THE BUZZ
Yesterday, Century Software (CSHB) proposed a bonus issue of 43m 5 year warrants in CSHB on the basis of 1 free warrant for every 8 existing shares.
OUR TAKE
Still having potential upside of 19.2% after dilution impact. Based on an indicative exercise price of RM0.50, the warrant is currently out-of-the-money. Nonetheless, assuming that the warrants are fully converted into mother shares in the future, our fair value (FV) would be adjusted to RM0.51, after taking into consideration the RM21.5m cash proceeds to be offset against CSHB's pre-existing debt obligations. Even with the full dilution impact to our EPS, our back-of-the-envelope FV of RM0.51 is still above the current market price of RM0.425, providing a handsome potential return of 19.2%.