(IMPORTANT) Things you must know about THIS company

The market weakness had indeed dragged the performance of several fundamental solid companies, where one of it being the top pick for my portfolio in 2022 – Sern Kou Resources Berhad (KLSE: SERNKOU , 7180). Being a market leader in the wood processing and furniture industry, the company had been delivering stellar results but the share price, albeit supported by value investors, but still faced some selling pressure on its end.

However, something peculiar had occurred as opposed to the weakness in share price.

Beginning of 21^st April 2022, in which Sern Kou is starting to see selling pressure, we see strong conversion of warrants and to date, a sum of 12.4 million shares had been converted despite the share price is retreating.

Why is that so, and who are the warrants converter? What do they aim to achieve to convert the warrants during market weakness instead of buying from open market?

Obviously, there are no simple answers to this.

My best guess is there could be smart traders who had been collecting the warrants of Sern Kou during market weakness and convert it for the sake of arbitrage opportunity – do note that the current premium for Sern Kou WA is negative 3.6%.

In other words, you save money from buying Sern Kou warrant and convert it now to acquire ordinary shares.

Our Fibonacci study shows that there might be a slow down in selling pressure at the price of RM0.700, RM0.680. We believe any further weakness represents good buying opportunities.

一JC