Sorry I have a full time job :( Don't worry, I don't think the WE will open up at 1.57 tomorrow. There will always be chance. Maybe US markets are bad tonight?
The huge discount was mainly due to extremely cheap Gamuda WRs that were traded within restricted number(5 days only) of trading days previously.So now It will take times to reach the equilibrium
Overvalued? I can't stop laughing.With premium on 3.85% and 5 years of period, it is overvalued? Genting-wa also traded with premium 5.58% at 2.07 and will expire in 2018. Don't you think Gamuda-WE is much worth it? With the coming MRT2 tunneling job worth at RM16 billion which is going to award end of this month, and many projects like Pan Borneo Highway, LRT3, Penang Transport Master Plan and Gemas-JB Double Tracking, Gamuda will move pass 5.00 and towards 5.50 soon. So Gamuda-WE is overvalued?
It is up to your judgement. Don't you see someone say is undervalued, another say is fairly valued and other say is overvalued. No matter what they said, the share price will perform accordingly to the company fundamental.
Hi Murali, first of all, thank you for your guidance :) Indeed it is true that warrants > RM1 have low premiums. The Black Scholes model does address the implied leverage, however on a peer comparison basis, you are right in pointing out the observation that absolute value warrants (on Bursa at least) command lower premiums. I think that using an arbitrage "if > RM1, low premium" is a little odd, but the market does behave that way.
Shaun, thanks for your very articulated comment. I need to think about it for a little longer as I am under the impression that since the ex of the WR, the market has auto-adjusted the price of the mother. We would calculate the adjusted mother price if we wanted to compute the value of the warrant cum-WR but at ex, I think using the market price of the mother is sufficient. Nevertheless, I will investigate your point. Thank you.
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Posted by Probability > 2016-03-21 19:02 | Report Abuse
Dude...aren't u little too late to inform us this discovery.. now? :(