YTLPower-WB, an attractive alternative entry to YTLPower

In the current market correction, you can find quite a number of bluechip stocks that had corrected back to their long-term uptrend line (as well as some that had broken below their uptrend line). One such stock that is at its uptrend line is YTLPower (see Chart 1 below). Of course, there are concerns regarding this stock. Among these concerns are possible adjustment to the charges payable by Tenaga to IPPs; proposed tax to be levied on IPPs for excessive profit; and possible rise in interest regime (thus, a higher rate for calculating the discounted cashflow, which will give rise to a lower value for the stock). Nevertheless, if the long-term uptrend line is not violated at the RM2.00 level, there is a chance that the stock may stage a rebound from here.


Chart 1: YTLPower's monthly chart as at June 19th (source: Quickcharts)

A cheaper entry into this stock is its newly-listed warrant, YTLPower-WB. This new warrant has a 10-year tenor (expiring on 6th November 2018); exercise price of RM1.25; and exercise ratio of 1-for-1. At yesterday's prices, YTLPower-WB (closed at RM0.685) is trading at a discount of 3.7%. YTLPower closed at RM2.01 yesterday.

YTLPower-WB looks more attractive than the older YTLPower-WA, which has a short tenor (expiring on 8th January 2010) but lower exercise price of RM1.20 (or, RM1.22 after 11th January 2009) and a similar exercise ratio of 1-for-1. At yesterday's prices, YTLPower-WA (closed at RM0.74) is trading at a discount of 3.5%. With nearly the same discount but a longer duration to expiry, YTLPower-WB would be preferred over YTLPower-WA. In addition, one can see that YTLPower-WA's long-term uptrend line support of RM0.78-80 has been violated (see Chart 2 below).


Chart 2: YTLPower-WA's monthly chart as at June 19th (source: Quickcharts)

Based on the above, YTLPower-WB could be a good indirect entry to YTLPower, provided that the underlying share price does not violate its long-term uptrend line support of RM2.00.