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!

Buying Tickets at Paradigm Mall GSC

Latest Halls and Equipment

If you intend to go to the GSC cinema chain at Paradigm Mall, take note of the following advice:

On Wednesday all tickets are priced at RM8.00

Senior citizens rates are available on weekdays for shows before 6 pm. I need to check what is the entry ticket rate.

If you are paying by credit cards and debit cards, taken note that there is an offer in July 2012.

Those using Citibank credit cards can book the ticket earlier than the show day. For every ticket bought, you get one free.

For RHB Cards, you can use it only for the show day. It is also a one ticket free for every ticket purchase.

The same goes for Hong Leong Bank Credit and debit cards. Though, I need to check on this.

Free lists can be used for shows that have been screened for more than 2 weeks. They are shown with asterisks  on the GSC  web pages.

Shareholder entry tickets can be used for any shows.

BJFoods-Sellers Dumping Options?

A Cup of Kindness

I wonder why?

With just 18 trading hours to go, yet we see sellers dumping their shares down to RM1.33 this evening. 1,370 lots of 100 units changed hands. Day seller? Anyway, small potatoes.

The question is what gives?

Who are these sellers? Why are they selling at the 13th  hour when they can buy the new rights at 65 sen only on 12 July?. Or is it they know something we do not?

As I know, it is a rights issue and one has to pay another RM650. Plus the investment of  RM1400 you have to pay on a cum purchase, it will add up to RM2.050. this means for 2000 share, you could make a gain of  30 sen per lot. For 2 lots there should be a RM62 sen gain (RM600)

Then, there is the warrants given gratis with a conversion rate of RM0.70 per lot. This is also trade-able. To convert into 1000 BJF shares, you need to pay 70 sen or only RM700.00.

If the mother share continues to trade about RM1.30 ex, it means you will stand to gain 60 sen profit per new BJF shares on converting grossing  a profit of RM1,200 for 2 lots of 1000 new shares.


The  theoretical gross profit then should amount to RM 1,800 at the end of the exercise with the price staying at RM1.30.


To ensure the uptake of all the rights, it is pretty sure that the 'powers that be' will try to keep the share price at RM1.30 or above to show a ringgit for ringgit return on the rights issue.


Let us assume that you only bought 1000 shares at RM1.36. What would you gain in terms of new shares and warrants and what could be your returns?


The factor to be used here is 0.8


As you will only get 800 shares per 1000 shares held, you will have to pay RM520 for the rights. You will also get 800 free warrants.


As you have bought the mother share cum rights at RM1.36, it means you have paid about RM1,400  for the shares (plus overheads). If you add this amount to the rights issue price outlay of RM520, it will add up to RM1,920. That means cost  per share to you will be RM1.06 sen; with a safety trading margin of  0.27 sen.


When the share goes ex on 12 July, watch out for any premiums. If it goes up beyond the last trading price on11 July , then you can get back you capital by selling off the mother share to let the new rights at 65 sen ride the high wind.


It it does not, be an investor and pray hard that Starbucks will do the magic by August 2012.


Also, throw the warrants for good measure if you do not want to take on an option for future gains.

CO-The Glossary of Terms

Oftentimes, when you study the law in English and yet have to be examined in Bahasa Malaysia, you may be stumped when you have problems with nomenclature and terminologies.

Here is a glossary of the terms you should get yourself familiar with.

                                         GLOSSARY AND TERMINOLOGY

BAHASA MALAYSIA	ENGLISH
sabit	convicted
curang	fraud
keburukan akhlak	moral turpitude
budi bicara	discretion
bermastautin	resident
setara	equal
batasan	limitation
akuterimaan	acknowledgement
ikatan jaminan	assurances
bon jaminan	bail bond
afidavit	affidavit
ikrar	pledge
rayuan	appeal
demurer	demurer
penolak tuntutan	disclaimer
pengataan	allegation
de bene esse	good for the present
sumpah wasi	oath of executor
pentadbir	administrator
akuan berkanun	statutory declaration
justifikasi jaminan	justification for guarantee
disemat	to be studded, be pinned
teg pengenalan	identification tag
diperihalkan	described
melayan	treat,serve
ekshibit	exhibits
dokumen yang hendak di persumpahkan	documents to be sworn
meterai	seal
mengecapkan cap jarinya	finger printed
perdayaan	deceived
fraud	fraud
dures	duress
menyelenggara suatu daftar	maintain a register
suratcara lain	other instruments
jelas dan zahir	clear and tangible
teks kaedah papan tanda berukuran	sign board text measuring
sub-kaedah	sub-rule
pelanggaran kaedah	violation of the rules
dipertuduh	charged
menggantung perlantikan	suspend the appointment
keputusan prosiding jenayah	results of criminal proceedings

nombor pengenalan	identification number
disifatkan	deemed as
dikendalikan	conducted
fee yang dilevikan	fees levied
ditandakan	marked
duti setem	stamp duties
Kumpulan Wang Disatukan Persekutuan	Federated Consolidated Fund
cek berpalang	crossed cheque
berukuran paspot	passport size
salinan foto	photostat copies
perakuan kelakuan baik	certificate of good behaviour

BJFoods-A Breather or Sprouting Roots?

Delicious Combo!

BJFoods (BJF)- after a flurry of buying, it seems BJF has met its nemesis price. It hit RM1.45. Was that a flash in the pan? Is RM1.40 that psychological " bridge too far" for this food giant?

Reading the answer given to Bursa in August 2011, BJF made some interesting assumptions when pricing both their rights and their warrants.

At the then going price of 81 sen, the rights issue was priced at a 13% discount of 65 sen. The TERP was quoted at 75 sen. With that berth of 10 sen, it was assumed that shareholders will pick up the rights.

As for the warrants, since they have been  given free, they wanted to impute a value on it as well. So, they decided that it should be priced at 70 sen giving the tradable value per warrant at 5 sen apiece higher than the 65 sen rights.

Let us used their logic to appraise the current price of BJF. will this be a true reflection or a mirage?

Let us take RM1.40 for convenient calculation. Let us also give it a 13% discount. That would work out to a fair support price of RM1.22 sen. Let us exercise the rights at 65 sen at 1000 shares. Total investment will be RM1.22+0.65=RM1,870 for 2000 shares. That means per 1000 lot is adjusted to RM940.00. At the theoretical support price of RM1.22, you stand to gain RM240.00. Selling off 2 lots of 1000 units will fetch  you RM480.00 gross profits.

Will buyers invest in this counter when their shares are adjusted truly to at RM1.22 sen? Looks okay to me since you would still be taking in 28 sen  of profit (29%) in such a short window of time.

Let us look  the warrants. It will be priced at 70 sen still. So to convert, add 70 sen. Total outlay will be RM700 to change for 1000 shares. If the ex-price is RM1.22, then the TERP of each warrant should be 52 sen.

To a layman this is a bonanza of 52 sen per share. That is another RM520 for the piggy bank.

When the rights offer letter are traded, the opportunity to sell presents itself.

First you collect the 28 sen from selling the rights and then a potential 52 sen from the warrants. The take home will possibly be RM800.00 for one lot of 1000 shares.

Let us see what happens on 17 July or is this the warped and fickle workings of an infantile mind?

STAREIT TAKES OVER 3 AUSTRALIAN MARRIOTS

No longer A local REIT

Stareit has moved aggressively to accumulate premium assets. This tme it made significant 

forays down under to take over three Marriots-Sydney Harbour Marriott Hotel, Brisbane 


Marriott Hotel and Melbourne Marriott Hotel.

An outlay of RM1.315 billion is the total cash payout for this acquisition.

 The purchase consideration will be satisfied in cash via bank borrowings and cash balances 


of Starhill REIT upon receiving approvals from the relevant regulatory bodies.

Managing director of  YTL Corp/chief executive officer of Starhill REIT) Francis Yeoh  said 


that the acquisition of this new portfolio of hospitality assets would enlarge the REIT's 


portfolio to about RM3bil from RM1.58bil currently.

With the acquisition, more than half of Starhill REIT's property value will be constituted by 


its hotel assets in Australia and Japan, making this the largest portfolio of overseas property 


investments of any Malaysian REIT. So, the footprint of Stareit has changed character-wise 


with a large exposure in Australia. Wise move I guess since the Aussie dollar is solid as 


Gibraltar!

“The acquisition represents a yield accretive opportunity for the REIT, generating two 


income streams, firstly, stable fixed lease rentals arising from its existing property portfolio 


and, secondly, variable income from the three Marriott hotels, increasing the potential for 


distribution per unit growth and variations,” he said.

The Marriot, Melbourne

He added: “It will also allow Starhill REIT to participate in the vibrant real estate market in 

Australia and explore further geographical diversification of the REIT's asset base.”

The Sydney Harbour Marriott Hotel, built on a 3,084 sq m site on Pitt Street is in close 


proximity to reknown tourist attractions, including Circular Quay, The Rocks and the 


Sydney Opera House as well as the city's major office and retail precincts. The 33-floor 


building has 563 rooms.

The Brisbane Marriott Hotel sits on 1,532 sq m land and is located close to the Brisbane 


River and with a view of the Storey Bridge. It is a 28-floor building with 267 guest rooms.

The Melbourne Marriott Hotel occupies 1,636 sq m, located on the corner of Exhibition and


Lonsdale Streets with 16 floors and 186 rooms.

The three are five-star AAA tourism-rated hotels, situated on freehold land within the cities' 


Central Business Districts and operated by Marriot International Inc. Group group.

Starhill REIT currently owns ten (10) prime hospitality related properties with a total 2,690 


rooms and services residences units in Malaysia and Japan, namely the JW Marriott Hotel 


Kuala Lumpur, The Residences at the Ritz-Carlton, The Ritz-Carlton, Kuala Lumpur, the 


Pangkor Laut, Cameron Highlands and Tanjong Jara resorts, the Vistana chain of hotels in 


Kuala Lumpur, Penang and Kuantan and Hilton Niseko. As at 31 March 2012, the combined 


value of the Trust’s property portfolio stands at RM1,577 million.

The Trust was established on 18 November 2005 and Starhill REIT was listed on the Main 


Market of Bursa Malaysia Securities Berhad on 16 December 2005.


An an IPO price at 0.98 sen, STAREIT is an undervalued REIT.

Time to accumulate STAREIT on weakness, don’t you think?

Risk Capital and REITS

REITS are Defensive

Doing Well

With the impending IPO of IGB and KLCCP planned REITs,investors will have another go at this better than FD category of investment.

Star Performer

If you are happy with Malaysian bonds and sukuks that regularly pays out 5% dividend, then REITS could be your cup of tea.

Glittering

Looking at the way Pavilion Reits and Stareits have ascended in its stock price as well as the gross dividends paid out thus far,those who have spare cash should seriously look into this type of investment. Other reits from Quills to Capitalmalls have also done well.

High End Office Reit

Let us look at some of the merits trotted out.

It is claimed that they bring in higher-than-market average yields

They have defensive qualities in the current uncertain economic and market environment [a low-beta proxy to the economy]

These days, analysts do not discount the possibility of eventual increased attention on REITs, saying that this could be a prelude to a re-rating for the sector.

“These two REITs are huge in terms of potential flotation volume and market capitalisation. For IGB REIT, its asset valuation of RM4.6bil will make it the largest retail REIT to date,”  RHB Research Institute's REIT analyst Loong Kok Wen said over the telephone.

Loong said the huge asset base due to high liquidity in the financial system would also attract the attention of institutional investors.

“This is a good opportunity to buy into such initial public offering REITs amid the sustained global uncertainties,” he added.

Loong noted that interest in REITs was currently high and this could be sustained, moving forward, should global uncertainties persist.

“There has been a lot of attention lately on consumer-based dividend-paying stocks and their prices have been going up.

“It is the same for REITs their asset revaluation had seen increased prices on the backdrop of high liquidity in the economic system,” Loong added.

A property analyst with TA Research said the other qualities of REITs that would be appreciated by investors in these volatile times were their dividend yielding nature compared with other fixed-income securities.

“I am positive about retail REITs as their dividends are stable because these cash stream comes from their rents.

“Retailers are resilient amid booming economies in the East. And locally, consumers here are always shopping and buying goods during the weekends,” the analyst said.

However, the analyst noted that while REIT yields had declined slightly from the past, one could still find yields as high as 8%.

Yields today still offer 2%-3% premium over fixed-deposit (FD) rates.

“For example, if I am a person with a lot of money, I would like to diversify my returns and risk. So REIT is the next best alternative after FD.

“Today, we are also looking at richer valuations for REIT stocks,” the analyst said.

In a report, Hong Leong IB said foreign funds and investors were continuing to show strong interest in Malaysian retail assets due to their attractive yields and pricing.

“The retail segment is blessed with a highly favourable macroeconomic backdrop sustained consumption theme in Malaysia, rising disposable income and discretionary spending, high consumer confidence, strong employment market (and) the tourism boom of Malaysia,” Hong Leong's REIT analyst Sean Lim wrote in the report.

Perhaps, I will do a posting on how reits have fared.