This morning, Scomi-LA & Scomi-WA started trading. You may recall that Scomi issued RM165.5 million Irredeemable Convertible Secured Loans Stocks ('ICSLS') together with up to 219,8 million free detachable warrants (“warrants”) on the basis of fifteen (15) RM0.10 nominal value of ICSLS together with two (2) free warrants for every ten (10) ordinary shares of RM0.10 each in Scomi held. The ICSLS is called Scomi-LA & the warrant is called Scomi-WA.
Scomi-LA has a tenor of 3 years and bears interest at a rate 4% pa. The tenor of Scomi-WA is also 3 years. Conversion for Scomi-LA: 4000 Scomi-LA exchangeable to 1000 shares. Conversion for Scomi-WA: 1000 Scomi-WA plus RM400 exchangeable to 1000 shares.
As at 10.45am, Scomi share, Scomi-LA & Scomi-WA were trading at RM0.465, RM0.105 & RM0.165 respectively. Based on these prices, we can see that Scomi-LA was trading at a discount of 9.7% while Scomi-WA was trading at a premium of 21.5%. Looking at this static picture, Scomi-LA would be preferred to Scomi-WA. However, some arbitraging is going on whereby a person holding Scomi share may choose to sell the share & buy Scomi-LA. This would put downward pressure in the price Scomi share, while demand for Scomi-LA would put upward pressure on its price. The downward pressure in the price of Scomi share may result in a lower price for the share and this would in turn put downward pressure on Scomi-LA & Scomi-WA. For Scomi-LA, the downward pressure from the declining price of Scomi share would be balanced somewhat by the demand for Scomi-LA (as a result of the arbitraging process). Scomi-WA would not enjoy such countervailing force & may succumb to the downward pressure from the declining price of Scomi share. This is more reason to avoid Scomi-WA.
5 comments:
Hi Alex,
I have 15 SCOMI-LA and 2 SCOMI-WA.
I would like to ask about the 4% interest for SCOMI-LA.
1) how much interest would I get if I hold on to the 15000 shares of SCOMI-LA (in terms of $$)
2) When will SCOMI pay the interest?
3) Is it true I can convert 4000 SCOMI-LA into 1000 SCOMI mother shares without paying anything?
4) At present situation, it seems it would be better for me to hold SCOMI-LA and convert it to mother share and sell off my SCOMI-WA?
Hey, just a quick comment, hope you don’t mind :)
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Sean
Hi Andrew,
The answer to your questions:
1) 15k of Scomi-LA has a par value of RM1500. At interest rate of 4% p.a., you will get RM60 per annum.
2) You can get the information on the date of interest payment quite easily from the Registrar.
3)You can ONLY convert by exchanging 4k of Scomi-LA for 1k of Scomi share. Except for handling charges, no other cash payment is necessary.
4) Yes, it seems logical to keep Scomi-LA (and convert it to Scomi share at the right time) and to sell off my Scomi-WA.
Speaking of Scomi, I like Scomi Marine which I find to be grossly undervalued. It owns 29.07% of Chuan Hup Offshore (209m shares) last traded at S$0.665. The market value of this holding is RM327.18m or 44.6sen per Scomi Marine share, more than the current traded price of 40sen. In May 2009, Norwegian tycoon John Fredriksen’s Deep Sea Supply plc (JF-DSS)has acquired a 5% stake in CH Offshore as he did with SapuraCrest, gradually increasing it to more than 20%. And Scomi Marine does intent to sell their stake if an offer close S$1 were to be bandied to them. A potential MA play here.
hi alex,
i got some amount of scomi mother share + LA + WA, whats your opnion of this counter, buy sell or hold...now losing quite a lot... thx.
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