How to compare ICAP’s NAV, Price with KLCI.

On 20th Oct 2005 (from its website)
NAV = 0.99
Price = 1.03
KLCI = 911.69

On 28th October 2020
NAV = 2.79
Price = 1.91
KLCI = 1495.20

ICAP dividend:
Amount = 0.095, subject to 25% tax
Payment Date: 7th Oct 2013
ICAP Price on 11th Oct 2013 = 2.33 (from its website)

Assume reinvesting the dividend for extra units,
Also assume the investor income tax rate is zero, meaning the 25% tax will be returned
Total holding will increase by 0.095/2.33 = 4.08%,

From 20th Oct 2005 to 28th Oct 2020, that is 15.02 years.

Now we calculate the Compound Annual Growth Rate:
For NAV = (2.79*1.0408/0.99)^(1/15.02)-1= 7.43%
For Price = (1.91*1.0408/1.03)^(1/15.02)-1= 4.47%
For KLCI = (1495.20/911.69)^(1/15.02)-1= 3.35%

However, if we invest into KLCI’s 30 index counters, we receive dividend.

I have closed some of my FKLI short positions so that the curve become symmetrical. The correct matching ratio now is one FKLI to 102,000 units C9P.

Forget to mention, my current matching ratio is one FKLI (Short) to 75,000 units C9P.

I forgot to say something about HARTA-C54.
When I first picked it up on 28th Sep,
HARTA was 17.42, Volatility was 76.19% and HARTA-C54 was 0.08,

Now,
HARTA is 19.04, already up 9.3%,
HARTA-C54 is 0.175, already up 119%,
Volatility is 69.23%, drop about 7%,

As:
1) The remaining life is shorter,
2) Volatility also drop significantly,

Therefore fair value also drop significantly,
Then some more HARTA-C54 market price also has shot up a lot,

So please take note that the fair value is now lower than market price.

https://klse.i3investor.com/blogs/gambler/2020-10-20-story-h1534737887-New_Call_Warrants_on_Glove_Kings_HARTA_C62_SUPERMX_C1M_and_TOPGLOV_C96.jsp

New TOPGLOV Call Warrant to be listed tomorrow.

https://klse.i3investor.com/blogs/gambler/2020-10-20-story-h1534737887-New_Call_Warrants_on_Glove_Kings_HARTA_C62_SUPERMX_C1M_and_TOPGLOV_C96.jsp

New SUPERMX Call Warrant to be listed tomorrow.

https://klse.i3investor.com/blogs/gambler/2020-10-20-story-h1534737887-New_Call_Warrants_on_Glove_Kings_HARTA_C62_SUPERMX_C1M_and_TOPGLOV_C96.jsp

New Harta Call Warrant to be listed tomorrow.

johoran

KMLOONG,
Market Cap: 1.3B
Oil Palm: 15,000 Ha
FFB Produced: 260,000 mt (Annual Report 2020)

SWKPLNT
Market Cap: 0.5B
Oil Palm: 35,000 Ha
FFB Produced: 280,000 mt (Last Year), This Year 9 months already 258,000 mt

At this moment,
KOSSAN=7.500, up 3.73% compare to 7.230 on 11.10.2020
C18=0.165, up 17.9%,

Now, the fair value of C18 = 0.1682, already not so much higher than market price.

You might want to decide further action, keep it or swap to mother share, or none of them.

https://www.hoadley.net/options/binomialtree.aspx?tree=B&warrant=Y

lai81533,

You can verify my calculation with the above calculator,
The maximum steps is 150.

I try with KOSSAN-C18,
Input 164 days to expiry, i.e. calculate from yesterday, fair value was 0.1537, same to my 200 steps calculation of 0.1537, see the screenshot in this post.
If you input 163 days, meaning calculate today, fair value is 0.1532.


My spreadsheet is for educational purpose,
I don't want to be blamed if some one lose money using my spreadsheet.

https://klse.i3investor.com/blogs/gambler/2020-10-11-story-h1534585086-Call_Warrants_on_Four_Heavenly_Glove_Kings_My_Pick_is_KOSSAN_C18_11_10_.jsp

KOSSAN's Installed capacity is 32 billion pcs, divided by market cap, we get 1.7 pc/RM.

For HARTA, SUPERMX and TOPGLOV, they are 0.7, 1.0 and 1.2 pc/RM.

Apart from cancellation, the treasury shares can be:
1) Distributed to shareholder as dividend, kind of a mini bonus issue, creating unnecessary odd lot, in this case I think it imply that the company is in tight cash flow, not enough cash to pay cash dividend.
2) Sold back to the market, in this case I think it imply that the company need money.

CBIP decided to cancel the treasury shares, so I think it is meaning their cash flow is good.

https://www.theedgemarkets.com/content/advertise/bulls-bears-and-dolphins

Don't like to buy call warrants?
What about acting like an insurance company and selling a PUT OPTION to the bank?
If interested, read the above article about Bull Equity-Linked Investment.
You get the option premium in the form of very high FD interest.

However, you still need Binomial Model to do the evaluation.

Look at the screen shot at the top of this post,
Date 04.10.2020 (Sunday),
HARTA = 17.50
HARTA-C52 = 0.230, Fair Value / Market Price, FV/MP = 121.6%
HARTA-C54 = 0.085, Fair Value / Market Price, FV/MP = 143.4%

Today 06.10.2020
HARTA = 17.02, already drop 0.48
HARTA-C52 = 0.215, went down 0.015, now FV/MP = 118.4%
HARTA-C54 = 0.009, went up 0.005, now FV/MP = 121.2%

Look at the changes, I should sell C54 and buy C52 today, reasons:
1) Their FV/MP, 118.4% and 121.2% are now closing,
2) Who know tomorrow their FV/MP may be far apart again, what I mean C54's FV/MP may go back to 140% level, to be safe I should sell C54 and buy C52 today.
3) If tomorrow C54 really go back to 140% level, then I sell C52 and buy back C54.

OK, look at things this way.

When you buy insurance, you pay insurance premium, and we can check the "Claim Ratio" from bank negara website, if I am not mistaken the "Claim Ratio" is normally around 60%, meaning 60% of the premium go back to the policy holders in claims, 40% go to the insurance companies operating costs and profit.

Now come back to Stock Investment, let say you want to invest 100K in HARTA, but I can actually invest 20K in HARTA-C54, and I keep 80K in Fixed Deposit.

If one week later, unfortunately HARTA drop 50%:
1) You lost 50K,
2) I lost 20K only.

To me, it is simple, I do calculation, I can make better decision either to buy the mother share or to buy any call warrant of it. May be now I should buy HARTA-C54, but next week may be I should sell off HARTA-C54 and buy HARTA mother share.

https://klse.i3investor.com/blogs/gambler/2020-10-04-story-h1514448168-Update_on_Call_Warrants_on_Four_Heavenly_Glove_Kings.jsp

Update, for your information.

Morpheus61,

No harm to write to them, let us see how they answer you.
However, please accept the reality that the authority wanted to promote structured warrants by waiving the 1% stamp duty. Anyway, we respect different opinions.

Yesterday I bought Oct / Nov Spread, so all my Short Spread Oct / Dec now become Short Spread Nov / Dec.

If you intend to trade short term, say buy today and sell within a week, then fair value calculation is not very important, because the issuer will most probably maintain the same pattern of market making, you will be buying expensive and selling expensive too.

But if we don't mind to buy and keep until cash settlement, then fair value calculation is very important.

Smart2Win，

If a structured warrant's expiry is on 30th Sept, the settlement value is the volume weighted average price (VWAP) calculated from 5 trading days before the expiry, i.e. 23rd, 24th, 25th, 28th and 29th Sept.

Candy3147,

Refer back to my earlier post on HARTA-C52,
That time HARTA=14.01, HARTA-C43=0.52, the fair value=0.3019, gearing=1.92

Because the gearing is low, HARTA-C43 will not move up or down very fast compare to mother share,

Now, HARTA=17.50, HARTA-C43=0.68buy/0.73sell, the fair value=0.4874.

After reading my posts, you can learn further from youtube.

https://www.youtube.com/watch?v=YJls_RgTniw&index=4&list=PL4108D90CA93915EB

https://www.youtube.com/watch?v=0WGDWAF7CGY&t=70s

Correction: then HARTA-C54 fair value will increase further.

Morpheus61,

You can always write to Bursa on what you want the IB to do, but up to Bursa whether they want to entertain you or not.

There are document and announcements which you can read from Bursa website, but again I don't know whether that meet your expectation or not.

For me it is simple, when I calculate and found it cheap, then I buy and am prepared to keep it until expiry, of course after that if I found it I should sell, even at a loss, I will sell.

IBs surely are allowed to buy mother share to hedge against the CW that they issue.

Morpheus61,
Of course SC or Bursa approve the issuance, else they can not be listed and traded in Bursa, and every issuance of structured warrant come with document.
Singapore and Hong Kong also have structured warrants, US also have options which is quite similar to structured warrants.
In fact, for those stocks that without structured warrants, you better be careful, may be SC or Bursa do not want to approve it because of not meeting certain criteria.

Morpheus61,

Litigate for what?
I mentioned it very clear in my writing, forget about those structured warrants issued by all other investment banks, look at the structured warrants issued by CIMB only.
Because their market making is the most reasonable, the implied volatility applied by them are not very far away from the historical volatility.
However, their market making sometime is not so efficient or slow, that mean I have opportunity to get it cheap.

Morpheus61,

Please understand the fair value calculation from youtube.

https://www.youtube.com/watch?v=YJls_RgTniw&index=4&list=PL4108D90CA93915EB

Call warrants on HARTA / KOSSAN / SUPERMX / TOPGLOV

https://klse.i3investor.com/blogs/gambler/2020-09-28-story-h1514354178-Call_Warrants_on_HARTA_KOSSAN_SUPERMX_TOPGLOV_My_pick_is_HARTA_C54.jsp

Call warrants on HARTA / KOSSAN / SUPERMX / TOPGLOV

https://klse.i3investor.com/blogs/gambler/2020-09-28-story-h1514354178-Call_Warrants_on_HARTA_KOSSAN_SUPERMX_TOPGLOV_My_pick_is_HARTA_C54.jsp

Call warrants on HARTA / KOSSAN / SUPERMX / TOPGLOV

https://klse.i3investor.com/blogs/gambler/2020-09-28-story-h1514354178-Call_Warrants_on_HARTA_KOSSAN_SUPERMX_TOPGLOV_My_pick_is_HARTA_C54.jsp

My pick is HARTA-C54.

https://klse.i3investor.com/blogs/gambler/2020-09-28-story-h1514354178-Call_Warrants_on_HARTA_KOSSAN_SUPERMX_TOPGLOV_My_pick_is_HARTA_C54.jsp

Correction: .....issued by other investment banks was worth looking at,

Sold all my C52.

Candy3147,

The gearing shown in my spreadsheet is not effective gearing, My gearing = mother share price / CW price / ratio. Effective gearing is lower than that. My spreadsheet can not calculate effective gearing because the calculation is a lot more complicated.

The purpose of effective gearing is to estimate the movement of mother share price versus CW price. Let say the effective gearing is 3, that mean we expect if mother share move 1%, the CW will move 3%.

Your C53 is currently trading at a very expensive price.
You just need to compare it with C60, which both expire on the same date, easier to compare.
C53 exercise price is 23.88 which is much higher than C60's 18.00.
C53 ratio is 50 against C60's 20.
The middle price for C53 is 0.0775 and C60 is 0.08,
Multiply with the ratio, we get:
1) For C53, 50*0.0775=3.875
2) For C60, 20*0.08=1.60

https://www.youtube.com/watch?v=YJls_RgTniw&index=4&list=PL4108D90CA93915EB

https://www.youtube.com/watch?v=0WGDWAF7CGY&t=97s

Watch the above 2 youtube video to have some understanding on binomial model.

Candy3147，

What is CEU that you mention?
HARTA-C53 is also a call warrant.
Now a day, call warrants can not be converted to mother share.
On expiry, the issuer will calculate the mother share average price, minus the exercise price, then divide by exercise ratio, and return the money to you. Of course if the mother share average price is less than the exercise price, then no money.
Warrants is good provided:
1) The mother share is good, and
2) The market price is lower or at least quite close to the fair value.
That mean you must know how to calculate fair value, you can learn from youtube and wiki.
Most companies issue free warrants during right issue, so must make sure that the mother share companies are reasonably good.

https://klse.i3investor.com/blogs/gambler/2020-09-18-story-h1513558281-HARTA_s_Call_Warrants_I_select_HARTA_C52.jsp

Buy HARTA-C52 instead of the mother share.

If the share price is undervalue for long time, I think the boss might take it private, we will lose a good company from Bursa.

The executive director Tan Sik Eek own 333,333 shares, he suppose to come out only 333333*0.08=RM26,667 for the right issue, but he has committed to subscribe excess right up to a total of RM15,000,000 if other shareholders refuse to subscribe.

If he is reluctant to subscribe more, he has to make sure that the right issue is attractive, i.e. the share price must be much higher than RM0.08 during the time when other shareholders are about to make their decision, whether to subscribe or not, probably during one week time before the closing date.

Of course, if he is more than happy to come out with RM15 million, then he does not need to worry about.

Update after today closing,
FINTEC 90 days historical volatility was 122.44%,

Input Interest Rate of 2%, and Dividend Yield of 0%,

We get:
FINTEC-WA Implied Volatility is 72.6%,
FINTEC-WB Implied Volatility is 83.9%,
FINTEC-PA Implied Volatility is 0% or not meaningful as there is no premium.

Average of the above 3 Implied Volatility = 52.17%, input into my spreadsheet, the results:
FINTEC-WA fair value = RM0.0355
FINTEC-WB fair value = RM0.0550
FINTEC-PA fair value = RM0.1241

Update after today closing,
FINTEC 90 days historical volatility was 121.25%,

Input Interest Rate of 2%, and Dividend Yield of 0%,

We get:
FINTEC-WA Implied Volatility is 69.1%,
FINTEC-WB Implied Volatility is 81.8%,
FINTEC-PA Implied Volatility is 0% or not meaningful as there is no premium.

Average of the above 3 Implied Volatility = 50.3%

Input this volatility = 50.3% into my spreadsheet, the results:
FINTEC-WA fair value = RM0.0403
FINTEC-WB fair value = RM0.0642
FINTEC-PA fair value = RM0.1365

rosetan,

This PA does not pay dividend at all.
Where did you get the info/dividend 0.02%?

pineapple123,

I am holding PA and do not want to convert for the time being.

Update after today closing,
FINTEC 90 days historical volatility was 121.06%,

Input Interest Rate of 2%, and Dividend Yield of 0%,

We get:
FINTEC-WA Implied Volatility is 74.4%,
FINTEC-WB Implied Volatility is 89.7%,
FINTEC-PA Implied Volatility is 0% or not meaningful as there is no premium.

Calculate the average = (74.4+89.7+0)/3 = 54.7%

Input this volatility = 54.7% into my spreadsheet, the results:
FINTEC-WA fair value = RM0.0490
FINTEC-WB fair value = RM0.0718
FINTEC-PA fair value = RM0.1439

pineapple123,

chankyew50 is right.

WB+0.15==>1 share,

But for PA, you can choose either:
1) PA+PA==>1 share, or
2) PA+0.08==> 1 share,

I also do not understand they buy WB for what?

If the price could stand a few cents higher than 0.16, people will convert PA by adding 8 cents, then plenty of money coming to the company.

Forget about other assets, consider only the value from FOCUS, and give 50% discount again, FINTEC should worth at least 20% of FOCUS price.

Now FOCUS is 2.33,
Meaning FINTEC should worth at least 0.2*2.33 = 0.46

Base on Friday closing,
FINTEC 90 days historical volatility was 121.46%,

Input Interest Rate of 2%, and Dividend Yield of 0%,

We get:
FINTEC-WA Implied Volatility is 77%,
FINTEC-WB Implied Volatility is 70.6%,
FINTEC-PA Implied Volatility is 0% or not meaningful as there is no premium.

If FINTEC Volatility in the coming years is around 70.6% (Lower of WA and WB Implied Volatility),
Then FINTEC-PA fair value is 0.1346.

When FINTEC was at 0.06, PA was at 0.03,
From there if FINTEC go down 50% to 0.03, PA also go down 50% to 0.015,
From there if FINTEC go up 50% to 0.09, PA also go up 50% to 0.045,

Now FINTEC is at 0.16, PA is at 0.08,
From now if FINTEC go down 50% to 0.08, PA also go down 50% to 0.04,
But, from now if FINTEC go up 50% to 0.24, PA will go up 100% to 0.16.

We should buy PA instead of FINTEC.

Of course, if you are very sure FINTEC will go down, then do not buy at all.

https://klse.i3investor.com/blogs/gambler/2020-08-29-story-h1512602244-FINTEC_prices_at_one_three_six_and_twelve_months_from_now.jsp

Predict future price movement using 200 steps Binomial model.