RIGHTS ISSUE WITH WARRANTS APPROVED! TIME TO FLY SOON?!

Seasoned investors that are familiar with corporate exercise would definitely be no stranger to rights issue. But for new investors, rights issue is commonly a way for listed companies to raise additional capital from shareholders – sometimes it also comes with a sweetener, warrant.

How impactful is warrant on the share price? Just take a look at these few companies share price after bonus issue or rights issue that comes with warrant.

Of course, there are plenty more examples where companies that issued free warrants might spike up. But why is that so?

Warrant – as a financial derivative which carries the ability to allow its holder to have the right but not obligated to convert it into mother share, often seen as an opportunity to arbitrage. It is an advanced technique that often used by seasoned investors but to put it in plain English, some big holders of warrant might “push” the mother share price to increase the attractiveness in warrant due to the conversion gap and the arbitrage opportunity.

However, Kanger International Berhad (KLSE: KANGER) – the recent darling of vaccine theme play had finally gotten their approval from Bursa for the rights issue that comes along with the warrant sweetener.

How do we know for sure KANGER might fly anytime soon? To answer this question, we must study the price movement pattern of the company.

As you can see, the company had a downturn in share price and momentum since the vaccine market was slammed hard by the government. But what we could tell from the chart is that there is an attempt to breakout on 28^th May 2021. What could possibly trigger the buying momentum?

After going around several forums and platforms, I noticed that there are already rumours being spread on KANGER’s rights issue shall be approved at anytime soon. Perhaps this spiked the buying interest – but unfortunately, the company only announced the good news on yesterday, hence investors might have got in too early.

Nevertheless, with the approval for warrants, I’m sure that KANGER will continue to fly once operator had finished the accumulation of shares – which they already did since 2019 to 2020 and washed most new investors off KANGER by now.

From technical analysis + corporate news standpoint, we could begin our execution on the trade. The for-sure support level for the company is at 6.0 cents level. And the most recent resistance of the company would be at 11.5 cents and 15.0 cents, respectively. This represents a potential downside risk of 20.0%, and for the upside, that would be between 53.3% and 100.0%, representing a risk-to-reward ratio of 2.6 times to 5.0 times!

On the back of years of my trading experience, KANGER will definitely ride on the positive news and depart soon. Do not miss out the ride on this company!