Would you invest in YTL Power International Warrants?

Up,Down and Up!

This warrant were issued in 2008 for a 10 year period until 2018. The price of RM1.2.1 is the conversion factor.Looking at the chart, prices were good in April touching 62 sen before slumping down in mid April and going further south in mid June before a gradual rebound to46-48 sen in late May. Thence, on an upward trajectory, it has moved to 60 sen currently. 

YTL Corp has decided to sell to its shareholders these warrants  in their holdings to reward them for their loyalty. The selling price is 20 sen per unit. This is a 66% price discount.

This offer for sale involves 682mil to 738mil warrants (based on the minimum and maximum scenario), which account for 73%-79% of the total 934mil  YTLP warrants held  by YTL. 

Question is would you buy,sell into strength in the market or accumulate them for  conversion as it has less than 6 years to go?

Let us look at some data on this warrant.

At the then price of 43 sen, it represents a steep discount of  46% . The converion rate is RM1.21.

Adding 0.20 sen to RM1.21 for a conversion is still profitable as YTL Power International is trading at RM1.81. Selling will bring you a profit of RM400 per lot of 1000 units.

Currently this warrant is trading at a good price at 59.5 sen.

Assuming YTL Corp shareholders take this up, it will be adding more money onto  the war chest stockpile of YTL Corp which currently is brimming with RM14 billion ringgits with nowhere to go!

If you buy the warrants at a steep discount of 20 sen, from the current trading price of RM0.60 sen, it is a super savings of about 66%.

The date of offer is not known yet but I guess it will be soon.

Let us assume you want to buy 20,000 YTL Power warrants. If you are successful and the price do not dip

much, you can trade them off for at least at 50 sen. At 20,000 shares, this will amount to RM10,000. Deducting for the 20 sen paid, your profits should show 30 sen x 20,000 which is RM6,000 in the best scenario.


In the worst case scenario, the warrant only fetches 30 sen.  The net gain is only 10 sen. So at 20,000 shares,  you will stand to gain RM2,000. 


Assuming the warrant is traded off by 10%, it means it will  trade at 53 sen.  Deducting 20 sen as your access price, there is a gain of 33 sen. This would mean selling 20,000 of the warrants should fetch RM6,600.


As the only project hanging around the neck of YTL Power International like a millstone is the Yes! project which should start making profits in 2013, I think it will be a calculated risk to go into this warrant but do not go overboard. 


Money to lose is risk money. Lose that is all you need too or make profit the other way around!


All the best.


Caveat emptor!