to buy excess shares if he is daring enough.

Assuming there is mass selling by the YTL Corp shareholders of the distributed warrants and it goes down by 30 percent (13 sen), the warrant  could still be sold at 30 sen to reap at least 10 sen gross profit or about RM100.00 per 1,000 shares which can be considered great as it reflects a return of 10% on such a short duration!

I expect YTL Power shares to move upward as more than 75% of YTL Corp's revenue comes for the overseas utilities in UK and Singapore.

Moreover, Francis Yeoh, with a thumping war chest of RM14 billion, is definitely looking out for bargains given the background of the current fall-out of the Eurozone which now includes Spain and Cyprus! Assets can now be purchased at really fair prices! So, Francis is looking high and low  for low, low prices!

Do not be surprised to see YTL Corp, YTL Power and the YTL Power warrants going up soon.

So, the backdoor way to amassing YTL Power stocks will strategically be through YTL Warrants.The exercise price is RM1.21.

The current price of YTL Power is RM1.64.

Theoretically the conversion into YTL Power  will involved cash of RM1,210 and twenty dollars of warrant or altogether an outlay of RM1,230.

This means that given today's price of RM1.64, there is a further discount of RM410.00 if the warrants are converted.

So, what should be the strategy now?

For me, buy YTL Power and YTL Power warrants!

PS:

At the end of the day, there was a barrage of sellers selling it down to RM1.86 again. It ended up at RM1.91 for a two sen gain though there were only buyers at RM1.87;indicating possible Treasury buy in to support the price for some reason only 'those people' knew.

Anyway, let us see whether there is improved traction tomorrow which is a freaky Friday for stocks.