Observer2, I noticed u posted on Yangzijiang last year. What do you think of YZJ now? I have been trying to understand the prospects and wonder what your view is regarding the issue of warrants with a strike price of S$1.50 and expiry in 3 years time.
$1.50 is damn high compared to current stock price of 95 cents. The buyers of the warrants must be very confident to take up the warrants.
Hi. Reck – I would view the issue of the warrants at RMB 0.3072 [S$0.0605] as a rather positive move. The conversion of the warrant to the mother share at RMB7.617 [S$1.50] is like a rights issue that would add RMB2,514M [S$495M] to YZJ’s cash pile. If the warrants are not exercised, the RMB92.17M or S$18.15M raised from the warrant issue is still a windfall to YZJ. From the Citigroup Global Market Ltd side, they must be quite confident that YZJ’s share price is very likely to rise beyond S$1.5605 [S$0.0605 + S$1.50] before the warrant expiry date on 29-4-2016. Instead of holding YZJ at around S$1.00 a share, they are effectively holding it at S$0.0605 a share. It is like placing a bet of 6 cts for a period of 4 years to win a “possible multi-bagger profits”. Once the warrant is in the money, Citigroup can convert all the warrant to the mother share and dispose them off.
For YZJ’s shareholders who have faith in this stock, the current very depressed share price offers an opportunity to buy more of the stock at cheaper price.
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