do u recommend reef

mcqueen · 1 do u recommend reef Thu Sep 01, 2011 10:55 am

mcqueen

Stock Analytic

Posts : 11
Equity Stars : 4851
Reputation : 0
Join date : 2011-08-26

hariesha · 2 Re: do u recommend reef Thu Sep 01, 2011 11:05 am

hariesha

Vice President - Equity Analytics

Posts : 1058
Equity Stars : 7478
Reputation : 34
Join date : 2011-03-14

At these levels its worth. There will be lot of trading opp. in REEF.

DK · 3 Re: do u recommend reef Thu Sep 01, 2011 11:43 am

DK

Manager - Equity Analytics

Posts : 166
Equity Stars : 5252
Reputation : 26
Join date : 2011-02-14

There might be lot of trading opportunity in REEF, but I dont agree with the pricing.

The warrants issue for REEF.W0017 is at a ratio of 3:2 compared to the existing shares (i.e. Once convertd to rights there will be 2 rights for every 3 shares existing).

REEF.N Price = 79
REEF.W0017 exercise price = 30
Therotical Price after XR = (79*3 + 30*2)/5 = 59
Therefore theoretical trading price of the warrant = 59 - 30 =29.

Currently it is trading 5/- above the rate.

sapumal · 4 Re: do u recommend reef Thu Sep 01, 2011 4:45 pm

sapumal

Vice President - Equity Analytics

Posts : 1105
Equity Stars : 6728
Reputation : 65
Join date : 2010-07-30

DK wrote:There might be lot of trading opportunity in REEF, but I dont agree with the pricing.

The warrants issue for REEF.W0017 is at a ratio of 3:2 compared to the existing shares (i.e. Once convertd to rights there will be 2 rights for every 3 shares existing).

REEF.N Price = 79
REEF.W0017 exercise price = 30
Therotical Price after XR = (79*3 + 30*2)/5 = 59
Therefore theoretical trading price of the warrant = 59 - 30 =29.

Currently it is trading 5/- above the rate.

Your assumptions are totally wrong. If you take warrants price as 30 why it is trading at 34 ? you assume REEF warrant 17 worth nothing. LOL

DK · 5 Re: do u recommend reef Thu Sep 01, 2011 5:53 pm

DK

Manager - Equity Analytics

Posts : 166
Equity Stars : 5252
Reputation : 26
Join date : 2011-02-14

Hi Sapumal
I havent actually made any assumptions.

30 is the price paid by warrant holders to convert the warrant i.e. capital injection to the company. As W0017 are converted end of this month we don't have to run a complicated model to estimate the price.

It is possible that you understood my post to say that I believe REEF.W0017 does not have an intrinsic value and therefore priced it at 30 (i.e. the conversion price). It is not so. The value of REEF.W0017 is the price difference between the share price after dilution and the warrant conversion price.

If you google "rights issue calculations" I'm sure you would be able to find some good reading material on this.

sapumal · 6 Re: do u recommend reef Thu Sep 01, 2011 6:23 pm

sapumal

Vice President - Equity Analytics

Posts : 1105
Equity Stars : 6728
Reputation : 65
Join date : 2010-07-30

DK wrote:Hi Sapumal

It is possible that you understood my post to say that I believe REEF.W0017 does not have an intrinsic value and therefore priced it at 30 (i.e. the conversion price). It is not so.

Your calculation say so

ATM share and warrants are at the 3:2 ratio

"Therotical Price after XR = (79*3 + 30*2)/5 = 59"

Then why did you put 30 for your calculation ? You should use at least 65 for that. (current warrant cost + conversion cost)
Emagewise bought big chunk of w17 at 35. Theoretically they will not consider 30 as the cost for that bunch of shares after conversion.

DK · 7 Re: do u recommend reef Thu Sep 01, 2011 7:42 pm

DK

Manager - Equity Analytics

Posts : 166
Equity Stars : 5252
Reputation : 26
Join date : 2011-02-14

30 is used because that's the capital injection. Smile

Like I said before, google for rights valuation.

I wouldn't have actually bothered to post back. But then I saw that you have pretty much said the same thing at http://forum.srilankaequity.com/t8569-sell-reef-normal-share-and-buy-reef-warrant-17-it-will-save-you-24-ruppes. I think you are either confused about the pricing and cost. Either that or you are deliberately trying to mislead. I think it's mostly the first.

sapumal · 8 Re: do u recommend reef Thu Sep 01, 2011 7:54 pm

sapumal

Vice President - Equity Analytics

Posts : 1105
Equity Stars : 6728
Reputation : 65
Join date : 2010-07-30

DK wrote:30 is used because that's the capital injection. Like I said before, google for rights valuation.

I wouldn't have actually bothered to post back. But then I saw that you have pretty much said the same thing at http://forum.srilankaequity.com/t8569-sell-reef-normal-share-and-buy-reef-warrant-17-it-will-save-you-24-ruppes. I think you are either confused about the pricing and cost. Either that or you are deliberately trying to mislead. I think it's mostly the first.

No. I deliberately tried to mislead