BARAKAH OFFSHORE - RCULS 13/18
KLSE (MYR): BARAKAH-LA (7251LA)
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Discussions
1 person likes this. Showing 50 of 194 comments
confirm with registrar no need to add 20 cts for conversion. Only can convert after 1 year from listing and until expiry, automatic conversion to mother share! BUY!
2014-01-10 16:02
after 24 OCt 2014 can convert already. No need add cash!!! Also they are paying interest on the LA at 3.5 %.
2014-01-10 16:03
yes buy there is also a write up by HONGLEONG bank about
it and may be published in papers soon where they highlighted
the automatic conversion to mother share.
as such HONGLEONG BANK has recommended the purchase LA
2014-01-10 16:10
HONGLEONG BANK did a good job in their research and explain to a lot of investors the value of the LA.
2014-01-10 16:23
Means on 24 Oct 2014 you get a 1 for 1 Barakah-LA automatically converted to Barakah shares and you can sell it then, whatever the price of Barakah may be then.
2014-01-10 17:25
Correct me if I'm wrong here, it is stated in their web page that the exercise /strike/conversion price is 20cts, does it mean we have to pay additional 20 cts
To convert to the mother. Tq
2014-01-11 10:45
Please someone help us to translate the above LA discussion in a simple lay men understanding.
2014-01-11 22:29
Guys, for those who don't quite understand the features of Barakah' s 5-year 3.5% RCULS (redeemable convertible unsecured loan stocks) please study the prospectus carefully. You can find it here --- http://announcements.bursamalaysia.com/EDMS/subweb.nsf/all/0F3CE29E2A40D27248257BFA00187731/$File/BARAKAH-AbridgedProspectus.pdf
Please note that it has a feature akin to warrant i.e the convertibility feature, but it also has one feature which all holders should be aware of, i.e. the redeemable feature which effectively gives Barakah the right to redeem the RCULS based on the par value of RM0.20 each during the life of the RCULS.
The second feature is what all holders should be very mindful of.
2014-01-11 22:32
Nicky, from my understanding, No. And, maturity date is not Oct 14, but Oct 24, 2018. As for the conversion price, the following is what is stated under the RCULS's Principal Terms & Conditions (see Prospectus, Appendix III, page 62):
Conversion price
Fixed at par value of RM0.20 per Barakah Share and shall be satisfied by surrendering one (1) RCULS of nominal value of RM0.20 each for every one (1) new Barakah Share
2014-01-12 08:34
Here's a good article to read before you decide to buy these RCULS.
http://klse.i3investor.com/blogs/race/40725.jsp
2014-01-12 09:44
Correct me if I am wrong. The earliest date they can redeem the LAs is 24 April and they must give notice by 24 March.
2014-01-12 11:07
From my understanding, the risky period is until the start of the conversion period (Oct 2014-Oct 2018). Thereafter, holders of the LA can convert to the mother share by giving 30 days' notice. As per HLIB analysis, the probability of the major shareholders approving a redemption of the LA is very low. But, they could be wrong. Then again, why would the major shareholders who hold more than 40% of the LAs would prefer to get back 20 sen per LA rather than converting their LAs into mother shares which are worth more?!
Why would Barakah redeem the LAs so soon after their issuance? Do they have the money to redeem? They could borrow but it defeats the purpose of issuing the LAs in the first place!
However, keep a close eye on the major shareholders! Are they selling or buying the LAs?
2014-01-12 14:35
Yes, the risk period is until October 24, 2014 (the first anniversary date) coz the convertibility of the LA only starts the day after. So long as buyers are aware of the potential risk, and understand that the risk profile of this RCULS is not the same as a warrant (at least until Oct 24, 2014), then the decision to buy is theirs to make.
2014-01-12 16:49
Care to paste here.... wat Hong Leong Bank n UOB KayHian wrote abt barakah-la.... to hv a look...
2014-01-12 18:50
Posted by awangngah > Jan 12, 2014 09:44 AM | Report Abuse
Here's a good article to read before you decide to buy these RCULS.
http://klse.i3investor.com/blogs/race/40725.jsp
That guy is delirious.
Come this October, you can filed for conversion. 1 LA= 1 Mother. Confirmed liao.
So AwangNgah - u believe what written on the blog 100% - kesian. Call up the Share Registrar to know more.
2014-01-12 19:43
From HONG LEONG
Barakah-LA (NOT RATED)
Cheaper Proxy with Higher Leverage…
§ Mispricing from the market creates buying opportunity… 1) Zero cost conversion: Each Barakah-LA can be converted into Barakah shares after 25 Oct 2014 with zero cost by surrendering one RCULS of nominal value of RM0.20 each for every one new Barakah shares. This suggests Barakah-LA is currently trading at 18% discount to Barakah shares.
§ 2) Almost zero possibility to redeem at par value of RM0.20: We think it is almost zero possibility for the company to redeem Barakah-LA at RM0.20 per share due to: i) the main purpose for issuing RCULS is to refinancing debts for purchasing of pipe-laying barge; ii) major shareholders of company (lead by Nik Hamdan and Azman Shah have sizeable stake in Barakah-LA (>40% of total issued, very highly unlikely they will approve any redemption proposal); and iii) recent purchase of Barakah-LA by management on open market at RM1.16-1.20 reaffirms our thesis that Barakah-LA is a cheaper proxy to leverage on the company growth prospect.
§ Cheaper proxy and better leverage with upside potential of 23% to 58%...(Refer below)
§ With upside potential of 23% to 58% and downside risk of 12%, the risk and reward for Barakah-LA at this level is attractive and favorable. It is also cheaper proxy for investors who are looking to build a long-term position in Barakah shares with better leverage on the upside potential.
2014-01-12 19:44
Well Zamsaham, I was just trying to highlight the difference between RCLUS and a warrant for those who thinks that the RCULS is a warrant and therefore share the same risk. I am very aware of risk inherent in each of the product as I was heading a capital markets department in an investment banks for many years, and was involved in the issuance of these types of securities. I don't need to depend on blogs to understand them -- just that I found a write up which I thought clearly explained the inherent risk, and decided to share the link with those interested to know.
2014-01-12 21:37
No UOBs...???? Want to buy 1st tomoro b4 u paste....
Well.... b careful...
u wil b put in a spot whr.... damned if d LA is redeemed..... damned if d LA is not....
2014-01-12 21:44
Based on my obversation on i3, many people were worried that Barakah-LA (7251LA) could potentially be redeemed by Barakah Offshore Petroleum Berhad ("the Company") at 0.20 per Barakah LA.
Based on my research, I feel that the chances of redemption of Barakah LA ("RCULS") by the Company is minimal.
Referring to page 9 (Point 4) of the Abridged Prospectus of Barakah, the rationale for issuing the RCULS is to enable Barakah to partially re-finance its bank borrowings and referring to page 10 (Point 5), the current interest rate of the Company is 8.1% per annum, by issuing the RCULS, they would have RM1.9million in savings per annum.
As such, these are the reasons I feel it is highly unlikely (Almost zero percent chance) that the Company will redeem the RCULS:
1. If the Company dont redeem it, they can continue to pay 3.5% interest on RCULS (Prior to issuing, they are serving 8.1% interest per annum on existing loans), which is significantly below market loan interest.
2. If they dont redeem it, there will be no cash outflow to the Company
3. It is better to let the RCULS holders to convert to Barakah mother shares because by letting them do so:
- They will pay lesser interest on the RCULS due to conversion of RCULS to mother shares (but the amount of loan they already raised is the same). Meaning they will be paying even lesser interest on the RCULS.
- No cash outflow to the Company.
4. Their directors themself are also holding the RCULS, if they redeem it, they also will lose alot of money.
2014-01-12 22:37
HLBs write up is half past six.... n awangngah i m afraid u r wrong.... my man
While.. damned if d LA is redeemed is obvious...
It seems to me all around here has not a clue of d impact if d LA is not redeemed
If u r thinking of buying d LA now at 1.45 thn happily convert it to d mother n sell at 1.75... n in d process making a tidy profit.... think again
Do u all know d number of LA issued by Barakah?!
Let me tell u.... it is 208,000,000... 208 millions
So...... do u get it now??
No.....
Ok........ let's assume u know d number of shares issued by Barakah now is 624,000,000....... now add d 208,000,000 new shares from d conversion of ur LA......... CAN U IMAGINE D DILUTION IN EPS tis is going to cause?? It wil b a freaking 25%...... as d share cap wil thn balloon to 832,000,000
So..... as d EPS is diluted.... d mother's price wil b hit by a reduction of 25% to 1.31... ie 1.75 x (100-25)%
Down to 1.31... but hey u hv bot ur LA at 1.45...
n so oh yes .... damned too if d LA is not redeemed
But of cos d one suffering d most wld b those who bot d mom.... 25% loss to b exact...
2014-01-13 12:32
Well JCool, you have a very valid point about the dilution in EPS due to the conversion, but I personally am not unduly worried as I believe in the biz of Barakah and its potential growth. IMHO, the theoretical reduction in share price, could be recoup in no time as long as the business continues to grow. This aspect is true for almost all shares where there are outstanding warrants.
My concern is with redemption coz' although the probability may be low as some have argued, there still remain the possibility. Should the LA be redeemed, then you can say that one will be damned coz you'll only get back RM0.20 after having paid say RM1.44/RCULS.
Whatever it is, each of us has different risk appetite. I for one can't afford to take too high a risk. As such I invested in Barakah shares instead of the RCULS. For those who can take higher risk, and therefore may potentially reap higher returns, they may opt for the RCULS instead of paying 31 sen or circa 20% extra for the mother shares (based on today's closing price), especially if they believe that the RCULS will never be redeemed.
What is important is for each of us to understand the features of the instruments and make decisions based on the understanding of the risk/reward profile. I'm here not to give any suggestion as to whether one should or shouldn't buy the RCULS, but to just highlight the important features which some of us may not be aware of.
2014-01-13 21:40
Tis redemption thingy.... has great impact.... n is gonna happen in jz months..... not years
While HLB is betting thr wil b no redemption....
MBBs stance is rather unclear... as it has not mentioned tis redemption at all..... so either its stance is...
thr wil b redemption.. as such.. no dilution.... n thus..... in total disagreement wit HLB...
Or..
in d worst case scenario...... it has missed d redemption thingy..... n hv not factored in d dilution in EPS.... tis can only means its TP of 1.98 is grossly overstated by 25%... or shd in fact b jz 1.48....
2014-01-14 09:07
The term of RCULS:
1. redeem out of net cash (ie cant redeem if still have borrowing)
2. redemption starts after 1 yr from listing date
3. holders can opt to convert during the notice of redemption if any....
if the above if true, buy RCULs for its 40sen discount ...
2014-02-06 11:34
Dear all, i would be glad if you guys could explain what are the differences btw ICULS and RCULS? TQ!
2014-02-10 22:05
Hey, everyone. Thank you for all your explanation. You have let learned something new on Barakah-LA which I have never thought before this. Since I am holding about 30 lots, I really need to rethink my strategies in holding the same.
2014-02-13 22:35
Wow....a lot of fear putting in here...no wonder LA is not moving....when there's fear, it is time to be greedy.
2014-02-13 23:12
Barakah-LA holders still have another 8 months more before the 1 year period expires for redemption to take place if it ever happens. 8 months to contemparory investors are deemed extremly long. At this juncture, players may just bank on the imminent news on the contract from Saudi Arabia.
2014-02-13 23:41
After having better understanding in the mechanism of the LA, I sold off a portion of LAs at a minimal profit to buy the mother share. Hope that I didn't make the wrong decision. So far, it was observed that the mother share moved more vigorously than the LA.
2014-02-14 21:33
I think LA is a cheaper proxy to enter barakah. After Oct, the conversion rate is 1 LA to 1 mother share. Means we buy barakah at RM1.38 based on closing price of barakah LA today.
2014-05-02 20:21
Hi, I am new to warrant, I would like to ask why you guys say this year October is the 1 year period expires for redemption? I thought the maturity date for the warrant is on October 2018?
2014-05-05 10:11
Yes, maturity is on Oct 2018 but we can convert the warrant only after the first year of the listing date.
2014-05-06 10:22
the main shareholder have huge load of RCULS. they will also be effected if they convert the RCULS. so they will not go the disadvantage way
2014-09-04 14:52
they will not redeem the LA. The main purpose they issue LA is refinancing, it will defeat their purpose if they redeem now.
2014-09-10 22:31
should i convert my LA to mother share now? seems mohter is trading at very high premium of 5%
2014-10-23 15:23
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2014-01-09 15:20