SHS - An opportunity for immediate capital gain

SHS (previously See Hup Seng) has been off the radar of most fund managers for some time. Recently the group has proposed a bonus issue of free warrants on the basis of 1 for 2 shares held. The proposal being submitted to the SGX on 10 Sep should be due for the authority's positive reply any time now.

The thing is, the counter has not moved much since and is still lingering around the 0.285 - 0.30 range. What has been overlooked by the investing market is that the warrants would come free with a conversion price of only 0.20 applicable within 5 years from issue. There is therefore a potential capital gain of average of 0.09 based on the market price differential of the warrants even if the main counter does not move after the expected SGX approval is publicly announced. But, given the trend of such issues, and the positive business growth potential of the group, the price of SHS is expected to climb anywhere from 0.35 to 0.40 In their previous warrant issue back in 2009 the counter rose to 0.46 just before ex-date. Back then the financial position of the group and its operations were not as strong and profitable as they are now.

In fact, the group has made some strategic change in its outlook. For one, they have changed their name to SHS Holdings, more reflective of a group that operates a diversified field of businesses. Also, they have just obtained SGX's re-classification from "construction" industry to "multi-industry". The potential of a run-up in the price of the SHS over the next few weeks or months is very likely in view of both the existing positive price differential latent in the proposed warrants as well as the expectations of increased volume in business operations and profitability for the coming year ending 21 Dec 14 and the ensuing years to follow.

At the current price range of 0.30 any investment made on the counter has an immediate unrealised asset value to reap on due to the potential capital gain differential to be derived from the free warrant issue, and the operations forecast for year ending Dec 2014 would also see tremendous growth in the group's profitability. There is very little downside risk involved. Just my 2 cents worth.

I am currently vested in this counter at this price range.

Aquarius -- is the warrant convertible at any time or only at end of 5 yrs? I suspect it's the latter. Too long wait to get gain.

As for FA I will look into it. Thanks.

Think wrts can be converted once listed...

Mel
edwinjup is correct. Normally, warrants are convertible anytime within the eligibility period once they are issued and listed (i.e. within the 5 year period)

upon listing, the warrants will be exercised @ 20 cents by many holders hoping to make a capital gain by selling the shares at 29 cents.

The supply will be great and the share price will b depressed!
The company will get the conversion price and improve its balance sheet.

This is like a rights issue except that you can choose to hold the warrants for some time, isn't it?

Mel
This is a bonus issue and not a rights issue. Existing shareholders do not need to pay out anything to get their entitlement of warrants free of charge. They only need to make a cash outlay if they convert their warrants into share (at the conversion price of 0.20) They can choose to take their profit element without having to come out any cash for conversion by selling the warrants once they are listed. Technically speaking, once the warrants are issued to shareholders their warrants upon being issued and listed would have a market value of 0.085 (at the current price of 0.285 of its motherboard). The price of SHS is unlikely to go down because there is no dilution of total shares in the market at this point. Share dilution only happens after warrants are converted to shares.