Genting- issuing a warrant!

Genting is now trading cum two related entitlements:
1. Special dividend of 50% less tax of 25%; and
2. Right Issue of warrant of 1-for-4 at RM1.50 each.

Effectively, a shareholder who has 1000 shares would get a net dividend of RM375 and that is equivalent to the amount payable of RM375 to subscribe for 250 warrants at RM1.50. The warrant's exercise price was set at RM7.96 and its tenor is 5 years. For more, go here.

The issuance of a warrant by an expensive blue chip stock is a fairly rare thing. As such, I believe there will be a strong demand for this warrant. As the exercise price is less than the current market price (of RM10.70 at the close of the morning session), the warrant is in-the-money. The intrinsic value is RM2.74 (arrived at by deducting RM7.96 from RM10.70) and assuming a small premium of 10% (or RM1.07), the warrant would be worth about RM3.81 (arrived at by adding the intrinsic value of RM2.74 to the premium of RM1.07).

Genting is pressing against its intermediate downtrend line, R1-R1 at RM10.60-10.70. If it can break above the downtrend line, its next upleg may begin. If Genting were to enter into a new upleg, the warrant would be preferred over the share.


Chart: Genting's monthly chart as at Nov 19, 2013_12.30pm (Source: Quickcharts)

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, Genting.