Chart 1: BAT's daily chart as at Nov 14, 2012 (Source: Quickcharts)
BAT's recent financial result shows a q-o-q drop in bottom-line while top-line increased. The increased revenue was attributed to higher semi-finished contract manufacturing while lower profit was attributed to higher marketing activities. All in all, the result was not disappointing nor encouraging.
At RM56.48, BAT is trading at a PE of 20.6 times. This rich valuation is in line with other consumer-related stocks which had a big price run-up over the past one year. We will have to wait & see whether the current correction is a minor consolidation or a reversal.
Table 1: BAT's last 8 quarterly results
Chart 2; BAT's last 23 quarterly results
Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, BAT.
Hi Alex
ReplyDeleteAbout WCT-WB, the exercise price will be adjusted from 2.50 to 1.85, Similarly, another WCT-WC also adjust its exercise price from 2.75 to 2.04. The detail and formula for these adjustment is stated in its circular (page no 20 and 21) to shareholder in conjunction for upcoming EGM next Friday to seek approval for 3 bonus and 4 WCT-WD for every 20 exiting share.
After WCT ex-all theoretical price of 2.33 (based on share price of 2.70) there is BIG gap discount of 23.5sen between current WCT-WB of 24.5sen + exercise price 1.85) - WCT ex all price of RM2.33. The arbitrary discount almost 100% different is too hard to ignore or is it too good to be true!?
Hi Hng,
ReplyDeleteYour computation of the WCT theoretical ex price of RM2.33 is correct. I am not sure whether the computation of the exercise price is correct. Assuming both are correct, then it makes sense to buy WCT-WB or WC.
Something don't seem right. This has the effect of creating money out of thin air.
The calculation of new exercise price involve two step:
ReplyDeleteStep 1: New exercise price after Bonus share
Exercise price = S x [A/ (A+B)]
= RM 2.50 x [823m/(823m + 123.4m)]
= RM 2.17
Step 2: New exercise price after step 1 and after free warrant
Final exercise price= S-[(Sx NI)/M]
= RM 2.17 - [ (2.17 x 164.6m)/ 1111m)]
= RM 1.85
Remark:
A = The number of WCT share on entitlement date (exiting no of share 823m)
B = The number of WCT to allotted to entitlement shareholder (bonus 3 for 20 = 123m)
NI = The number of new WCT to be issue assuming full exercise of warrant (5 free warrant for 20 share = 164.6m)
M = The enlarge share assuming full exercise of all outstanding warrant (exiting share + bonus 3 for 20 and full exercise new warrant 5 for 20, 823m + 123m + 164.6 = 1111m)
Hi Hng,
ReplyDeleteI saw the circular. I am not sure about step 2. However, it is likely to be correct since it is prepared by merchant or investment banker, with help from accountant.
Hi Alex
ReplyDeleteI hope it is correct too, so that there will be real gap between WCT ex all price and WCT-WB from current less than 1% premium to more than 10% discount.
Discount/premium
= [(warrant price + exercise price)- underlying price] /underlying price
Current scenario
premium 0.9% = [(0.235 + 2.50)-2.71] /2.71
Ex-all scenario
Discount 10.5% = [ (0.235 + 1.85) - 2.33] / 2.33