Riding on Luster Industries Warrants or Loan Stocks?
Published on Wednesday, 06 November 2013 23:14
The share price of Luster Industries Berhad (Luster) more than doubled between May and the first half of June 2013 from about 9 sen to a high of 25.5 sen on 17 June during which the company completed its private placement of 270 million shares representing 24.8% of Luster’s issued and paid-up capital. However, the share price virtually collapsed in the last few days of June and has since been hovering around 10 sen. Luster share price closed at 9 sen on 6 November. Besides the underlying shares, Luster also has two series of warrants and a loan stock quoted on Bursa Malaysia.
Luster’s core business is in the high precision plastic parts and components manufacturing. It is also involved in automotive parts manufacturing. In the first half of 2013, Luster recorded a revenue of RM72.2 million, a jump of more than 150% compared with RM28.9 million achieved in the corresponding period in 2012. The substantial jump in revenue is due the inclusion of results of a few newly acquired subsidiaries. However, net profit of Luster in the first half fell from RM28.9 million in 2012 to RM1.5 million in 2013 as a result of waiver of debts and interests pursuant to the company’s regularization exercise in 2012. In the notes accompanying the financial results, Luster indicated that it is moving into the market for medical and life science products and is optimistic of delivering better operating results in 2013 as a whole.
The substantial rise in Luster share price in June was also partly due to speculation that the company was potentially involved in the development of the Kuala Muda port project in Kedah. Luster had announced then it has submitted a letter to the Kedah State Government to voice its intention and interest to participate in the possible development and upgrading of the current Kuala Muda port.
LUSTER-WA is the first warrant issued by Luster as a result of issuance of shares and free warrants accompanying the company’s regularization plan in 2012. The second warrant LUSTER-WB was issued earlier this year as part of Luster’s private placement of company’s shares.
Luster’s irredeemable convertible unsecured loan stock (ICULS) or LUSTER-LA was issued in 2012 as part settlement for the purchase considerations of its acquisitions of three subsidiaries then. The holders of LUSTER-LA can convert the loan stocks to mother share via a 1 for 1 exchange but such conversion can only be done after the second anniversary of the issuance of the loan stocks which falls in the middle of 2014.
Both Luster warrants are trading at 5 sen and the two 10-year warrants share similar exercise price of 10 sen but LUSTER-WB has a slightly longer tenure due to it being issued this year instead of last year. Both warrants are considered slightly undervalued theoretically as their implied volatilities are lower than the mother share historical volatility. However, investors who are bullish on Luster share price may be better off buying into LUSTER-LA which is trading at a discount of 16.7% and will be convertible into mother share in about 7 months’ time.
LUSTER WARRANTS and ICULS
| :
| LUSTER-WA
| LUSTER-WB
| LUSTER-LA
| Warrant Price
| :
| RM0.050
| RM0.050
| RM0.075
| Share Price
| :
| RM0.09
| Exercise/Conversion Price
| :
| RM0.10
| RM0.10
| RM0.10
| Warrants Expiry Date
| :
| 3/6/2022
| 26/5/2023
| 5/6/2017
| Premium
| :
| 66.7%
| 66.7%
| -16.7%
| Gearing
| :
| 1.8
| 1.8
| 1.2
| Underlying Historical Volatility
| :
| 54.5%
| Warrant’s Implied Volatility
| :
| 46.9%
| 43.5%
| N/A
| Delta
| :
| 0.8
| 0.8
| N/A
| Effective Gearing
| :
| 1.4
| 1.4
| N/A
|
By,
The Warrants Specialist
www.warrants.com.my
本帖最后由 icy97 于 8-11-2013 04:21 PM 编辑
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