Wednesday, 2 May 2012

Ivory warrants up 42-fold, shares deemed undervalued

KUALA LUMPUR (May 2) : Ivory PROPERTIES [] Group Bhd warrants jumped as much as 42-fold on their maiden trading day to be among top gainers across the exchange.

The derivative securities rose 21 sen to 21.5 sen before settling lower at 20 sen at lunch break with some 7.7 million units done. Ivory shares fell one sen to 56 sen.

Ivory had issued 186 million warrants in conjunction with its renounceable rights issue of a similar number of new shares on the basis of one rights unit and warrant for one existing share held in the firm. The five-year warrants which will mature on April 26, 2017, have conversion ratio of 1:1 with a strike price of 75 sen. This means each warrant can be converted into one ordinary share at 75 sen.

Based on the warrants’ price of 20 sen and Ivory share’s price of 56 sen, the warrants command a premium of 70%. The premium indicates the quantum of share price increase needed to equal the combined price of the warrant and its strike price.

The company’s warrants are out of the money as the strike and warrant price combined at 95 sen is higher than the underlying share price of 56 sen,

Analysts said Ivory shares are undervalued. In a note, TA Securities Holdings Bhd said it believes investors have discounted the value of the stock as they failed to recognise the earnings potential from Ivory’s proposed Penang World City mixed development within 102.56 acres at Penang’s Bayan Mutiara enclave.

Ivory is undertaking the project with a potential value of RM10 billion, in collaboration with Dijaya Corp Bhd.

According to TA, Ivory shares are trading at a price-to-earnings ratio (PER) of five times 2012 earnings which is a discount to the research firms’s targeted PER of seven times for small-cap stocks under its coverage.

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