Posted by contemplator > 2015-07-02 11:46 | Report Abuse

"Bonus" is a gimmick term used by investment banker and the board of director. More proper term will be share split or share "dilution".

There is no free lunch in this world. No tooth fairy in stock investment as well.



Thanks for your sharing Mr KC.

Posted by 914601117 > 2015-07-02 15:44 | Report Abuse

Bonus gimmick by new and speculative counters like JAG. Investors had lost at least 60% after the bonus issue. After all, not all bonus issue are positive.

Posted by kcchongnz > 2015-07-02 17:16 | Report Abuse

914601117,

Thanks for your JAG case. I know one more stock which share price deteriorated badly after bonus issues.

I hope I can get more examples. I am gathering stocks like these for case studies.

Posted by kcchongnz > 2015-07-02 17:18 | Report Abuse

Posted by contemplator > Jul 2, 2015 11:46 AM | Report Abuse

"Bonus" is a gimmick term used by investment banker and the board of director. More proper term will be share split or share "dilution".

There is no free lunch in this world. No tooth fairy in stock investment as well.


What is the point some big shareholders asking management to give bonus issues, share split and free warrants? Speculating on the shares? Beats me!

Posted by aikwais > 2015-07-02 23:56 | Report Abuse

Dear kcchongnz

I can think of BONIA and DSONIC. Maybe you can add them in your case studies.

Posted by adeodatus3 > 2015-07-03 13:09 | Report Abuse

Bonus issue by all means, is not a pure evil. What's evil is the business itself.

A good business will have continuous EPS growth, hence it will be able to recover/ support it's shares dilution in the future. A bad business however, well... vice versa.

We take Dsonic as a case study, why does it falls so much after the bonus issue?
If one checked properly, after the bonus issue, it's 2014 & 2015 EPS (there was no EPS growth compared to 2013) was not able to support the shares from the dilution, hence the figures explains everything. Censof is another example.

Bonus issue, free warrants in my humble opinion, are more like market instruments to affect sentiment a.k.a. psychology of the stock market (everyone loves free stuff). However, what comes after, is another story.

Posted by Mat Cendana > 2015-07-03 13:24 | Report Abuse

Congratulations.
Have to say that your blog has become one of the top ones here at i3investor.com. Your posts tend to be very well researched and always worth thinking about.

Posted by SentulMali > 2015-07-03 14:40 | Report Abuse

I always felt that in most cases bonus issues are done by rubbish companies to con shareholders into believing that they are being rewarded as u rightly point out that the pizza is still the same size. On the contrary, I think these directors are trying to punish the shareholders by having bonus issues especially if the BI is done via capitalising capital reserve and not distributable reserve. Even if via distributable reserves, I am sceptical bcos if making so much money why not pay higher dividend. The only instances I think BI is good is when the co is growing at a fast rate and needs to maintain cash to fund growth or the value of its shares is so high that a BI would bring it down to be more tradeable. I still remember my young son who loves Milo and Maggi goreng asked me to put his entire piggy bank money in Nestle. Alas, he would need to save much more to buy 1 lot unless Nestle do a share split or BI to bring it down to RM7!!!!

Posted by adeodatus3 > 2015-07-03 15:33 | Report Abuse

From my 2 cent opinion, reiterate what I've mentioned, bonus issue are not evil by itself. It's a neutral market instrument.

Bonus issue for one, improves liquidity. Share prices are more easily to moves up (and of course, vice versa). And when a share price moves up, the company will have more capital invested on hand. This allows the company to further expand their business.

Posted by kcchongnz > 2015-07-04 13:39 | Report Abuse

Posted by aikwais > Jul 2, 2015 11:56 PM | Report Abuse

Dear kcchongnz

I can think of BONIA and DSONIC. Maybe you can add them in your case studies.


Thanks aikwais. In Bonis's case the share price continued to rally after the announcement of bonus. It finally revert back to the price before the announcement. A good case of in the long term, it behaves lke a weighing machine.

The last bonus issue of Datasonic was a trap for those new investors chasing bonus issues. It did not do the magic as its earlier share split and bonus.

So is bonus issues good generally?

Posted by citychew_1886 > 2015-07-12 10:26 | Report Abuse

hi KC , good discuss and analysis from your post .i think bonus issue is almost same with the share split . it does not add in any true value to the company .
it just a matter of the share liquidity .

Posted by kcchongnz > 2015-07-12 10:34 | Report Abuse

Posted by citychew_1886 > Jul 12, 2015 10:26 AM | Report Abuse
hi KC , good discuss and analysis from your post .i think bonus issue is almost same with the share split . it does not add in any true value to the company .
it just a matter of the share liquidity .


Actually how does bonus issues and share split help in liquidity?

Previous if you want to invest in say Public Bank, you have to have at least RM15500 to buy a lot of 1000 shares. Now you can invest in 100 shares with RM1550.

Posted by Yew Joon Khong > 2015-12-16 06:54 | Report Abuse

what will happen to existing warrant exp in 2018 for par exercise 1:5? will my warrants share consolidate as well?

Posted by Kylo_Ren > 2016-05-15 12:31 | Report Abuse

Could someone enlighten me on how the open price/issue price of the company warrant is determined on the 1st day of listing in Bursa? Same for company rights too? Thank you.

Posted by coolinvestor > 2016-05-15 13:36 | Report Abuse

Kc what about iculs? I can never understand this. Thx

Posted by coolinvestor > 2016-05-15 13:38 | Report Abuse

Kylo the issue price will be determined by the company. Once listed i believe the opening price of the warrants are determined by market forces. We cant predict wat price it will go

Posted by coolinvestor > 2016-05-15 13:38 | Report Abuse

Rights is similar to warrants

Posted by Kylo_Ren > 2016-05-15 13:57 | Report Abuse

Hi coolinvestor thanks for your reply.

AFAIK the company will only determine the exercise/strike price but not the issue price/listing price of warrant. The company will also determine the issue price of rights shares but not the rights itself. I am really curious how the market force price them on first day of listing if there are no "reference issue price" unlike IPO of shares.

Posted by kcchongnz > 2016-05-15 18:15 | Report Abuse

Posted by coolinvestor > May 15, 2016 01:36 PM | Report Abuse
Kc what about iculs? I can never understand this. Thx


iculs stand for irredeemable convertible loan stocks. They are a hybrid instrument acting as a loan stock as well as a warrant.

I think when listing, the reference price is the par value of the iculs.