The exercise price of the free warrants (SUNWAY-WB) is fixed at RM1.86 with a lifespan of 7 years. 6 October 2017 is the first trading day for SUNWAY-WB and thus it will only expire on 3 October 2024.

Hong Leong Invesment Bank continues to believe that the value of the warrants is enhanced by the first-of-its-kind fixed annual step-down mechanism of RM0.07, which is akin to fixed dividend payments worth RM0.42 at the 7th year. The adjusted prices on respective anniversary are depicted as follows:

Anniversary:            1st      2nd     3rd       4th     5th      6th

Exercise price (RM): 1.79    1.72    1.65     1.58    1.51    1.44

It ends its first trading day by hitting limit-up (RM0.305) from its initial price of RM0.005.

Let the premium of SUNWAY-WB be x.

[(100 + x)/100 * 1.79] - 1.86 = 0.305

                                          x = 20.95%

SUNWAY-WB ends its second trading day with a second limit-up (RM0.605).

What is the new premium?

Let the premium of SUNWAY-WB be y.

[(100 + y)/100 * 1.82] - 1.86 = 0.605

                                          y = 35.44%

INTRINSIC VALUE OF SUNWAY-WB

Intrinsic value = Mother share - Exercise price + Time value

                      = RM2.21 - RM1.86 + RM0.49

                     = RM0.84

[Note: Hong Leong Investment Bank allocates a TP of RM2.21 (cum TP: RM5.16) for SUNWAY and SUNWAY-WB has a 7 year lifespan giving it a lime value of 7 * 0.07 = RM0.49.]

ECOWLD-WA (expiring on 26/03/2022) fetches a premium of 64.71% while EWINT-WA (expires on 02/04/2022) fetches a premium of 60.85%.

If we were to asign a 50% premium to SUNWAY-WB, then the mother share is [(100 + 50)/100] * 1.82 = 2.73.

Thus, 2.73 - 1.86 = RM0.87.