Monday, August 03, 2020

HLT-WA: Trading at a Big Discount

Another warrant is going down the road less traveled. In this case, it is HLT-WA- another warrant that's trading at a huge discount to the share price. As at last Thursday (July 30, 2020), HLT closed at RM1.46 while the warrant closed at RM1.03.  

Since HLT-WA has an exercise price of RM0.20 and still a long way to expiry (876 days to 27 December 2022) [here], it is hard to justify the discount of RM0.23 or 16%. As I had mentioned before (here), a warrant trading at a discount is a warning sign that the rally for both the share price and the warrant price are not sustainable.

Be careful!


Chart 1: HLT's daily chart as at July 30, 2020 (Source: Malaysiastock.biz)


Chart 2: HLT-WA's daily chart as at July 30, 2020 (Source: Malaysiastock.biz)

3 comments:

. said...

Hi sir. I have been into Bursa for 10 years but there are things that still doesnt make any sense to me and I would like your opinion / view.

You see, HLT number of shares is 525 Million, in which around 15% (79 million) of shares belong to other than top 20 of the shareholders of the company. If you look at recent HLT rally, the volume went beyond 100 million / day and on the 'usual' days, around 20 million.

How could this be possible? I mean supposed 50% of the volumes were made from those who plan to HOLD to the stock, then obviously, the next day the volume would be seriously depleted, due to hoarding of the stock (but this doesn't happen. Example, have a look at HLT graph on 15th July. 163 Million volume. But the next day, the volume returned back to normal).

Or is these volumes were made by MAJORITY if whom who have no intention to hold; and traded hundred times per day?

Thank you.

Alex Lu said...

The answer is found in your last sentence. The huge volume of trading in the market is only possible if the shares were "traded" at high velocity using computer program, with someone managing the operation. This operation must be pretty sophisticated in order to avoid being caught out by Bursa Malaysia.

While we are at my post on HLT-WA; it is interesting to note that this warrant is now trading at a discount of 16% or 39 sen at the close of the morning trading. HLT and HLT-WA closed at 2.42 and 1.83 respectively. Under normal circumstances, sensible shareholders would switch from the shares to the warrants in order to benefit from this deep discount. In the current market, people seems to be indifferent to the yawning discount. Why? Something is not right with this play. Again, I would recommend to avoid HLT and HLT-WA.

. said...

Thanks for your insight. I never thought this 'high velocity computer program' is being used in our bursa (as compared to NYSE, our trade value is very tiny).

And being able to escape from being caught by Bursa is indeed spectacular, as it is mathematically obvious.

Thanks for your warning too. I have been into Bursa in 10 years and I would avoid stock below RM2 as I noticed, these stock volumes/total transactions don't make any sense. Any many who are into these kind of stocks usually will get burned.


Looking at the surge of volumes in DPHARMA and PHARMA today (10/8/20) at 9.30am - 10.30am, (which occur at the same time) is this likely due to the computer programs? As for me, it seems unnatural.