kcchongnz blog
A case study of company warrant of BIMB kcchongnz
A case study of company warrant of BIMB kcchongnz
Recently many companies in Bursa carry out fund raising of right issues for debt reduction, business expansion, acquisition etc. To entice the existing shareholders to subscribe to the right issues, detachable warrants were purported given free.
Company warrant is a derivative instrument, like a call option, which gives the holders the right, but not an obligation, to subscribe for new ordinary shares at a specified price during a specified period of time. Warrants have a maturity date (up to 10 years) after which they expire are worthless unless the holder had exercised to subscribe for the new shares before the maturity date.
Why invest in company warrant?
Because the prices of warrants are low, and hence the relative much lower investment outlay, the leverage and gearing they offer is high. This means that there is a potential for larger capital gains. Warrants generally exaggerate share price movements in terms of percentage change, and hence a perfect security in a bull market.
To be fair, warrants also experience outsized declines in a falling market, or even a total loss when the warrant expires out-of-the-money. However, as the investment outlay is low, there is a limit of that loss.
A holder of a warrant does not have any voting, shareholding or dividend rights. The investor can therefore have no say in the functioning of the company, even though he or she is affected by any decisions made.
Punters should also be aware that warrant trading can be tricky because many don't have a lot of liquidity. Before buying, the cardinal rule is that investors have to like the company, not just be looking for a quick trading profit.
Hence investors who are interested in investing in warrants should buy warrants only on stocks they are confident about. Furthermore, you should invest only in warrants with a long expiry date, say at least two years of remaining life, enough time to allow a bullish scenario to play out. Finally, investors should insist that any warrant they buy offers leverage that will result in a high percentage rise say at least double the move in the underlying share.
Basic Pricing of Options
Investing in company warrant is similar to investing in a stock, or in fact it is the same as buying anything. What is the appropriate price to pay for estimated value of the warrant?
The two components of the value of the warrants are the intrinsic value and the time value. The intrinsic value is the difference between the underlying's share price and the exercise price. Specifically, the intrinsic value for a warrant is equal to the underlying price minus the exercise price. Any premium that is in excess of the warrant's intrinsic value is referred to as time value.
Many people investing in warrants only look at a couple of things. First is the premium, or the cost of owning the warrant measured by:
Premium = Warrant price + exercise price - underlying share price, or
Premium % = (warrant price + exercise price) / underlying share price -1
The highly the premium, the higher the warrant price appears to be. Normally in an efficient market, warrants are quoted at very high premiums in tenths of percentage points, or even multiple times, depending on some factors described below.
The other factor is the gearing measured by:
Gearing = underlying share price / Warrant price.
The higher the gearing, the more attractive is the warrant as the more exaggerated the gain would be. However, just looking at these two considerations alone is a little too simplistic.
Factors influencing and the pricing of warrants
The six major factors influencing the price of options are:
- underlying share price,
- exercise price,
- expected volatility of the underlying share,
- time to expiry,
- interest rate and
- dividends.
Warrants with high underlying share prices, low exercise prices of course would generally be higher priced as they are generally are or close to in-the-money. The more time to expiration, the greater the time value of the option. In general, investors are willing to pay a higher premium for more time, since time increases the likelihood that the position can become profitable. Time value decreases over time and decays to zero at expiration.
Volatility of the share price movement also command a higher warrant price as it has a higher chance that the underlying stock prices can go up higher, and hence the better payoff for the warrants. The volatility of the underlying share price plays a very big part in the pricing of its warrant. A warrant trading at a high implied volatility is considered as expensive.
High dividend yield for the underlying stock is a damper for warrant holders as they are not entitled to the payment. On the other hand, if company constantly has been engaging in share buyback, it is good for warrant holders as the price of underlying would move up due to share buyback.
Notice that the gearing does not physically come into the pricing consideration. It merely amplifies the gain or loss. But in real life, investors do pay higher price for a similar warrant.
For more information about options and their pricing using the Black-Scholes Option pricing Model , please refer to the appended link.
http://www.investopedia.com/university/options-pricing/
A case study on BIMB Wa
BIMB Holdings Berhad is engaged in the Islamic banking, Takaful and others such as investment holding, currency trading, ijarah financing, stockbroking and unit trust. Its share price has dropped from a high of closed to RM5.00 six months ago to RM4.23 now, mainly due to its poorer performance for its final quarter result ended 31st December 2013 resulting from a one-off tax charge of dividend income. Its full year result remains unchanged with earnings per share of 24 sen.
With its recent acquisition of 49% equity interest in Bank Islam, it is expected that there will be substantial increase in earnings in the future. CIMB gave it a target price of RM5.45 a month ago.
BIMB and its warrant, Wa closed at RM4.23 and 66 sen respectively on 28th March 2014. The exercise price of Wa is RM4.72 and the expiry date is on 4th December 2023, or in nine and a half years time. The warrant is hence way out-of-the-money with zero intrinsic value. The premium now is 27% [(0.66+4.72)/4.23-1]. The value of Wa is purely in its time value, a value which is considerable due to its long expiry date. The gearing is 6.4 times (4.23/0.66) which is reasonably high and hence attractive. Hence Wa appears to be a good alternative in investing in the business of BIMB.
Black-Scholes Option Pricing
With the underlying share price at RM4.23, exercise price of RM4.72, 9.7 years to maturity, a dividend yield of 1.7%, risk-free rate of 4% and a historical volatility of BIMB at 29.5%, the option value of Wa is RM1.41. This shows Wa at 66 sen, is apparently trading at 53% undervalued.
The implied volatility, by forcing the warrant value equals to its market price, is only 12.3%, a relatively low value which signifying a cheap price for Wa.
Payoff for BIMB warrant
Table 1 below shows the payoff for Wa for various price of BIMB before expiry of the warrant.
Table 1: Payoff
|
Uly Price |
4.00 |
4.23 |
4.50 |
5.00 |
5.50 |
6.00 |
6.50 |
7.00 |
|
BIMB |
-5.4% |
0.0% |
6.4% |
18.2% |
30.0% |
41.8% |
53.7% |
65.5% |
|
Wa |
-100.0% |
-100.0% |
-100.0% |
-57.6% |
18.2% |
93.9% |
169.7% |
245.5% |
If the price of the underlying share does not move above RM4.72, the exercise price, when Wa expires, it will be worthless. Your initial outlay is the limit of your total loss. However, if BIMB share price moves up by 66% to RM7.00, Wa can be exercised for a gain of 246%, about 4 times more than the gain in the underlying share. Figure 1 below depicts the payoff at different price of BIMB.
Figure 1: Payoff for underlying share and warrant of BIMB
Conclusion
BIMB Wa, with a long time to expiry, is trading at an undemanding valuation in terms of premium of 27% and implied volatility of just 12.3% compared to its historical volatility of 29.5%. Furthermore, it has a high gearing of 6.4 times which would greatly amplify the gain if the underlying share price goes up before the expiry date. Hence, if you believe in a company like BIMB as an investment, Wa is definitely an excellent buy.
K C Chong (30/3/14)
Related Stocks
| Chart | Stock Name | Last | Change | Volume |
|---|
More articles on kcchongnz blog
Insas Warrants WC and Its Valuation kcchongnz
Created by kcchongnz | Jan 22, 2024
Which to buy, Insas or Insas WC?
Isn’t this the most undervalued stock in Bursa?: Insas Berhad by Kcchongnz
Created by kcchongnz | Jan 15, 2024
2024 New Year Reflection Investing in the Stock Market: Timing the Market
Created by kcchongnz | Jan 01, 2024
2023 Christmas reflection on pitfalls of investing in the Malaysian stock market kcchongnz
Created by kcchongnz | Dec 25, 2023
Introduction: The Complete Dividend Investing Guide That Works by K C Chong
Created by kcchongnz | Oct 02, 2022
Discussions
1 person likes this. Showing 50 of 53 comments
With indepth studies by kcchongnz I'm pretty sure it WILL boost up Bimb-Wa price in the near n long terms 'cos expiry date more than 9 years' time ...anyway thank u...job well done n hoping 2 see more of these on those deserving counters!
2014-03-30 16:53
Hi KC, may I know what method you use to calculate the historical volatility of 29.5%? If standard deviation is used in your case, what is the time frame?
I did some calculations, but the value is slightly differ from your calculated value.
period σ
1yr 41.1%
6months 27.2%
3months 24.8%
1month 8.1%
2014-03-30 18:51
Horse field,
What I did was I used the weekly price from yahoo finance, obtain the weekly return, and compute the standard deviation of the weekly return. Then I convert that to annual std by multiplying sqrt (52). That is the volatility of bimb.
You could use the daily data too and do the same to get the annual std. There will be some difference in the value obtained. But that is valuation, an art. Anyway, the option pricing is itself not an exact science.
2014-03-30 19:02
KC, informative write up.
What is the purpose of looking at implied volatility instead of just premium to determine good entry price for warrant ? Would implied volatility of the option relative to the historical volatility provide any more useful information ? Hope you can enlighten. Thanks
2014-03-30 23:14
KC, I ran a similar exercise with PJDEV-WC with following conditions :-
Underlying price = RM1.45
Strike price = RM 1
Ex- ratio =1
Days to expiry = 2435
Annual volatility = 25.6%
Div yield = 3.4%
I was very surprised to find the black-schole intrinsic value for warrant to be only RM0.49 considering the significant time to expiry and only 15% premium. I found BSM valuation to be extremely sensitive to dividend yield input. A 0% DY assumption increased intrinsic value to RM0.74. Would PJDEV-WC still be a good investment in your opinion and why ?
2014-03-31 00:03
Posted by houseofordos > Mar 30, 2014 11:14 PM | Report Abuse
KC, informative write up.
What is the purpose of looking at implied volatility instead of just premium to determine good entry price for warrant ? Would implied volatility of the option relative to the historical volatility provide any more useful information ? Hope you can enlighten. Thanks
Premium varies widely depending on the time to maturity, volatility and gearing etc. So it is not a good measure of if a warrant is expensive or cheap.
In practice, implied volatility (IV) is the most important factor in determining if a warrant is worth buying. Often options are traded based on implied volatility. Compared to historical, IV is forward looking and hence preferred. Read the article at the link appended below:
http://www.optionsplaybook.com/options-introduction/what-is-volatility/
2014-03-31 10:40
Posted by houseofordos > Mar 31, 2014 12:03 AM | Report Abuse
KC, I ran a similar exercise with PJDEV-WC with following conditions :-
Underlying price = RM1.45
Strike price = RM 1
Ex- ratio =1
Days to expiry = 2435
Annual volatility = 25.6%
Div yield = 3.4%
I was very surprised to find the black-schole intrinsic value for warrant to be only RM0.49 considering the significant time to expiry and only 15% premium. I found BSM valuation to be extremely sensitive to dividend yield input. A 0% DY assumption increased intrinsic value to RM0.74. Would PJDEV-WC still be a good investment in your opinion and why ?
A great analysis of option from you. You were using the Nobel price award winner Black-Scholes Option Pricing to value the PJD Wc.
Yes, cash dividends issued by stocks have big impact on their warrant prices. This is because the underlying stock price is expected to drop by the dividend amount on the ex-dividend date, the higher the dividend, the larger is the drop in the stock, and hence the lower the value of warrant. Share buyback has the opposite effect on option price.
Although option pricing is used widely in derivative markets, and the BS OPM won Nobel price award, it is not infallible. This is because the assumptions behind it, such as the log-normal behaviour of share price, which is far from reality.
the other factor for the price movement of warrant is the supply and demand in the market, just like normal stocks which doesn't follow price and value relationship.
No I won't buy PJD Wc at the present price of underlying share and warrant price. Like what you have analyzed, Wc is overvalued, at least theoretically. I am not a trader as you know.
2014-03-31 11:57
Posted by brendonyeap > Mar 30, 2014 04:03 PM | Report Abuse
Thanks KCHONG for ur analysis...whats the TP for it, mid to long term?
Interesting question. Never thought of "target price" for warrants. Let me try to answer you this question.
Warrant is a stock call option, a derivative deriving its value from something, that is the underlying share price. Meaning the value of BIMB Wa depends on what the price of BIMB share price is. I know many would disagree with me because they would opine that it depends on what price people are willing to sell, or buy. That would be very abstract for me because i won't be able to gauge what traders think about what they are willing to buy or sell a warrant.
So instead of "target price", I think in term of "intrinsic value". Yes warrant has an intrinsic value too just like common stocks. Its intrinsic value will depend what the underlying share price is.
The intrinsic value of BIMB Wa = Max[0, (stock price-exercise price)].
The table below shows the intrinsic value of BIMB Wa at various stock price of BIMB:
BIMB 4.00 4.33 4.50 5.00 5.50 6.00 6.50 7.00
IV BIMB Wa 0.00 0.00 0.00 0.28 0.78 1.28 1.78 2.28
So what would you think the possible prices of Wa could be within this 9 and a half years before it expires, when BIMB share price moves up and down? Mind you, this is only the intrinsic value. Wa also has valuable time value, which could be very valuable depending on the volatility and time to expiry.
In the above write-up, I used an option pricing to value Wa with all the data and assumptions (an artistic endeavor), and the fair value of Wa (intrinsic value+time value) is RM1.49.
So you notice I talk about intrinsic value and time value of warrant, not target price. Could you share with us your "target price"?
2014-03-31 18:59
KC, thanks for all your explanation. The idea is clearer to me now... Just to clarify then, how do you gauge if the 12.3% implied volatility is considered low ?
2014-04-01 00:16
Posted by houseofordos > Apr 1, 2014 12:16 AM | Report Abuse
KC, thanks for all your explanation. The idea is clearer to me now... Just to clarify then, how do you gauge if the 12.3% implied volatility is considered low ?
To me the most important factor for the expected price of an option such as a warrant is its volatility. The higher the statistical or historical volatility SV), the higher the value of a warrant. This is because there is a higher probability that the warrant has a chance to be in-the-money and gets a good payoff. Also note that different stock has different SV.
Implied volatility (IV) is a forward looking number by gauging the market expectation; with the price the market willing to pay now, what is the "implied volatility"? This is done by "forcing" the volatility to make the market price equals to the value computed with the option pricing model.
Hence if the implied volatility (12.3%)is much lower than the statistical volatility (29.5%) of BIMB Wa, then the warrant appears to be cheap. This is because if the volatility of BIMB suddenly increases, the warrant price will increase in tandem.
However, there's no guarantee the market will make a violent move anytime soon which will spike up the price of BIMB Wa. By incorporating into trading an awareness of IV and SV, which are important dimensions of pricing, you can gain a decisive edge as an options trader.
2014-04-01 05:52
KC, how to get the implied volatility (12.3%)and statiscal volatility (29.5%?)? Would you show me the formula?
2014-04-06 17:36
KC what is your opinion on YTLPOWR-WB ? Gearing about 3x. Premium is only about 12% with 4 years to expiry. The good thing is that this company very aggressive in share buy back.
2014-04-07 15:54
Hi kcchongnz, iam interested in your study of warrant. I understood the intrinsic value, premium%, gearing etc but confuse on implied volatility.
"What I did was I used the weekly price from yahoo finance, obtain the weekly return, and compute the standard deviation of the weekly return. Then I convert that to annual std by multiplying sqrt (52). That is the volatility of bimb."
Can you advise an example of the calculation of the BIMB-WA ( 29.5%)?
2014-04-07 16:54
Posted by sleeplessguy > Apr 7, 2014 04:54 PM | Report Abuse
Hi kcchongnz, iam interested in your study of warrant. I understood the intrinsic value, premium%, gearing etc but confuse on implied volatility.
"What I did was I used the weekly price from yahoo finance, obtain the weekly return, and compute the standard deviation of the weekly return. Then I convert that to annual std by multiplying sqrt (52). That is the volatility of bimb."
Can you advise an example of the calculation of the BIMB-WA ( 29.5%)?
That is exactly how I obtained the historical volatility of BIMB.
For implied volatility, you have to understand Black-Scholes Option Pricing. I have explained what implied volatility means in the article.
2014-04-07 17:03
Posted by houseofordos > Apr 7, 2014 03:54 PM | Report Abuse
KC what is your opinion on YTLPOWR-WB ? Gearing about 3x. Premium is only about 12% with 4 years to expiry. The good thing is that this company very aggressive in share buy back.
YTL Warrant was trading at a discount a few months ago when its underlying share gone up to 1.80+ when the company aggressively buying back shares. Since then the underlying share dropped to now at 1.60, and its warrant price retreated in tandem. That is the peril of playing derivatives. The same thing I can see happening to many other warrants. You are at the mercy of someone else.
Forgetting the above, at 53.5 now when the underlying share is at 1.60, it is a good bet as you have my spreadsheet to do evaluation yourself. This is especially true the company is continuing to buy back share continuously, according to your perception, and especially the shares bought back are cancelled off. And also provided you are not trading and hope for short term gain.
2014-04-07 17:17
In the above write-up, I used an option pricing to value Wa with all the data and assumptions (an artistic endeavor), and the fair value of Wa (intrinsic value+time value) is RM1.49.
Hi KC,as known intrinsic value = max (0,Underlying(4.23) - exercise price(4.72) )= 0
but how could I know the time value and how could it be the fair value 1.49?
2014-04-07 22:47
Posted by sleeplessguy > Apr 7, 2014 10:47 PM | Report Abuse
Hi KC,as known intrinsic value = max (0,Underlying(4.23) - exercise price(4.72) )= 0
but how could I know the time value and how could it be the fair value 1.49?
Use option pricing to find the value of a warrant (Wp).
Wp = intrinsic value + time value
1.49 = 0 + time value
time value = 1.49
You must know how to use the option pricing to find Wp. To explain the theory will take pages and it is that easy to truly understand just by reading. There are plenty of resources in the web and you have to have the patience to try understand it, and practice. No short cut.
I can see your keenness. Very very few are interested in the theory and it is doubtful if it is that useful. But in my opinion, there is plenty of intuition in the theory.
Anybody interested if I include this in my web-based investment training?
2014-04-08 04:29
Hi KC, hope i am not too late to join your web-based investment training. kkpsk2011@gmail.com
2014-04-08 09:00
Posted by shareinformation > Apr 8, 2014 09:00 AM | Report Abuse
Hi KC, hope i am not too late to join your web-based investment training. kkpsk2011@gmail.com
No you aren't. I am getting serious now. Still collecting names and preparing for my course.
2014-04-08 09:13
Hi KC, some parameter inquiry of option pricing, is the dividend yield is refer to its mother BIMB? Besides the risk free rate 4% where could we get this information(try to search but couldn't find)?
2014-04-08 22:49
Posted by sleeplessguy > Apr 8, 2014 10:49 PM | Report Abuse
Hi KC, some parameter inquiry of option pricing, is the dividend yield is refer to its mother BIMB? Besides the risk free rate 4% where could we get this information(try to search but couldn't find)?
Yes, dividend yield refers to the underlying share. Risk free rate means what it meant. You can use the short term MGS rate as risk free rate.
2014-04-09 08:48
Good day KC, we have discussed before that when trading in warrants and call warrants, it is important to analyse the underlying mother share as well. Let's look at the following numbers (all TTM basis as extracted from I3):
Counter P/E DY P/B
BIMB 18.19 0.81% 2.36
Affin 8.83 3.91% 0.90
AFG 12.47 1.69% 1.71
AMMB 12.36 3.1% 1.71
CIMB 12.39 3.21% 1.90
HLB 16.70 3.2% 1.80
MBB 12.80 5.52% 1.87
PBB 17.15 2.61% 3.41
RHB 11.56 1.94% 1.28
Median 12.47 1.80
Average 13.6 1.88
In your view, why is BIMB trading at such a high P/E and P/B compared to the the rest of the banking groups listed on Bursa?
Whilst I understand the high premium accorded to PBB due to its management capability, asset quality and historical growth rate, I can't seem to convince myself with the pricing of BIMB, except for its stake in Takaful.
Can you enlighten me what's the upside for BIMB (that will also trigger interests in its WA other than a takeover bid)? Yes, I agree with you that the gearing and the time value of this WA is awesome, but I really need more justifications to convince myself to invest in this WA. Do you think you can spare your thoughts and help me out?
2014-04-09 11:40
avacado, the formulation of the option pricing by Black and Scholes was based purely the share price of the underlying stock. Yes, it is the price, not the value. The underlying assumption is the efficient market, ie the value equals the price, and that share price moves in like the Brownian Motion, and the distribution of the stock price is lognormal, etc etc. This is especially true for short duration option, where stock price is the determining factor, rather than the value.
In BIMB warrant which is a long duration option, I would agree with you the fundamentals of the company is important, but that is not in the assumption of the model.
BIMB's PE is high mainly because of its poorer performance for its final quarter result ended 31st December 2013 resulting from a one-off tax charge of dividend income, I think.
However it is the future expectation which is important for the share price performance. With its recent acquisition of 49% equity interest in Bank Islam, it is expected that there will be substantial increase in earnings in the future.
2014-04-09 12:14
KC, thanks for your pointer. After adding additonal 49% of profit from Bank Islam and accounted for the enlarged share base, I derived a theoretical PE of 12.44x @ 31.12.2013, which is roughly the industry median. Nevertheless, the P/B ratio is still high because the net assets of Bank Islam has been consolidated.
Noticed that 75% of Bank Islam loans come from retail customers, so I believe it's a challenge for them to grow the loan book at the same rate like previous years. Generally, the banking sector is quite challenging, which is already reflected in the share price.
2014-04-09 15:19
Avacado, try use this valuation method for BIMB.
P=ROE/Required return * Book value
ROE is the expected future Return of equity
2014-04-09 15:24
KC, I got a price lower than its existing share price. Maybe it's my assumption. How would you compute then?
2014-04-09 17:08
I did some fundamental calculation, can advise whether it is correct?
Ratio : 1.06
Working capital : ~3 billion
Debt to Equity Ration : 15.8
EPS : 23.65
PE : 19.2
ROE : 9%
DY : 1%
NTA 1.82
Overall can we conclude the fundamental not strong enough? Please correct me if I am wrong
2014-04-09 17:52
That formula is good for banks and other financial institutions. Everything hinges on your assumptions, ie what would you expect its future earnings per share? Not the EPS in the past.
For me I have no knowledge of it except some analysts are bullish about its Takaful business, and its prospective income form Bank Islam.
I invest in its company warrants basing on the assumptions that the share price of BIMB has incorporated all information and expectation of the company, ie relying on its implied volatility against the historical volatility.
2014-04-09 17:55
Hi boss kcchongz, would you consider destini-wa as your warrant profolio? Please advise. Thanks. Regards, Chua
2014-04-12 00:08
Posted by ccs999 > Apr 12, 2014 12:08 AM | Report Abuse
Hi boss kcchongz, would you consider destini-wa as your warrant profolio? Please advise. Thanks. Regards, Chua
ccs999. have you worked under me before?
The share price movement of Destini warrant depends on the share price movement of Destini more than the true value of Destini. At 21 sen when Destini is at 57sen, the implied volatility is 21%, not high at all, and hence not expensive for Destini warrant. So if you believe Destini share price will go up in the future, good to invest in its warrant. It gives a gearing of 2.7 times.
Is the fundamental of the business of Destini important? It is in a long term. It made profit for the last two years. But I don't like the quality of its earnings. There is no cash flows from operating activities at all, not good in my opinion.
So for me I won't invest in the warrant. But as i have said, the share price movement of Destini is more important than its value when investing, especially punting, in warrant.
2014-04-12 10:43
Hi kcchongz,no, I never working with you before but I wish that I can... Hehe...
2014-04-12 11:08
BIMB-WA is an excellent buy with rumors on a possible merger announcement soon.
2014-07-13 19:11
Posted by brendonyeap > Jul 25, 2014 11:48 PM | Report Abuse
Kc: how do calculate volatility of a stock? TQ
Posted by kcchongnz > Mar 30, 2014 07:02 PM | Report Abuse X
Horse field,
What I did was I used the weekly price from yahoo finance, obtain the weekly return, and compute the standard deviation of the weekly return. Then I convert that to annual std by multiplying sqrt (52). That is the volatility of bimb.
You could use the daily data too and do the same to get the annual std. There will be some difference in the value obtained. But that is valuation, an art. Anyway, the option pricing is itself not an exact science.
2014-07-26 02:32
Posted by donfollowblindly > Oct 29, 2014 10:29 PM | Report Abuse
donfollowblindly
2 posts
If follow this blog advise I lose money.
I like your new identity. Yes absolutely, don't follow blindly, do you always follow blindly? Really don't know why your comment is flagged. It is an excellent comment.
But your comment though excellent, may be out of point and won't get any mark in an exam. Why?
The article I wrote here is about sharing of pricing of derivative such as warrant; What is premium and discount, intrinsic value and time value of warrant, gearing, how to use option pricing to price it, the various scenarios if the underlying share goes up or down and the resulting return etc. Nothing is mentioning about asking you nor advising you to buy it.
You read all the good comments there? All are talking about those stuff I mentioned above, nothing about buying or selling. Very good discussions and learning.
Won't you like to join in this type of fruitful discussion, constructively?
2014-10-30 05:22
@kcchongnz, like your case study about bimb wa...
do u notice that for the past few months, mother BIMB vol hv been increasing but the share price still stagnant below 4.30 level... it seems like someone is trying to prevent the price from going up, but for what reason? at first, I thought there is share change hand between major shareholder to someone...but after checking the percentage of share owned by EPF and tabung haji from 2013 to 2014, guess I am wrong...look more like they are selling and buying between their left and right hand...
Another question is, Do you foreseen a risk for BIMB wa when there is M&A activity for BIMB... because the offer price for BIMB Wa can be solely depend on take-over company generosity... normally they would not pay extra premium for the warrant rite?
2014-11-11 10:58
funda,
No, I don't notice the right hand left hand thingy as i don't watch what they are doing. Good observation of yours.
As BIMB warrant's value is merely made up of time value with a long time to expire, if BIMB is taken over by another company and the offer price is what is now, BIMB warrant is dead. Certainly there is a risk. Tell me in investing, is there such thing as riskless?
No, I don't think they are obliged to pay extra premium to warrant holders.
Nothing is sure in investing, even in life. So that is why I never encourage people to swing for the fence. I always discouraged people to leverage in investing, never never encourage people to use margin financing.
2014-11-11 11:19
Hi kcchongnz,
Thanks for the explanation...
Agreed with that, I also not a fans of over leverage, that's why never apply for margin account, just to prevent myself from hand itchy...
At least for the mid-term, I still do not foreseen BIMB to be a M&A target(cross finger)... hope the mother will break-out 4.30 soon...
2014-11-11 12:05
bullchett, all kcchongnz buy call masuk longkang. bought 0.66 now look at the price. sifu from longkang.
2014-11-20 18:20
Posted by jimmyfallow > Nov 20, 2014 06:20 PM | Report Abuse
bullchett, all kcchongnz buy call masuk longkang. bought 0.66 now look at the price. sifu from longkang.
Wow, first time comment in i3investor already know all my "buy call" masuk longkang. Genius! Tell us what were you in your previous life?
Actually you got it wrong. Anyway I don't expect you to get anything right after all.
The article here talked about warrants and their pricing. Other things such as gearing, premium, intrinsic and time value, volatility, historical and implied volatility etc. You can see from the comments above that many people benefited in learning something about options and their pricing.
2014-11-20 18:48
Agree with jimmyfallow. How to retire comfortably if I have longkang stock like this(down 23% since his recommendation). So don't follow KC Chong tips blindly despite his sifu status in i3.
2014-11-20 21:29
Posted by donfollowblindly > Nov 20, 2014 09:29 PM | Report Abuse
Agree with jimmyfallow. How to retire comfortably if I have longkang stock like this(down 23% since his recommendation). So don't follow KC Chong tips blindly despite his sifu status in i3.
One of the best comments above. You are absolutely right, don't follow KC Chong. And never follow tips blindly. But thanks for your recognition of KC Chong's sifu status in i3 as mentioned by you.
Yes, you most likely won't reach your wealth building goal following KC Chong's tips. As a matter of fact, not only my tips (if any), also others, including your broker, remisier, analysts, financial adviser and investment bankers etc. This is because nobody will take care of your interest.
But I like to correct you a couple of points here.
1) I don't look at myself as a sifu to you, or to anyone else. I am just a small time retail investor, not an analyst, nor an investment banker. I am not even in this industry.
2) I never give tips as mentioned by you. I share knowledge if you can understand English well.
3) Jimmyfallow so far has 1 post. Even that one post he also deleted already, wondering why. And you have 5 posts, and you seem to know me so well. Are you such an admirer of me? Then you deserve not to be able to retire comfortably. It is your own fault following me.
2014-11-21 05:08
Post a Comment
Featured Posts
Introducing MY's First IPO Fund for Sophisticated Investors!
New Update. Discover investment communities that resonate with your ideas
M & A Value Partners IPO Equity Fund has been launched - Targeted 13% Return p.a
Latest Videos
Apps
Top Articles
1
2
3
Stockhistory
4
BFM Podcast
6
BFM Podcast
7
BFM Podcast
#
Stock
Score
Daily Stocks
Stock Name
Last
Change
Volume
Stock Name
Last
Change
Volume
Stock Name
Last
Change
Volume
Featured Advertisers / Partners
Ride The Bull Short The Bear
CS Tan
4.9 / 5.0
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
brendonyeap
Thanks KCHONG for ur analysis...whats the TP for it, mid to long term?
2014-03-30 16:03