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Comments (CIMB) 28/May/09
Not surprising. Golden Agri had already flagged to the market two weeks ago that it was mulling a rights issue. The amount of funds to be raised matches the amount speculated by the media, of around US$200m. What was new were the two free detachable warrants for every five rights shares subscribed which would be EPSdilutive if and when the warrants are in-the-money. We believe this is to help sweeten the deal. Also, the rights issue price is at a sharp 60% discount to the last closing price against our earlier expectation of 40%. We understand that this is to ensure strong take-up of the rights. Assuming the net proceeds fetch an annual return of 5%, we estimate that the rights will dilute our FY10 EPS forecast for Golden Agri by 12%. We are not computing dilution from the warrants at this juncture as they are out-of-the
money.
Although the news is not a surprise, we maintain our negative take on it given:
1) the earnings dilution;
2) the group’s ability to fund its capex needs with internal funds; and
3) its low net gearing ratio of 0.09x as at 31 Mar 09.
Figure 1: Impact on EPS and target price
Tuesday's closing price (S$ per share) 0.45
Rights price (S$ per share) 0.18
Theoretical ex-rights price (S$ per share) 0.41
Current number of shares (m) 10,375 x 0.45 = a. $4,668.75
17-for100 rights issue (m) 1,764 x 0.18 = b. $317.52
Total shares after rights issue (m) 10,375 + 1,764 = c. 12,139
After dilution : (a.$4668.75 + b.$317.52) / c.12,139 = $0.411
E-war ( Date: 28-May-2009 15:08) Posted:
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Hi, I 'm having trouble finding the XR, nil-paid rights trading dates on SGX. Anyone has advice? Thkq
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Hi, I think it is more accurate to use the closing price on the last day of CR just before the next day goes XR to calculate the theorethical ex-rights price. So, if the price of GAR trends downwards over this current period of time while on CR, investors may expect to get an even lower theorethical ex-rights price below $0.40 perhaps. On the other hand, if the price of GAR trends upwards, then the theorethical ex-rights price will eventually be higher. This ex-rights price is just a theorethical price to serve as a reference to the share price of GAR after the effect of rights issue. As one can see, this theorethical ex-rights price can change depending on the sentiments of investors trading its main shares during CR period. Since it is just a theorethical price after effects of rights issue and is dependent on trading sentiments, it may not reflect very accurately the fair value of GAR shares.
Oh no wonder, the price back track when RIGHT announce. UNDERSTOOD. So that means better entry price is below $0.40 loh.
Alligator ( Date: 27-May-2009 15:10) Posted:
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read their announcement .. it is 41 cents ex-rights based on 45 b4 announcement
work out: 100x 45 cents=4500
17x18cents=306
add them 4806
divide by 117===>>> 4806/117==41.07 == theorethical ex-right trading price (TERP)
rodney301 ( Date: 27-May-2009 13:55) Posted:
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warrant is simply given to you at 2 warrant for every 5 rights. Warrant has 3 year expiry, it gives you the rights to subscribe for new mother share at a pretermined price of ( S$0.54). it means within the three years if you want to convert to mother share, you pay S$0.54 each.
To exercise your warrant you follow the procedure by the warrant agent
Warrant, when listed in SGX , can be traded also, just like share.
Warrant, when expired, will also become worthless.
oinkoink1999 ( Date: 27-May-2009 14:12) Posted:
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You have basically 3 options
1. Exercise your Rights , pay for it, then you get rights converted to mother shares and you have some warrant.
2. Sell away your rights during rights trading period
3. Do nothing, then see your shares get diluted by the new rights and warrant when other exercise.
erwinliong ( Date: 27-May-2009 14:33) Posted:
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I am newbie with rights issue... Say I have 10,000 units of GAR. What are the options that I have? What does it means/what do I have to do if I want to exercise the rights given?
Thx in advance for the info.
warrants again...can someone explain how this mechanism work in a nut shell?...
fruitty ( Date: 27-May-2009 13:51) Posted:
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The Rights Issue price is 18 Singapore cents per share, on the basis of 17 rights shares for
every one hundred existing shares outstanding and two free detachable warrants for
every five rights shares subscribed (“Warrants”). The Warrants, which have a 3-year
maturity date, are exercisable at maturity at an exercise price of 54 Singapore cents per
share and at a conversion ratio of one warrant to one share.
The stock will start trading at 1400.