Posted by kevin5059 > 2015-01-07 14:10 | Report Abuse

Side bet?? hahaha. Ok la, go to calculate the mother price for Inari during their last Right Issue. Both Right shares and Warrants were considered in the adjustment. Nothing is free under the sun. Warrant is considers as an ordinary Shares but only counted according to the exercise Price.

Posted by mililia > 2015-01-07 14:17 | Report Abuse

Kevin5059: Not keen on side bet. Thanks. I just give my view based on my experience and understanding.

Posted by cfoong > 2015-01-07 14:28 | Report Abuse

mililia... no jokes... it will be adjusted as per the listed prices of the so called free warrants.. same as your dividen..x date. No points tht u argue the share prices wont be adjusted during the x date of dividen ...rite?

Posted by cfoong > 2015-01-07 14:35 | Report Abuse

I thk the better entry point shall be after the corporate exercise if happens!!! this is the conclusion.. Bursa sentimen is bad as well while oil prices dropping...continue~~.. Malaysia is badly hitted but if u look at states, China/HK.. and spore ...Low oil prices or commodities prices are good news for them...

Posted by cfoong > 2015-01-07 14:39 | Report Abuse

when Warren Buffet was young.. he used to use arbituation to build his war chest! he started investing a bit long term only after he became superrich... We are not superrich, therefore, we need to preserve our capital and attempt to look at the market trends. Market is damped bad... Good luck to all..

Posted by mililia > 2015-01-07 15:32 | Report Abuse

cfoong: Thanks. I know we are all in the same boat despite all the disagreement.
kcc888: Not convenient to reveal because I am still accumulating slowly each day. But my initial cost is close to recent share buyback price.

Good luck all.

Posted by SS661M > 2015-01-07 16:26 | Report Abuse

I agree with cfoong. Although warrant is not a share before it is ex, but it does has it's claim on company asset to certain extent. Imagine this, if your are gaoing to buy the entire company, you have to pay the warrant holders besides the common share holders, right? One way of determining the price adjustment is like the following:

1. Using option pricing model to figure out the theoretical value of warrant. Since the variebles are volatility, time to maturity & ex price, the theoretical value will change in daily bassis.
2. Adjusted share price would be (MarketCap - Theretical value of warrant) / Total no. of share

Posted by SS661M > 2015-01-07 17:04 | Report Abuse

If warrants are deep in the money, warrant holders are very likely to ex their warrants. The quick & dirty way is to assume full dillution.
Adjusted price = MarketCap / (Total no. share + Total no. warrant)

After all the theories bla bla bla. Adjusted price is in the hand of buyers to decide.

Posted by gweilo > 2015-01-07 18:17 | Report Abuse

assuming full dilution is the worst case but will be offset with share buybacks and as you say mother share high and warrants deep in the money so company doing well then. i restate i like this offering because its impossible to lose money and almost guaranteed to make money. so, its like free money !

Posted by beso > 2015-01-07 18:23 | Report Abuse

so insas up up up

Posted by SS661M > 2015-01-07 18:32 | Report Abuse

gweilo. Dun be too confident. Any irrational thing can happen. Insas is a Graham NNWC candidate with the highest ROE; 13.6% last year. Who can expect it is selling at almost half of it's Graham NNWC value?

Posted by AzmiMerican > 2015-01-07 18:33 | Report Abuse

ss

Something wrong formula u bawah ni.....

assume full dillution.
Adjusted price = MarketCap / (Total no. share + Total no. warrant)


kalau u nak... + Total no. warrant)..... the MarketCap must be the NEW market cap after conversion of the warrant..... CANNOT be the market cap sekarang

and to convert warrant to share u kena bayar 1.00 so the dilution should be sangat sangat kecil

Posted by SS661M > 2015-01-07 18:44 | Report Abuse

Azmi. U r right. The formula doesn't hold water. Can u suggest one?

Posted by SS661M > 2015-01-07 18:48 | Report Abuse

If full dilution, can I say adjusted price = Price before ex / (total no share + total no warrant)?

Posted by n00bpelabur > 2015-01-07 18:48 | Report Abuse

Exploded head calculate the scenario

Posted by AzmiMerican > 2015-01-07 18:50 | Report Abuse

6.48pm I can think lagi...

tapi rasa dilution sangat sangat kecil sampai nominal value 0.005 like that

nanti la..... give me a bit of time or u or siapa siapa je fikir filir kan lagi la

Posted by SS661M > 2015-01-07 18:52 | Report Abuse

Or maybe ( Price before ex + Total no warrant * $1 )/ (Total no share + Total no warrant)

Posted by AzmiMerican > 2015-01-07 18:55 | Report Abuse

( Price before ex + Total no warrant * $1 )/ (Total no share + Total no warrant)

yang ni effect big or not???

Posted by SS661M > 2015-01-07 18:59 | Report Abuse

This case would be very interesting. If price before ex < ex price, there is no dilution. In fact there is price appreciation. You can plug in 80sen (current price) & $1.2 (price before correction) and try it out.

Posted by AzmiMerican > 2015-01-07 19:00 | Report Abuse

Ya... tapi hapotetical la sebab nobody will convert

Posted by AzmiMerican > 2015-01-07 19:07 | Report Abuse

Take 5 dulu la... later

Posted by Invest123 > 2015-01-07 19:57 | Report Abuse

Adjusted price = Price before ex - 0.4 x Listed price of Warrants.

Posted by SS661M > 2015-01-07 19:58 | Report Abuse

Ok. Here is the answer from my sifu:

The price adjustment calculation was based on the assumption that warrant holders will exercise their warrants right after the ex. In actual fact, who in the right mind will exercise when the underlying share price is less than the exercise price? Even if the underlying share price is above the exercise price, is it rational to exercise when you lose 5 years of time value?

Do not forget warrants has time value, plus the intrinsic value. Often the time value is the only thing it has when the warrant is deep out-ot-the-money.

I did mention to you the right way of valuing warrants is by the option pricing, not the simplistic intrinsic value.

Posted by Ooi Teik Bee > 2015-01-07 20:08 | Report Abuse

Posted by mililia > Jan 7, 2015 01:59 PM | Report Abuse

kevin5059 and cfoong: I stand by my statement the mother share will not be adjusted.

Yes. Mililia is correct. There is no adjustment of mother share price when you subscribe for the right issue with 2 free warrants.

Posted by SS661M > 2015-01-07 20:22 | Report Abuse

That's mean just value adjustment. No price adjustment.

Posted by gweilo > 2015-01-07 21:10 | Report Abuse

the only way it might happen is arbitrage selling of the mother to buy the warrant to get greater leverage with less capital but this is self limiting because the share will fall and the warrant rise until the risk reward reaches equilibrium and then from there on they will both rise or fall based on fundamentals.

Posted by mililia > 2015-01-07 21:25 | Report Abuse

If one cannot understand why there is no adjustment on the share price after ex-date, then you will not appreciate why Insas will go back up to above RM 1. But I have to put disclaimer, it has HIGH POSSIBILITY to go back above RM1. Not a certainty.

1. No adjustment because there is no rights to own another share at a discount. There is only rights to own a RPS with dividend.

2. Warrants are not included in Theoretical ex Rights Price because warrants are not a mother share. Formula for TERP = {(price x # shares) + (rights price x # rights share)}/(# shares + # rights share). Warrants and RPS aren't included. Only additional mother share will be included.

3. Just as right shares always offer at a discount to entice existing share holders to subscribe in addition of free warrants this corporate exercise by Insas should have carrot to entice existing shareholders to participate. But since there aren't any discounts then where is the carrot?

- the carrot is when the mother share traded above RM1, then the warrants will be in the money! Then existing will be incentivized to subscribe. So, it's just a matter of time before the share price will go above RM1. All these will happen before announcement of the EGM and announcement of the ex-date.

But what if the "magic hands" or the market are unable to push the share price up?

- then they have to "re-create" the carrot. Insas may, the keyword is MAY adjust down the exercise price of the warrants. Then again, you are able to make your warrants IN THE MONEY. Setting the exercise price of the warrants are at the discretion of the company.

Bear in mind, EGM has not been called yet. All this will happen before EGM for the approval of this corporate exercise.

I have shared all my knowledge. And I don't wish to have anymore disagreement. I'm more than happy to share but not arguing. Good luck.

Posted by Ooi Teik Bee > 2015-01-07 21:29 | Report Abuse

Bear in mind, EGM has not been called yet. All this will happen before EGM for the approval of this corporate exercise.

Ans : EGM had called and approved for this corporate exercise. No announcement on the date yet. I also follow up on this stock.
Thank you.

Posted by SS661M > 2015-01-07 21:36 | Report Abuse

Adjusting the ex price seems to be the cheaper way. So better dun speculate on share price will be pushed above $1. Right?

Posted by mililia > 2015-01-07 21:42 | Report Abuse

Sorry. My mistake. EGM has been called. So the only option is before announcement of the ex-date. We will have to wait and see. Thanks Teik Bee.

Posted by mililia > 2015-01-07 22:21 | Report Abuse

SS661M: Each option has its advantage abd its drawback.

On the other hand, the company may postpone the corporate exercise if they deem the timing is not right. That's the 3rd option.

To me all three options are favorable options at this price. You will likely make money. However, if it is at RM1.20 then option 1 is favorable, option 2 won't happen, option 3 is bad for investors.

It's a game theory. So keep calm and stay Invest if you believe in this counter.

Posted by SS661M > 2015-01-07 22:28 | Report Abuse

Thanks for the infor, mililia.

Posted by AzmiMerican > 2015-01-07 22:39 | Report Abuse

Theoretically there ought to be an adjustment to harga ibu, because...

Sum of pre = Sum of post

Else semua company should issue warrant... unlimited warrant... at a conversion price that discourage conversion.... and create value out of thin air for its shareholders

But think the adjustment to ibu is sangat sangat kecil...

Posted by AzmiMerican > 2015-01-07 23:08 | Report Abuse

Kalau no adjustment to harga ibu anyway ask la Insas to issue 200 warrants bukan 2 je...

Tak tahu la I kalau u cannot sleep tonight thinking about this...

Posted by ccs999 > 2015-01-07 23:13 | Report Abuse

aku pun tak tau la bnyak confuse skrg...

Posted by Andre Kua > 2015-01-08 09:30 | Report Abuse

I dont think there will be any adjustment to the share price. It just does not make sense to buy it at RM1 (since warrant is free) when you can buy directly at RM0.80

Posted by kevin5059 > 2015-01-08 11:31 | Report Abuse

"AzmiMerican Kalau no adjustment to harga ibu anyway ask la Insas to issue 200 warrants bukan 2 je..."

A like for this. haha

Posted by kcchongnz > 2015-01-08 11:49 | Report Abuse

Posted by AzmiMerican > Jan 7, 2015 10:39 PM | Report Abuse

Theoretically there ought to be an adjustment to harga ibu, because...

Sum of pre = Sum of post

Else semua company should issue warrant... unlimited warrant... at a conversion price that discourage conversion.... and create value out of thin air for its shareholders

But think the adjustment to ibu is sangat sangat kecil...


This is a most logical argument by Azmi.

A company has 10 shareholders of 1000 shares each. Say the company equity worth $10,000, or $1 per share. It issues 200 share of "free' warrants to each shareholder. The shareholders can sell the warrants to others say at 20 sen each, making $40 and yet still hold the 1000 shares at $1, or $1000 worth of the company as originally did. So a total of $400 is "created" from the thin air?

Bursa may not require the underlying share price to be officially adjusted after the ex-date of the "free" warrant. But if share price before the ex-date is the "true" value, the market will adjust the underlying share price itself by supply and demand. No free lunch.

By right, the total value of the underlying share plus warrants must be equal to the value of the underlying share before the ex date, like what Azmi said.

One way to do it is to value the warrant using option pricing. Some iterations work will be needed to get Azmi's equation of

Sum of pre = Sum of post

Posted by born2bking > 2015-01-08 11:56 | Report Abuse

stop arguing.. now quickly buy as operator moving up already.. the boat is moving off..

Posted by kcchongnz > 2015-01-08 12:01 | Report Abuse

But the question now is is 80 sen a true value of Insas.

I believe at this price it is way undervalued. The depressed price could be many reasons:

1) Foreigners are selling at any cost
2) Some panicky punters are selling
3) Some momentum players are selling
4) Some margin players are forced selling
5) Investors do not trust the management
6) etc etc etc

Just wild speculating the reasons.

Posted by gweilo > 2015-01-08 12:04 | Report Abuse

7) Most investors are pussies and have no staying power,

Posted by mililia > 2015-01-08 12:06 | Report Abuse

What kcc mentioned is correct. Values for RPS + Warrants + Mother Share = should remains the same theoretically after the corporate exercise. Value don't dissipate into the thin air. This is the calculation:-

RPS = RM1, Warrants = RM0, Mother Share = RM0.80

Since the exercise is 5 Mother Shares for 1 RPS + 2 Warrants. then total investment is RM5.00, before it is traded in the market. When it is traded in the market, theoretical, the sum of part (SOP) will remains the same, so we have to make an assumption for RPS traded value:-

RPS = RM0.90. Warrants = RM??. Mother Share = RM0.80

In this case, Warrants will act as balancing securities. In this case using the above assumption, warrants will have to trade at RM0.05/each. There is where I am coming from, using the above assumption (and you gotta know why I think RPS is worth RM0.90, read my earlier comment), there is no way warrant trades at RM0.05/each.

That is why I have been saying the SOP, will be greater than the total investment you make before ex-date.

---------------------------------------!!-------------------------------------------------

On the other note, it is worth to mentioned Inari shares moved. Not surprising but if the share price remains/sustain at RM2.70, by right, using "pair trade methodology" Insas should worth RM1.10. From current price to RM1.10, there is enough safety margin. But I have to put a disclaimer here, Inari share price has to be able to sustain above RM2.70.

Posted by born2bking > 2015-01-08 12:07 | Report Abuse

good one gweilo

Posted by AzmiMerican > 2015-01-08 12:09 | Report Abuse

kevin5059

If Insas does that I give Insas a like haha

Posted by AzmiMerican > 2015-01-08 12:11 | Report Abuse

kcchongnz

As a value investor u know makna "value"

Posted by newbiehk2014 > 2015-01-08 12:15 | Report Abuse

breaking out fast

Posted by AzmiMerican > 2015-01-08 12:20 | Report Abuse

I simpan ni for cenderamata : )


Posted by kcchongnz > Jan 8, 2015 11:49 AM | Report Abuse

Posted by AzmiMerican > Jan 7, 2015 10:39 PM | Report Abuse

Theoretically there ought to be an adjustment to harga ibu, because...

Sum of pre = Sum of post

Else semua company should issue warrant... unlimited warrant... at a conversion price that discourage conversion.... and create value out of thin air for its shareholders

But think the adjustment to ibu is sangat sangat kecil...


This is a most logical argument by Azmi.

A company has 10 shareholders of 1000 shares each. Say the company equity worth $10,000, or $1 per share. It issues 200 share of "free' warrants to each shareholder. The shareholders can sell the warrants to others say at 20 sen each, making $40 and yet still hold the 1000 shares at $1, or $1000 worth of the company as originally did. So a total of $400 is "created" from the thin air?

Bursa may not require the underlying share price to be officially adjusted after the ex-date of the "free" warrant. But if share price before the ex-date is the "true" value, the market will adjust the underlying share price itself by supply and demand. No free lunch.

By right, the total value of the underlying share plus warrants must be equal to the value of the underlying share before the ex date, like what Azmi said.

One way to do it is to value the warrant using option pricing. Some iterations work will be needed to get Azmi's equation of

Sum of pre = Sum of post

Posted by truthseeker1 > 2015-01-08 12:26 | Report Abuse

Insas is cash rich but stingy in paying dividend. Now want money from shareholders, why?

Posted by AzmiMerican > 2015-01-08 12:26 | Report Abuse

There is no adjustment to the harga ibu by Bursa is most likely due the the ratio of warant to ibu not big enough so adjustment sangat sangat kecil.. not significant to adjust sebab macam 0.0003452 ini macam

kalau ratio of warant to ibu is big enough... say 20,000 to 1 sudah tentu kena adjust harga ibu

Posted by AzmiMerican > 2015-01-08 12:31 | Report Abuse

cakap balik Insas.. sebab warrants 2 je so can ignore the adjustment to the ibu.. buat je tak ada adjustment